-----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, WShRh8gP8aFqlPQQJ/Tl2hXz+WEZ0ODnHJshN/O3yIBVjt1pXBkfZs4Kj3Jh6ha1 BDik7UALK2FzjMDqMUR5PQ== 0000950137-06-006343.txt : 20060530 0000950137-06-006343.hdr.sgml : 20060529 20060530103238 ACCESSION NUMBER: 0000950137-06-006343 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060530 DATE AS OF CHANGE: 20060530 EFFECTIVENESS DATE: 20060530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY EQUITY FUND CENTRAL INDEX KEY: 0000088525 IRS NUMBER: 486104426 STATE OF INCORPORATION: KS FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01136 FILM NUMBER: 06872324 BUSINESS ADDRESS: STREET 1: SECURITY MANAGEMENT COMPANY, LLC STREET 2: ONE SECURITY BENEFIT PLACE CITY: TOPEKA STATE: KS ZIP: 66636-0001 BUSINESS PHONE: 7854383127 MAIL ADDRESS: STREET 1: SECURITY MANAGEMENT COMPANY, LLC STREET 2: ONE SECURITY BENEFIT PLACE CITY: TOPEKA STATE: KS ZIP: 66636-0001 0000088525 S000008805 EQUITY C000023958 A SECEX C000023959 B SEQBX C000023960 C SFECX 0000088525 S000008806 ALPHA OPPORTUNITY C000023961 A SAOAX C000023962 B SAOBX C000023963 C SAOCX 0000088525 S000008807 GLOBAL C000023964 A SEQAX C000023965 B SGOBX C000023966 C SFGCX 0000088525 S000008808 SOCIAL AWARENESS C000023967 A SWAAX C000023968 B SWABX C000023969 C SESAX 0000088525 S000008809 MID CAP VALUE C000023970 A SEVAX C000023971 B SVSBX C000023972 C SEVSX 0000088525 S000008810 SMALL CAP GROWTH C000023973 A SSCAX C000023974 B SEPBX C000023975 C SESCX 0000088525 S000008811 ENHANCED INDEX C000023976 A SEEAX C000023977 B SBEIX C000023978 C SEFCX 0000088525 S000008812 SELECT 25 C000023979 A SEFAX C000023980 B SEFBX C000023981 C SSSCX 0000088525 S000008813 LARGE CAP GROWTH C000023982 A SFLAX C000023983 B SFGLX C000023984 C SLACX N-CSRS 1 c05598anvcsrs.txt CERTIFIED SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01136 SECURITY EQUITY FUND (Exact name of registrant as specified in charter) ONE SECURITY BENEFIT PLACE, TOPEKA, KANSAS 66636-0001 (Address of principal executive offices) (Zip code) MICHAEL G. ODLUM, PRESIDENT SECURITY EQUITY FUND ONE SECURITY BENEFIT PLACE TOPEKA, KANSAS 66636-0001 (Name and address of agent for service) Registrant's telephone number, including area code: (785) 438-3000 Date of fiscal year end: September 30 Date of reporting period: March 31, 2006 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. SECURITY FUNDS(SM) SEMI-ANNUAL REPORT MARCH 31, 2006 - - SECURITY EQUITY FUND(R) - ALPHA OPPORTUNITY SERIES - ENHANCED INDEX SERIES - EQUITY SERIES - GLOBAL SERIES - LARGE CAP GROWTH SERIES - MID CAP VALUE SERIES - SELECT 25 SERIES - SMALL CAP GROWTH SERIES - SOCIAL AWARENESS SERIES - - SECURITY LARGE CAP VALUE FUND - - SECURITY MID CAP GROWTH FUND (SECURITY BENEFIT(SM) LOGO) Security Distributors, Inc. SECURITY EQUITY FUND(R) SECURITY LARGE CAP VALUE FUND SECURITY MID CAP GROWTH FUND MARCH 31, 2006 SEMI-ANNUAL REPORT (unaudited) TABLE OF CONTENTS Chairman's Letter ........................................................ 2 Security Equity Fund Alpha Opportunity Series .............................................. 3 Enhanced Index Series ................................................. 13 Equity Series ......................................................... 25 Global Series ......................................................... 35 Large Cap Growth Series ............................................... 45 Mid Cap Value Series .................................................. 53 Select 25 Series ...................................................... 63 Small Cap Growth Series ............................................... 71 Social Awareness Series ............................................... 81 Security Large Cap Value Fund ............................................ 89 Security Mid Cap Growth Fund ............................................. 99 Notes to Financial Statements ............................................ 109 Director's Disclosure .................................................... 117 Directors and Officers ................................................... 119
1 Chairman's Letter May 15, 2006 (PHOTO OF JOHN CLELAND) John Cleland Chairman of the Board TO OUR SHAREHOLDERS: Equities across most major stock index categories posted strong returns for investors over the first six months of this fiscal year (from September 2005 through March 2006), as illustrated in the following table of selected index returns for each quarter and over the entire six-month period. Bonds, on the other hand, did not fare as well and posted slightly negative returns as interest rates rose all along the maturity spectrum. In the domestic fixed income markets, only very short-term bonds, including money markets and high yield bonds, enjoyed decent returns over this period. Despite a backdrop of increasing economic uncertainty, as well as the Federal Reserve continuing its tightening policy, investor expectations were positively influenced by tame overall inflation, continued earnings expansion, and historically reasonable equity valuations. As has been the case over recent years, mid and small cap stocks once again outperformed the large caps over this period with most of that relative move occurring in the first quarter of 2006.
RETURN % -------------------------- SIX MONTHS 4TH Q 1ST Q 9/30/05- INDEX 2005 2006 3/31/06 - ----- ----- ----- ---------- S&P 500 2.08 4.21 6.38 Russell 2500 1.81 11.14 13.15 Russell 2000 1.13 13.94 15.23 MSCI EAFE ($US) 3.79 8.78 12.90 Lehman Aggregate Bond 0.59 (0.65) (0.10)
Interest rates were up over the six-month period, with short rates rising faster than long-term rates. The influence of Fed policy had its expected effect, but during this period two additional noteworthy events happened. The shape of yield curve turned negative (short-term rates were higher than long-term rates) for a short period, and long term rates, which had remained stubbornly low over the past several quarters of Fed tightening, were now beginning to rise. This can be seen in the following table showing interest rates on U.S. Treasury Securities of varying maturities at the beginning, middle and end of the six-month timeframe.
% RATES ---------------------------- U.S. TREASURY MATURITY 9/30/05 12/31/05 3/31/06 - ---------------------- ------- -------- ------- 3 Month 3.47 3.99 4.52 1 Year 4.01 4.38 4.82 10 Year 4.34 4.39 4.86 Long Term (20+ Years) 4.62 4.61 5.07
Over the remainder of the fiscal year investors face a number of possible risk factors including a slowing housing market, the potential for commodity price increases to spill over into general inflation, rising interest rates, a deceleration in corporate earnings growth, and a little less certainty about how the new Fed Chairman, Ben Bernanke, will manage monetary policy in this environment. To the extent that earnings continue to grow at a reasonable pace and if inflation remains subdued, the outlook may continue to be positive for investors. As a general rule, because there is always uncertainty about how the markets will perform, particularly over specific time frames, investors are well advised to consider the benefits of well-defined and diversified investment strategies that the Security Funds are intended to provide shareholders over the long run. We appreciate your investment in the Funds and welcome any comments or questions you may have. Sincerely, /s/ John Cleland - ------------------------------------- John Cleland Chairman, the Security Funds 2 SECURITY EQUITY FUND Alpha Opportunity Series (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC AND (MAINSTREAM INVESTMENT ADVISERS LOGO) SUBADVISER, MAINSTREAM INVESTMENT ADVISERS 3 SECURITY EQUITY FUND Performance Summary ALPHA OPPORTUNITY SERIES May 15, 2006 (unaudited) PERFORMANCE ALPHA OPPORTUNITY SERIES VS. S&P 500 INDEX (PERFORMANCE GRAPH) ALPHA OPPORTUNITY SERIES 7/7/03 9,425.00 9/30/03 9,632.35 12/31/03 11,152.80 3/31/04 11,381.22 6/30/04 11,609.63 9/30/04 11,708.95 12/31/04 12,528.47 3/31/05 12,485.97 6/30/05 12,358.45 9/30/05 13,144.80 12/31/05 13,423.47 3/31/06 14,727.73
S&P 500 INDEX INCEPTION 7/01/03 10,000.00 9/30/2003 10,264.66 12/31/2003 11,515.49 3/31/2004 11,710.84 6/30/2004 11,912.75 9/30/2004 11,689.41 12/31/2004 12,768.79 3/31/2005 12,493.71 6/30/2005 12,663.78 9/30/2005 13,120.77 12/31/2005 13,393.36 3/31/2006 13,956.34
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Alpha Opportunity Series on July 7, 2003 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance. AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR SINCE INCEPTION - --------------------- ------ ---------------- A Shares 17.95% 17.73% (7-07-03) A Shares with sales charge 11.14% 15.21% (7-07-03) B Shares 17.06% 16.86% (7-07-03) B Shares with CDSC 12.06% 16.02% (7-07-03) C Shares 17.06% 16.86% (7-07-03) C Shares with CDSC 16.06% 16.86% (7-07-03)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 0.08% Consumer Staples 0.78 Energy 0.48 Financials 0.50 Health Care (0.14) Industrials 25.73 Information Technology 5.34 Materials 7.84 Exchange Traded Funds 4.95 U.S. Government Sponsored Agencies 39.09 Asset Backed Securities 0.52 Cash & other assets, less liabilities 14.83 ------ Total net assets 100.00% ======
4 See accompanying notes. SECURITY EQUITY FUND Performance Summary ALPHA OPPORTUNITY SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 3-31-06(1) PERIOD(2) ------------- ------------- ------------- Alpha Opportunity Series - Class A Actual $1,000.00 $1,120.40 $15.07 Hypothetical 1,000.00 1,010.72 14.29 Alpha Opportunity Series - Class B Actual 1,000.00 1,116.60 19.00 Hypothetical 1,000.00 1,006.98 18.01 Alpha Opportunity Series - Class C Actual 1,000.00 1,116.60 19.00 Hypothetical 1,000.00 1,006.98 18.01
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 12.04%, 11.66% and 11.66%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (2.85%, 3.60% and 3.60% for Class A, B and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 5 SECURITY EQUITY FUND Schedule of Investments ALPHA OPPORTUNITY SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ----------- COMMON STOCKS - 47.2% AEROSPACE & DEFENSE - 1.9% Empresa Brasileira de Aeronautica S.A. ADR 3,700 $ 136,345 Hexcel Corporation* 3,500 76,895 K&F Industries Holdings, Inc.* 1,000 16,600 United Technologies Corporation 5,500 318,835 ----------- 548,675 ----------- AGRICULTURAL PRODUCTS - 0.1% Archer-Daniels-Midland Company 500 16,825 ----------- AIRLINES - 1.3% AirTran Holdings, Inc.* 11,700 211,887 Lan Airlines S.A. ADR 2,500 97,975 Republic Airways Holdings, Inc.* 3,200 47,392 SkyWest, Inc. 900 26,343 ----------- 383,597 ----------- ALUMINUM - 1.7% Aluminum Corporation of China, Ltd. ADR 4,600 481,712 ----------- AUTO PARTS & EQUIPMENT - 0.1% Sauer-Danfoss, Inc. 1,200 27,540 ----------- COMMODITY CHEMICALS - 0.1% Spartech Corporation 1,500 36,000 ----------- COMMUNICATIONS EQUIPMENT - 0.5% Belden CDT, Inc. 3,500 95,305 Harris Corporation 900 42,561 ----------- 137,866 ----------- CONSTRUCTION & ENGINEERING - 2.9% Fluor Corporation 2,700 231,660 Infrasource Services, Inc.* 8,500 146,285 Insituform Technologies, Inc.* 6,300 167,580 Michael Baker Corporation* 3,100 87,823 Washington Group International, Inc. 3,100 177,909 ----------- 811,257 ----------- CONSTRUCTION & FARM MACHINERY - 4.2% Cascade Corporation 8,600 454,510 Caterpillar, Inc. 1,900 136,439 Deere & Company 2,400 189,720 Federal Signal Corporation 1,000 18,500 Gehl Company* 1,000 33,120 JLG Industries, Inc. 4,600 141,634 Trinity Industries, Inc. 2,000 108,780 Wabtec Corporation 3,700 120,620 ----------- 1,203,323 ----------- CONSTRUCTION MATERIALS - 1.0% Florida Rock Industries, Inc. 5,300 297,966 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 0.6% Electronic Data Systems Corporation 6,000 160,980 ----------- DIVERSIFIED CHEMICALS - 0.4% BASF AG ADR 1,600 125,440 ----------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 0.4% Ritchie Brothers Auctioneers, Inc. 2,300 $ 113,850 ----------- DIVERSIFIED METALS & MINING - 0.1% Cameco Corporation 500 18,000 ----------- ELECTRICAL COMPONENTS & EQUIPMENT - 2.9% Emerson Electric Company 9,800 819,574 ----------- ELECTRONIC EQUIPMENT MANUFACTURERS - 3.0% Agilent Technologies, Inc.* 3,700 138,935 Amphenol Corporation 6,300 328,734 Mettler-Toledo International, Inc.* 6,400 386,176 ----------- 853,845 ----------- ELECTRONIC MANUFACTURING SERVICES - 0.3% Kemet Corporation* 5,100 48,297 Molex, Inc. 1,300 43,160 ----------- 91,457 ----------- EXCHANGE TRADED FUNDS - 5.0% Consumer Discretionary Select Sector Spdr Fund 7,000 235,480 iShares FTSE/Xinhua China 25 Index Fund 2,800 207,844 iShares MSCI Hong Kong Index Fund 19,800 267,102 iShares MSCI Japan Index Fund 14,600 210,240 iShares MSCI Singapore Index Fund 2,600 22,828 Materials Select Sector Index 9,500 307,325 Technology Select Sector Spdr Fund 7,900 175,064 ----------- 1,425,883 ----------- FERTILIZERS & AGRICULTURAL CHEMICALS - 1.2% Agrium, Inc. 7,600 191,976 Mosaic Company* 1,400 20,090 Sociedad Quimica y Minera de Chile S.A. ADR 800 90,800 Terra Industries, Inc.* 7,000 49,350 ----------- 352,216 ----------- HOME FURNISHINGS - 0.2% Ethan Allen Interiors, Inc. 1,100 46,222 ----------- INDUSTRIAL CONGLOMERATES - 3.1% ABB, Ltd. ADR* 2,500 31,375 General Electric Company 4,000 139,120 Siemens AG ADR 7,500 698,775 ----------- 869,270 ----------- INDUSTRIAL MACHINERY - 5.8% Barnes Group, Inc. 1,500 60,750 Esco Technologies, Inc.* 4,200 212,730 Harsco Corporation 1,100 90,882 Ingersoll-Rand Company, Ltd. 4,200 175,518 Kennametal, Inc. 11,400 696,996 Nordson Corporation 1,000 49,860 Parker Hannifin Corporation 1,000 80,610 Pentair, Inc. 2,900 118,175 RBC Bearings, Inc.* 2,200 45,100 Watts Waters Technologies, Inc. 2,800 101,752 ----------- 1,632,373 -----------
6 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ALPHA OPPORTUNITY SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ----------- COMMON STOCKS (CONTINUED) IT CONSULTING & OTHER SERVICES - 0.7% Gartner, Inc.* 13,700 $ 191,115 ----------- LIFE & HEALTH INSURANCE - 0.6% Prudential Financial, Inc. 2,100 159,201 ----------- MARINE - 0.1% Sea Containers, Ltd. 2,300 16,583 ----------- METAL & GLASS CONTAINERS - 0.2% Silgan Holdings, Inc. 1,600 64,272 ----------- OIL & GAS DRILLING - 0.1% GlobalSantaFe Corporation 400 24,300 ----------- OIL & GAS EQUIPMENT & SERVICES - 1.1% Technip S.A. ADR 4,600 312,524 ----------- OIL & GAS REFINING & MARKETING - 0.3% Sasol, Ltd. ADR 2,300 87,009 Xethanol Corporation* 600 4,080 ----------- 91,089 ----------- PACKAGED FOODS & MEATS - 0.1% Cresud S.A. ADR 2,600 37,518 ----------- PAPER PACKAGING - 1.3% Smurfit-Stone Container Corporation* 28,200 382,674 ----------- PAPER PRODUCTS - 0.7% Abitibi-Consolidated, Inc. 8,600 35,690 International Paper Company 4,400 152,108 ----------- 187,798 ----------- PERSONAL PRODUCTS - 0.6% Estee Lauder Companies, Inc. 4,500 167,355 ----------- SEMICONDUCTOR EQUIPMENT - 0.1% Credence Systems Corporation* 2,600 19,084 ----------- SEMICONDUCTORS - 0.2% Cypress Semiconductor Corporation* 3,400 57,630 ----------- SPECIALIZED FINANCE - 0.2% CBOT Holdings, Inc.* 400 47,760 ----------- SPECIALTY CHEMICALS - 0.3% Ferro Corporation 3,800 76,000 ----------- STEEL - 0.7% Companhia Siderurgica Nacional S.A. ADR 3,000 94,260 Gerdau S.A. ADR 4,000 90,080 NN, Inc. 1,000 12,910 ----------- 197,250 ----------- TRADING COMPANIES & DISTRIBUTORS - 2.5% Applied Industrial Technology, Inc. 1,300 57,980 GATX Corporation 11,900 491,351 United Rentals, Inc.* 3,700 127,650 W.W. Grainger, Inc. 500 37,675 ----------- 714,656 -----------
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE ---------- ----------- COMMON STOCKS (CONTINUED) TRUCKING - 0.6% YRC Worldwide, Inc.* 4,600 $ 175,076 ----------- TOTAL COMMON STOCKS (cost $13,223,589) 13,375,756 ----------- U.S. GOVERNMENT SPONSORED AGENCIES - 39.1% Federal Home Loan Bank: 4.445%, 04-12-06(2) $ 550,000 549,361 4.549%, 04-17-06(2) $ 125,000 124,774 4.48%, 04-19-06(2) $1,400,000 1,397,106 4.60%, 04-25-06(3) $ 700,000 698,011 4.575%, 05-12-06(2) $ 950,000 945,143 4.59%, 05-17-06(2) $ 300,000 298,269 4.59%, 05-31-06(2) $ 600,000 595,438 4.67%, 06-14-06(2) $ 750,000 742,875 4.755%, 06-30-06(2) $ 450,000 444,775 Federal Home Loan Mortgage Corporation: 4.36%, 04-11-06(2) $ 600,000 599,380 4.52%, 05-01-06(2) $ 600,000 597,797 4.53%, 05-02-06(2) $ 225,000 224,145 Federal National Mortgage Assocation: 4.43%, 04-05-06(2) $1,500,000 1,499,613 4.65%, 04-12-06(2) $ 40,000 39,943 4.47%, 04-28-06(2) $ 650,000 647,901 4.55%, 05-08-06(2) $ 700,000 696,788 4.64%, 05-24-06(2) $ 975,000 968,480 ----------- TOTAL U.S. GOVERNMENT SPONSORED AGENCIES (cost $11,068,102) 11,069,799 ----------- ASSET BACKED SECURITIES - 0.5% OTHER - 0.5% Credit-Based Asset Servicing & Securitization, 2005-CB2 AV1, 4.918% - 2036(1,2) $ 147,059 147,085 ----------- TOTAL ASSET BACKED SECURITIES (cost $147,060) 147,085 ----------- TOTAL INVESTMENTS - 86.8% (cost $24,438,751) 24,592,640 ----------- SHORT POSITIONS - (1.6%) EXCHANGE TRADED FUNDS - (0.1%) Semiconductor Holders Trust (700) (25,424) ----------- HOMEBUILDING - (0.2%) D.R. Horton, Inc. (700) (23,254) Pulte Homes, Inc. (700) (26,894) ----------- (50,148) ----------- MANAGED HEALTH CARE - (0.1%) UnitedHealth Group, Inc. (700) (39,102) -----------
7 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ALPHA OPPORTUNITY SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ----------- SHORT POSITIONS (CONTINUED) OIL & GAS EXPLORATION & PRODUCTION - (1.0%) Apache Corporation (1,200) $ (78,612) Encore Acquisition Company* (400) (12,400) Newfield Exploration Company* (1,100) (46,090) Pioneer Natural Resources Company (1,100) (48,675) Pogo Producing Company (700) (35,175) Quicksilver Resources, Inc.* (700) (27,062) Whiting Petroleum Corporation* (1,100) (45,089) ----------- (293,103) ----------- OTHER DIVERSIFIED FINANCIAL SERVICES - (0.1%) St. Joe Company (600) (37,704) ----------- REGIONAL BANKS - (0.1%) Synovus Financial Corporation (1,000) (27,090) ----------- TOTAL SHORT POSITIONS (proceeds $470,753) (472,571) CASH & OTHER ASSETS, LESS LIABILITIES(2) - 14.8% 4,200,373 ----------- TOTAL NET ASSETS - 100.0% $28,320,442 ===========
For federal income tax purposes, the identified cost of investments owned at March 31, 2006 was $24,000,324. * Non-income producing security ADR (American Depositary Receipt) (1) Variable rate security. Rate indicated is rate effective at March 31, 2006. (2) Security is segregated as collateral for open futures contracts. (3) Security is segregated as collateral for short positions. 8 See accompanying notes. SECURITY EQUITY FUND ALPHA OPPORTUNITY SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value (1) ....................................... $24,592,640 Cash ............................................................ 2,450,104 Receivables: Fund shares sold ............................................. 8,887 Securities sold .............................................. 4,532,294 Interest ..................................................... 141 Dividends .................................................... 13,269 Prepaid expenses ................................................ 19,064 ----------- Total assets .................................................... 31,616,399 ----------- LIABILITIES: Securities sold short, at value (2) ............................. 472,571 Payable for: Securities purchased ......................................... 2,694,170 Fund shares redeemed ......................................... 6,792 Variation margin ............................................. 38,850 Management fees .............................................. 49,456 Custodian fees ............................................... 3,301 Transfer agent and administration fees ....................... 6,578 Professional fees ............................................ 8,290 12b-1 distribution plan fees ................................. 15,894 Director's fees .............................................. 55 ----------- Total liabilities ............................................... 3,295,957 ----------- NET ASSETS ...................................................... $28,320,442 =========== NET ASSETS CONSIST OF: Paid in capital ................................................. $25,194,005 Accumulated net investment loss ................................. (82,847) Accumulated undistributed net realized gain on sale of investments, futures and short positions .................................................... 3,003,679 Net unrealized appreciation in value of investments, futures and short positions .............................................. 205,605 ----------- Net assets ...................................................... $28,320,442 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) ...................... 1,436,095 Net assets ...................................................... $18,326,116 Net asset value and redemption price per share .................. $ 12.76 =========== Maximum offering price per share (net asset value divided by 94.25%) .......................... $ 13.54 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) ...................... 379,154 Net assets ...................................................... $ 4,728,639 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) .. $ 12.47 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) ...................... 422,195 Net assets ...................................................... $ 5,265,687 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) .. $ 12.47 =========== (1) Investments, at cost ........................................ $24,438,751 (2) Securities sold short, at proceeds .......................... 470,753
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends .................................................... $ 114,404 Interest ..................................................... 209,071 ---------- Total investment income ...................................... 323,475 ---------- EXPENSES: Management fees .............................................. 270,870 Transfer agent/maintenance fees .............................. 14,643 Administration fees .......................................... 21,174 Custodian fees ............................................... 15,758 Directors' fees .............................................. 301 Professional fees ............................................ 22,351 Reports to shareholders ...................................... 3,426 Registration fees ............................................ 15,920 Other expenses ............................................... 970 12b-1 distribution plan fees - Class A ....................... 19,268 12b-1 distribution plan fees - Class B ....................... 21,465 12b-1 distribution plan fees - Class C ....................... 30,300 ---------- Total expenses ............................................... 436,446 Less: Reimbursement of expenses - Class A .................... (16,055) Reimbursement of expenses - Class B .................... (4,494) Reimbursement of expenses - Class C .................... (6,235) Earnings credits ....................................... (3,340) ---------- Net expenses ................................................. 406,322 ---------- Net investment loss .......................................... (82,847) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments .................................................. 2,635,191 Securities sold short ........................................ (2,249) Futures ...................................................... 417,723 ---------- Net realized gain ............................................ 3,050,665 ---------- Net unrealized depreciation during the period on: Investments .................................................. (57,057) Securities sold short ........................................ (1,818) Futures ...................................................... (3,195) ---------- Net unrealized depreciation .................................. (62,070) ---------- Net realized and unrealized gain ............................. 2,988,595 ---------- Net increase in net assets resulting from operations ................................. $2,905,748 ==========
9 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets ALPHA OPPORTUNITY SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ----------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ................................. $ (82,847) $ (252,493) Net realized gain during the period on investments, futures and securities sold short ................ 3,050,665 2,310,074 Net unrealized appreciation (depreciation) during the period on investments, futures and securities sold short ............................................ (62,070) 144,528 ----------- ----------- Net increase in net assets resulting from operations ....................................... 2,905,748 2,202,109 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain Class A .......................................... (1,193,077) (604,730) Class B .......................................... (346,674) (202,618) Class C .......................................... (438,798) (478,033) ----------- ----------- Total distributions to shareholders ................. (1,978,549) (1,285,381) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A .......................................... 3,497,793 11,459,073 Class B .......................................... 524,828 1,533,972 Class C .......................................... 455,392 4,544,101 Distributions reinvested Class A .......................................... 1,170,684 591,209 Class B .......................................... 343,297 202,336 Class C .......................................... 380,745 269,335 Cost of shares redeemed Class A .......................................... (1,577,902) (4,559,666) Class B .......................................... (384,462) (107,116) Class C .......................................... (3,557,670) (332,772) ----------- ----------- Net increase from capital share transactions ........ 852,705 13,600,472 ----------- ----------- Net increase in net assets .......................... 1,779,904 14,517,200 ----------- ----------- NET ASSETS: Beginning of period ................................. 26,540,538 12,023,338 ----------- ----------- End of period ....................................... $28,320,442 $26,540,538 =========== =========== Accumulated net investment income (loss) at end of period ........................................... $ (82,847) $ -- =========== =========== CAPITAL SHARE ACTIVITY: Shares sold Class A .......................................... 283,047 970,012 Class B .......................................... 43,048 130,674 Class C .......................................... 37,962 378,831 Shares reinvested Class A .......................................... 99,888 50,401 Class B .......................................... 29,904 17,458 Class C .......................................... 33,166 23,238 Shares redeemed Class A .......................................... (129,254) (393,904) Class B .......................................... (31,762) (9,111) Class C .......................................... (291,905) (28,119)
10 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period ALPHA OPPORTUNITY SERIES
SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, ---------------------------- CLASS A 2006(g) 2005 2004 2003(e) - ------- ---------- ------- ------ ------- PER SHARE DATA Net asset value, beginning of period $ 12.37 $ 11.79 $10.21 $10.00 Income (loss) from investment operations: Net investment loss(c) (0.02) (0.10) (0.16) (0.03) Net gain on securities (realized and unrealized) 1.42 1.50 2.33 0.24 ------- ------- ------ ------ Total from investment operations 1.40 1.40 2.17 0.21 ------- ------- ------ ------ Less distributions: Distributions from realized gains (1.01) (0.82) (0.59) -- ------- ------- ------ ------ Total distributions (1.01) (0.82) (0.59) -- ------- ------- ------ ------ Net asset value, end of period $ 12.76 $ 12.37 $11.79 $10.21 ======= ======= ====== ====== TOTAL RETURN(a) 12.04% 12.26% 21.68% 2.10% ------- ------- ------ ------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $18,326 $14,622 $6,556 $2,935 ------- ------- ------ ------ Ratios to average net assets: Net investment loss (0.36%) (0.83%) (1.48%) (1.35%) Total expenses(b) 3.09% 2.94% 3.57% 3.25% Net expenses(d) 2.85% 2.86% 2.78% 2.75% Expenses prior to custodian earnings credits and net of expense waivers 2.88% 2.86% 2.79% 2.75% Net expenses prior to performance fee adjustment(f) 2.75% 2.78% 2.78% 2.75% ------- ------- ------ ------ Portfolio turnover rate 1,456% 1,502% 1,175% 867%
SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, -------------------------- CLASS B 2006(g) 2005 2004 2003(e) - ------- ---------- ------ ------ ------ PER SHARE DATA Net asset value, beginning of period $12.15 $11.68 $10.20 $10.00 Income (loss) from investment operations: Net investment loss(c) (0.07) (0.18) (0.25) (0.05) Net gain on securities (realized and unrealized) 1.40 1.47 2.32 0.25 ------ ------ ------ ------ Total from investment operations 1.33 1.29 2.07 0.20 ------ ------ ------ ------ Less distributions: Distributions from realized gains (1.01) (0.82) (0.59) -- ------ ------ ------ ------ Total distributions (1.01) (0.82) (0.59) -- ------ ------ ------ ------ Net asset value, end of period $12.47 $12.15 $11.68 $10.20 ====== ====== ====== ====== TOTAL RETURN(a) 11.66% 11.39% 20.68% 2.00% ------ ------ ------ ------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $4,729 $4,106 $2,324 $1,731 ------ ------ ------ ------ Ratios to average net assets: Net investment loss (1.11%) (1.60%) (2.25%) (2.11%) Total expenses(b) 3.84% 3.69% 4.29% 4.01% Net expenses(d) 3.60% 3.61% 3.53% 3.50% Expenses prior to custodian earnings credits and net of expense waivers(d) 3.63% 3.61% 3.53% 3.50% Net expenses prior to performance fee adjustment(f) 3.50% 3.53% 3.53% 3.50% ------ ------ ------ ------ Portfolio turnover rate 1,456% 1,502% 1,175% 867%
11 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period ALPHA OPPORTUNITY SERIES
SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, --------------------------- CLASS C 2006(g) 2005 2004 2003(e) - ------- ---------- ------ ------ ------- PER SHARE DATA Net asset value, beginning of period $12.15 $11.68 $10.20 $10.00 Income (loss) from investment operations: Net investment loss(c) (0.06) (0.18) (0.25) (0.05) Net gain on securities (realized and unrealized) 1.39 1.47 2.32 0.25 ------ ------ ------ ------ Total from investment operations 1.33 1.29 2.07 0.20 ------ ------ ------ ------ Less distributions: Distributions from realized gains (1.01) (0.82) (0.59) -- ------ ------ ------ ------ Total distributions (1.01) (0.82) (0.59) -- ------ ------ ------ ------ Net asset value, end of period $12.47 $12.15 $11.68 $10.20 ====== ====== ====== ====== TOTAL RETURN(a) 11.66% 11.39% 20.68% 2.00% ------ ------ ------ ------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $5,266 $7,813 $3,143 $1,723 ------ ------ ------ ------ Ratios to average net assets: Net investment loss (1.02%) (1.58%) (2.24%) (2.11%) Total expenses(b) 3.84% 3.68% 4.30% 4.01% Net expenses(d) 3.60% 3.61% 3.53% 3.50% Expenses prior to custodian earnings credits and net of expense waivers 3.63% 3.61% 3.53% 3.50% Net expenses prior to performance fee adjustment(f) 3.50% 3.53% 3.53% 3.50% ------ ------ ------ ------ Portfolio turnover rate 1,456% 1,502% 1,175% 867% ------ ------ ------ ------
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and custodian earnings credits. (c) Net investment loss was computed using average shares outstanding throughout the period. (d) Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements, and custodian earnings credits, as applicable. (e) Security Alpha Opportunity Series was initially capitalized on July 7, 2003 with a net asset value of $10 per share. Percentage amounts for the period, except total return, have been annualized. (f) Net expenses prior to performance fee adjustment reflect ratios after voluntary expense waivers, reimbursements, custodian earnings credits, and before performance fee adjustments, as applicable. (g) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 12 See accompanying notes. SECURITY EQUITY FUND Enhanced Index Series (NORTHERN TRUST LOGO) SUBADVISER, NORTHERN TRUST 13 SECURITY EQUITY FUND Performance Summary ENHANCED INDEX SERIES May 15, 2006 (unaudited) PERFORMANCE ENHANCED INDEX SERIES VS. S&P 500 INDEX (PERFORMANCE GRAPH) ENHANCED INDEX SERIES 1/29/99 9,425.00 3/31/99 9,443.85 6/30/99 10,103.60 9/30/99 9,462.70 12/31/99 10,954.79 3/31/00 11,231.04 6/30/00 10,878.58 9/30/00 10,754.74 12/31/00 9,846.88 3/31/01 8,617.22 6/30/01 9,097.56 9/30/01 7,714.19 12/31/01 8,521.16 3/31/02 8,521.16 6/30/02 7,339.53 9/30/02 6,052.23 12/31/02 6,522.96 3/31/03 6,292.40 6/30/03 7,224.25 9/30/03 7,387.56 12/31/03 8,280.99 3/31/04 8,405.88 6/30/04 8,511.55 9/30/04 8,290.60 12/31/04 9,030.31 3/31/05 8,828.57 6/30/05 8,895.82 9/30/05 9,203.23 12/31/05 9,407.34 3/31/06 9,755.04
S&P 500 INDEX INCEPTION 1/29/99 10,000.00 3/31/99 10,075.52 6/30/99 10,785.58 9/30/99 10,111.95 12/31/99 11,616.46 3/31/00 11,883.45 06/30/00 11,568.33 09/30/00 11,456.43 12/31/00 10,560.83 3/31/2001 9,309.30 6/30/2001 9,854.43 9/30/2001 8,408.85 12/31/2001 9,307.93 3/31/2002 9,333.23 6/30/2002 8,083.12 9/30/2002 6,687.10 12/31/2002 7,251.86 3/31/2003 7,023.47 6/30/2003 8,104.60 9/30/2003 8,319.10 12/31/2003 9,332.84 3/31/2004 9,491.17 6/30/2004 9,654.81 9/30/2004 9,473.80 12/31/2004 10,348.59 3/31/2005 10,125.65 6/30/2005 10,263.49 9/30/2005 10,633.86 12/31/2005 10,854.78 3/31/2006 11,311.05
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Enhanced Index Series on January 29, 1999 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance. AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- ---------------- A Shares 10.49% 2.51% 0.48% (1-29-99) A Shares with sales charge 4.15% 1.30% (0.35%) (1-29-99) B Shares 9.73% 1.69% (0.31%) (1-29-99) B Shares with CDSC 4.73% 1.31% (0.31%) (1-29-99) C Shares 9.70% 1.68% (0.29%) (1-29-99) C Shares with CDSC 8.70% 1.68% (0.29%) (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 10.08% Consumer Staples 8.95 Energy 9.57 Financials 20.44 Health Care 12.77 Industrials 11.38 Information Technology 16.00 Materials 3.22 Telecommunication Services 3.27 Utilities 3.28 U.S. Government Securities 0.35 Repurchase Agreement 2.01 Liabilities, less cash & other assets (1.32) ------ Total net assets 100.00% ======
14 See accompanying notes. SECURITY EQUITY FUND Performance Summary ENHANCED INDEX SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Enhanced Index Series - Class A Actual $1,000.00 $1,060.00 $ 8.42 Hypothetical 1,000.00 1,016.75 8.25 Enhanced Index Series - Class B Actual 1,000.00 1,056.20 12.25 Hypothetical 1,000.00 1,013.01 11.99 Enhanced Index Series - Class C Actual 1,000.00 1,056.00 12.25 Hypothetical 1,000.00 1,013.01 11.99
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 6.00%, 5.62% and 5.60%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.64%, 2.39% and 2.39% for Class A, B and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 15 SECURITY EQUITY FUND Schedule of Investments ENHANCED INDEX SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- -------- COMMON STOCKS - 99.0% AEROSPACE & DEFENSE - 2.1% Boeing Company 1,447 $112,765 General Dynamics Corporation 1,000 63,980 Honeywell International, Inc. 400 17,108 Lockheed Martin Corporation 688 51,689 Northrop Grumman Corporation 580 39,608 United Technologies Corporation 380 22,029 -------- 307,179 -------- AIR FREIGHT & LOGISTICS - 0.8% United Parcel Service, Inc. (Cl.B) 1,458 115,736 -------- APPAREL, ACCESSORIES & LUXURY GOODS - 0.1% V.F. Corporation 200 11,380 -------- APPLICATION SOFTWARE - 0.3% Autodesk, Inc.* 100 3,852 Compuware Corporation* 1,500 11,745 Parametric Technology Corporation* 1,800 29,394 -------- 44,991 -------- ASSET MANAGEMENT & CUSTODY BANKS - 1.0% Ameriprise Financial, Inc. 1,204 54,252 Franklin Resources, Inc. 700 65,968 Mellon Financial Corporation 611 21,752 -------- 141,972 -------- AUTOMOBILE MANUFACTURERS - 0.0% Ford Motor Company 400 3,184 -------- AUTOMOTIVE RETAIL - 0.3% AutoNation, Inc.* 2,000 43,100 -------- BIOTECHNOLOGY - 1.5% Amgen, Inc.* 2,164 157,431 Applera Corporation - Applied Biosystems Group 100 2,714 Biogen Idec, Inc.* 1,100 51,810 -------- 211,955 -------- BROADCASTING & CABLE TV - 0.7% CBS Corporation (Cl.B)* 2,906 69,686 Clear Channel Communications, Inc. 400 11,604 Comcast Corporation* 779 20,379 -------- 101,669 -------- BUILDING PRODUCTS - 0.3% Masco Corporation 1,404 45,616 -------- COMMERCIAL PRINTING - 0.3% R.R. Donnelley & Sons Company 1,300 42,536 -------- COMMUNICATIONS EQUIPMENT - 3.0% Ciena Corporation* 700 3,647 Cisco Systems, Inc.* 9,802 212,409 Comverse Technology, Inc.* 1,000 23,530 Corning, Inc.* 100 2,691 Motorola, Inc. 3,653 83,690 Qualcomm, Inc. 1,058 53,545 Tellabs, Inc.* 3,600 57,240 -------- 436,752 -------- COMPUTER HARDWARE - 3.4% Apple Computer, Inc.* 500 $ 31,360 Dell, Inc.* 3,084 91,780 Hewlett-Packard Company 4,908 161,473 International Business Machines Corporation 2,563 211,371 NCR Corporation* 70 2,925 -------- 498,909 -------- COMPUTER STORAGE & PERIPHERALS - 0.4% EMC Corporation* 3,910 53,293 Lexmark International, Inc.* 100 4,538 -------- 57,831 -------- CONSTRUCTION & FARM MACHINERY - 0.8% Caterpillar, Inc. 200 14,362 Deere & Company 400 31,620 Paccar, Inc. 898 63,291 -------- 109,273 -------- CONSUMER FINANCE - 0.8% American Express Company 1,123 59,014 Capital One Financial Corporation 700 56,364 -------- 115,378 -------- DATA PROCESSING & OUTSOURCED SERVICES - 1.0% Automatic Data Processing, Inc. 1,217 55,593 Computer Sciences Corporation* 700 38,885 Fiserv, Inc.* 1,300 55,315 -------- 149,793 -------- DEPARTMENT STORES - 0.5% J.C. Penney Company, Inc. 900 54,369 Sears Holding Corporation* 100 13,224 -------- 67,593 -------- DIVERSIFIED BANKS - 4.4% Bank of America Corporation 6,718 305,938 Comerica, Inc. 1,100 63,767 U.S. Bancorp 3,134 95,587 Wachovia Corporation 1,097 61,487 Wells Fargo & Company 1,806 115,349 -------- 642,128 -------- DIVERSIFIED CHEMICALS - 0.3% Dow Chemical Company 141 5,725 Engelhard Corporation 100 3,961 PPG Industries, Inc. 500 31,675 -------- 41,361 -------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 0.3% Cendant Corporation 2,217 38,465 -------- DIVERSIFIED METALS & MINING - 0.3% Freeport-McMoRan Copper & Gold, Inc. (Cl.B) 800 47,816 --------
16 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ENHANCED INDEX SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- -------- COMMON STOCKS (CONTINUED) DRUG RETAIL - 0.0% Walgreen Company 155 $ 6,685 -------- ELECTRIC UTILITIES - 1.2% American Electric Power Company, Inc. 1,900 64,638 Edison International 1,600 65,888 Entergy Corporation 346 23,853 FPL Group, Inc. 500 20,070 Progress Energy, Inc. - Contingent Value Obligation*(2) 400 128 -------- 174,577 -------- ELECTRICAL COMPONENTS & EQUIPMENT - 0.2% American Power Conversion Corporation 300 6,933 Emerson Electric Company 338 28,267 -------- 35,200 -------- ELECTRONIC EQUIPMENT MANUFACTURERS - 0.1% Agilent Technologies, Inc.* 300 11,265 -------- ELECTRONIC MANUFACTURING SERVICES - 0.2% Molex, Inc. 800 26,560 Sanmina-SCI Corporation* 700 2,870 -------- 29,430 -------- ENVIRONMENTAL & FACILITIES SERVICES - 0.4% Waste Management, Inc. 1,700 60,010 -------- FERTILIZERS & AGRICULTURAL CHEMICALS - 0.2% Monsanto Company 300 25,425 -------- FOOD RETAIL - 1.3% Kroger Company* 3,300 67,188 Safeway, Inc. 2,500 62,800 Supervalu, Inc. 1,700 52,394 -------- 182,382 -------- FOOTWEAR - 0.2% Nike, Inc. (Cl.B) 400 34,040 -------- FOREST PRODUCTS - 0.4% Louisiana-Pacific Corporation 1,113 30,274 Weyerhaeuser Company 300 21,729 -------- 52,003 -------- GENERAL MERCHANDISE STORES - 0.8% Dollar General Corporation 1,400 24,738 Target Corporation 1,806 93,930 -------- 118,668 -------- GOLD - 0.3% Newmont Mining Corporation 900 46,701 -------- HEALTH CARE DISTRIBUTORS - 0.5% AmerisourceBergen Corporation 200 9,654 Cardinal Health, Inc. 882 65,727 -------- 75,381 -------- HEALTH CARE EQUIPMENT - 1.8% Becton, Dickinson & Company 899 $ 55,360 Guidant Corporation 400 31,224 Hospira, Inc.* 1,300 51,298 Medtronic, Inc. 1,693 85,920 Thermo Electron Corporation* 200 7,418 Waters Corporation* 301 12,988 Zimmer Holdings, Inc.* 200 13,520 -------- 257,728 -------- HEALTH CARE FACILITIES - 0.6% HCA, Inc. 1,600 73,264 Tenet Healthcare Corporation* 1,800 13,284 -------- 86,548 -------- HEALTH CARE SERVICES - 0.6% Caremark Rx, Inc.* 500 24,590 IMS Health, Inc. 100 2,577 Laboratory Corporation of America Holdings* 1,000 58,480 -------- 85,647 -------- HOME IMPROVEMENT RETAIL - 1.7% Home Depot, Inc. 3,108 131,468 Lowe's Companies, Inc. 1,672 107,744 -------- 239,212 -------- HOMEBUILDING - 0.6% D.R. Horton, Inc. 1,100 36,542 KB Home 600 38,988 Lennar Corporation 200 12,076 Pulte Homes, Inc. 100 3,842 -------- 91,448 -------- HOMEFURNISHING RETAIL - 0.3% Bed Bath & Beyond, Inc.* 1,200 46,080 -------- HOTELS, RESORTS & CRUISE LINES - 0.7% Carnival Corporation 200 9,474 Hilton Hotels Corporation 2,400 61,104 Marriott International, Inc. 500 34,300 -------- 104,878 -------- HOUSEHOLD APPLIANCES - 0.2% Black & Decker Corporation 300 26,067 -------- HOUSEHOLD PRODUCTS - 1.9% Clorox Company 164 9,815 Kimberly-Clark Corporation 1,396 80,689 Procter & Gamble Company 3,272 188,533 -------- 279,037 -------- HYPERMARKETS & SUPERCENTERS - 1.0% Wal-Mart Stores, Inc. 2,983 140,917 --------
17 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ENHANCED INDEX SERIES March 31, 2006 (unaudited)
NUMBER OF MARKET SHARES VALUE ------- ----------- COMMON STOCKS (CONTINUED) INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.8% Duke Energy Corporation 2,700 $ 78,705 TXU Corporation 806 36,077 ----------- 114,782 ----------- INDUSTRIAL CONGLOMERATES - 4.4% 3M Company 1,027 77,734 General Electric Company 12,741 443,132 Tyco International, Ltd. 4,079 109,644 ----------- 630,510 ----------- INDUSTRIAL GASES - 0.1% Air Products & Chemicals, Inc. 300 20,157 ----------- INDUSTRIAL MACHINERY - 0.8% Illinois Tool Works, Inc. 800 77,048 Ingersoll-Rand Company, Ltd. 1,100 45,969 ----------- 123,017 ----------- INTEGRATED OIL & GAS - 5.0% Chevron Corporation 2,131 123,534 ConocoPhillips 1,198 75,654 Exxon Mobil Corporation(1) 8,315 506,051 Murphy Oil Corporation 200 9,964 Occidental Petroleum Corporation 42 3,891 ----------- 719,094 ----------- INTEGRATED TELECOMMUNICATION SERVICES - 2.7% AT&T, Inc. 5,852 158,238 BellSouth Corporation 1,521 52,703 Citizens Communications Company 2,900 38,483 Qwest Communications International, Inc.* 9,438 64,178 Verizon Communications, Inc. 2,130 72,548 ----------- 386,150 ----------- INTERNET RETAIL - 0.2% Amazon.com, Inc.* 800 29,208 ----------- INTERNET SOFTWARE & SERVICES - 1.0% eBay, Inc.* 872 34,060 Google, Inc.* 200 78,000 Yahoo!, Inc.* 1,184 38,196 ----------- 150,256 ----------- INVESTMENT BANKING & BROKERAGE - 2.1% E*Trade Financial Corporation* 1,700 45,866 Goldman Sachs Group, Inc. 738 115,837 Lehman Brothers Holdings, Inc. 700 101,171 Merrill Lynch & Company, Inc. 525 41,349 ----------- 304,223 ----------- LEISURE PRODUCTS - 0.3% Mattel, Inc. 2,300 41,699 ----------- LIFE & HEALTH INSURANCE - 1.8% AFLAC, Inc. 100 $ 4,513 Jefferson-Pilot Corporation 132 7,384 Lincoln National Corporation 26 1,419 MetLife, Inc. 1,913 92,532 Principal Financial Group, Inc. 1,292 63,050 Prudential Financial, Inc. 1,167 88,470 ----------- 257,368 ----------- MANAGED HEALTH CARE - 1.4% Cigna Corporation 500 65,310 Coventry Health Care, Inc.* 300 16,194 Humana, Inc.* 1,100 57,915 UnitedHealth Group, Inc. 832 46,476 WellPoint, Inc.* 238 18,428 ----------- 204,323 ----------- METAL & GLASS CONTAINERS - 0.2% Ball Corporation 700 30,681 ----------- MOTORCYCLE MANUFACTURERS - 0.3% Harley-Davidson, Inc. 947 49,130 ----------- MOVIES & ENTERTAINMENT - 2.1% News Corporation 5,400 89,694 Time Warner, Inc. 8,413 141,254 Viacom, Inc. (Cl.B)* 1,406 54,553 Walt Disney Company 533 14,865 ----------- 300,366 ----------- MULTI-LINE INSURANCE - 1.3% American International Group, Inc. 2,419 159,872 Genworth Financial, Inc. 500 16,715 Hartford Financial Services Group, Inc. 200 16,110 ----------- 192,697 ----------- MULTI-UTILITIES - 1.3% CMS Energy Corporation* 1,000 12,950 CenterPoint Energy, Inc. 2,400 28,632 Dominion Resources, Inc. 700 48,321 PG&E Corporation 1,200 46,680 Teco Energy, Inc. 3,100 49,972 ----------- 186,555 ----------- OIL & GAS DRILLING - 1.4% Nabors Industries, Ltd.* 1,000 71,580 Noble Corporation 800 64,880 Rowan Companies, Inc. 1,200 52,752 Transocean, Inc.* 100 8,030 ----------- 197,242 ----------- OIL & GAS EQUIPMENT & SERVICES - 0.3% BJ Services Company 200 6,920 Schlumberger, Ltd. 283 35,819 ----------- 42,739 -----------
18 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ENHANCED INDEX SERIES March 31, 2006 (unaudited)
NUMBER OF MARKET SHARES VALUE ------- ----------- COMMON STOCKS (CONTINUED) OIL & GAS EXPLORATION & PRODUCTION - 1.6% Anadarko Petroleum Corporation 600 $ 60,606 Burlington Resources, Inc. 462 42,462 Devon Energy Corporation 1,100 67,287 XTO Energy, Inc. 1,400 60,998 ----------- 231,353 ----------- OIL & GAS REFINING & MARKETING - 0.5% Valero Energy Corporation 1,302 77,825 ----------- OIL & GAS STORAGE & TRANSPORTATION - 0.8% Kinder Morgan, Inc. 600 55,194 Williams Companies, Inc. 3,000 64,170 ----------- 119,364 ----------- OTHER DIVERSIFIED FINANCIAL SERVICES - 3.5% Citigroup, Inc. 6,927 327,232 JP Morgan Chase & Company 3,033 126,294 Morgan Stanley 882 55,407 ----------- 508,933 ----------- PACKAGED FOODS & MEATS - 1.2% Campbell Soup Company 1,700 55,080 ConAgra Foods, Inc. 2,200 47,212 General Mills, Inc. 1,300 65,884 ----------- 168,176 ----------- PAPER PACKAGING - 0.2% Temple-Inland, Inc. 700 31,185 ----------- PHARMACEUTICALS - 6.4% Abbott Laboratories 1,903 80,820 Barr Pharmaceuticals, Inc.* 100 6,298 Bristol-Myers Squibb Company 287 7,063 Eli Lilly & Company 2,243 124,038 Johnson & Johnson 4,447 263,351 King Pharmaceuticals, Inc.* 2,900 50,025 Merck & Company, Inc. 2,676 94,275 Pfizer, Inc. 10,380 258,670 Schering-Plough Corporation 427 8,109 Watson Pharmaceuticals, Inc.* 200 5,748 Wyeth 660 32,023 ----------- 930,420 ----------- PROPERTY & CASUALTY INSURANCE - 1.7% Allstate Corporation 1,310 68,264 Chubb Corporation 600 57,264 Cincinnati Financial Corporation 367 15,440 Progressive Corporation 200 20,852 Safeco Corporation 500 25,105 St. Paul Travelers Companies, Inc. 1,483 61,975 ----------- 248,900 ----------- PUBLISHING - 0.2% Gannett Company, Inc. 420 25,166 ----------- RAILROADS - 1.0% Burlington Northern Santa Fe Corporation 924 $ 76,997 Union Pacific Corporation 700 65,345 ----------- 142,342 ----------- REAL ESTATE INVESTMENT TRUSTS - 0.5% Archstone-Smith Trust 500 24,385 Equity Office Properties Trust 104 3,492 Simon Property Group, Inc. 600 50,484 ----------- 78,361 ----------- REGIONAL BANKS - 1.4% First Horizon National Corporation 707 29,447 KeyCorp 1,800 66,240 PNC Financial Services Group, Inc. 700 47,117 SunTrust Banks, Inc. 7 509 Synovus Financial Corporation 2,100 56,889 ----------- 200,202 ----------- RESTAURANTS - 0.5% Darden Restaurants, Inc. 1,400 57,442 McDonald's Corporation 287 9,861 Yum! Brands, Inc. 200 9,772 ----------- 77,075 ----------- SEMICONDUCTOR EQUIPMENT - 0.1% KLA-Tencor Corporation 300 14,508 ----------- SEMICONDUCTORS - 3.1% Advanced Micro Devices, Inc.* 400 13,264 Analog Devices, Inc. 300 11,487 Freescale Semiconductor, Inc. (Cl.B)* 2,237 62,122 Intel Corporation 8,323 161,050 LSI Logic Corporation* 2,500 28,900 Linear Technology Corporation 100 3,508 National Semiconductor Corporation 2,100 58,464 Texas Instruments, Inc. 3,325 107,963 ----------- 446,758 ----------- SOFT DRINKS - 2.2% Coca-Cola Company 3,715 155,547 Coca-Cola Enterprises, Inc. 100 2,034 Pepsi Bottling Group, Inc. 1,800 54,702 PepsiCo, Inc. 1,936 111,881 ----------- 324,164 ----------- SPECIALIZED FINANCE - 0.5% CIT Group, Inc. 1,200 64,224 Moody's Corporation 100 7,146 ----------- 71,370 ----------- SPECIALTY CHEMICALS - 0.7% International Flavors & Fragrances, Inc. 200 6,864 Rohm & Haas Company 800 39,096 Sigma-Aldrich Corporation 800 52,632 ----------- 98,592 -----------
19 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments ENHANCED INDEX SERIES March 31, 2006 (unaudited)
PRINCIPAL AMOUNT OR NUMBER OF MARKET SHARES VALUE --------- ----------- COMMON STOCKS (CONTINUED) SPECIALTY STORES - 0.2% Office Depot, Inc.* 700 $ 26,068 ----------- STEEL - 0.5% Nucor Corporation 700 73,353 ----------- SYSTEMS SOFTWARE - 3.3% BMC Software, Inc.* 2,500 54,150 CA, Inc. 700 19,047 Microsoft Corporation 11,705 318,493 Oracle Corporation* 3,706 50,735 Symantec Corporation* 2,186 36,790 ----------- 479,215 ----------- THRIFTS & MORTGAGE FINANCE - 1.4% Countrywide Financial Corporation 500 18,350 Federal Home Loan Mortgage Corporation 155 9,455 Federal National Mortgage Association 321 16,499 Golden West Financial Corporation 100 6,790 MGIC Investment Corporation 900 59,967 Washington Mutual, Inc. 2,121 90,397 ----------- 201,458 ----------- TIRES & RUBBER - 0.2% Goodyear Tire & Rubber Company* 1,800 26,064 ----------- TOBACCO - 1.4% Altria Group, Inc. 2,381 168,718 Reynolds American, Inc. 100 10,550 UST, Inc. 400 16,640 ----------- 195,908 ----------- WIRELESS TELECOMMUNICATION SERVICE - 0.6% Sprint Nextel Corporation 3,400 87,856 ----------- TOTAL COMMON STOCKS (cost $13,234,413) 14,348,759 ----------- U.S. GOVERNMENT SECURITIES - 0.3% U.S. Treasury Bill, 4.048%, 04-06-06(1) $ 50,000 49,982 ----------- TOTAL U.S. GOVERNMENT SECURITIES (cost $49,973) 49,982 ----------- REPURCHASE AGREEMENT - 2.0% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $291,106 (Collateralized by GNMA, 4.50%, 11-16-31 with a value of $297,325) $291,000 291,000 ----------- TOTAL REPURCHASE AGREEMENT (cost $291,000) 291,000 ----------- TOTAL INVESTMENTS - 101.3% (cost $13,575,386) 14,689,741 LIABILITIES, LESS CASH & OTHER ASSETS - (1.3%) (190,964) ----------- TOTAL NET ASSETS - 100.0% $14,498,777 ===========
For federal income tax purposes, the identified cost of investments owned at March 31, 2006 was $14,015,326. * Non-income producing security (1) Security is segregated as collateral for open futures contracts. (2) Security is restricted. The total market value of restricted securities is $128 (cost $190), or 0.0% of total net The acquisition dates range from assets. November 8, 1999 to September 28, 2000. 20 See accompanying notes. SECURITY EQUITY FUND ENHANCED INDEX SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ......................................... $14,689,741 Cash ............................................................. 266 Receivables: Fund shares sold .............................................. 15,414 Securities sold ............................................... 128,032 Dividends ..................................................... 17,680 Prepaid expenses ................................................ 22,027 ----------- Total assets ..................................................... 14,873,160 ----------- LIABILITIES: Payable for: Securities purchased .......................................... 206,112 Fund shares redeemed .......................................... 18,974 Variation margin on futures contracts ......................... 420 Management fees ............................................... 6,158 Custodian fees ................................................ 6,000 Transfer agent and administration fees ........................ 4,167 Professional fees ............................................. 6,105 12b-1 distribution plan fees .................................. 126,308 Director's fees ............................................... 139 ----------- Total liabilities ................................................ 374,383 ----------- NET ASSETS ....................................................... $14,498,777 =========== NET ASSETS CONSIST OF: Paid in capital .................................................. $17,247,979 Accumulated undistributed net investment income .................. 2,901 Accumulated net realized loss on sale of investments and futures ....................................................... (3,864,882) Net unrealized appreciation in value of investments and futures ................................................... 1,112,779 ----------- Net assets ....................................................... $14,498,777 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) ................................................... 577,040 Net assets ....................................................... $ 5,828,711 Net asset value and redemption price per share ................... $ 10.10 =========== Maximum offering price per share (net asset value divided by 94.25%) ........................... $ 10.72 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) ................................................... 477,600 Net assets ....................................................... $ 4,578,616 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 9.59 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) ................................................... 425,581 Net assets ....................................................... $ 4,091,450 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 9.61 =========== (1) Investments, at cost ......................................... $13,575,386
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ........................................................ $144,162 Interest ......................................................... 8,504 -------- Total investment income .......................................... 152,666 -------- EXPENSES: Management fees .................................................. 54,306 Transfer agent/maintenance fees .................................. 17,723 Administration fees .............................................. 14,327 Custodian fees ................................................... 9,070 Directors' fees .................................................. 223 Professional fees ................................................ 5,042 Reports to shareholders .......................................... 1,811 Registration fees ................................................ 15,019 Other expenses ................................................... 819 12b-1 distribution plan fees - Class A ........................... 7,549 12b-1 distribution plan fees - Class B ........................... 23,010 12b-1 distribution plan fees - Class C ........................... 19,204 -------- Total expenses ................................................... 168,103 Less: Expenses waived ............................................ (18,102) -------- Net expenses ..................................................... 150,001 -------- Net investment income ............................................ 2,665 -------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain during the period on: Investments ...................................................... 677,396 Futures .......................................................... 8,161 -------- Net realized gain ................................................ 685,557 -------- Net unrealized appreciation (depreciation) during the period on: Investments ...................................................... 122,285 Futures .......................................................... (1,125) -------- Net unrealized appreciation ...................................... 121,160 -------- Net realized and unrealized gain ................................. 806,717 -------- Net increase in net assets resulting from operations ............. $809,382 ========
21 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets ENHANCED INDEX SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ----------- ------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income ........................................... $ 2,665 $ 33,715 Net realized gain during the period on investments and futures .. 685,557 1,298,196 Net unrealized appreciation during the period on investments and futures ...................................................... 121,160 248,274 ----------- ----------- Net increase in net assets resulting from operations ............ 809,382 1,580,185 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ...................................................... (33,479) -- ----------- ----------- Total distributions to shareholders ............................. (33,479) -- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ...................................................... 686,874 1,413,314 Class B ...................................................... 115,844 370,568 Class C ...................................................... 457,241 771,325 Distributions reinvested Class A ...................................................... 32,223 -- Cost of shares redeemed Class A ...................................................... (1,457,109) (2,918,252) Class B ...................................................... (503,864) (1,464,112) Class C ...................................................... (347,839) (616,833) ----------- ----------- Net decrease from capital share transactions .................... (1,016,630) (2,443,990) ----------- ----------- Net decrease in net assets ...................................... (240,727) (863,805) ----------- ----------- NET ASSETS: Beginning of period ............................................. 14,739,504 15,603,309 ----------- ----------- End of period ................................................... $14,498,777 $14,739,504 =========== =========== Accumulated undistributed net investment income at end of period ............................................. $ 2,901 $ 33,715 =========== =========== CAPITAL SHARE ACTIVITY: Shares sold Class A ...................................................... 69,668 153,265 Class B ...................................................... 12,394 41,963 Class C ...................................................... 48,943 87,531 Shares reinvested Class A ...................................................... 3,275 -- Shares redeemed Class A ...................................................... (148,052) (313,759) Class B ...................................................... (54,457) (165,694) Class C ...................................................... (37,729) (70,041)
22 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period ENHANCED INDEX SERIES
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ---------------------------------------------- CLASS A 2006(h) 2005 2004 2003(f) 2002 2001 - ------- ---------------- ------ ------ ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 9.58 $ 8.63 $ 7.69 $ 6.30 $ 8.03 $ 11.29 Income (loss) from investment operations: Net investment income (loss)(c) 0.02 0.06 0.02 -- (0.01) -- Net gain (loss) on securities (realized and unrealized) 0.55 0.89 0.92 1.39 (1.72) (3.17) ------ ------ ------ ------ ------- ------- Total from investment operations 0.57 0.95 0.94 1.39 (1.73) (3.17) ------ ------ ------ ------ ------- ------- Less distributions: Dividends from net investment income (0.05) -- -- -- -- -- Distributions from realized gains -- -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Total distributions (0.05) -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Net asset value, end of period $10.10 $ 9.58 $ 8.63 $ 7.69 $ 6.30 $ 8.03 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 6.00% 11.01% 12.22% 22.06% (21.54%) (28.27%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $5,829 $6,248 $7,017 $6,377 $ 7,171 $ 6,699 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment income (loss) 0.47% 0.64% 0.19% 0.00% (0.10%) 0.02%(g) Total expenses(b) 1.89% 1.81% 1.80% 1.83% 1.61% 1.42% Net expenses(d) 1.64% 1.56% 1.54% 1.73% 1.61% 1.42% Expenses prior to custodian earnings credits and net expense waivers 1.64% 1.56% 1.55% 1.73% 1.61% 1.42% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 96% 104% 79% 60% 62% 40%
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ---------------------------------------------- CLASS B 2006(h) 2005 2004 2003(f) 2002 2001 - ------- ---------------- ------ ------ ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 9.08 $ 8.25 $ 7.40 $ 6.11 $ 7.87 $ 11.15 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.01) (0.01) (0.05) (0.05) (0.07) (0.08) Net gain (loss) on securities (realized and unrealized) 0.52 0.84 0.90 1.34 (1.69) (3.11) ------ ------ ------ ------ ------- ------- Total from investment operations 0.51 0.83 0.85 1.29 (1.76) (3.19) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 9.59 $ 9.08 $ 8.25 $ 7.40 $ 6.11 $ 7.87 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 5.62% 10.06% 11.49% 21.11% (22.36%) (28.81%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $4,579 $4,718 $5,305 $4,929 $ 6,125 $ 7,360 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (0.28%) (0.11%) (0.56%) (0.75%) (0.84%) (0.74%) Total expenses(b) 2.64% 2.56% 2.55% 2.58% 2.35% 2.17% Net expenses(d) 2.39% 2.31% 2.29% 2.48% 2.35% 2.17% Expenses prior to custodian earnings credits and net expense waivers 2.39% 2.31% 2.30% 2.48% 2.35% 2.17% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 96% 104% 79% 60% 62% 40%
23 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period ENHANCED INDEX SERIES
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ---------------------------------------------- CLASS C 2006(h) 2005 2004 2003(f) 2002(e) 2001 - ------- ---------------- ------ ------ ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 9.10 $ 8.27 $ 7.42 $ 6.12 $ 7.88 $ 11.16 Income (loss) from investment operations: Net investment loss(c) (0.01) (0.01) (0.05) (0.05) (0.07) (0.08) Net gain (loss) on securities (realized and unrealized) 0.52 0.84 0.90 1.35 (1.69) (3.11) ------ ------ ------ ------ ------- ------- Total from investment operations 0.51 0.83 0.85 1.30 (1.76) (3.19) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (0.09) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 9.61 $ 9.10 $ 8.27 $ 7.42 $ 6.12 $ 7.88 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 5.60% 10.04% 11.46% 21.24% (22.34%) (28.78%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $4,091 $3,773 $3,281 $2,991 $ 4,129 $ 4,840 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (0.28%) (0.15%) (0.56%) (0.74%) (0.85%) (0.74%) Total expenses(b) 2.64% 2.56% 2.55% 2.57% 2.35% 2.17% Net expenses(d) 2.39% 2.31% 2.29% 2.47% 2.35% 2.17% Expenses prior to custodian earnings credits and net expense waivers 2.39% 2.31% 2.30% 2.47% 2.35% 2.17% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 96% 104% 79% 60% 62% 40%
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and custodian earnings credits. (c) Net investment income (loss) was computed using average shares outstanding throughout the period. (d) Net expense information reflects expense ratios after voluntary expense waivers, reimbursements, and custodian earnings credits, as applicable. (e) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (f) Northern Trust became the sub-adviser for Enhanced Index Series effective May 1, 2003. Prior to May 1, 2003 Security Management Company, LLC (SMC) paid Deutsche Asset Management, Inc. for sub-advisory services. (g) Net investment income is less than $0.01 per share. (h) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 24 See accompanying notes. SECURITY EQUITY FUND Equity Series (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 25 SECURITY EQUITY FUND Performance Summary EQUITY SERIES May 15, 2006 (unaudited) PERFORMANCE EQUITY SERIES VS. S&P 500 INDEX (PERFORMANCE GRAPH) EQUITY SERIES 3/31/96 9,425.00 6/30/96 9,831.83 9/30/96 10,225.11 12/31/96 10,696.97 3/31/97 10,771.25 6/30/97 12,598.65 9/30/97 13,504.92 12/31/97 13,863.11 3/31/98 15,843.55 6/30/98 16,334.57 9/30/98 14,501.43 12/31/98 17,532.39 3/31/99 17,708.07 6/30/99 18,691.85 9/30/99 17,497.26 12/31/99 19,458.63 3/31/00 19,658.67 6/30/00 19,094.92 9/30/00 18,658.46 12/31/00 17,021.45 3/31/01 14,877.85 6/30/01 15,875.37 9/30/01 13,498.31 12/31/01 15,005.20 3/31/02 14,920.30 6/30/02 12,734.25 9/30/02 10,802.89 12/31/02 11,460.83 3/31/03 11,142.47 6/30/03 12,522.02 9/30/03 12,691.81 12/31/03 13,859.51 3/31/04 14,008.31 6/30/04 14,199.62 9/30/04 13,817.00 12/31/04 14,881.97 3/31/05 14,404.84 6/30/05 14,518.44 9/30/05 14,950.13 12/31/05 15,445.86 3/31/06 16,010.95
S&P 500 INDEX 3/31/1996 10,000.00 6/30/96 10,448.35 9/30/96 10,771.35 12/31/96 11,669.70 3/31/97 11,982.19 6/30/97 14,074.30 9/30/97 15,129.75 12/31/97 15,564.72 3/31/98 17,736.01 6/30/98 18,321.85 9/30/98 16,498.67 12/31/98 20,010.98 3/31/99 21,010.92 6/30/99 22,491.65 9/30/99 21,086.90 12/31/99 24,224.31 3/31/00 24,781.07 06/30/00 24,123.94 09/30/00 23,890.59 12/31/00 22,022.97 3/31/2001 19,413.09 6/30/2001 20,549.87 9/30/2001 17,535.34 12/31/2001 19,410.23 3/31/2002 19,462.98 6/30/2002 16,856.08 9/30/2002 13,944.90 12/31/2002 15,122.63 3/31/2003 14,646.35 6/30/2003 16,900.88 9/30/2003 17,348.18 12/31/2003 19,462.18 3/31/2004 19,792.34 6/30/2004 20,133.60 9/30/2004 19,756.13 12/31/2004 21,580.37 3/31/2005 21,115.46 6/30/2005 21,402.90 9/30/2005 22,175.26 12/31/2005 22,635.95 3/31/2006 23,587.44
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Equity Series on March 31, 1996, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance. AVERAGE ANNUAL RETURNS
SINCE PERIODS ENDED 3-31-06 1 YEAR 5 YEARS 10 YEARS INCEPTION - --------------------- ------ ------- -------- --------- A Shares 11.15% 1.48% 5.44% -- A Shares with sales charge 4.71% 0.28% 4.83% -- B Shares 10.41% 0.63% 4.48% -- B Shares with CDSC 5.41% 0.23% 4.48% -- C Shares 10.36% 0.66% N/A (2.34%) (1-29-99) C Shares with CDSC 9.36% 0.66% N/A (2.34%) (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 10.33% Consumer Staples 9.58 Energy 8.30 Financials 17.53 Health Care 12.88 Industrials 18.93 Information Technology 13.03 Materials 3.82 Telecommunication Services 2.19 Utilities 0.42 Exchange Traded Funds 2.74 Repurchase Agreement 0.20 Cash & other assets, less liabilities 0.05 ------ Total net assets 100.00% ======
26 See accompanying notes. SECURITY EQUITY FUND Performance Summary EQUITY SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Equity Series - Class A Actual $1,000.00 $1,071.00 $ 6.82 Hypothetical 1,000.00 1,018.35 6.64 Equity Series - Class B Actual 1,000.00 1,066.20 10.66 Hypothetical 1,000.00 1,014.61 10.40 Equity Series - Class C Actual 1,000.00 1,065.90 10.66 Hypothetical 1,000.00 1,014.61 10.40
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 7.10%, 6.62% and 6.59%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.32%, 2.07% and 2.07% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 27 SECURITY EQUITY FUND Schedule of Investments EQUITY SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ------------ COMMON STOCKS - 99.7% AEROSPACE & DEFENSE - 6.4% General Dynamics Corporation 178,000 $ 11,388,440 L-3 Communications Holdings, Inc. 42,000 3,603,180 United Technologies Corporation 202,900 11,762,113 ------------ 26,753,733 ------------ AIR FREIGHT & LOGISTICS - 2.9% FedEx Corporation 107,700 12,163,638 ------------ ALUMINUM - 1.7% Alcoa, Inc. 232,000 7,089,920 ------------ BIOTECHNOLOGY - 2.4% Amgen, Inc.* 139,100 10,119,525 ------------ BROADCASTING & CABLE TV - 2.0% CBS Corporation (Cl.B)* 137,500 3,297,250 Univision Communications, Inc.* 142,200 4,901,634 ------------ 8,198,884 ------------ COMMUNICATIONS EQUIPMENT - 3.8% ADC Telecommunications, Inc.* 224,657 5,748,973 Cisco Systems, Inc.* 469,400 10,171,898 ------------ 15,920,871 ------------ CONSTRUCTION & ENGINEERING - 1.9% Shaw Group, Inc.* 265,800 8,080,320 ------------ CONSUMER FINANCE - 2.7% American Express Company 178,900 9,401,195 PHH Corporation* 71,800 1,917,060 ------------ 11,318,255 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 3.0% First Data Corporation 270,200 12,650,764 ------------ DRUG RETAIL - 2.7% CVS Corporation 371,600 11,099,692 ------------ ELECTRIC UTILITIES - 0.4% KFx, Inc.* 97,000 1,765,400 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 0.6% Power-One, Inc.* 369,000 2,656,800 ------------ EXCHANGE TRADED FUNDS - 2.8% S & P Depositary Receipts Trust 88,000 11,425,040 ------------ HEALTH CARE EQUIPMENT - 4.1% Medtronic, Inc. 162,400 8,241,800 Zimmer Holdings, Inc.* 128,200 8,666,320 ------------ 16,908,120 ------------ HEALTH CARE SERVICES - 1.2% Medco Health Solutions, Inc.* 86,150 4,929,503 ------------ HOME IMPROVEMENT RETAIL - 2.8% Home Depot, Inc. 273,100 11,552,130 ------------ HOTELS, RESORTS & CRUISE LINES - 2.5% Carnival Corporation 216,500 10,255,605 ------------ HYPERMARKETS & SUPERCENTERS - 5.4% Costco Wholesale Corporation 206,900 $ 11,205,704 Wal-Mart Stores, Inc. 240,200 11,347,048 ------------ 22,552,752 ------------ INDUSTRIAL CONGLOMERATES - 7.0% General Electric Company 552,800 19,226,384 Tyco International, Ltd. 373,000 10,026,240 ------------ 29,252,624 ------------ INDUSTRIAL GASES - 2.1% Praxair, Inc. 160,000 8,824,000 ------------ INTEGRATED OIL & GAS - 4.9% Chevron Corporation 120,000 6,956,400 Exxon Mobil Corporation 221,100 13,456,146 ------------ 20,412,546 ------------ IT CONSULTING & OTHER SERVICES - 2.2% Unisys Corporation* 1,343,300 9,255,337 ------------ MANAGED HEALTH CARE - 2.5% WellPoint, Inc.* 136,100 10,538,223 ------------ MOVIES & ENTERTAINMENT - 3.1% Time Warner, Inc. 460,000 7,723,400 Viacom, Inc. (Cl.B)* 137,500 5,335,000 ------------ 13,058,400 ------------ MULTI-LINE INSURANCE - 4.5% American International Group, Inc. 282,500 18,670,425 ------------ OIL & GAS EQUIPMENT & SERVICES - 3.4% BJ Services Company 128,200 4,435,720 Halliburton Company 133,500 9,748,170 ------------ 14,183,890 ------------ OTHER DIVERSIFIED FINANCIAL SERVICES - 7.5% Citigroup, Inc. 285,600 13,491,744 First Marblehead Corporation(1) 274,700 11,880,775 JP Morgan Chase & Company 143,800 5,987,832 ------------ 31,360,351 ------------ PACKAGED FOODS & MEATS - 1.5% Tyson Foods, Inc. 458,000 6,292,920 ------------ PHARMACEUTICALS - 2.7% Johnson & Johnson 189,000 11,192,580 ------------ PROPERTY & CASUALTY INSURANCE - 2.8% Berkshire Hathaway, Inc.* 130 11,745,500 ------------ SYSTEMS SOFTWARE - 4.0% Microsoft Corporation 606,200 16,494,702 ------------ WIRELESS TELECOMMUNICATION SERVICE - 2.2% Sprint Nextel Corporation 353,200 9,126,688 ------------ TOTAL COMMON STOCKS (cost $320,007,160) 415,849,138 ------------
28 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments EQUITY SERIES March 31, 2006 (unaudited)
PRINCIPAL MARKET AMOUNT VALUE --------- ------------ REPURCHASE AGREEMENT - 0.2% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $816,296 (Collateralized by FHLMC, 4.35%, 06-02-08 with a value of $833,175) $816,000 $ 816,000 ------------ TOTAL REPURCHASE AGREEMENT (cost $816,000) 816,000 ------------ TOTAL INVESTMENTS - 99.9% (cost $320,823,160) 416,665,138 CASH & OTHER ASSETS, LESS LIABILITIES - 0.1% 262,383 ------------ TOTAL NET ASSETS - 100.0% $416,927,521 ============
The identified cost of investments owned at March 31, 2006 was the same for federal income tax and financial statement purposes. * Non-income producing security (1) Security is segregated as collateral for open written option contracts. 29 See accompanying notes. SECURITY EQUITY FUND EQUITY SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ....................................... $416,665,138 Cash ........................................................... 240 Receivables: Securities sold ............................................. 10,188,517 Fund shares sold ............................................ 37,926 Dividends ................................................... 277,802 Prepaid expenses ............................................... 41,532 ------------ Total assets ................................................... 427,211,155 ------------ LIABILITIES: Payable for: Securities purchased ........................................ 9,229,276 Fund shares redeemed ........................................ 359,730 Written options, at value (premiums received, $152,571) ..... 194,560 Management fees ............................................. 266,984 Custodian fees .............................................. 6,400 Transfer agent and administration fees ...................... 55,840 Professional fees ........................................... 36,397 12b-1 distribution plan fees ................................ 121,842 Director's fees ............................................. 2,211 Other ....................................................... 10,394 ------------ Total liabilities .............................................. 10,283,634 ------------ NET ASSETS ..................................................... $416,927,521 ------------ NET ASSETS CONSIST OF: Paid in capital ................................................ $314,065,127 Accumulated undistributed net investment loss .................. (254,312) Accumulated undistributed net realized gain on sale of investments and options written ............................. 7,316,717 Net unrealized appreciation in value of investments and options written ..................................................... 95,799,989 ------------ Net assets ..................................................... $416,927,521 ============ CLASS A: Capital shares outstanding (unlimited number of shares authorized) ................................................. 54,896,280 Net assets ..................................................... $373,125,529 Net asset value and redemption price per share ................. $ 6.80 ============ Maximum offering price per share (net asset value divided by 94.25%) ..................................................... $ 7.21 ============ CLASS B: Capital shares outstanding (unlimited number of shares authorized) ................................................. 6,273,124 Net assets ..................................................... $ 37,708,647 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge)...................................................... $ 6.01 ============ CLASS C: Capital shares outstanding (unlimited number of shares authorized) ................................................. 958,050 Net assets ..................................................... $ 6,093,345 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ..................................................... $ 6.36 ============ (1) Investments, at cost ....................................... $320,823,160
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends .................................................... $ 2,532,449 Interest ..................................................... 184,228 ----------- Total investment income ...................................... 2,716,677 ----------- EXPENSES: Management fees .............................................. 1,565,892 Transfer agent/maintenance fees .............................. 354,133 Administration fees .......................................... 196,111 Custodian fees ............................................... 8,380 Directors' fees .............................................. 5,539 Professional fees ............................................ 28,609 Reports to shareholders ...................................... 49,365 Registration fees ............................................ 20,693 Other expenses ............................................... 11,636 12b-1 distribution plan fees - Class A ....................... 466,090 12b-1 distribution plan fees - Class B ....................... 194,445 12b-1 distribution plan fees - Class C ....................... 29,053 ----------- Total expenses ............................................... 2,929,946 ----------- Net investment loss .......................................... (213,269) ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain during the period on: Investments .................................................. 14,664,518 Options written .............................................. 591,964 ----------- Net realized gain ............................................ 15,256,482 ----------- Net unrealized appreciation (depreciation) during the period on: Investments .................................................. 13,033,943 Options written .............................................. (77,792) ----------- Net unrealized appreciation .................................. 12,956,151 ----------- Net realized and unrealized gain ............................. 28,212,633 ----------- Net increase in net assets resulting from operations ......... $27,999,364 ===========
30 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets EQUITY SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ................................. $ (213,269) $ 2,106,508 Net realized gain during the period on investments and options written ................................................... 15,256,482 5,986,078 Net unrealized appreciation during the period on investments and options written ....................................... 12,956,151 26,726,517 ------------ ------------ Net increase in net assets resulting from operations ......... 27,999,364 34,819,103 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ................................................... (2,147,551) -- Net realized gain Class A ................................................... (11,068,147) (26,380,459) Class B ................................................... (1,320,160) (3,538,521) Class C ................................................... (182,232) (441,254) ------------ ------------ Total distributions to shareholders .......................... (14,718,090) (30,360,234) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ................................................... 11,467,279 27,211,499 Class B ................................................... 3,713,847 7,524,651 Class C ................................................... 620,581 1,434,117 Distributions reinvested Class A ................................................... 12,004,929 24,060,300 Class B ................................................... 1,296,700 3,490,102 Class C ................................................... 180,424 436,627 Cost of shares redeemed Class A ................................................... (37,584,390) (71,972,519) Class B ................................................... (8,403,144) (20,528,055) Class C ................................................... (597,977) (2,480,994) ------------ ------------ Net decrease from capital share transactions ................. (17,301,751) (30,824,272) ------------ ------------ Net decrease in net assets ................................... (4,020,477) (26,365,403) ------------ ------------ NET ASSETS: Beginning of period .......................................... 420,947,998 447,313,401 ------------ ------------ End of period ................................................ $416,927,521 $420,947,998 ============ ============ Accumulated undistributed net investment income (loss) at end of period ....................................................... $ (254,312) $ 2,106,508 ============ ============ CAPITAL SHARE ACTIVITY: Shares sold Class A ................................................... 1,708,865 4,214,004 Class B ................................................... 623,647 1,306,540 Class C ................................................... 99,198 233,732 Shares reinvested Class A ................................................... 1,816,177 3,673,328 Class B ................................................... 221,280 597,620 Class C ................................................... 29,101 70,881 Shares redeemed Class A ................................................... (5,627,072) (11,058,402) Class B ................................................... (1,422,596) (3,529,552) Class C ................................................... (96,378) (406,368)
31 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period EQUITY SERIES
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED ------------------------------------------------- MARCH 31, 2002 CLASS A 2006(g) 2005 2004 2003 (c, e) 2001 - ------- ---------- -------- -------- -------- -------- -------- PER SHARE DATA Net asset value, beginning of period $ 6.58 $ 6.50 $ 5.98 $ 5.09 $ 6.36 $ 10.26 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income(b) -- 0.04 0.01 0.01 0.01 -- Net gain (loss) on securities (realized and unrealized) 0.46 0.49 0.52 0.88 (1.28) (2.49) -------- -------- -------- -------- -------- -------- Total from investment operations 0.46 0.53 0.53 0.89 (1.27) (2.49) -------- -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income (0.04) -- (0.01) -- -- -- Distributions from realized gains (0.20) (0.45) -- -- -- (1.40) Return of capital -- -- -- -- -- (0.01) -------- -------- -------- -------- -------- -------- Total distributions (0.24) (0.45) (0.01) -- -- (1.41) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 6.80 $ 6.58 $ 6.50 $ 5.98 $ 5.09 $ 6.36 ======== ======== ======== ======== ======== ======== TOTAL RETURN(a) 7.10% 8.20% 8.87% 17.49% (19.97%) (27.66%) -------- -------- -------- -------- -------- -------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $373,126 $375,280 $391,384 $430,161 $412,791 $563,553 -------- -------- -------- -------- -------- -------- Ratios to average net assets: Net investment income (loss) (0.02%)(f) 0.57% 0.08% 0.23% 0.13% 0.03%(f) Total expenses 1.32% 1.30% 1.28% 1.25% 1.11% 1.02% -------- -------- -------- -------- -------- -------- Portfolio turnover rate 36% 32% 28% 54% 30% 23%
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED --------------------------------------------------- MARCH 31, 2002 CLASS B 2006(g) 2005 2004 2003 (c, e) 2001 - ------- ---------- ------- ------- ------- -------- ------- PER SHARE DATA Net asset value, beginning of period $ 5.83 $ 5.85 $ 5.41 $ 4.64 $ 5.86 $ 9.65 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.02) (0.01) (0.04) (0.03) (0.05) (0.07) Net gain (loss) on securities (realized and unrealized) 0.40 0.44 0.48 0.80 (1.17) (2.31) ------- ------- ------- ------- ------- ------- Total from investment operations 0.38 0.43 0.44 0.77 (1.22) (2.38) ------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains (0.20) (0.45) -- -- -- (1.40) Return of capital -- -- -- -- -- (0.01) ------- ------- ------- ------- ------- ------- Total distributions (0.20) (0.45) -- -- -- (1.41) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 6.01 $ 5.83 $ 5.85 $ 5.41 $ 4.64 $ 5.86 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 6.62% 7.35% 8.13% 16.59% (20.82%) (28.34%) ------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $37,709 $39,962 $49,600 $61,733 $66,267 $96,067 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.77%) (0.16%) (0.67%) (0.52%) (0.78%) (0.97%) Total expenses 2.07% 2.05% 2.03% 2.00% 2.02% 2.02% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 36% 32% 28% 54% 30% 23%
32 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period EQUITY SERIES
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED ------------------------------------------------ MARCH 31, 2002 CLASS C 2006(g) 2005 2004 2003 (c, d, e) 2001 - ------- ---------- ------ ------ ------ --------- ------- PER SHARE DATA Net asset value, beginning of period $ 6.16 $ 6.16 $ 5.69 $ 4.88 $ 6.16 $ 10.07 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.02) (0.01) (0.04) (0.03) (0.05) (0.07) Net gain (loss) on securities (realized and unrealized) 0.42 0.46 0.51 0.84 (1.23) (2.43) ------ ------ ------ ------ ------- ------- Total from investment operations 0.40 0.45 0.47 0.81 (1.28) (2.50) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains (0.20) (0.45) -- -- -- (1.40) Return of capital -- -- -- -- -- (0.01) ------ ------ ------ ------ ------- ------- Total distributions (0.20) (0.45) -- -- -- (1.41) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 6.36 $ 6.16 $ 6.16 $ 5.69 $ 4.88 $ 6.16 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 6.59% 7.32% 8.26% 16.60% (20.78%) (28.35%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $6,093 $5,706 $6,329 $6,651 $ 4,979 $ 4,230 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (0.77%) (0.18%) (0.67%) (0.52%) (0.76%) (0.97%) Total expenses 2.07% 2.05% 2.03% 2.00% 2.02% 2.02% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 36% 32% 28% 54% 30% 23%
(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 and C. (b) Net investment income (loss) was computed using average shares outstanding throughout the period. (c) The financial highlights for the Equity Series exclude the historical financial highlights of the Total Return Series Class A, B and C shares. The assets of the Total Return Series were acquired by the Equity Series on August 27, 2002. (d) The financial highlights for Class C shares exclude the historical financial highlights of class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (e) Effective May 1, 2002 the fee structure for Equity Series changed. Per share information reflects this change. (f) Net investment income is less than $0.01 per share. (g) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 33 See accompanying notes. This page left blank intentionally. 34 SECURITY EQUITY FUND Global Series (OPPENHEIMER FUNDS(R) LOGO) SUBADVISER, OPPENHEIMERFUNDS, INC. 35 SECURITY EQUITY FUND Performance Summary GLOBAL SERIES May 15, 2006 (unaudited) PERFORMANCE GLOBAL SERIES VS. MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX (PERFORMANCE GRAPH) GLOBAL SERIES 3/31/96 9,425.00 6/30/96 9,935.55 9/30/96 10,065.22 12/31/96 10,369.18 3/31/97 10,619.04 6/30/97 11,689.87 9/30/97 12,100.36 12/31/97 11,085.60 3/31/98 12,781.97 6/30/98 12,505.82 9/30/98 11,075.74 12/31/98 13,214.27 3/31/99 13,458.98 6/30/99 14,650.61 9/30/99 14,884.68 12/31/99 20,458.94 3/31/00 23,197.63 6/30/00 22,350.49 9/30/00 21,886.31 12/31/00 21,084.30 3/31/01 18,055.85 6/30/01 19,333.25 9/30/01 15,845.52 12/31/01 18,299.85 3/31/02 18,558.20 6/30/02 16,807.16 9/30/02 13,620.83 12/31/02 13,879.18 3/31/03 12,716.60 6/30/03 15,357.52 9/30/03 16,764.10 12/31/03 19,649.02 3/31/04 20,452.77 6/30/04 20,194.42 9/30/04 19,993.48 12/31/04 23,179.81 3/31/05 22,361.70 6/30/05 23,007.58 9/30/05 25,074.38 12/31/05 26,208.26 3/31/06 28,059.77
MSCI WORLD INDEX 3/31/1996 10,000.00 6/30/1996 10,300.52 9/30/1996 10,449.35 12/31/1996 10,940.43 3/31/1997 10,983.88 6/30/1997 12,649.90 9/30/1997 13,024.76 12/31/1997 12,716.37 3/31/1998 14,550.59 6/30/1998 14,859.28 9/30/1998 13,090.91 12/31/1998 15,869.11 3/31/1999 16,448.41 6/30/1999 17,248.47 9/30/1999 17,006.09 12/31/1999 19,890.57 3/31/2000 20,106.67 6/30/2000 19,407.38 9/30/2000 18,446.40 12/31/2000 17,318.66 3/31/2001 15,105.81 6/30/2001 15,525.45 9/30/2001 13,304.44 12/31/2001 14,457.33 3/31/2002 14,518.77 6/30/2002 13,212.39 9/30/2002 10,793.95 12/31/2002 11,629.65 3/31/2003 11,054.54 6/30/2003 12,960.72 9/30/2003 13,599.90 12/31/2003 15,539.36 3/31/2004 15,945.71 6/30/2004 16,083.90 9/30/2004 15,923.40 12/31/2004 17,825.87 3/31/2005 17,630.20 6/30/2005 17,703.73 9/30/2005 18,938.94 12/31/2005 19,537.11 3/31/2006 20,846.66
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Global Series on March 31, 1996, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The MSCI World Index is an unmanaged capitalization-weighted index that is designed to measure global developed market equity performance. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 18.14% Consumer Staples 8.64 Energy 6.41 Financials 15.86 Health Care 13.56 Industrials 8.89 Information Technology 19.85 Materials 1.17 Telecommunication Services 5.25 Utilities 1.37 Repurchase Agreement 0.65 Cash & other assets, less liabilities 0.21 ------ Total net assets 100.00% ======
AVERAGE ANNUAL RETURNS
SINCE PERIODS ENDED 3-31-06 1 YEAR 5 YEARS 10 YEARS INCEPTION - --------------------- ------ ------- -------- --------- A Shares 25.48% 9.22% 11.53% -- A Shares with sales charge 18.27% 7.93% 10.87% -- B Shares 25.33% 8.74% 10.86% -- B Shares with CDSC 20.33% 8.45% 10.86% -- C Shares 24.58% 8.37% N/A 9.86% (1-29-99) C Shares with CDSC 23.58% 8.37% N/A 9.86% (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waivers, the performance quoted would be reduced. 36 See accompanying notes. SECURITY EQUITY FUND Performance Summary GLOBAL SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Global Series - Class A Actual $1,000.00 $1,119.10 $ 9.09 Hypothetical 1,000.00 1,016.36 8.65 Global Series - Class B Actual 1,000.00 1,120.40 7.82 Hypothetical 1,000.00 1,017.55 7.44 Global Series - Class C Actual 1,000.00 1,114.80 13.08 Hypothetical 1,000.00 1,012.57 12.44
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 11.91%, 12.04% and 11.48%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.72%, 1.48% and 2.48% for Class A, B and C shares, respectively), net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 37 SECURITY EQUITY FUND Schedule of Investments GLOBAL SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS - 98.6% AUSTRALIA - 0.3% Macquarie Airports 173,602 $ 418,483 ----------- BERMUDA - 0.6% Ace, Ltd. 17,740 922,657 ----------- BRAZIL - 1.5% Companhia de Bebidas das Americas ADR 21,357 917,497 Empresa Brasileira de Aeronautica S.A. ADR 36,568 1,347,531 ----------- 2,265,028 ----------- CANADA - 1.7% Husky Energy, Inc. 30,080 1,819,791 Manulife Financial Corporation 12,673 795,020 ----------- 2,614,811 ----------- CAYMAN ISLANDS - 0.3% XL Capital, Ltd. 8,300 532,113 ----------- DENMARK - 0.3% Novo Nordisk A/S (Cl.B) 6,300 391,685 ----------- FINLAND - 0.7% Fortum Oyj 34,300 865,135 Neste Oil Oyj 5,325 183,016 ----------- 1,048,151 ----------- FRANCE - 6.8% European Aeronautic Defence & Space Company 39,810 1,676,896 JC Decaux S.A.* 18,760 507,494 LVMH Moet Hennessy Louis Vuitton S.A 18,350 1,798,431 Sanofi-Aventis 26,585 2,528,224 Societe Generale 10,880 1,635,724 Technip S.A 26,470 1,790,962 Total S.A 2,525 665,931 ----------- 10,603,662 ----------- GERMANY - 4.2% Allianz AG 10,437 1,742,092 Bayerische Motoren Werke (BMW) AG 24,869 1,369,309 SAP AG 7,918 1,717,125 Siemens AG 17,817 1,662,877 ----------- 6,491,403 ----------- HONG KONG - 1.8% HSBC Holdings plc 89,489 1,498,173 Hong Kong & China Gas Company, Ltd. 305,400 737,995 Hutchison Whampoa, Ltd. 55,082 505,089 ----------- 2,741,257 ----------- INDIA - 3.1% Hindustan Lever, Ltd. 216,100 1,319,028 ICICI Bank, Ltd. ADR 19,750 546,680 Infosys Technologies, Ltd. 27,087 1,812,223 Zee Telefilms, Ltd. 210,700 1,130,038 ----------- 4,807,969 ----------- IRELAND - 0.4% Anglo Irish Bank Corporation plc 39,413 $ 649,363 ----------- ITALY - 0.2% Bulgari SpA 19,700 236,987 ----------- JAPAN - 11.1% Canon, Inc. 8,000 529,369 Chugai Pharmaceutical Company, Ltd. 29,300 531,370 Credit Saison Company, Ltd. 18,200 1,006,430 Fanuc, Ltd. 4,800 461,958 Hoya Corporation 25,700 1,036,951 JGC Corporation 18,000 353,960 KDDI Corporation 288 1,538,773 Kao Corporation 21,000 552,984 Keyence Corporation 3,190 829,170 Kyocera Corporation 4,600 407,152 Murata Manufacturing Company, Ltd. 19,000 1,286,303 Nidec Corporation 6,300 516,951 Nintendo Company, Ltd. 4,100 612,954 Resona Holdings, Inc.* 238 818,773 Shionogi & Company, Ltd. 72,000 1,180,990 Shiseido Company, Ltd. 37,000 688,299 Sony Corporation 43,300 2,004,544 Square Enix Corporation, Ltd. 26,500 684,307 Takeda Pharmaceutical Company, Ltd. 12,800 729,565 Toyota Motor Corporation 25,400 1,387,318 ----------- 17,158,121 ----------- KOREA - 2.4% Hyundai Heavy Industries Company, Ltd. 9,049 789,663 SK Telecom Company, Ltd. ADR 60,160 1,419,174 Samsung Electronics Company, Ltd. 2,421 1,569,570 ----------- 3,778,407 ----------- MEXICO - 1.9% Fomento Economico Mexicano, S.A. de C.V 109,500 1,008,776 Grupo Modelo, S.A. de C.V. (Cl.C) 150,300 548,752 Grupo Televisa S.A. ADR 66,656 1,326,454 ----------- 2,883,982 ----------- NETHERLANDS - 1.1% Koninklijke (Royal) Philips Electronics N.V 52,200 1,763,714 ----------- NORWAY - 0.3% Tandberg ASA 53,600 484,470 ----------- PANAMA - 0.9% Carnival Corporation 30,100 1,425,837 ----------- PORTUGAL - 0.3% Energias de Portugal S.A 134,182 526,682 ----------- SINGAPORE - 0.4% Singapore Press Holdings, Ltd. 223,848 623,262 -----------
38 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments GLOBAL SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ------------ COMMON STOCKS (CONTINUED) SPAIN - 0.7% Industria de Diseno Textil S.A 29,200 $ 1,126,682 ------------ SWEDEN - 4.7% Hennes & Mauritz AB (Cl.B) 65,200 2,377,027 Investor AB (Cl.B)** 31,734 576,434 Telefonaktiebolaget LM Ericsson (Cl.B) 1,142,400 4,340,882 ------------ 7,294,343 ------------ SWITZERLAND - 3.1% Credit Suisse Group 32,917 1,846,037 Novartis AG 15,321 851,591 Roche Holding AG 11,835 1,761,163 Syngenta AG* 2,102 295,232 ------------ 4,754,023 ------------ TAIWAN - 0.6% Taiwan Semiconductor Manufacturing Company, Ltd. ADR 97,735 983,214 ------------ UNITED KINGDOM - 11.2% 3i Group plc** 42,636 696,226 BP plc ADR 19,367 1,335,161 Burberry Group plc 59,971 482,100 Cadbury Schweppes plc 154,604 1,536,779 Diageo plc 10,030 157,864 Gus plc 26,090 478,358 Pearson plc 64,990 901,025 Prudential plc 114,339 1,325,137 Reckitt Benckiser plc 77,294 2,718,945 Royal Bank of Scotland Group plc 69,889 2,274,017 Smith & Nephew plc 102,102 905,879 Tesco plc 131,150 752,015 Vodafone Group plc 1,602,300 3,352,325 WPP Group plc 41,880 502,458 ------------ 17,418,289 ------------ UNITED STATES - 38.0% 3M Company 20,500 1,551,645 Adobe Systems, Inc. 23,900 834,588 Advanced Micro Devices, Inc.* 89,300 2,961,188 Affymetrix, Inc.* 14,700 484,071 Altera Corporation* 33,600 693,504 Altria Group, Inc. 5,100 361,386 Amazon.com, Inc.* 10,900 397,959 American Express Company 16,900 888,095 Amgen, Inc.* 17,300 1,258,575 AtheroGenics, Inc.* 6,100 99,552 Automatic Data Processing, Inc. 20,800 950,144 Avon Products, Inc. 23,000 716,910 Berkshire Hathaway, Inc. (Cl.B)* 270 813,240 Biomet, Inc. 25,900 919,968 Boeing Company 12,800 997,504 Boston Scientific Corporation* 51,600 1,189,380 Burlington Resources, Inc. 13,300 1,222,403 Cendant Corporation 50,800 $ 881,380 Chevron Corporation 15,766 913,955 Cisco Systems, Inc.* 42,700 925,309 Citigroup, Inc. 7,866 371,590 Coach, Inc.* 22,700 784,966 Conor Medsystems, Inc.* 9,400 276,360 Corning, Inc.* 67,700 1,821,807 Cree, Inc.* 26,100 856,341 eBay, Inc.* 52,600 2,054,556 Emerson Electric Company 11,900 995,197 Everest Re Group, Ltd. 4,800 448,176 Express Scripts, Inc.* 8,200 720,780 First Data Corporation 4,700 220,054 Genentech, Inc.* 8,500 718,335 Gilead Sciences, Inc.* 20,600 1,281,732 GlobalSantaFe Corporation 25,000 1,518,750 Guidant Corporation 1,000 78,060 ImClone Systems, Inc.* 8,800 299,376 International Business Machines Corporation 12,867 1,061,141 International Game Technology 29,000 1,021,380 International Rectifier Corporation* 19,300 799,599 Intuit, Inc.* 24,000 1,276,560 JP Morgan Chase & Company 29,269 1,218,761 Johnson & Johnson 6,400 379,008 Juniper Networks, Inc.* 24,600 470,352 Lockheed Martin Corporation 10,100 758,813 Medtronic, Inc. 8,500 431,375 Microsoft Corporation 78,500 2,135,985 Morgan Stanley 26,600 1,671,012 Nektar Therapeutics*(1, 2) 10,308 168,062 Northern Trust Corporation 26,400 1,386,000 Northrop Grumman Corporation 11,200 764,848 Novell, Inc.* 102,400 786,432 Nuvelo, Inc.* 4,000 71,280 Pfizer, Inc. 24,938 621,455 Procter & Gamble Company 9,727 560,470 Qualcomm, Inc. 26,240 1,328,006 Quest Diagnostics, Inc. 20,800 1,067,040 Raytheon Company 22,200 1,017,648 Sirius Satellite Radio, Inc.* 262,100 1,331,468 Starbucks Corporation* 22,400 843,136 Theravance, Inc.* 12,800 358,912 Tiffany & Company 9,100 341,614 Transocean, Inc.* 24,900 1,999,470 Wal-Mart Stores, Inc. 33,000 1,558,920 Walt Disney Company 33,800 942,682 Wyeth 13,900 674,428 Yahoo!, Inc.* 11,200 361,312 ------------ 58,914,005 ------------ TOTAL COMMON STOCKS (cost $111,480,195) 152,858,600 ------------
39 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments GLOBAL SERIES March 31, 2006 (unaudited)
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE ---------- ------------ PREFERRED STOCK - 0.5% GERMANY - 0.5% Porsche AG 870 $ 832,637 ------------ TOTAL PREFERRED STOCK (cost $363,292) 832,637 ------------ REPURCHASE AGREEMENT - 0.7% State Street Bank, 1.75%, dated 03-31-06, matures 04-03-06; repurchase amount of $1,000,240 (Collateralized by FNMA, 3.00%, 08-15-07 with a value of $1,024,822) $1,000,094 1,000,094 ------------ TOTAL REPURCHASE AGREEMENT (cost $1,000,094) 1,000,094 ------------ TOTAL INVESTMENTS - 99.8% (cost $112,843,581) 154,691,331 CASH & OTHER ASSETS, LESS LIABILITIES - 0.2% 324,796 ------------ TOTAL NET ASSETS - 100.0% $155,016,127 ============
INVESTMENT CONCENTRATION At March 31, 2006, Global Series' investment concentration by industry was as follows: Aerospace & Defense ................................................... 1.1% Air Freight & Logistics ............................................... 3.1% Automobiles ........................................................... 2.3% Beverages ............................................................. 2.7% Biotechnology ......................................................... 2.7% Capital Markets ....................................................... 2.0% Chemicals ............................................................. 0.2% Commercial Banks ...................................................... 2.0% Commercial Services & Supplies ........................................ 0.9% Communications Equipment .............................................. 4.9% Computers & Peripherals ............................................... 0.7% Construction & Engineering ........................................... 0.2% Consumer Finance ...................................................... 1.2% Diversified Financial Services ........................................ 6.4% Diversified Telecommunications ........................................ 2.2% Electric Utilities .................................................... 0.3% Electrical Equipment .................................................. 0.6% Electronic Equipment & Instruments .................................... 2.0% Energy Equipment & Services ........................................... 1.2% Food & Staples Retailing .............................................. 1.5% Gas Utilities ......................................................... 0.5% Health Care Equipment & Services ...................................... 3.1% Health Care Providers & Services ...................................... 1.1% Hotels, Restaurants & Leisure Products ................................ 2.1% Household Durables .................................................... 3.4% Household Products .................................................... 3.0% Industrial Conglomerates .............................................. 2.1% Insurance ............................................................. 4.2% Internet & Catalog Retail ............................................. 0.6% Internet Software & Services .......................................... 2.1% IT Services ........................................................... 1.9% Leisure Equipment & Products .......................................... 0.4% Machinery ............................................................. 0.8% Media ................................................................. 4.6% Multi-Utilities ....................................................... 0.6% Oil, Gas & Consumable Fuels ........................................... 5.2% Paper & Forest Products ............................................... 1.0% Personal Products ..................................................... 1.3% Pharmaceuticals ....................................................... 6.6% Semiconductors & Semiconductor Equipment .............................. 4.1% Software .............................................................. 4.3% Specialty Retail ...................................................... 0.2% Textiles, Apparel & Luxury Goods ...................................... 4.4% Tobacco ............................................................... 0.2% Wireless Telecommunications ........................................... 3.1% Repurchase agreement .................................................. 0.7% Cash & other assets, less liabilities ................................. 0.2% ----- 100.0% =====
For federal income tax purposes the identified cost of investments owned at March 31, 2006 was $114,244,819. * Non-income producing security ** Passive Foreign Investment Company ADR (American Depositary Receipt) plc (public limited company) (1) Security is restricted. The total market value of restricted securities is $168,062 (cost $116,996), or 0.1% of total net assets. The acquisition date was August 5, 2004. (2) Security is fair valued by the Board of Directors. The total market value of fair valued securities amounts to $168,062, or 0.1% of total net assets. 40 See accompanying notes. SECURITY EQUITY FUND GLOBAL SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ....................................... $154,691,331 Cash denominated in a foreign currency, at value(2) ............ 348,289 Receivables: Fund shares sold ............................................ 82,904 Securities sold ............................................. 213,519 Dividends ................................................... 239,593 Interest .................................................... 16,406 Foreign taxes recoverable ...................................... 14,556 Prepaid expenses ............................................... 34,210 ------------ Total assets ................................................... 155,640,808 ------------ LIABILITIES: Cash overdraft ................................................. 48,141 Payable for: Securities purchased ........................................ 81,801 Fund shares redeemed ........................................ 188,650 Management fees ............................................. 129,869 Custodian fees .............................................. 13,999 Transfer agent and administration fees ...................... 37,825 Professional fees ........................................... 9,731 12b-1 distribution plan fees ................................ 114,479 Director's fees ............................................. 186 ------------ Total liabilities .............................................. 624,681 ------------ NET ASSETS ..................................................... $155,016,127 ============ NET ASSETS CONSIST OF: Paid in capital ................................................ $102,664,192 Accumulated net investment loss ................................ (1,226,668) Accumulated undistributed net realized gain on sale of investments, foreign currency translations and options purchased ................................................... 11,733,473 Net unrealized appreciation in value of investments and translation of assets and liabilities in foreign currency ... 41,845,130 ------------ Net assets ..................................................... $155,016,127 ============ CLASS A: Capital shares outstanding (unlimited number of shares authorized) ................................................. 5,824,481 Net assets ..................................................... $113,889,099 Net asset value and redemption price per share ................. $ 19.55 ============ Maximum offering price per share (net asset value divided by 94.25%) ..................................................... $ 20.74 ============ CLASS B: Capital shares outstanding (unlimited number of shares authorized) ................................................. 1,712,119 Net assets ..................................................... $ 30,924,701 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ..................................................... $ 18.06 ============ CLASS C: Capital shares outstanding (unlimited number of shares authorized) ................................................. 555,910 Net assets ..................................................... $ 10,202,327 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ..................................................... $ 18.35 ============ (1) Investments, at cost ....................................... $112,843,581 (2) Cash denominated in a foreign currency, at cost ............ 350,935
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends (net of foreign withholding tax $69,058) ........... $ 900,053 Interest ..................................................... 31,523 ----------- Total investment income ...................................... 931,576 ----------- EXPENSES: Management fees .............................................. 805,793 Transfer agent/maintenance fees .............................. 138,951 Administration fees .......................................... 125,818 Custodian fees ............................................... 63,516 Directors' fees .............................................. 1,624 Professional fees ............................................ 10,617 Reports to shareholders ...................................... 16,763 Registration fees ............................................ 20,331 Other expenses ............................................... 4,236 12b-1 distribution plan fees - Class A ....................... 152,815 12b-1 distribution plan fees - Class C ....................... 46,121 ----------- Total expenses ............................................... 1,386,585 Less: Earnings credits ....................................... (1,167) ----------- Net expenses ................................................. 1,385,418 ----------- Net investment loss .......................................... (453,842) ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments .................................................. 21,266,560 Foreign currency transactions ................................ (4,342,991) Options purchased ............................................ 2,910 ----------- Net realized gain ............................................ 16,926,479 ----------- Net unrealized appreciation (depreciation) during the period on: Investments .................................................. 2,022,423 Translation of assets and liabilities in foreign currencies .. (3,849) ----------- Net unrealized appreciation .................................. 2,018,574 ----------- Net realized and unrealized gain ............................. 18,945,053 ----------- Net increase in net assets resulting from operations ......... $18,491,211 ===========
41 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets GLOBAL SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss .......................................... $ (453,842) $ (466,732) Net realized gain during the period on investments, options purchased and foreign currency transactions ............... 16,926,479 13,103,309 Net unrealized appreciation during the period on investments and translation of assets and liabilities in foreign currencies ........................................ 2,018,574 20,726,759 ------------ ------------ Net increase in net assets resulting from operations ......... 18,491,211 33,363,336 ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ................................................... 17,954,846 31,692,774 Class B ................................................... 2,646,258 3,283,116 Class C ................................................... 1,356,306 1,610,608 Cost of shares redeemed Class A ................................................... (46,088,862) (27,395,260) Class B ................................................... (4,142,214) (8,996,589) Class C ................................................... (1,011,427) (2,115,442) ------------ ------------ Net decrease from capital share transactions ................. (29,285,093) (1,920,793) ------------ ------------ Net increase (decrease) in net assets ........................ (10,793,882) 31,442,543 ------------ ------------ NET ASSETS: Beginning of period .......................................... 165,810,009 134,367,466 ------------ ------------ End of period ................................................ $155,016,127 $165,810,009 ============ ============ Accumulated net investment loss at end of period ............. $ (1,226,668) $ (772,826) ============ ============ CAPITAL SHARE ACTIVITY: Shares sold Class A ................................................... 984,848 2,004,496 Class B ................................................... 158,224 225,028 Class C ................................................... 78,237 107,909 Shares redeemed Class A ................................................... (2,485,223) (1,748,721) Class B ................................................... (245,293) (618,877) Class C ................................................... (59,513) (142,443)
42 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period GLOBAL SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------------ CLASS A 2006(j) 2005 2004(h) 2003 2002(e, g) 2001 - ------- ------------ -------- ------- ------- ---------- ------- PER SHARE DATA Net asset value, beginning of period $ 17.47 $ 13.93 $ 11.68 $ 9.49 $ 11.04 $ 18.86 -------- -------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.05) (0.02) (0.03) (0.03) (0.05) (0.08) Net gain (loss) on securities (realized and unrealized) 2.13 3.56 2.28 2.22 (1.50) (4.33) -------- -------- ------- ------- ------- ------- Total from investment operations 2.08 3.54 2.25 2.19 (1.55) (4.41) -------- -------- ------- ------- ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (3.41) Total distributions -- -- -- -- -- (3.41) -------- -------- ------- ------- ------- ------- Net asset value, end of period $ 19.55 $ 17.47 $ 13.93 $ 11.68 $ 9.49 $ 11.04 ======== ======== ======= ======= ======= ======= TOTAL RETURN(a) 11.91% 25.41% 19.26% 23.08% (14.04%) (27.60%) -------- -------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $113,889 $127,970 $98,450 $42,711 $50,893 $48,089 -------- -------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.57%) (0.14%) (0.20%) (0.26%) (0.46%) (0.57%) Total expenses(b) 1.72% 1.73% 1.79% 2.00% 1.85% 1.90% Net expenses(d) 1.72% 1.73% 1.79% 2.00% 1.85% 1.90% Expenses prior to custodian earnings credits and net of expense waivers 1.72% 1.73% 1.79% 2.00% 1.85% 1.90% -------- -------- ------- ------- ------- ------- Portfolio turnover rate 28% 31% 25% 62% 36% 38%
SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- CLASS B 2006(j) 2005(i) 2004(h) 2003 2002(e, g) 2001 - ------- ------------ ------- ------- ------- ---------- ------- PER SHARE DATA Net asset value, beginning of period $ 16.12 $ 12.93 $ 10.93 $ 8.89 $ 10.38 $ 18.00 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.03) (0.12) (0.13) (0.04) (0.10) (0.14) Net gain (loss) on securities (realized and unrealized) 1.97 3.31 2.13 2.08 (1.39) (4.07) ------- ------- ------- ------- ------- ------- Total from investment operations 1.94 3.19 2.00 2.04 (1.49) (4.21) ------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (3.41) ------- ------- ------- ------- ------- ------- Total distributions -- -- -- -- -- (3.41) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 18.06 $ 16.12 $ 12.93 $ 10.93 $ 8.89 $ 10.38 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 12.04% 24.67% 18.30% 22.95% (14.35%) (27.86%) ------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $30,925 $28,999 $28,360 $16,461 $19,021 $23,533 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.30%) (0.80%) (1.00%) (0.42%) (0.89%) (1.07%) Total expenses(b) 1.48% 2.38% 2.54% 2.18% 2.28% 2.39% Net expenses(d) 1.48% 2.38% 2.54% 2.18% 2.28% 2.39% Expenses prior to custodian earnings credits and net of expense waivers 1.48% 2.38% 2.54% 2.18% 2.28% 2.39% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 28% 31% 25% 62% 36% 38%
43 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period GLOBAL SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- CLASS C 2006(j) 2005 2004(h) 2003 2002(e, f, g) 2001 - ------- ------------ ------ ------- ------ -------------- ------- PER SHARE DATA Net asset value, beginning of period $ 16.46 $13.22 $11.17 $ 9.14 $ 10.72 $ 18.55 ------- ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.11) (0.13) (0.13) (0.09) (0.15) (0.21) Net gain (loss) on securities (realized and unrealized) 2.00 3.37 2.18 2.12 (1.43) (4.21) ------- ------ ------ ------ ------- ------- Total from investment operations 1.89 3.24 2.05 2.03 (1.58) (4.42) ------- ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (3.41) ------- ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (3.41) ------- ------ ------ ------ ------- ------- Net asset value, end of period $ 18.35 $16.46 $13.22 $11.17 $ 9.14 $ 10.72 ======= ====== ====== ====== ======= ======= TOTAL RETURN(a) 11.48% 24.51% 18.35% 22.21% (14.74%) (28.20%) ------- ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $10,202 $8,841 $7,557 $5,326 $ 4,076 $ 3,569 ------- ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.29%) (0.90%) (1.02%) (0.96%) (1.33%) (1.57%) Total expenses(b) 2.48% 2.48% 2.54% 2.77% 2.74% 2.91% Net expenses(d) 2.48% 2.48% 2.54% 2.77% 2.74% 2.91% Expenses prior to custodian earnings credits and net of expense waivers 2.48% 2.48% 2.54% 2.77% 2.74% 2.91% ------- ------ ------ ------ ------- ------- Portfolio turnover rate 28% 31% 25% 62% 36% 38%
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager. (c) Net investment loss was computed using average shares outstanding throughout the period. (d) Net expense information reflects expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable. (e) As required, effective October 1, 2001, the Funds adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on fixed income securities. The effect of this change for the period ended September 30, 2002, was to increase net investment income per share by less than 1/2 of a cent, decrease net realized and unrealized gains and losses per share by less than 1/2 of a cent and increase the ratio of net investment income to average net assets from 0.06% to 0.07%. Per share, ratios and supplemental data for periods prior to October 1, 2001 have not been restated to reflect this change in presentation. (f) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (g) Effective May 1, 2002 the fee structure for Global Series changed. Per share information reflects this change. (h) The financial highlights for the Global Series exclude the historical financial highlights of the International Series Class A, B and C shares. The assets of the International Series were acquired by the Global Series on October 3, 2003. (i) Effective August 25, 2005, Class B shares ceased charging 12b-1 fees in accordance with the NASD sales cap regulations. Per share information reflects this change. This fee may be reinstated at any time. (j) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 44 See accompanying notes. SECURITY EQUITY FUND Large Cap Growth Series (SECUIRTY BENEFIT(SM) (LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 45 SECURITY EQUITY FUND Performance Summary LARGE CAP GROWTH SERIES May 15, 2006 (unaudited) PERFORMANCE LARGE CAP GROWTH SERIES VS. RUSSELL 1000 GROWTH INDEX (PERFORMANCE GRAPH) LARGE CAP GROWTH SERIES 5/1/00 9,425.00 6/30/00 9,641.78 9/30/00 9,151.68 12/31/00 7,558.85 3/31/01 6,314.75 6/30/01 6,767.15 9/30/01 5,655.00 12/31/01 6,380.73 3/31/02 6,163.95 6/30/02 5,023.53 9/30/02 4,335.50 12/31/02 4,646.53 3/31/03 4,618.25 6/30/03 5,221.45 9/30/03 5,296.85 12/31/03 5,739.83 3/31/04 5,739.83 6/30/04 5,824.65 9/30/04 5,523.05 12/31/04 5,890.63 3/31/05 5,541.90 6/30/05 5,655.00 9/30/05 5,805.80 12/31/05 6,022.58 3/31/06 6,239.35
RUSSELL 1000 GROWTH INDEX INCEPTION 5/01/00 10,000.00 06/30/00 10,215.80 09/30/00 9,665.85 12/31/00 7,603.20 3/31/2001 6,014.12 6/30/2001 6,520.45 9/30/2001 5,254.83 12/31/2001 6,050.69 3/31/2002 5,894.05 6/30/2002 4,793.50 9/30/2002 4,072.29 12/31/2002 4,363.25 3/31/2003 4,316.46 6/30/2003 4,933.91 9/30/2003 5,127.23 12/31/2003 5,661.58 3/31/2004 5,705.90 6/30/2004 5,816.42 9/30/2004 5,512.78 12/31/2004 6,018.40 3/31/2005 5,772.65 6/30/2005 5,915.09 9/30/2005 6,152.47 12/31/2005 6,335.69 3/31/2006 6,532.15
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Large Cap Growth Series on May 1, 2000 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Growth Index is an unmanaged capitalization-weighted index which includes stocks incorporated in the United States and its territories and measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 13.51% Consumer Staples 8.43 Energy 5.89 Financials 10.67 Health Care 16.13 Industrials 23.75 Information Technology 19.04 Exchange Traded Funds 1.93 Cash & other assets, less liabilities 0.65 ------ Total net assets 100.00% ======
AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- --------------- A Shares 12.59% (0.24%) (6.73%) (5-1-00) A Shares with sales charge 6.09% (1.42%) (7.66%) (5-1-00) B Shares 11.88% (0.98%) (7.49%) (5-1-00) B Shares with CDSC 6.88% (1.38%) (7.49%) (5-1-00) C Shares 11.82% (0.95%) (7.41%) (5-1-00) C Shares with CDSC 10.82% (0.95%) (7.41%) (5-1-00)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced. 46 See accompanying notes. SECURITY EQUITY FUND Performance Summary LARGE CAP GROWTH SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Large Cap Growth Series - Class A Actual $1,000.00 $1,074.70 $ 9.62 Hypothetical 1,000.00 1,015.66 9.35 Large Cap Growth Series - Class B Actual 1,000.00 1,069.50 13.47 Hypothetical 1,000.00 1,011.92 13.09 Large Cap Growth Series - Class C Actual 1,000.00 1,071.00 13.48 Hypothetical 1,000.00 1,011.92 13.09
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 7.47%, 6.95% and 7.10%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.86%, 2.61% and 2.61% for Class A, B and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 47 SECURITY EQUITY FUND Schedule of Investments LARGE CAP GROWTH SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS - 99.3% AEROSPACE & DEFENSE - 6.3% General Dynamics Corporation 7,200 $ 460,656 United Technologies Corporation 9,200 533,324 ----------- 993,980 ----------- AIR FREIGHT & LOGISTICS - 3.8% FedEx Corporation 5,400 609,876 ----------- BIOTECHNOLOGY - 3.4% Amgen, Inc.* 7,400 538,350 ----------- BROADCASTING & CABLE TV - 3.3% CBS Corporation (Cl.B)* 7,100 170,258 Univision Communications, Inc.* 10,100 348,147 ----------- 518,405 ----------- COMMUNICATIONS EQUIPMENT - 6.6% 3Com Corporation* 35,000 179,200 ADC Telecommunications, Inc.* 14,157 362,281 Cisco Systems, Inc.* 23,600 511,412 ----------- 1,052,893 ----------- CONSUMER FINANCE - 2.3% American Express Company 6,800 357,340 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 3.8% First Data Corporation 12,800 599,296 ----------- DRUG RETAIL - 3.9% CVS Corporation 20,600 615,322 ----------- ELECTRICAL COMPONENTS & EQUIPMENT - 2.8% Power-One, Inc.* 61,100 439,920 ----------- EXCHANGE TRADED FUNDS - 1.9% iShares Russell 1000 Growth Index Fund 5,800 305,428 ----------- GENERAL MERCHANDISE STORES - 0.8% Target Corporation 2,500 130,025 ----------- HEALTH CARE EQUIPMENT - 6.8% Medtronic, Inc. 10,300 522,725 Zimmer Holdings, Inc.* 8,200 554,320 ----------- 1,077,045 ----------- HEALTH CARE SERVICES - 3.3% Covance, Inc.* 8,900 522,875 ----------- HOME IMPROVEMENT RETAIL - 3.9% Home Depot, Inc. 14,700 621,810 ----------- HOTELS, RESORTS & CRUISE LINES - 3.8% Carnival Corporation 12,600 596,862 ----------- HYPERMARKETS & SUPERCENTERS - 3.1% Wal-Mart Stores, Inc. 10,500 496,020 ----------- INDUSTRIAL CONGLOMERATES - 4.3% General Electric Company 19,600 681,688 ----------- MOVIES & ENTERTAINMENT - 1.7% Viacom, Inc. (Cl.B)* 7,100 $ 275,480 ----------- MULTI-LINE INSURANCE - 4.3% American International Group, Inc. 10,400 687,336 ----------- OIL & GAS EQUIPMENT & SERVICES - 2.9% BJ Services Company 13,200 456,720 ----------- OIL & GAS STORAGE & TRANSPORTATION - 3.0% Williams Companies, Inc. 22,300 476,997 ----------- OTHER DIVERSIFIED FINANCIAL SERVICES - 4.1% Citigroup, Inc. 6,400 302,336 First Marblehead Corporation 8,000 346,000 ----------- 648,336 ----------- PHARMACEUTICALS - 2.7% Johnson & Johnson 7,100 420,462 ----------- SEMICONDUCTORS - 4.4% Analog Devices, Inc. 6,700 256,543 Applied Micro Circuits Corporation* 47,200 192,104 Intel Corporation 12,900 249,615 ----------- 698,262 ----------- SOFT DRINKS - 1.4% PepsiCo, Inc. 3,900 225,381 ----------- SYSTEMS SOFTWARE - 4.2% Microsoft Corporation 24,600 669,366 ----------- TRADING COMPANIES & DISTRIBUTORS - 3.1% W.W. Grainger, Inc. 6,600 497,310 ----------- TRUCKING - 3.4% J.B. Hunt Transport Services, Inc. 25,300 544,962 ----------- TOTAL COMMON STOCKS (cost $13,946,487) 15,757,747 ----------- TOTAL INVESTMENTS - 99.3% (cost $13,946,487) 15,757,747 CASH & OTHER ASSETS, LESS LIABILITIES - 0.7% 103,434 ----------- TOTAL NET ASSETS - 100.0% $15,861,181 ===========
For federal income tax purposes the identified cost of investments owned at March 31, 2006 was $14,022,639. * Non-income producing security 48 See accompanying notes. SECURITY EQUITY FUND LARGE CAP GROWTH SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ........................................ $15,757,747 Cash ............................................................ 87,695 Receivables: Fund shares sold ............................................. 58,813 Dividends .................................................... 9,655 Prepaid expenses ................................................ 16,530 ----------- Total assets .................................................... 15,930,440 ----------- LIABILITIES: Payable for: Fund shares redeemed ......................................... 7,425 Management fees .............................................. 13,470 Custodian fees ............................................... 21 Transfer agent and administration fees ....................... 5,118 Professional fees ............................................ 6,262 12b-1 distribution plan fees ................................. 36,866 Director's fees .............................................. 97 ----------- Total liabilities ............................................... 69,259 ----------- NET ASSETS ...................................................... $15,861,181 =========== NET ASSETS CONSIST OF: Paid in capital ................................................. $16,182,815 Accumulated net investment loss ................................. (86,057) Accumulated net realized loss on sale of investments ............ (2,046,837) Net unrealized appreciation in value of investments ............. 1,811,260 ----------- Net assets ...................................................... $15,861,181 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) .................................................. 1,387,563 Net assets ...................................................... $ 9,187,415 Net asset value and redemption price per share .................. $ 6.62 =========== Maximum offering price per share (net asset value divided by 94.25%) ................................................... $ 7.02 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) .................................................. 433,647 Net assets ...................................................... $ 2,736,507 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ...................................................... $ 6.31 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) .................................................. 621,170 Net assets ...................................................... $ 3,937,259 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ...................................................... $ 6.34 =========== (1) Investments, at cost ........................................ $13,946,487
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ..................................................... $ 76,662 Interest ...................................................... 11,954 ---------- Total investment income ....................................... 88,616 ---------- EXPENSES: Management fees ............................................... 80,121 Transfer agent/maintenance fees ............................... 29,431 Administration fees ........................................... 12,906 Custodian fees ................................................ 1,602 Directors' fees ............................................... 223 Professional fees ............................................. 8,019 Reports to shareholders ....................................... 1,708 Registration fees ............................................. 16,206 Other expenses ................................................ 837 12b-1 distribution plan fees - Class A ........................ 11,631 12b-1 distribution plan fees - Class B ........................ 13,960 12b-1 distribution plan fees - Class C ........................ 19,639 ---------- Total expenses ................................................ 196,283 Less: Expenses waived ......................................... (20,030) Earnings credits ........................................ (1,580) ---------- Net expenses .................................................. 174,673 ---------- Net investment loss ........................................... (86,057) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain during the period on: Investments ................................................... 341,685 ---------- Net realized gain ............................................. 341,685 ---------- Net unrealized appreciation during the period on: Investments ................................................... 873,217 ---------- Net unrealized appreciation ................................... 873,217 ---------- Net realized and unrealized gain .............................. 1,214,902 ---------- Net increase in net assets resulting from operations .......... $1,128,845 ==========
49 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets LARGE CAP GROWTH SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ----------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ........................................... $ (86,057) $ (152,601) Net realized gain during the period on investments ............ 341,685 292,724 Net change in unrealized appreciation during the period on investments ................................................ 873,217 499,904 ----------- ----------- Net increase in net assets resulting from operations .......... 1,128,845 640,027 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A .................................................... 3,146,368 5,885,757 Class B .................................................... 304,009 943,562 Class C .................................................... 1,356,775 935,616 Cost of shares redeemed Class A .................................................... (2,885,574) (9,484,442) Class B .................................................... (409,383) (1,955,914) Class C .................................................... (840,981) (1,005,819) ----------- ----------- Net increase (decrease) from capital share transactions ....... 671,214 (4,681,240) ----------- ----------- Net increase (decrease) in net assets ......................... 1,800,059 (4,041,213) ----------- ----------- NET ASSETS: Beginning of period ........................................... 14,061,122 18,102,335 ----------- ----------- End of period ................................................. $15,861,181 $14,061,122 =========== =========== Accumulated net investment loss at end of period .............. $ (86,057) $ -- =========== =========== CAPITAL SHARE ACTIVITY: Shares sold Class A .................................................... 494,723 973,824 Class B .................................................... 49,820 162,302 Class C .................................................... 224,704 160,117 Shares redeemed Class A .................................................... (447,649) (1,588,369) Class B .................................................... (66,288) (342,470) Class C .................................................... (134,957) (173,001)
50 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period LARGE CAP GROWTH SERIES
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED MARCH 31, -------------------------------------------------- CLASS A 2006(f) 2005 2004 2003 2002 2001 - ------- --------------- ------ ------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 6.16 $ 5.86 $ 5.62 $ 4.60 $ 6.00 $ 9.71 ------ ------ ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.02) (0.05) (0.05) (0.04) (0.05) (0.08) Net gain (loss) on securities (realized and unrealized) 0.48 0.35 0.29 1.06 (1.35) (3.63) ------ ------ ------- ------- ------- ------- Total from investment operations 0.46 0.30 0.24 1.02 (1.40) (3.71) ------ ------ ------- ------- ------- ------- Net asset value, end of period $ 6.62 $ 6.16 $ 5.86 $ 5.62 $ 4.60 $ 6.00 ====== ====== ======= ======= ======= ======= TOTAL RETURN(a) 7.47% 5.12% 4.27% 22.17% (23.33%) (38.21%) ------ ------ ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $9,187 $8,261 $11,455 $16,179 $ 9,243 $ 2,436 ------ ------ ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.76%) (0.76%) (0.81%) (0.71%) (1.00%) (1.10%) Total expenses(b) 2.13% 2.57% 2.00% 1.83% 1.99% 2.15% Net expenses(d) 1.86% 2.25% 1.83% 1.83% 1.99% 1.99% Expenses prior to custodian earnings credits and net of expense waivers 1.88% 2.26% 1.84% 1.83% 1.99% 2.00% ------ ------ ------- ------- ------- ------- Portfolio turnover rate 34% 59% 44% 39% 12% 6%
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED MARCH 31, ------------------------------------------------ CLASS B 2006(f) 2005 2004 2003 2002 2001 - ------- --------------- ------ ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $ 5.89 $ 5.65 $ 5.45 $ 4.50 $ 5.92 $ 9.65 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.05) (0.09) (0.09) (0.07) (0.11) (0.14) Net gain (loss) on securities (realized and unrealized) 0.47 0.33 0.29 1.02 (1.31) (3.59) ------ ------ ------ ------ ------- ------- Total from investment operations 0.42 0.24 0.20 0.95 (1.42) (3.73) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 6.31 $ 5.89 $ 5.65 $ 5.45 $ 4.50 $ 5.92 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 6.95% 4.25% 3.67% 21.11% (23.99%) (38.65%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $2,737 $2,653 $3,559 $6,557 $ 1,949 $ 1,955 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.51%) (1.45%) (1.55%) (1.49%) (1.88%) (1.85%) Total expenses(b) 2.88% 3.32% 2.72% 2.59% 2.82% 2.92% Net expenses(d) 2.61% 3.00% 2.56% 2.59% 2.82% 2.75% Expenses prior to custodian earnings credits and net of expense waivers 2.63% 3.01% 2.56% 2.59% 2.82% 2.75% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 34% 59% 44% 39% 12% 6%
51 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period LARGE CAP GROWTH SERIES
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED MARCH 31, ------------------------------------------------ CLASS C 2006(f) 2005 2004 2003 2002(e) 2001 - ------- --------------- ------ ------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 5.92 $ 5.67 $ 5.48 $ 4.52 $ 5.93 $ 9.65 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.05) (0.09) (0.09) (0.07) (0.11) (0.13) Net gain (loss) on securities (realized and unrealized) 0.47 0.34 0.28 1.03 (1.30) (3.59) ------ ------ ------ ------ ------- ------- Total from investment operations 0.42 0.25 0.19 0.96 (1.41) (3.72) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 6.34 $ 5.92 $ 5.67 $ 5.48 $ 4.52 $ 5.93 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 7.10% 4.41% 3.47% 21.24% (23.78%) (38.55%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $3,937 $3,147 $3,088 $3,432 $ 2,547 $ 2,577 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.51%) (1.52%) (1.58%) (1.44%) (1.88%) (1.85%) Total expenses(b) 2.88% 3.32% 2.77% 2.58% 2.82% 2.92% Net expenses(d) 2.61% 3.00% 2.61% 2.58% 2.82% 2.75% Expenses prior to custodian earnings credits and net of expense waivers 2.63% 3.01% 2.61% 2.58% 2.82% 2.75% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 34% 59% 44% 39% 12% 6%
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager. (c) Net investment loss was computed using average shares outstanding throughout the period. (d) Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable. (e) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (f) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 52 See accompanying notes. SECURITY EQUITY FUND Mid Cap Value Series (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 53 SECURITY EQUITY FUND Performance Summary MID CAP VALUE SERIES May 15, 2006 (unaudited) PERFORMANCE MID CAP VALUE SERIES VS. RUSSELL 2500 VALUE INDEX (PERFORMANCE GRAPH) MID CAP VALUE SERIES 5/1/97 9,425.00 6/30/97 10,386.35 9/30/97 12,205.38 12/31/97 12,202.14 3/31/98 13,982.63 6/30/98 13,914.89 9/30/98 11,679.61 12/31/98 14,172.02 3/31/99 13,968.04 6/30/99 16,872.38 9/30/99 16,124.44 12/31/99 17,264.05 3/31/00 19,149.61 6/30/00 18,997.55 9/30/00 21,035.18 12/31/00 21,872.54 3/31/01 22,618.32 6/30/01 24,688.70 9/30/01 20,080.44 12/31/01 24,341.98 3/31/02 26,771.65 6/30/02 24,635.80 9/30/02 19,098.39 12/31/02 20,725.71 3/31/03 20,228.48 6/30/03 25,731.98 9/30/03 27,664.42 12/31/03 31,467.96 3/31/04 33,864.00 6/30/04 34,753.95 9/30/04 34,742.54 12/31/04 39,907.19 3/31/05 39,821.68 6/30/05 40,921.05 9/30/05 44,390.18 12/31/05 46,184.87 3/31/06 51,316.52
RUSSELL 2500 VALUE INDEX INCEPTION 5/01/97 10,000.00 6/30/1997 11,200.83 9/30/1997 12,594.49 12/31/1997 12,952.70 3/31/1998 14,188.46 6/30/1998 13,681.09 9/30/1998 11,427.77 12/31/1998 12,705.04 3/31/1999 11,687.40 6/30/1999 13,558.89 9/30/1999 12,386.34 12/31/1999 12,892.04 3/31/2000 13,494.60 6/30/2000 13,413.75 9/30/2000 14,336.43 12/31/2000 15,571.76 3/31/2001 15,264.14 6/30/2001 16,787.57 9/30/2001 14,698.15 12/31/2001 17,088.66 3/31/2002 18,542.23 6/30/2002 17,895.20 9/30/2002 14,608.72 12/31/2002 15,401.82 3/31/2003 14,666.86 6/30/2003 17,788.08 9/30/2003 19,169.13 12/31/2003 22,319.49 3/31/2004 23,698.49 6/30/2004 23,817.52 9/30/2004 23,877.08 12/31/2004 27,134.02 3/31/2005 26,556.13 6/30/2005 27,969.20 9/30/2005 28,963.85 12/31/2005 29,232.64 3/31/2006 32,291.66
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Mid Cap Value Series on May 1, 1997 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2500 Value Index is an unmanaged index that measures the performance of securities of small-to-mid cap U.S. companies with greater-than-average value orientation. AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- ----------------- A Shares 28.87% 17.80% 20.93% (5-1-97) A Shares with sales charge 21.45% 16.42% 20.13% (5-1-97) B Shares 27.93% 16.85% 19.85% (5-1-97) B Shares with CDSC 22.93% 16.63% 19.85% (5-1-97) C Shares 27.91% 16.87% 18.69% (1-29-99) C Shares with CDSC 26.91% 16.87% 18.69% (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 4.44% Consumer Staples 8.15 Energy 9.24 Financials 14.40 Health Care 3.02 Industrials 23.82 Information Technology 14.51 Materials 6.01 Telecommunication Services 0.73 Utilities 6.48 Exchange Traded Funds 2.57 Convertible Bond 0.34 Commercial Paper 2.04 Asset Backed Commercial Paper 2.17 Warrants 0.05 Repurchase Agreement 2.40 Liabilities, less cash & other assets (0.37) ------ Total net assets 100.00% ======
54 See accompanying notes. SECURITY EQUITY FUND Performance Summary MID CAP VALUE SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Mid Cap Value Series - Class A Actual $1,000.00 $1,156.00 $ 7.31 Hypothetical 1,000.00 1,018.15 6.84 Mid Cap Value Series - Class B Actual 1,000.00 1,151.80 11.32 Hypothetical 1,000.00 1,014.41 10.60 Mid Cap Value Series - Class C Actual 1,000.00 1,152.10 11.32 Hypothetical 1,000.00 1,014.41 10.60
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 15.60%, 15.18% and 15.21%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.36%, 2.11% and 2.11% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 55 SECURITY EQUITY FUND Schedule of Investments MID CAP VALUE SERIES March 31, 2006 (unaudited)
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE ---------- ------------ CONVERTIBLE BOND - 0.3% PHARMACEUTICALS - 0.3% Ligand Pharmaceuticals, Inc., 6.00% - 2007 $1,250,000 $ 2,614,063 ------------ TOTAL CONVERTIBLE BOND (cost $1,250,000) 2,614,063 ------------ PREFERRED STOCKS - 0.2% DIVERSIFIED METALS & MINING - 0.1% Arch Coal, Inc. 4,600 842,375 ------------ ENVIRONMENTAL & FACILITIES SERVICES - 0.1% ThermoEnergy Corporation PIPE(2, 3, 4, 5, 6) 1,745,000 791,532 ------------ TOTAL PREFERRED STOCKS (cost $1,876,500) 1,633,907 ------------ COMMON STOCKS - 93.2% AEROSPACE & DEFENSE - 2.0% Curtiss-Wright Corporation 80,000 5,296,000 Orbital Sciences Corporation* 627,500 9,927,050 ------------ 15,223,050 ------------ AGRICULTURAL PRODUCTS - 2.9% Archer-Daniels-Midland Company(1) 420,000 14,133,000 Corn Products International, Inc. 255,000 7,540,350 ------------ 21,673,350 ------------ AIR FREIGHT & LOGISTICS - 0.1% AirNet Systems, Inc.* 168,000 586,320 Stonepath Group, Inc.* 480,000 374,400 ------------ 960,720 ------------ APPAREL, ACCESSORIES & LUXURY GOODS - 0.5% Kellwood Company 117,600 3,691,464 ------------ APPLICATION SOFTWARE - 0.9% Epiq Systems, Inc.* 200,500 3,809,500 Plato Learning, Inc.* 285,000 2,704,650 ------------ 6,514,150 ------------ COAL & CONSUMABLE FUELS - 3.0% Arch Coal, Inc. 198,000 15,036,120 Consol Energy, Inc. 65,000 4,820,400 Hydrogen Corporation*(4, 6) 547,442 3,065,675 ------------ 22,922,195 ------------ COMMUNICATIONS EQUIPMENT - 3.3% 3Com Corporation* 3,200,000 16,384,000 Dycom Industries, Inc.* 220,000 4,675,000 Oplink Communications, Inc.* 228,571 3,963,421 ------------ 25,022,421 ------------ COMPUTER & ELECTRONICS RETAIL - 1.3% RadioShack Corporation 530,000 10,191,900 ------------ COMPUTER STORAGE & PERIPHERALS - 1.2% Hutchinson Technology, Inc.* 300,000 9,051,000 ------------
NUMBER MARKET OF SHARES VALUE ---------- ------------ COMMON STOCKS (CONTINUED) CONSTRUCTION & ENGINEERING - 13.5% Granite Construction, Inc.(1) 84,900 $ 4,132,932 Insituform Technologies, Inc.* 239,600 6,373,360 MasTec, Inc.* 774,900 10,980,333 McDermott International, Inc.*(1) 515,000 28,041,750 Quanta Services, Inc.* 1,050,000 16,821,000 Shaw Group, Inc.*(1) 1,190,000 36,176,000 ------------ 102,525,375 ------------ CONSUMER FINANCE - 0.7% PHH Corporation* 199,000 5,313,300 ------------ DATA PROCESSING & OUTSOURCED SERVICES - 1.9% Computer Sciences Corporation*(1) 260,000 14,443,000 ------------ DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 1.4% FTI Consulting, Inc.* 374,000 10,670,220 ------------ DIVERSIFIED METALS & MINING - 2.5% Inco, Ltd.*(1) 240,000 11,973,600 Usec, Inc. 580,000 6,989,000 ------------ 18,962,600 ------------ ELECTRIC UTILITIES - 6.1% Cinergy Corporation(1) 130,000 5,903,300 Great Plains Energy, Inc. 360,000 10,134,000 KFx, Inc.* 1,645,000 29,939,000 Westar Energy, Inc. 1,400 29,134 ------------ 46,005,434 ------------ ELECTRICAL COMPONENTS & EQUIPMENT - 1.6% Electric City Corporation*(4) 1,518,000 971,520 Power-One, Inc.* 1,556,900 11,209,680 ------------ 12,181,200 ------------ ELECTRONIC EQUIPMENT MANUFACTURERS - 3.1% Maxwell Technologies, Inc.* 564,000 11,003,640 Merix Corporation* 828,600 10,191,780 Powell Industries, Inc.* 117,300 2,554,794 ------------ 23,750,214 ------------ EXCHANGE TRADED FUNDS - 2.6% iShares Russell 2000 Value Index Fund 57,000 4,255,050 iShares S&P MidCap 400/Barra Value Index Fund 199,500 15,291,675 ------------ 19,546,725 ------------ GAS UTILITIES - 0.4% Southern Union Company* 130,000 3,227,900 ------------ HEALTH CARE EQUIPMENT - 0.5% HealthTronics, Inc.* 430,000 3,556,100 ------------ HEALTH CARE FACILITIES - 2.1% Community Health Systems, Inc.*(1) 130,000 4,699,500 Triad Hospitals, Inc.*(1) 155,000 6,494,500 Universal Health Services, Inc. (Cl.B.)(1) 100,000 5,079,000 ------------ 16,273,000 ------------
56 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments MID CAP VALUE SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ------------ COMMON STOCKS (CONTINUED) HEALTH CARE SERVICES - 0.4% Hooper Holmes, Inc. 1,076,900 $ 3,112,241 ------------ HOUSEWARES & SPECIALTIES - 0.3% Newell Rubbermaid, Inc. 82,000 2,065,580 ------------ INDUSTRIAL CONGLOMERATES - 0.7% Alleghany Corporation* 17,136 4,960,872 ------------ INDUSTRIAL MACHINERY - 0.4% Quixote Corporation 123,300 3,051,675 ------------ INSURANCE BROKERS - 0.2% Hub International, Ltd. 64,000 1,793,280 ------------ INTEGRATED OIL & GAS - 1.6% Murphy Oil Corporation 247,000 12,305,540 ------------ INTEGRATED TELECOMMUNICATION SERVICES - 0.4% Global Crossing, Ltd.* 101,900 2,700,350 ------------ IT CONSULTING & OTHER SERVICES - 0.3% Keane, Inc.*(1) 154,000 2,425,500 ------------ LIFE & HEALTH INSURANCE - 0.6% KMG America Corporation* 549,000 4,699,440 ------------ MARINE - 1.4% Double Hull Tankers, Inc. 578,700 7,667,775 Frontline, Ltd. 87,000 2,913,630 ------------ 10,581,405 ------------ MULTI-LINE INSURANCE - 0.8% American Financial Group, Inc.(1) 155,000 6,449,550 ------------ OIL & GAS EQUIPMENT & SERVICES - 1.2% Key Energy Services, Inc.* 620,000 9,448,800 ------------ OIL & GAS EXPLORATION & PRODUCTION - 0.6% Newfield Exploration Company* 110,800 4,642,520 ------------ OIL & GAS STORAGE & TRANSPORTATION - 2.7% Williams Companies, Inc. 976,000 20,876,640 ------------ OTHER DIVERSIFIED FINANCIAL SERVICES - 1.7% First Marblehead Corporation 293,600 12,698,200 ------------ PACKAGED FOODS & MEATS - 4.0% Hain Celestial Group, Inc.* 110,000 2,880,900 Hormel Foods Corporation(1) 300,000 10,140,000 J.M. Smucker Company 260,000 10,322,000 Tyson Foods, Inc. 539,700 7,415,478 ------------ 30,758,378 ------------ PAPER PACKAGING - 2.4% Bemis Company, Inc. 350,000 11,053,000 Sonoco Products Company 215,000 7,282,050 ------------ 18,335,050 ------------ PERSONAL PRODUCTS - 1.3% Alberto-Culver Company 80,000 3,538,400 Playtex Products, Inc.* 572,800 5,997,216 ------------ 9,535,616 ------------ PROPERTY & CASUALTY INSURANCE - 4.1% First American Corporation 238,500 $ 9,339,660 North Pointe Holdings Corporation*(4) 259,300 3,241,250 United America Indemnity, Ltd. ADR* 117,000 2,679,300 W.R. Berkley Corporation(1) 270,000 15,676,200 ------------ 30,936,410 ------------ REAL ESTATE INVESTMENT TRUSTS - 3.5% HomeBanc Corporation 508,000 4,465,320 MortgageIT Holdings, Inc. 960,700 10,404,381 Opteum, Inc.(4, 6) 1,400,000 11,984,000 ------------ 26,853,701 ------------ REGIONAL BANKS - 1.8% Mercantile Bankshares Corporation 127,000 4,883,150 Wilmington Trust Corporation 97,900 4,243,965 Zions Bancorporation 53,000 4,384,690 ------------ 13,511,805 ------------ SEMICONDUCTOR EQUIPMENT - 1.8% Ultratech, Inc.* 550,000 13,464,000 ------------ SEMICONDUCTORS - 2.1% Applied Micro Circuits Corporation* 760,000 3,093,200 IXYS Corporation* 764,100 7,045,002 Stats ChipPAC, Ltd. ADR* 700,000 5,495,000 ------------ 15,633,202 ------------ SPECIALIZED CONSUMER SERVICES - 0.5% Regis Corporation 105,850 3,649,708 ------------ SPECIALTY CHEMICALS - 1.0% H.B. Fuller Company(1) 100,000 5,134,000 Material Sciences Corporation* 85,700 1,035,256 Minerals Technologies, Inc. 23,000 1,343,430 ------------ 7,512,686 ------------ SPECIALTY STORES - 0.4% Bombay Company, Inc.* 990,000 3,267,000 ------------ THRIFTS & MORTGAGE FINANCE - 0.9% BankAtlantic Bancorp, Inc. 500,000 7,195,000 ------------ TIRES & RUBBER - 1.4% Bandag, Inc. 260,000 10,886,200 ------------ TRADING COMPANIES & DISTRIBUTORS - 2.1% United Rentals, Inc.*(1) 450,000 15,525,000 ------------ TRUCKING - 0.6% Werner Enterprises, Inc. 250,000 4,592,500 ------------ WIRELESS TELECOMMUNICATION SERVICE - 0.4% Wireless Facilities, Inc.* 700,000 2,814,000 ------------ TOTAL COMMON STOCKS (cost $495,666,355) 707,987,167 ------------ WARRANTS - 0.1% Electric City Corporation, $0.40, 03-19-09(4, 5) 442,750 134,696 ThermoEnergy Corporation, $1.50, 07-14-08 (3, 4, 5, 6) 1,745,000 228,770 ------------ TOTAL WARRANTS (cost $862,064) 363,466 ------------
57 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments MID CAP VALUE SERIES March 31, 2006 (unaudited)
PRINCIPAL MARKET AMOUNT VALUE ----------- ------------ COMMERCIAL PAPER - 2.0% AUTOMOTIVE - 0.2% American Honda Finance, 4.60%, 04-10-06 $ 1,550,000 $ 1,548,218 ------------ BANKING - 0.6% Ing (U.S.) Funding LLC, 4.69%, 04-19-06 1,000,000 997,655 UBS Finance (De) LLC: 4.72%, 04-28-06 1,000,000 996,460 4.77%, 05-01-06 1,950,000 1,942,249 Westpac Banking Corporation, 4.73%, 04-17-06 1,000,000 997,898 ------------ 4,934,262 ------------ BROKERAGE - 0.8% Goldman Sachs Group, Inc., 4.78%, 04-04-06 2,000,000 1,999,198 Merrill Lynch & Company, Inc.: 4.68%, 04-03-06 1,000,000 999,738 4.65%, 04-05-06 1,000,000 999,483 4.69%, 04-11-06 1,000,000 998,697 4.71%, 04-27-06 1,000,000 996,598 ------------ 5,993,714 ------------ ELECTRIC - 0.3% Florida Power & Light Company: 4.68%, 04-13-06 1,000,000 998,440 4.72%, 04-24-06 1,000,000 996,985 ------------ 1,995,425 ------------ NON U.S. BANKING - 0.1% Danske Corporation, 4.62%, 04-04-06 1,000,000 999,615 ------------ TOTAL COMMERCIAL PAPER (cost $15,471,234) 15,471,234 ------------ ASSET BACKED COMMERCIAL PAPER - 2.2% FINANCIAL COMPANIES - DIVERSIFIED - 0.2% Amsterdam Funding Corporation, 4.76%, 05-16-06 1,000,000 994,050 ------------ FINANCIAL COMPANIES - MISCELLANEOUS RECEIVABLES - 0.9% Falcon Asset Securitization Corporation: 4.75%, 04-25-06 1,000,000 996,833 4.75%, 04-26-06 1,000,000 996,701 Jupiter Securitization Corporation: 4.60%, 04-03-06 1,000,000 999,745 4.63%, 04-07-06 1,500,000 1,498,843 4.65%, 04-10-06 1,000,000 998,838 4.66%, 04-12-06 1,540,000 1,537,774 ------------ 7,028,734 ------------ FINANCIAL COMPANIES - SECURITIES - 0.4% Asset One Securitization: 4.69%, 04-06-06 $ 1,000,000 $ 999,349 4.76%, 04-18-06 1,000,000 997,752 Perry Global Funding LLC, 4.75%, 04-20-06 1,000,000 997,493 ------------ 2,994,594 ------------ FINANCIAL COMPANIES - TRADE RECEIVABLES - 0.7% Eureka Securitization: 4.74%, 04-26-06 1,000,000 996,708 4.76%, 05-11-06 1,500,000 1,492,067 4.77%, 05-17-06 1,000,000 993,892 Old Line Funding LLC, 4.74%, 04-25-06 1,000,000 996,840 Sheffield Receivables Corporation, 4.73%, 04-21-06 1,000,000 997,372 ------------ 5,476,879 ------------ TOTAL ASSET BACKED COMMERCIAL PAPER (cost $16,494,257) 16,494,257 ------------ REPURCHASE AGREEMENT - 2.4% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $18,271,636 (Collateralized by FHLB, 5.375%, 05-15-06 with a value of $18,632,757) 18,265,000 18,265,000 ------------ TOTAL REPURCHASE AGREEMENT (cost $18,265,000) 18,265,000 ------------ TOTAL INVESTMENTS - 100.4% (cost $549,885,410) 762,829,094 LIABILITIES, LESS CASH & OTHER ASSETS - (0.4%) (2,770,077) ------------ TOTAL NET ASSETS - 100.0% $760,059,017 ============
For federal income tax purposes, the identified cost of investments owned at March 31, 2006 was $550,119,388. * Non-income producing security ADR (American Depositary Receipt) (1) Security is segregated as collateral for open written option contracts. (2) PIPE (Private Investment in Public Equity) - Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration on a secondary public offering. (3) Security is restricted. The total market value securities is of restricted $1,020,302 (cost $2,094,000), or 0.1% of total net assets. The acquisition date was July 14, 2005. (4) Security is illiquid. The total market value of illiquid securities is $20,417,443 (cost $26,366,694), or 2.7% of total net assets. (5) Security is fair valued by the Board of Directors. The total market value of fair valued securities is $1,154,998 (cost $2,508,564), or 0.2% of total net assets. (6) Investment in an affiliated issuer. See Note 8 to the financial statements. 58 See accompanying notes. SECURITY EQUITY FUND MID CAP VALUE SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments in unaffiliated issues, at value(1) ................. $758,743,117 Investments in affiliated issues, at value(1) ................... 4,085,977 Cash ............................................................ 4,811 Receivables: Fund shares sold ............................................. 4,143,671 Interest ..................................................... 28,177 Dividends .................................................... 579,645 Prepaid expenses ............................................. 100,290 ------------ Total assets ................................................. 767,685,688 ------------ LIABILITIES: Payable for: Securities purchased ......................................... 2,540,944 Fund shares redeemed ......................................... 555,290 Written options, at value (premiums received $3,232,465) ..... 3,496,725 Management fees .............................................. 499,510 Custodian fees ............................................... 9,000 Transfer agent and administration fees ....................... 112,949 Professional fees ............................................ 14,939 12b-1 distribution plan fees ................................. 397,314 ------------ Total liabilities ............................................... 7,626,671 ------------ NET ASSETS ...................................................... $760,059,017 ============ NET ASSETS CONSIST OF: Paid in capital ................................................. $527,481,188 Accumulated net investment loss ................................. (891,134) Accumulated undistributed net realized gain on sale of investments and options written .............................. 20,789,539 Net unrealized appreciation in value of investments and options written ...................................................... 212,679,424 ------------ Net assets ...................................................... $760,059,017 ============ CLASS A: Capital shares outstanding (unlimited number of shares authorized) .................................................. 12,871,721 Net assets ...................................................... $511,030,298 Net asset value and redemption price per share .................. $ 39.70 ============ Maximum offering price per share (net asset value divided by 94.25%) ...................................................... $ 42.12 ============ CLASS B: Capital shares outstanding (unlimited number of shares authorized) .................................................. 3,144,273 Net assets ...................................................... $113,810,233 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) .. $ 36.20 ============ CLASS C: Capital shares outstanding (unlimited number of shares authorized) .................................................. 3,664,503 Net assets ...................................................... $135,218,486 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) .. $ 36.90 ============ (1)Investments, at cost ......................................... $549,885,410
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends from securities of unaffiliated issuers ............ $ 3,591,711 Interest ..................................................... 558,775 ----------- Total investment income ...................................... 4,150,486 ----------- EXPENSES: Management fees .............................................. 2,590,076 Custodian fees ............................................... 18,575 Transfer agent/maintenance fees .............................. 409,368 Administration fees .......................................... 294,267 Directors' fees .............................................. 5,658 Professional fees ............................................ 39,931 Reports to shareholders ...................................... 61,608 Registration fees ............................................ 37,567 Other expenses ............................................... 12,338 12b-1 distribution plan fees - Class A ....................... 516,257 12b-1 distribution plan fees - Class B ....................... 513,414 12b-1 distribution plan fees - Class C ....................... 542,573 ----------- Total expenses ............................................... 5,041,632 Less: Earnings credits ....................................... (12) ----------- Net expenses ................................................. 5,041,620 ----------- Net investment loss .......................................... (891,134) ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain during the period on: Investment transactions of unaffiliated issuers .............. 25,759,608 Options written .............................................. 2,337,178 ----------- Net realized gain ............................................ 28,096,786 ----------- Net unrealized appreciation (depreciation) during the period on: Investment transaction of unaffiliated issuers ............... 64,791,041 Investment transactions of affiliated issuers ................ 429,190 Options written .............................................. (377,809) ----------- Net unrealized appreciation .................................. 64,842,422 ----------- Net realized and unrealized gain ............................. 92,939,208 ----------- Net increase in net assets resulting from operations ......... $92,048,074 ===========
59 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets MID CAP VALUE SERIES
SIX MONTHS ENDED MARCH 31, 2006 YEAR ENDED (unaudited) SEPTEMBER 30, 2005 -------------- ------------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ....................................... $ (891,134) $ (1,019,140) Net realized gain during the period on investments and options written ........................................ 28,096,786 27,789,769 Net unrealized appreciation during the period on investments and options written ........................ 64,842,422 81,570,182 ------------ ------------ Net increase in net assets resulting from operations ...... 92,048,074 108,340,811 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain Class A ................................................ (21,770,226) (17,531,136) Class B ................................................ (5,997,238) (6,133,150) Class C ................................................ (6,154,241) (4,546,382) ------------ ------------ Total distributions to shareholders ....................... (33,921,705) (28,210,668) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ................................................ 150,793,172 161,215,930 Class B ................................................ 11,782,489 17,972,042 Class C ................................................ 32,660,663 36,990,088 Distributions reinvested Class A ................................................ 20,081,173 16,302,449 Class B ................................................ 5,715,440 5,863,417 Class C ................................................ 5,766,876 4,260,542 Cost of shares redeemed Class A ................................................ (72,211,382) (73,348,101) Class B ................................................ (10,220,907) (15,202,832) Class C ................................................ (7,016,768) (14,043,393) ------------ ------------ Net increase from capital share transactions .............. 137,350,756 140,010,142 ------------ ------------ Net increase in net assets ................................ 195,477,124 220,140,285 ------------ ------------ NET ASSETS: Beginning of period ....................................... 564,581,893 344,441,608 ------------ ------------ End of period ............................................. $760,059,017 $564,581,893 ============ ============ Accumulated net investment loss at end of period .......... $ (891,134) $ -- ============ ============ CAPITAL SHARE ACTIVITY: Shares sold Class A ................................................ 4,015,240 4,912,125 Class B ................................................ 345,566 597,004 Class C ................................................ 933,428 1,196,717 Shares reinvested Class A ................................................ 565,348 505,033 Class B ................................................ 176,130 196,298 Class C ................................................ 174,331 140,103 Shares redeemed Class A ................................................ (1,974,058) (2,235,399) Class B ................................................ (299,246) (503,071) Class C ................................................ (201,967) (454,764)
60 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period MID CAP VALUE SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- CLASS A 2006(e) 2005 2004 2003 2002 2001 - ------- ------------ -------- -------- -------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 36.34 $ 30.45 $ 24.48 $ 16.90 $ 18.04 $ 20.75 -------- -------- -------- -------- ------- ------- Income (loss) from investment operations: Net investment income (loss)(b) (0.01) 0.01 (0.09) (0.07) (0.04) -- Net gain (loss) on securities (realized and unrealized) 5.44 8.16 6.32 7.65 (0.78) (0.90) -------- -------- -------- -------- ------- ------- Total from investment operations 5.43 8.17 6.23 7.58 (0.82) (0.90) -------- -------- -------- -------- ------- ------- Less distributions: Distributions from realized gains (2.07) (2.28) (0.26) -- (0.21) (1.81) Return of capital -- -- -- -- (0.11) -- -------- -------- -------- -------- ------- ------- Total distributions (2.07) (2.28) (0.26) -- (0.32) (1.81) -------- -------- -------- -------- ------- ------- Net asset value, end of period $ 39.70 $ 36.34 $ 30.45 $ 24.48 $ 16.90 $ 18.04 ======== ======== ======== ======== ======= ======= TOTAL RETURN(a) 15.60% 27.77% 25.59% 44.85% (4.89%) (4.54%) -------- -------- -------- -------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $511,030 $373,031 $215,659 $113,822 $68,544 $50,541 -------- -------- -------- -------- ------- ------- Ratios to average net assets: Net investment income (loss) (0.03%) 0.04% (0.31%) (0.33%) (0.20%) 0.01%(d) Total expenses 1.36% 1.41% 1.48% 1.65% 1.45% 1.30% -------- -------- -------- -------- ------- ------- Portfolio turnover rate 22% 19% 45% 52% 51% 55%
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, --------------------------------------------------- CLASS B 2006(e) 2005 2004 2003 2002 2001 - ------- ------------ ------- ------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 33.43 $ 28.37 $ 22.99 $ 15.99 $ 17.26 $ 20.11 -------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.13) (0.22) (0.28) (0.20) (0.21) (0.19) Net gain (loss) on securities (realized and unrealized) 4.97 7.56 5.92 7.20 (0.74) (0.85) -------- ------- ------- ------- ------- ------- Total from investment operations 4.84 7.34 5.64 7.00 (0.95) (1.04) -------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains (2.07) (2.28) (0.26) -- (0.21) (1.81) Return of capital -- -- -- -- (0.11) -- -------- ------- ------- ------- ------- ------- Total distributions (2.07) (2.28) (0.26) -- (0.32) (1.81) -------- ------- ------- ------- ------- ------- Net asset value, end of period $ 36.20 $ 33.43 $ 28.37 $ 22.99 $ 15.99 $ 17.26 ======== ======= ======= ======= ======= ======= TOTAL RETURN(a) 15.18% 26.83% 24.67% 43.78% (5.88%) (5.45%) -------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $113,810 $97,664 $74,650 $53,947 $37,136 $26,967 -------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.80%) (0.72%) (1.07%) (1.08%) (1.09%) (0.98%) Total expenses 2.11% 2.16% 2.23% 2.40% 2.34% 2.30% -------- ------- ------- ------- ------- ------- Portfolio turnover rate 22% 19% 45% 52% 51% 55%
61 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period MID CAP VALUE SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------- CLASS C 2006(e) 2005 2004 2003 2002(c) 2001 - ------- ------------ ------- ------- ------- ------- ------ PER SHARE DATA Net asset value, beginning of period $ 34.03 $ 28.85 $ 23.37 $ 16.26 $ 17.53 $20.39 -------- ------- ------- ------- ------- ------ Income (loss) from investment operations: Net investment loss(b) (0.13) (0.21) (0.29) (0.21) (0.21) (0.19) Net gain (loss) on securities (realized and unrealized) 5.07 7.67 6.03 7.32 (0.74) (0.86) -------- ------- ------- ------- ------- ------ Total from investment operations 4.94 7.46 5.74 7.11 (0.95) (1.05) -------- ------- ------- ------- ------- ------ Less distributions: Distributions from realized gains (2.07) (2.28) (0.26) -- (0.21) (1.81) Return of capital -- -- -- -- (0.11) -- -------- ------- ------- ------- ------- ------ Total distributions (2.07) (2.28) (0.26) -- (0.32) (1.81) -------- ------- ------- ------- ------- ------ Net asset value, end of period $ 36.90 $ 34.03 $ 28.85 $ 23.37 $ 16.26 $17.53 ======== ======= ======= ======= ======= ====== TOTAL RETURN(a) 15.21% 26.80% 24.70% 43.73% (5.79%) (5.42%) -------- ------- ------- ------- ------- ------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $135,219 $93,887 $54,133 $32,999 $18,785 $6,976 -------- ------- ------- ------- ------- ------ Ratios to average net assets: Net investment loss (0.78%) (0.71%) (1.06%) (1.08%) (1.06%) (0.98%) Total expenses 2.11% 2.16% 2.23% 2.40% 2.35% 2.30% -------- ------- ------- ------- ------- ------ Portfolio turnover rate 22% 19% 45% 52% 51% 55%
(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 and C. (b) Net investment income (loss) was computed using average shares outstanding throughout the period. (c) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (d) Net investment income is less than $0.01 per share. (e) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 62 See accompanying notes. SECURITY EQUITY FUND Select 25 Series (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 63 SECURITY EQUITY FUND Performance Summary SELECT 25 SERIES May 15, 2006 (unaudited) PERFORMANCE SELECT 25 SERIES VS. RUSSELL 1000 GROWTH INDEX (PERFORMANCE GRAPH) SELECT 25 SERIES 1/29/99 9,425.00 3/31/99 9,802.00 6/30/99 9,915.10 9/30/99 9,924.53 12/31/99 11,734.13 3/31/00 11,573.90 6/30/00 11,064.95 9/30/00 10,687.95 12/31/00 9,660.63 3/31/01 8,228.03 6/30/01 8,793.53 9/30/01 7,144.15 12/31/01 8,605.03 3/31/02 8,539.05 6/30/02 7,002.78 9/30/02 6,145.10 12/31/02 6,343.03 3/31/03 6,173.38 6/30/03 6,776.58 9/30/03 6,851.98 12/31/03 7,417.48 3/31/04 7,719.08 6/30/04 7,775.63 9/30/04 7,360.93 12/31/04 8,228.03 3/31/05 7,954.70 6/30/05 8,048.95 9/30/05 8,821.80 12/31/05 9,189.38 3/31/06 9,641.78
RUSSELL 1000 GROWTH INDEX INCEPTION 1/29/99 10,000.00 3/31/99 10,045.92 6/30/99 10,432.68 9/30/99 10,049.99 12/31/99 12,577.25 3/31/00 13,473.82 06/30/00 13,109.39 09/30/00 12,403.67 12/31/00 9,756.78 3/31/2001 7,717.61 6/30/2001 8,367.35 9/30/2001 6,743.24 12/31/2001 7,764.53 3/31/2002 7,563.52 6/30/2002 6,151.25 9/30/2002 5,225.76 12/31/2002 5,599.12 3/31/2003 5,539.08 6/30/2003 6,331.43 9/30/2003 6,579.50 12/31/2003 7,265.20 3/31/2004 7,322.08 6/30/2004 7,463.91 9/30/2004 7,074.26 12/31/2004 7,723.10 3/31/2005 7,407.74 6/30/2005 7,590.52 9/30/2005 7,895.14 12/31/2005 8,130.26 3/31/2006 8,382.36
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Select 25 Series on January 29, 1999 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Growth Index is an unmanaged capitalization-weighted index which includes stocks incorporated in the United States and its territories and measures the performance of the Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- ----------------- A Shares 21.21% 3.22% 0.32% (1-29-99) A Shares with sales charge 14.30% 2.01% (0.51%) (1-29-99) B Shares 20.30% 2.48% (0.40%) (1-29-99) B Shares with CDSC 15.30% 2.11% (0.40%) (1-29-99) C Shares 20.37% 2.47% (0.35%) (1-29-99) C Shares with CDSC 19.37% 2.47% (0.35%) (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 11.05% Consumer Staples 4.87 Energy 8.00 Financials 9.37 Health Care 12.59 Industrials 20.57 Information Technology 15.64 Materials 3.77 Utilities 5.62 Exchange Traded Funds 2.60 Commercial Paper 4.20 Repurchase Agreement 1.80 Liabilities, less cash & other assets (0.08) ------ Total net assets 100.00% ======
64 See accompanying notes. SECURITY EQUITY FUND Performance Summary SELECT 25 SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Select 25 Series - Class A Actual $1,000.00 $1,093.00 $ 9.55 Hypothetical 1,000.00 1,015.81 9.20 Select 25 Series - Class B Actual 1,000.00 1,089.70 13.44 Hypothetical 1,000.00 1,012.07 12.94 Select 25 Series - Class C Actual 1,000.00 1,090.60 13.45 Hypothetical 1,000.00 1,012.07 12.94
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 9.30%, 8.97% and 9.06%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.83%, 2.58% and 2.58% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 65 SECURITY EQUITY FUND Schedule of Investments SELECT 25 SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ------------ COMMON STOCKS - 94.1% AEROSPACE & DEFENSE - 4.5% L-3 Communications Holdings, Inc. 13,800 $ 1,183,902 ----------- AIR FREIGHT & LOGISTICS - 5.5% FedEx Corporation 12,800 1,445,632 ----------- BIOTECHNOLOGY - 3.1% Amgen, Inc.* 11,200 814,800 ----------- BROADCASTING & CABLE TV - 2.6% CBS Corporation (Cl.B)* 11,950 286,561 Univision Communications, Inc.* 11,800 406,746 ----------- 693,307 ----------- COMMUNICATIONS EQUIPMENT - 10.1% 3Com Corporation* 136,500 698,880 ADC Telecommunications, Inc.* 44,628 1,142,031 Cisco Systems, Inc.* 38,000 823,460 ----------- 2,664,371 ----------- CONSTRUCTION & ENGINEERING - 7.3% Shaw Group, Inc.* 63,500 1,930,400 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 4.0% First Data Corporation 22,600 1,058,132 ----------- ELECTRIC UTILITIES - 5.6% KFx, Inc.* 81,300 1,479,660 ----------- EXCHANGE TRADED FUNDS - 2.6% iShares Russell 1000 Growth Index Fund 13,000 684,580 ----------- HEALTH CARE EQUIPMENT - 3.6% Medtronic, Inc. 18,600 943,950 ----------- HEALTH CARE SERVICES - 2.9% Covance, Inc.* 12,900 757,875 ----------- HOME IMPROVEMENT RETAIL - 2.8% Home Depot, Inc. 17,600 744,480 ----------- HOTELS, RESORTS & CRUISE LINES - 3.8% Carnival Corporation 21,300 1,008,981 ----------- HYPERMARKETS & SUPERCENTERS - 3.2% Wal-Mart Stores, Inc. 17,500 826,700 ----------- INDUSTRIAL GASES - 3.8% Praxair, Inc. 18,000 992,700 ----------- MOVIES & ENTERTAINMENT - 1.8% Viacom, Inc. (Cl.B)* 11,950 463,660 ----------- MULTI-LINE INSURANCE - 3.9% American International Group, Inc. 15,500 1,024,395 ----------- OIL & GAS EQUIPMENT & SERVICES - 4.2% BJ Services Company 32,100 1,110,660 ----------- OIL & GAS STORAGE & TRANSPORTATION - 3.8% Williams Companies, Inc. 46,600 996,774 -----------
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE ---------- ------------ COMMON STOCKS (CONTINUED) OTHER DIVERSIFIED FINANCIAL SERVICES - 5.5% Citigroup, Inc. 9,300 $ 439,332 First Marblehead Corporation 23,200 1,003,400 ----------- 1,442,732 ----------- PHARMACEUTICALS - 3.0% Johnson & Johnson 13,500 799,470 ----------- SEMICONDUCTOR EQUIPMENT - 1.5% Mindspeed Technologies, Inc.* 100,000 398,000 ----------- SOFT DRINKS - 1.7% PepsiCo, Inc. 7,900 456,541 ----------- TRUCKING - 3.3% J.B. Hunt Transport Services, Inc. 39,800 857,292 ----------- TOTAL COMMON STOCKS (cost $19,001,724) 24,778,994 ----------- COMMERCIAL PAPER - 4.2% BROKERAGE - 4.2% Goldman Sachs Group, Inc., 4.80%, 04-05-06 $1,100,000 1,099,413 ----------- TOTAL COMMERCIAL PAPER (cost $1,099,413) 1,099,413 ----------- REPURCHASE AGREEMENT - 1.8% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $487,177 (Collateralized by FHLMC, 4.35%, 06-02-08 with a value of $497,507) $ 487,000 487,000 ----------- TOTAL REPURCHASE AGREEMENT (cost $487,000) 487,000 ----------- TOTAL INVESTMENTS - 100.1% (cost $20,588,137) 26,365,407 LIABILITIES, LESS CASH & OTHER ASSETS - (0.1%) (24,403) ----------- TOTAL NET ASSETS - 100.0% $26,341,004 ===========
The identified cost of investments owned at March 31, 2006 was the same for federal income tax and financial statement purposes. * Non-income producing security 66 See accompanying notes. SECURITY EQUITY FUND SELECT 25 SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ....................................... $ 26,365,407 Cash ........................................................... 600 Receivables: Fund shares sold ............................................ 1,975 Dividends ................................................... 8,828 Prepaid expenses ............................................... 22,441 ------------ Total assets ................................................... 26,399,251 ------------ LIABILITIES: Payable for: Fund shares redeemed ........................................ 8,892 Management fees ............................................. 16,744 Custodian fees .............................................. 1,300 Transfer agent and administration fees ...................... 5,129 Professional fees ........................................... 6,370 12b-1 distribution plan fees ................................ 19,352 Director's fees ............................................. 103 Other ....................................................... 357 ------------ Total liabilities .............................................. 58,247 ============ NET ASSETS ..................................................... $ 26,341,004 ============ NET ASSETS CONSIST OF: Paid in capital ................................................ $ 31,006,917 Accumulated net investment loss ................................ (155,163) Accumulated net realized loss on sale of investments and options written .................. (10,288,020) Net unrealized appreciation in value of investments ............ 5,777,270 ------------ Net assets ..................................................... $ 26,341,004 ============ CLASS A: Capital shares outstanding (unlimited number of shares authorized) ................................................. 1,144,973 Net assets ..................................................... $ 11,717,550 Net asset value and redemption price per share ................. $ 10.23 ============ Maximum offering price per share (net asset value divided by 94.25%) ......................... $ 10.85 ============ CLASS B: Capital shares outstanding (unlimited number of shares authorized) ................................................. 911,418 Net assets ..................................................... $ 8,856,804 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ..................................................... $ 9.72 ============ CLASS C: Capital shares outstanding (unlimited number of shares authorized) ................................................. 591,675 Net assets ..................................................... $ 5,766,650 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ..................................................... $ 9.75 ============ (1)Investments, at cost ........................................ $ 20,588,137
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ................................................... $ 89,630 Interest .................................................... 23,174 ------------ Total investment income ..................................... 112,804 ------------ EXPENSES: Management fees ............................................. 88,910 Custodian fees .............................................. 1,538 Transfer agent/maintenance fees ............................. 60,300 Administration fees ......................................... 13,056 Directors' fees ............................................. 295 Professional fees ........................................... 5,113 Reports to shareholders ..................................... 2,499 Registration fees ........................................... 15,146 Other expenses .............................................. 1,104 12b-1 distribution plan fees - Class A ...................... 12,847 12b-1 distribution plan fees - Class B ...................... 40,149 12b-1 distribution plan fees - Class C ...................... 27,010 ------------ Total expenses .............................................. 267,967 ------------ Net investment loss ......................................... (155,163) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain during the period on: Investments ................................................. 1,144,437 Options written ............................................. 27,146 ------------ Net realized gain ........................................... 1,171,583 ------------ Net unrealized appreciation during the period on: Investments ................................................. 1,050,760 ------------ Net unrealized appreciation ................................. 1,050,760 ------------ Net realized and unrealized gain ............................ 2,222,343 ------------ Net increase in net assets resulting from operations ........ $ 2,067,180 ============
67 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets SELECT 25 SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss .......................................... $ (155,163) $ (265,585) Net realized gain during the period on investments and options written ................................................... 1,171,583 544,010 Net unrealized appreciation during the period on investments ............................................... 1,050,760 3,480,799 ----------- ----------- Net increase in net assets resulting from operations ......... 2,067,180 3,759,224 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ................................................... 2,867,574 1,492,556 Class B ................................................... 1,960,024 666,322 Class C ................................................... 629,354 610,317 Cost of shares redeemed Class A ................................................... (973,180) (3,447,276) Class B ................................................... (792,846) (2,219,476) Class C ................................................... (358,032) (2,348,235) ----------- ----------- Net increase (decrease) from capital share transactions ...... 3,332,894 (5,245,792) ----------- ----------- Net increase (decrease) in net assets ........................ 5,400,074 (1,486,568) ----------- ----------- NET ASSETS: Beginning of period .......................................... 20,940,930 22,427,498 ----------- ----------- End of period ................................................ $26,341,004 $20,940,930 =========== =========== Accumulated net investment loss at end of period ............. $ (155,163) $ -- =========== =========== CAPITAL SHARE ACTIVITY: Shares sold Class A ................................................... 291,904 174,623 Class B ................................................... 210,224 82,316 Class C ................................................... 67,852 73,575 Shares redeemed Class A ................................................... (99,411) (403,526) Class B ................................................... (83,858) (274,915) Class C ................................................... (38,408) (291,186)
68 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period SELECT 25 SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------- CLASS A 2006(d) 2005 2004 2003 2002 2001 - ------- ------------ ------ ------ ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 9.36 $ 7.81 $ 7.27 $ 6.52 $ 7.58 $ 11.34 ------- ------ ------ ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.04) (0.07) (0.06) (0.05) (0.07) (0.06) Net gain (loss) on securities (realized and unrealized) 0.91 1.62 0.60 0.80 (0.99) (3.70) ------- ------ ------ ------- ------- ------- Total from investment operations 0.87 1.55 0.54 0.75 (1.06) (3.76) ------- ------ ------ ------- ------- ------- Net asset value, end of period $ 10.23 $ 9.36 $ 7.81 $ 7.27 $ 6.52 $ 7.58 ======= ====== ====== ======= ======= ======= TOTAL RETURN(a) 9.30% 19.85% 7.43% 11.50% (13.98%) (33.16%) ------- ------ ------ ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $11,717 $8,912 $9,228 $10,396 $11,933 $14,347 ------- ------ ------ ------- ------- ------- Ratios to average net assets: Net investment loss (0.88%) (0.79%) (0.75%) (0.70%) (0.81%) (0.60%) Total expenses 1.83% 1.67% 1.56% 1.63% 1.46% 1.39% ------- ------ ------ ------- ------- ------- Portfolio turnover rate 23% 13% 44% 54% 33% 44%
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------ CLASS B 2006(d) 2005 2004 2003 2002 2001 - ------- ------------ ------ ------ ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 8.92 $ 7.50 $ 7.04 $ 6.36 $ 7.44 $ 11.22 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.08) (0.13) (0.11) (0.10) (0.13) (0.13) Net gain (loss) on securities (realized and unrealized) 0.88 1.55 0.57 0.78 (0.95) (3.65) ------ ------ ------ ------ ------- ------- Total from investment operations 0.80 1.42 0.46 0.68 (1.08) (3.78) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 9.72 $ 8.92 $ 7.50 $ 7.04 $ 6.36 $ 7.44 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 8.97% 18.93% 6.53% 10.69% (14.52%) (33.69%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $8,857 $7,000 $7,333 $8,203 $ 8,566 $11,519 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.64%) (1.54%) (1.50%) (1.45%) (1.56%) (1.35%) Total expenses 2.58% 2.42% 2.31% 2.38% 2.21% 2.14% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 23% 13% 44% 54% 33% 44%
69 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period SELECT 25 SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------ CLASS C 2006(d) 2005 2004 2003 2002(c) 2001 - ------- ------------ ------ ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $ 8.94 $ 7.52 $ 7.06 $ 6.38 $ 7.47 $ 11.26 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.08) (0.13) (0.11) (0.10) (0.13) (0.13) Net gain (loss) on securities (realized and unrealized) 0.89 1.55 0.57 0.78 (0.96) (3.66) ------ ------ ------ ------ ------- ------- Total from investment operations 0.81 1.42 0.46 0.68 (1.09) (3.79) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 9.75 $ 8.94 $ 7.52 $ 7.06 $ 6.38 $ 7.47 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 9.06% 18.88% 6.52% 10.66% (14.59%) (33.66%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $5,767 $5,029 $5,866 $6,225 $ 3,954 $ 4,531 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.62%) (1.54%) (1.50%) (1.44%) (1.56%) (1.35%) Total expenses 2.58% 2.42% 2.31% 2.37% 2.21% 2.14% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 23% 13% 44% 54% 33% 44%
(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 and C. (b) Net investment loss was computed using average shares outstanding throughout the period. (c) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (d) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 70 See accompanying notes. SECURITY EQUITY FUND Small Cap Growth Series (RS INVESTMENTS LOGO) SUBADVISER, RS INVESTMENTS 71 SECURITY EQUITY FUND Performance Summary SMALL CAP GROWTH SERIES May 15, 2006 (unaudited) PERFORMANCE SMALL CAP GROWTH SERIES VS. RUSSELL 2000 GROWTH INDEX (PERFORMANCE GRAPH) SMALL CAP GROWTH SERIES 10/15/97 9,425.00 12/31/97 9,063.00 3/31/98 10,128.68 6/30/98 9,921.20 9/30/98 8,204.80 12/31/98 10,006.08 3/31/99 10,015.51 6/30/99 10,571.93 9/30/99 12,241.18 12/31/99 18,728.25 3/31/00 23,780.52 6/30/00 20,741.41 9/30/00 21,370.53 12/31/00 16,926.48 3/31/01 12,356.86 6/30/01 13,572.63 9/30/01 10,271.18 12/31/01 12,042.43 3/31/02 11,665.12 6/30/02 10,428.39 9/30/02 8,258.87 12/31/02 8,751.46 3/31/03 8,248.39 6/30/03 10,522.72 9/30/03 12,189.16 12/31/03 13,572.63 3/31/04 14,453.02 6/30/04 14,222.44 9/30/04 13,740.32 12/31/04 15,763.12 3/31/05 14,756.96 6/30/05 15,658.31 9/30/05 16,517.73 12/31/05 16,821.68 3/31/06 18,551.01
RUSSELL 2000 GROWTH INDEX INCEPTION 10/15/97 10,000.00 12/31/97 9,180.81 03/31/98 10,271.66 06/30/98 9,680.76 09/30/98 7,516.68 12/31/98 9,294.11 03/31/99 9,137.79 06/30/99 10,485.49 09/30/99 9,970.23 12/31/99 13,299.60 03/31/00 14,534.92 06/30/00 13,462.59 09/30/00 12,927.63 12/31/00 10,315.79 3/31/2001 8,747.02 6/30/2001 10,319.67 9/30/2001 7,421.14 12/31/2001 9,363.46 3/31/2002 9,179.82 6/30/2002 7,739.04 9/30/2002 6,073.63 12/31/2002 6,529.39 3/31/2003 6,275.55 6/30/2003 7,790.90 9/30/2003 8,606.49 12/31/2003 9,698.35 3/31/2004 10,240.11 6/30/2004 10,249.93 9/30/2004 9,633.73 12/31/2004 11,085.85 3/31/2005 10,329.58 6/30/2005 10,688.99 9/30/2005 11,363.97 12/31/2005 11,545.56 3/31/2006 13,204.61
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Small Cap Growth Series on October 15, 1997 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 13.89% Consumer Staples 1.49 Energy 6.28 Financials 8.96 Health Care 19.66 Industrials 17.96 Information Technology 28.07 Materials 0.95 Repurchase Agreement 2.30 Cash & other assets, less liabilities 0.44 ------ Total net assets 100.00% ======
AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- --------------- A Shares 25.71% 8.47% 8.33% (10-15-97) A Shares with sales charge 18.47% 7.19% 7.58% (10-15-97) B Shares 24.73% 7.64% 7.35% (10-15-97) B Shares with CDSC 19.73% 7.34% 7.35% (10-15-97) C Shares 24.81% 7.66% 7.33% (1-29-99) C Shares with CDSC 23.81% 7.66% 7.33% (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Series and in the absence of such waivers, the performance quoted would be reduced. 72 See accompanying notes. SECURITY EQUITY FUND Performance Summary SMALL CAP GROWTH SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID VALUE VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) --------- ----------- --------- Small Cap Growth Series - Class A Actual $1,000.00 $1,123.10 $10.75 Hypothetical 1,000.00 1,014.81 10.20 Small Cap Growth Series - Class B Actual 1,000.00 1,119.20 14.69 Hypothetical 1,000.00 1,011.07 13.94 Small Cap Growth Series - Class C Actual 1,000.00 1,119.00 14.69 Hypothetical 1,000.00 1,011.07 13.94
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 12.31%, 11.92% and 11.90%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (2.03%, 2.78% and 2.78% for Class A, B and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 73 SECURITY EQUITY FUND Schedule of Investments SMALL CAP GROWTH SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS - 97.2% AEROSPACE & DEFENSE - 1.7% Dynamic Materials Corporation 5,400 $ 192,456 Hexcel Corporation* 23,410 514,318 ----------- 706,774 ----------- AGRICULTURAL PRODUCTS - 1.5% Central Garden & Pet Company* 11,960 635,554 ----------- APPAREL RETAIL - 2.2% Cache, Inc.* 29,780 546,165 Jos. A. Bank Clothiers, Inc.* 7,986 382,929 ----------- 929,094 ----------- APPLICATION SOFTWARE - 5.2% Bottomline Technologies, Inc.* 21,590 296,431 Concur Technologies, Inc.* 19,630 363,744 Retalix, Ltd.* 16,360 404,419 Synplicity, Inc.* 57,240 369,770 Ultimate Software Group, Inc.* 16,920 437,382 Witness Systems, Inc.* 13,510 343,154 ----------- 2,214,900 ----------- BIOTECHNOLOGY - 4.3% Adeza Biomedical Corporation* 20,210 427,037 Illumina, Inc.* 8,450 200,687 LifeCell Corporation* 23,780 536,239 Solexa, Inc.* 27,240 271,855 United Therapeutics Corporation* 5,590 370,505 ----------- 1,806,323 ----------- CASINOS & GAMING - 3.9% Century Casinos, Inc.* 41,040 436,666 Mikohn Gaming Corporation* 42,820 409,787 Scientific Games Corporation* 23,350 820,286 ----------- 1,666,739 ----------- COMPUTER HARDWARE - 1.0% Neoware, Inc.* 14,430 427,417 ----------- COMPUTER STORAGE & PERIPHERALS - 0.9% M-Systems Flash Disk Pioneers, Ltd.* 14,630 378,332 ----------- CONSTRUCTION & FARM MACHINERY - 1.2% Gehl Company* 14,760 488,851 ----------- CONSTRUCTION MATERIALS - 1.0% U.S. Concrete, Inc.* 27,940 404,012 ----------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 3.9% FirstService Corporation* 24,280 597,045 McGrath Rentcorp 18,320 550,699 Nutri/Systems, Inc.* 10,750 510,840 ----------- 1,658,584 ----------- EDUCATION SERVICES - 1.1% Laureate Education, Inc.* 8,340 445,189 ----------- ELECTRICAL COMPONENTS & EQUIPMENT - 1.0% Regal-Beloit Corporation 10,550 $ 445,949 ----------- ELECTRONIC EQUIPMENT MANUFACTURERS - 4.3% I.D. Systems, Inc.* 15,640 391,000 Intevac, Inc.* 16,320 469,690 Itron, Inc.* 7,830 468,625 Optimal Group, Inc.* 33,880 492,276 ----------- 1,821,591 ----------- ENVIRONMENTAL & FACILITIES SERVICES - 1.8% Rollins, Inc. 29,950 606,188 Team, Inc.* 5,200 172,952 ----------- 779,140 ----------- FOOTWEAR - 1.0% Iconix Brand Group, Inc.* 28,550 415,403 ----------- HEALTH CARE EQUIPMENT - 7.1% AngioDynamics, Inc.* 11,320 340,279 Encore Medical Corporation* 8,140 41,677 I-Flow Corporation* 25,410 338,461 Neurometrix, Inc.* 5,520 214,949 NuVasive, Inc.* 22,210 418,659 ResMed, Inc.* 5,540 243,649 SonoSite, Inc.* 7,410 301,142 Spectranetics Corporation* 42,700 504,714 Vital Signs, Inc 11,230 616,864 ----------- 3,020,394 ----------- HEALTH CARE FACILITIES - 2.2% Five Star Quality Care, Inc.* 46,460 505,949 Health Grades, Inc.* 25,130 133,940 LCA-Vision, Inc. 6,100 305,671 ----------- 945,560 ----------- HEALTH CARE SERVICES - 1.9% AMN Healthcare Services, Inc.* 24,580 460,138 Providence Service Corporation* 10,660 346,663 ----------- 806,801 ----------- HEALTH CARE SUPPLIES - 3.0% Immucor, Inc.* 14,180 406,824 Orthovita, Inc.* 79,180 327,805 PolyMedica Corporation 12,482 528,738 ----------- 1,263,367 ----------- HOME IMPROVEMENT RETAIL - 0.8% Building Materials Holding Corporation 9,980 355,687 ----------- HOMEBUILDING - 0.9% Champion Enterprises, Inc.* 26,120 390,755 ----------- HOTELS, RESORTS & CRUISE LINES - 1.1% Steiner Leisure, Ltd.* 12,040 487,620 -----------
74 See accompanying notes. SECURITY EQUITY FUND Schedule of Investments SMALL CAP GROWTH SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS (CONTINUED) HUMAN RESOURCE & EMPLOYMENT SERVICES - 1.5% Barrett Business Services, Inc.* 22,770 $ 614,790 ----------- INDUSTRIAL MACHINERY - 2.0% Flow International Corporation* 14,500 190,965 GSI Group, Inc.* 30,100 332,605 Gardner Denver, Inc.* 5,230 340,996 ----------- 864,566 ----------- INTERNET RETAIL - 2.0% Ctrip.com International, Ltd. ADR* 4,880 403,576 Netflix, Inc.* 15,740 456,303 ----------- 859,879 ----------- INTERNET SOFTWARE & SERVICES - 9.1% CyberSource Corporation* 26,580 296,633 Digitas, Inc.* 33,770 486,288 Equinix, Inc.* 7,560 485,503 j2 Global Communications, Inc.* 14,160 665,520 Marchex, Inc. (Cl.B)* 8,380 180,170 Online Resources Corporation* 41,250 536,250 Openwave Systems, Inc.* 19,810 427,500 RADVision, Ltd.* 24,780 442,323 Radware, Ltd.* 19,670 346,782 ----------- 3,866,969 ----------- INVESTMENT BANKING & BROKERAGE - 1.1% GFI Group, Inc.* 9,120 473,419 ----------- LEISURE PRODUCTS - 0.8% The9, Ltd. ADR* 11,900 354,025 ----------- MARINE - 1.6% American Commercial Lines, Inc.* 14,250 672,600 ----------- MULTI-LINE INSURANCE - 1.4% Amerisafe, Inc.* 49,040 588,480 ----------- OIL & GAS DRILLING - 1.7% Grey Wolf, Inc.* 43,040 320,218 Unit Corporation* 7,550 420,913 ----------- 741,131 ----------- OIL & GAS EQUIPMENT & SERVICES - 4.5% Dril-Quip, Inc.* 600 42,510 Hydril* 5,540 431,843 Maverick Tube Corporation* 8,890 471,081 Oil States International, Inc.* 12,500 460,625 Superior Energy Services, Inc.* 19,510 522,673 ----------- 1,928,732 ----------- PHARMACEUTICALS - 1.2% Adolor Corporation* 8,500 202,300 Matrixx Initiatives, Inc.* 13,450 313,385 ----------- 515,685 ----------- PROPERTY & CASUALTY INSURANCE - 1.4% Navigators Group, Inc.* 11,820 586,272 -----------
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS (CONTINUED) RAILROADS - 0.9% American Railcar Industries, Inc. 10,500 $ 368,235 ----------- REAL ESTATE INVESTMENT TRUSTS - 1.3% KKR Financial Corporation 23,880 535,628 ----------- REGIONAL BANKS - 2.7% Boston Private Financial Holdings, Inc. 15,630 528,138 PrivateBancorp, Inc. 15,240 632,308 ----------- 1,160,446 ----------- SEMICONDUCTOR EQUIPMENT - 1.6% PDF Solutions, Inc.* 25,390 480,379 Ultratech, Inc.* 8,760 214,445 ----------- 694,824 ----------- SEMICONDUCTORS - 5.1% Anadigics, Inc.* 28,400 224,360 Microsemi Corporation* 10,620 309,148 02Micro International, Ltd. ADR* 42,890 455,921 SRS Labs, Inc.* 62,850 378,357 Supertex, Inc.* 10,760 404,791 Volterra Semiconductor Corporation* 21,840 416,926 ----------- 2,189,503 ----------- SPECIALIZED FINANCE - 1.1% Portfolio Recovery Associates, Inc.* 9,930 465,022 ----------- SYSTEMS SOFTWARE - 0.8% Radiant Systems, Inc.* 25,400 343,408 ----------- TRUCKING - 2.4% Old Dominion Freight Line, Inc.* 19,200 517,440 Vitran Corporation, Inc.* 25,870 519,211 ----------- 1,036,651 ----------- TOTAL COMMON STOCKS (cost $31,913,068) 41,354,301 ----------- REPURCHASE AGREEMENT - 2.3% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $964,350 (Collateralized by FHLMC, 4.35%, 06-02-08 with a value of $984,026) $ 964,000 964,000 ----------- TOTAL REPURCHASE AGREEMENT (cost $964,000) 964,000 ----------- TOTAL INVESTMENTS - 99.5% (cost $32,877,068) 42,318,301 CASH & OTHER ASSETS, LESS LIABILITIES - 0.5% 202,937 ----------- TOTAL NET ASSETS - 100.0% $42,521,238 ===========
For federal income tax purposes the identified cost of investments owned at March 31, 2006 was $33,007,965. * Non-income producing security ADR (American Depositary Receipt) 75 See accompanying notes. SECURITY EQUITY FUND SMALL CAP GROWTH SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ......................................... $42,318,301 Cash ............................................................. 497 Receivables: Fund shares sold .............................................. 139,712 Securities sold ............................................... 494,723 Dividends ..................................................... 2,555 Prepaid expenses ................................................. 22,605 ----------- Total assets ..................................................... 42,978,393 ----------- LIABILITIES: Payable for: Securities purchased .......................................... 343,219 Fund shares redeemed .......................................... 33,955 Management fees ............................................... 34,869 Custodian fees ................................................ 6,800 Transfer agent and administration fees ........................ 9,995 Professional fees ............................................. 6,696 12b-1 distribution plan fees .................................. 21,470 Director's fees ............................................... 151 ----------- Total liabilities ................................................ 457,155 ----------- NET ASSETS ....................................................... $42,521,238 =========== NET ASSETS CONSIST OF: Paid in capital .................................................. $35,385,818 Accumulated net investment loss .................................. (361,534) Accumulated net realized loss on sale of investments ............. (1,944,279) Net unrealized appreciation in value of investments .............. 9,441,233 ----------- Net assets ....................................................... $42,521,238 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) ....................... 1,567,592 Net assets ....................................................... $27,745,142 Net asset value and redemption price per share ................... $ 17.70 =========== Maximum offering price per share (net asset value divided by 94.25%) ........................... $ 18.78 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) ....................... 594,922 Net assets ....................................................... $ 9,720,099 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 16.34 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) ....................... 303,753 Net assets ....................................................... $ 5,055,997 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 16.65 =========== (1) Investments, at cost ......................................... $32,877,068
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ...................................................... $ 39,364 Interest ....................................................... 38,372 ---------- Total investment income ........................................ 77,736 ---------- EXPENSES: Management fees ................................................ 191,191 Transfer agent/maintenance fees ................................ 93,472 Administration fees ............................................ 19,026 Custodian fees ................................................. 10,258 Directors' fees ................................................ 450 Professional fees .............................................. 5,391 Reports to shareholders ........................................ 3,383 Registration fees .............................................. 16,606 Other expenses ................................................. 1,407 12b-1 distribution plan fees - Class A ......................... 30,985 12b-1 distribution plan fees - Class B ......................... 44,254 12b-1 distribution plan fees - Class C ......................... 22,997 ---------- Total expenses ................................................. 439,420 Less: Earnings credits ......................................... (150) ---------- Net expenses ................................................... 439,270 ---------- Net investment loss ............................................ (361,534) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain during the period on: Investments .................................................... 2,112,086 ---------- Net realized gain .............................................. 2,112,086 ---------- Net unrealized appreciation during the period on: Investments .................................................... 2,785,249 ---------- Net unrealized appreciation .................................... 2,785,249 ---------- Net realized and unrealized gain ............................... 4,897,335 ---------- Net increase in net assets resulting from operations ........... $4,535,801 ==========
76 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets SMALL CAP GROWTH SERIES
SIX MONTHS ENDED MARCH YEAR ENDED 31, 2006 SEPTEMBER (unaudited) 30, 2005 ----------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ............................ $ (361,534) $ (703,494) Net realized gain during the period on investments ................................. 2,112,086 4,851,401 Net unrealized appreciation during the period on investments ................................. 2,785,249 1,920,648 ----------- ------------ Net increase in net assets resulting from operations .................................. 4,535,801 6,068,555 ----------- ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ..................................... 6,265,022 8,144,188 Class B ..................................... 1,636,567 1,848,399 Class C ..................................... 538,265 1,278,043 Cost of shares redeemed Class A ..................................... (4,139,837) (10,786,990) Class B ..................................... (1,217,938) (4,281,215) Class C ..................................... (436,322) (1,752,947) ----------- ------------ Net increase (decrease) from capital share transactions ................................ 2,645,757 (5,550,522) ----------- ------------ Net increase in net assets ..................... 7,181,558 518,033 ----------- ------------ NET ASSETS: Beginning of period ............................ 35,339,680 34,821,647 ----------- ------------ End of period .................................. $42,521,238 $ 35,339,680 =========== ============ Accumulated net investment loss at end of period ...................................... $ (361,534) $ -- =========== ============ CAPITAL SHARE ACTIVITY: Shares sold Class A ..................................... 383,082 560,063 Class B ..................................... 107,752 138,265 Class C ..................................... 34,784 91,558 Shares redeemed Class A ..................................... (251,795) (759,381) Class B ..................................... (80,029) (324,239) Class C ..................................... (28,103) (128,106)
77 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period SMALL CAP GROWTH SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, --------------------------------------------------- CLASS A 2006(g) 2005 2004 2003 2002(f) 2001 - ------- ------------ ------- ------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 15.76 $ 13.11 $ 11.63 $ 7.88 $ 9.80 $ 22.08 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.13) (0.24) (0.25) (0.18) (0.20) (0.18) Net gain (loss) on securities (realized and unrealized) 2.07 2.89 1.73 3.93 (1.72) (10.78) ------- ------- ------- ------- ------- ------- Total from investment operations 1.94 2.65 1.48 3.75 (1.92) (10.96) ------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (1.32) ------- ------- ------- ------- ------- ------- Total distributions -- -- -- -- -- (1.32) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 17.70 $ 15.76 $ 13.11 $ 11.63 $ 7.88 $ 9.80 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 12.31% 20.21% 12.73% 47.59% (19.59%) (51.94%) ------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $27,745 $22,637 $21,443 $14,406 $ 8,350 $17,235 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (1.63%) (1.67%) (1.95%) (2.01%) (1.93%) (1.32%) Total expenses(b) 2.03% 2.10% 2.09% 2.51% 2.14% 1.91% Net expenses(d) 2.03% 2.10% 2.09% 2.25% 2.14% 1.91% Expenses prior to custodian earnings credits and net of expense waivers 2.03% 2.10% 2.09% 2.25% 2.14% 1.91% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 139% 134% 157% 206% 302% 394%
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------ CLASS B 2006(g) 2005 2004 2003 2002(f) 2001 - ------- ------------ ------- ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $14.60 $12.24 $10.94 $ 7.47 $ 9.37 $ 21.34 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.18) (0.33) (0.33) (0.24) (0.26) (0.28) Net gain (loss) on securities (realized and unrealized) 1.92 2.69 1.63 3.71 (1.64) (10.37) ------ ------ ------ ------ ------- ------- Total from investment operations 1.74 2.36 1.30 3.47 (1.90) (10.65) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (1.32) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (1.32) ------ ------ ------ ------ ------- ------- Net asset value, end of period $16.34 $14.60 $12.24 $10.94 $ 7.47 $ 9.37 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 11.92% 19.28% 11.88% 46.45% (20.28%) (52.31%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $9,720 $8,283 $9,218 $6,838 $ 4,292 $ 6,173 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (2.38%) (2.41%) (2.69%) (2.76%) (2.69%) (2.07%) Total expenses(b) 2.78% 2.85% 2.84% 3.23% 2.90% 2.67% Net expenses(d) 2.78% 2.85% 2.83% 3.00% 2.90% 2.67% Expenses prior to custodian earnings credits and net of expense waivers 2.78% 2.85% 2.84% 3.00% 2.90% 2.67% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 139% 134% 157% 206% 302% 394%
78 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY EQUITY FUND outstanding throughout each period SMALL CAP GROWTH SERIES
SIX YEAR ENDED MONTHS ENDED SEPTEMBER 30, MARCH 31, -------------------------------------------------- CLASS C 2006(g) 2005 2004 2003 2002(e, f) 2001 - ------- ------------ ------ ------ ------ ---------- ------- PER SHARE DATA Net asset value, beginning of period $14.88 $12.47 $11.15 $ 7.61 $ 9.53 $ 21.74 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.18) (0.33) (0.33) (0.24) (0.26) (0.28) Net gain (loss) on securities (realized and unrealized) 1.95 2.74 1.65 3.78 (1.66) (10.61) ------ ------ ------ ------ ------- ------- Total from investment operations 1.77 2.41 1.32 3.54 (1.92) (10.89) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (1.32) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (1.32) Net asset value, end of period $16.65 $14.88 $12.47 $11.15 $ 7.61 $ 9.53 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 11.90% 19.33% 11.84% 46.52% (20.15%) (52.46%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $5,056 $4,420 $4,160 $3,533 $ 2,164 $ 2,339 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (2.38%) (2.42%) (2.69%) (2.76%) (2.69%) (2.09%) Total expenses(b) 2.78% 2.85% 2.83% 3.23% 2.91% 2.68% Net expenses(d) 2.78% 2.85% 2.82% 3.00% 2.91% 2.68% Expenses prior to custodian earnings credits and net of expense waivers 2.78% 2.85% 2.83% 3.00% 2.91% 2.68% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 139% 134% 157% 206% 302% 394%
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager. (c) Net investment loss was computed using average shares outstanding throughout the period. (d) Net expense information reflects expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable. (e) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (f) RS Investments, Inc. became the sub-adviser of Small Cap Growth Series effective September 3, 2002. Prior to September 3, 2002, Security Management Company, LLC (SMC) paid Strong Capital Management, Inc. for sub-advisory services. (g) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 79 See accompanying notes. This page left blank intentionally. 80 SECURITY EQUITY FUND Social Awareness Series (SECURITY BENEFIT(SM) LOGO) SECURITY MANAGEMENT COMPANY, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 81 SECURITY EQUITY FUND Performance Summary SOCIAL AWARENESS SERIES May 15, 2006 (unaudited) PERFORMANCE SOCIAL AWARENESS SERIES VS. S&P 500 INDEX (PERFORMANCE GRAPH) SOCIAL AWARENESS SERIES 11/1/96 9,425.00 12/31/96 9,443.85 3/31/97 9,010.30 6/30/97 10,436.62 9/30/97 11,303.72 12/31/97 11,547.06 3/31/98 13,051.83 6/30/98 13,341.45 9/30/98 12,195.56 12/31/98 15,061.35 3/31/99 15,477.05 6/30/99 16,449.17 9/30/99 15,381.12 12/31/99 17,400.39 3/31/00 18,360.95 6/30/00 17,789.81 9/30/00 16,900.64 12/31/00 15,228.70 3/31/01 13,441.76 6/30/01 14,030.79 9/30/01 11,879.84 12/31/01 13,236.59 3/31/02 13,196.88 6/30/02 11,469.51 9/30/02 9,761.99 12/31/02 10,483.38 3/31/03 10,192.18 6/30/03 11,548.93 9/30/03 11,807.04 12/31/03 12,826.26 3/31/04 12,892.44 6/30/04 13,051.28 9/30/04 12,402.69 12/31/04 13,355.72 3/31/05 12,766.69 6/30/05 13,051.28 9/30/05 13,435.14 12/31/05 13,924.89 3/31/06 14,494.07
S&P 500 INCEPTION 11/1/96 10,000.00 12/31/96 10,543.03 3/31/97 10,825.35 6/30/97 12,715.48 9/30/97 13,669.03 12/31/97 14,062.00 3/31/98 16,023.66 6/30/98 16,552.94 9/30/98 14,905.78 12/31/98 18,078.99 3/31/99 18,982.39 6/30/99 20,320.16 9/30/99 19,051.03 12/31/99 21,885.54 3/31/00 22,388.55 06/30/00 21,794.86 09/30/00 21,584.04 12/31/00 19,896.73 3/31/2001 17,538.83 6/30/2001 18,565.85 9/30/2001 15,842.36 12/31/2001 17,536.24 3/31/2002 17,583.90 6/30/2002 15,228.68 9/30/2002 12,598.57 12/31/2002 13,662.59 3/31/2003 13,232.30 6/30/2003 15,269.15 9/30/2003 15,673.27 12/31/2003 17,583.18 3/31/2004 17,881.46 6/30/2004 18,189.77 9/30/2004 17,848.74 12/31/2004 19,496.86 3/31/2005 19,076.84 6/30/2005 19,336.53 9/30/2005 20,034.31 12/31/2005 20,450.52 3/31/2006 21,310.15
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Social Awareness Series on November 1, 1996 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization-weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance. AVERAGE ANNUAL RETURNS
PERIODS ENDED 3-31-06 1 YEAR 5 YEARS SINCE INCEPTION - --------------------- ------ ------- ---------------- A Shares 13.53% 1.52% 4.68% (11-1-96) A Shares with sales charge 6.99% 0.32% 4.02% (11-1-96) B Shares 12.71% 0.70% 3.69% (11-1-96) B Shares with CDSC 7.71% 0.31% 3.69% (11-1-96) C Shares 12.70% 0.71% (1.96%) (1-29-99) C Shares with CDSC 11.70% 0.71% (1.96%) (1-29-99)
The performance data above represent past performance that is not predictive of future results. The investment return and principal value of an investment in the Series 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Series and in the absence of such waivers, the performance quoted would be reduced. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 12.78% Consumer Staples 10.99 Energy 2.76 Financials 12.22 Health Care 19.49 Industrials 14.36 Information Technology 19.53 Materials 2.39 Telecommunication Services 2.12 Repurchase Agreement 3.40 Liabilities, less cash & other assets (0.04) ------ Total net assets 100.00% ======
82 See accompanying notes. SECURITY EQUITY FUND Performance Summary SOCIAL AWARENESS SERIES May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR SERIES EXPENSES CALCULATING YOUR ONGOING SERIES EXPENSES EXAMPLE As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. SERIES EXPENSES
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID VALUE VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) --------- ----------- --------- Social Awareness Series - Class A Actual $1,000.00 $1,078.80 $ 9.23 Hypothetical 1,000.00 1,016.06 8.95 Social Awareness Series - Class B Actual 1,000.00 1,074.50 13.09 Hypothetical 1,000.00 1,012.32 12.69 Social Awareness Series - Class C Actual 1,000.00 1,075.00 13.09 Hypothetical 1,000.00 1,012.32 12.69
(1) The actual ending account value is based on the actual total return of the Series for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 7.88%, 7.45% and 7.50%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Series annualized expense ratio (1.78%, 2.53% and 2.53% for Class A, B and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 83 SECURITY EQUITY FUND Schedule of Investments SOCIAL AWARENESS SERIES March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS - 96.6% AIR FREIGHT & LOGISTICS - 4.2% FedEx Corporation 6,400 $ 722,816 ---------- BIOTECHNOLOGY - 2.6% Amgen, Inc.* 6,100 443,775 ---------- BROADCASTING & CABLE TV - 3.4% CBS Corporation (Cl.B)* 7,800 187,044 Univision Communications, Inc.* 11,300 389,511 ---------- 576,555 ---------- COMMUNICATIONS EQUIPMENT - 6.0% ADC Telecommunications, Inc.* 17,685 452,559 Cisco Systems, Inc.* 26,700 578,589 ---------- 1,031,148 ---------- CONSTRUCTION & ENGINEERING - 3.3% Shaw Group, Inc.* 18,500 562,400 ---------- CONSUMER FINANCE - 2.5% American Express Company 8,150 428,282 ---------- DATA PROCESSING & OUTSOURCED SERVICES - 3.0% First Data Corporation 10,850 507,997 ---------- DRUG RETAIL - 3.4% CVS Corporation 19,600 585,452 ---------- ELECTRICAL COMPONENTS & EQUIPMENT - 2.1% Power-One, Inc.* 49,000 352,800 ---------- GENERAL MERCHANDISE STORES - 1.4% Target Corporation 4,500 234,045 ---------- HEALTH CARE EQUIPMENT - 8.6% Fisher Scientific International, Inc.* 5,500 374,275 Medtronic, Inc. 11,300 573,475 Zimmer Holdings, Inc.* 7,600 513,760 ---------- 1,461,510 ---------- HEALTH CARE SERVICES - 3.4% Covance, Inc.* 10,000 587,500 ---------- HOME IMPROVEMENT RETAIL - 3.4% Home Depot, Inc. 13,800 583,740 ---------- HYPERMARKETS & SUPERCENTERS - 2.9% Costco Wholesale Corporation 9,200 498,272 ---------- INDUSTRIAL GASES - 2.4% Praxair, Inc. 7,400 408,110 ---------- IT CONSULTING & OTHER SERVICES - 2.2% Unisys Corporation* 53,700 369,993 ---------- MANAGED HEALTH CARE - 2.3% WellPoint, Inc.* 5,000 387,150 ---------- MOVIES & ENTERTAINMENT - 4.6% Time Warner, Inc. 29,000 486,910 Viacom, Inc. (Cl.B)* 7,800 302,640 ---------- 789,550 ----------
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE --------- ------------ COMMON STOCKS (CONTINUED) MULTI-LINE INSURANCE - 4.6% American International Group, Inc. 11,854 $ 783,431 ----------- OIL & GAS EQUIPMENT & SERVICES - 1.6% BJ Services Company 8,000 276,800 ----------- OIL & GAS STORAGE & TRANSPORTATION - 1.1% Williams Companies, Inc. 9,100 194,649 ----------- OTHER DIVERSIFIED FINANCIAL SERVICES - 5.1% First Marblehead Corporation 13,700 592,525 JP Morgan Chase & Company 6,800 283,152 ----------- 875,677 ----------- PHARMACEUTICALS - 2.6% Johnson & Johnson 7,604 450,309 ----------- SEMICONDUCTORS - 4.1% Analog Devices, Inc. 8,600 329,294 Intel Corporation 19,500 377,325 ----------- 706,619 ----------- SOFT DRINKS - 4.7% Coca-Cola Company 9,300 389,391 PepsiCo, Inc. 7,000 404,530 ----------- 793,921 ----------- SYSTEMS SOFTWARE - 4.2% Microsoft Corporation 26,500 721,065 ----------- TRADING COMPANIES & DISTRIBUTORS - 2.1% W.W. Grainger, Inc. 4,700 354,145 ----------- TRUCKING - 2.7% J.B. Hunt Transport Services, Inc. 21,400 460,956 ----------- WIRELESS TELECOMMUNICATION SERVICE - 2.1% Sprint Nextel Corporation 14,000 361,760 ----------- TOTAL COMMON STOCKS (cost $15,748,823) 16,510,427 ----------- REPURCHASE AGREEMENT - 3.4% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $578,210 (Collateralized by FHLMC, 4.35%, 06-02-08 with a value of $590,416) $ 578,000 578,000 ----------- TOTAL REPURCHASE AGREEMENT (cost $578,000) 578,000 ----------- TOTAL INVESTMENTS - 100.0% (cost $16,326,823) 17,088,427 LIABILITIES, LESS CASH & OTHER ASSETS - (0.0%) (5,191) ----------- TOTAL NET ASSETS - 100.0% $17,083,236 ===========
The identified cost of investments owned at March 31, 2006 was the same for federal income tax and financial statement purposes. * Non-income producing security 84 See accompanying notes. SECURITY EQUITY FUND SOCIAL AWARENESS SERIES (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ........................................ $17,088,427 Cash ............................................................ 387 Receivables: Fund shares sold ............................................. 5,194 Dividends .................................................... 5,694 Prepaid expenses ................................................ 20,150 ----------- Total assets .................................................... 17,119,852 ----------- LIABILITIES: Payable for: Fund shares redeemed ......................................... 5,522 Management fees .............................................. 11,019 Custodian fees ............................................... 1,400 Transfer agent and administration fees ....................... 3,649 Professional fees ............................................ 6,115 12b-1 distribution plan fees ................................. 8,678 Director's fees .............................................. 88 Other ........................................................ 145 ----------- Total liabilities ............................................... 36,616 ----------- NET ASSETS ...................................................... $17,083,236 =========== NET ASSETS CONSIST OF: Paid in capital ................................................. $17,412,211 Accumulated net investment loss ................................. (94,011) Accumulated net realized loss on sale of investments ............ (996,568) Net unrealized appreciation in value of investments ............. 761,604 ----------- Net assets ...................................................... $17,083,236 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) ...................... 514,461 Net assets ...................................................... $11,266,301 Net asset value and redemption price per share .................. $ 21.90 =========== Maximum offering price per share (net asset value divided by 94.25%) .......................... $ 23.24 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) ...................... 207,741 Net assets ...................................................... $ 4,163,968 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ...................................................... $ 20.04 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) ...................... 80,628 Net assets ...................................................... $ 1,652,967 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ...................................................... $ 20.50 =========== (1)Investments, at cost ......................................... $16,326,823
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ..................................................... $ 66,179 Interest ...................................................... 12,954 ---------- Total investment income ....................................... 79,133 ---------- EXPENSES: Management fees ............................................... 84,845 Custodian fees ................................................ 2,128 Transfer agent/maintenance fees ............................... 24,000 Administration fees ........................................... 12,826 Directors' fees ............................................... 230 Professional fees ............................................. 8,392 Reports to shareholders ....................................... 2,235 Registration fees ............................................. 15,559 Other expenses ................................................ 988 12b-1 distribution plan fees - Class A ........................ 13,898 12b-1 distribution plan fees - Class B ........................ 21,020 12b-1 distribution plan fees - Class C ........................ 8,234 ---------- Total expenses ................................................ 194,355 Less: Expenses waived ......................................... (21,211) ---------- Net expenses .................................................. 173,144 ---------- Net investment loss ........................................... (94,011) ---------- NET REALIZED AND UNREALIZED GAIN: Net realized gain during the period on: Investments ................................................... 554,863 ---------- Net realized gain ............................................. 554,863 ---------- Net unrealized appreciation during the period on: Investments ................................................... 804,847 ---------- Net unrealized appreciation ................................... 804,847 ---------- Net realized and unrealized gain .............................. 1,359,710 ---------- Net increase in net assets resulting from operations .......... $1,265,699 ==========
85 See accompanying notes. SECURITY EQUITY FUND Statement of Changes in Net Assets SOCIAL AWARENESS SERIES
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ----------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ........................................... $ (94,011) $ (10,128) Net realized gain (loss) during the period on investments ..... 554,863 (90,090) Net unrealized appreciation during the period on investments .. 804,847 1,425,092 ----------- ----------- Net increase in net assets resulting from operations .......... 1,265,699 1,324,874 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A .................................................... 1,060,726 2,732,571 Class B .................................................... 200,651 383,674 Class C .................................................... 86,539 446,322 Cost of shares redeemed Class A .................................................... (1,362,904) (2,543,663) Class B .................................................... (629,226) (2,114,208) Class C .................................................... (163,845) (564,810) ----------- ----------- Net decrease from capital share transactions .................. (808,059) (1,660,114) ----------- ----------- Net increase (decrease) in net assets ......................... 457,640 (335,240) ----------- ----------- NET ASSETS: Beginning of period ........................................... 16,625,596 16,960,836 ----------- ----------- End of period ................................................. $17,083,236 $16,625,596 =========== =========== Accumulated net investment loss at end of period .............. $ (94,011) $ -- =========== =========== CAPITAL SHARE ACTIVITY: Shares sold Class A .................................................... 50,295 139,285 Class B .................................................... 10,338 21,066 Class C .................................................... 4,377 24,090 Shares redeemed Class A .................................................... (64,207) (128,966) Class B .................................................... (32,661) (116,183) Class C .................................................... (8,202) (30,640)
86 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period SOCIAL AWARENESS SERIES
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------- CLASS A 2006(f) 2005 2004 2003 2002 2001 - ------- ---------- ------- ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $ 20.30 $ 18.74 $17.84 $14.75 $ 17.95 $ 26.04 ------- ------- ------ ------ ------- ------- Income (loss) from investment operations: Net investment income (loss)(c) (0.09) 0.04 (0.10) (0.13) (0.11) (0.07) Net gain (loss) on securities (realized and unrealized) 1.69 1.52 1.00 3.22 (3.09) (7.55) ------- ------- ------ ------ ------- ------- Total from investment operations 1.60 1.56 0.90 3.09 (3.20) (7.62) ------- ------- ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (0.47) ------- ------- ------ ------ ------- ------- Total distributions -- -- -- -- -- (0.47) ------- ------- ------ ------ ------- ------- Net asset value, end of period $ 21.90 $ 20.30 $18.74 $17.84 $ 14.75 $ 17.95 ======= ======= ====== ====== ======= ======= TOTAL RETURN(a) 7.88% 8.32% 5.04% 20.95% (17.83%) (29.71%) ------- ------- ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $11,266 $10,725 $9,708 $9,243 $ 7,355 $10,909 ------- ------- ------ ------ ------- ------- Ratios to average net assets: Net investment income (loss) (0.85%) 0.20% (0.55%) (0.76%) (0.58%) (0.30%) Total expenses(b) 2.03% 2.04% 1.93% 2.05% 1.66% 1.43% Net expenses(d) 1.78% 1.79% 1.76% 2.05% 1.66% 1.43% Expenses prior to custodian earnings credits and net of expense waivers 1.78% 1.79% 1.77% 2.05% 1.66% 1.43% ------- ------- ------ ------ ------- ------- Portfolio turnover rate 24% 42% 28% 26% 3% 17%
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------ CLASS B 2006(f) 2005 2004 2003 2002 2001 - ------- ---------- ------ ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $18.65 $17.34 $16.63 $13.85 $ 17.01 $ 24.96 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.16) (0.08) (0.23) (0.24) (0.26) (0.28) Net gain (loss) on securities (realized and unrealized) 1.55 1.39 0.94 3.02 (2.90) (7.20) ------ ------ ------ ------ ------- ------- Total from investment operations 1.39 1.31 0.71 2.78 (3.16) (7.48) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (0.47) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (0.47) ------ ------ ------ ------ ------- ------- Net asset value, end of period $20.04 $18.65 $17.34 $16.63 $ 13.85 $ 17.01 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 7.45% 7.56% 4.27% 20.07% (18.58%) (30.44%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $4,164 $4,290 $5,639 $6,153 $ 5,999 $ 8,969 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.60%) (0.44%) (1.30%) (1.51%) (1.49%) (1.31%) Total expenses(b) 2.78% 2.79% 2.68% 2.80% 2.57% 2.43% Net expenses(d) 2.53% 2.54% 2.51% 2.80% 2.57% 2.43% Expenses prior to custodian earnings credits and net of expense waivers 2.53% 2.54% 2.52% 2.80% 2.57% 2.43% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 24% 42% 28% 26% 3% 17%
87 See accompanying notes. Financial Highlights Selected data for each share of capital SECURITY EQUITY FUND stock outstanding throughout each period SOCIAL AWARENESS SERIES
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------ CLASS A 2006(f) 2005 2004 2003 2002(e) 2001 - ------- ---------- ------ ------ ------ ------- ------- PER SHARE DATA Net asset value, beginning of period $19.07 $17.74 $17.01 $14.17 $ 17.40 $ 25.50 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(c) (0.16) (0.10) (0.24) (0.24) (0.26) (0.28) Net gain (loss) on securities (realized and unrealized) 1.59 1.43 0.97 3.08 (2.97) (7.35) ------ ------ ------ ------ ------- ------- Total from investment operations 1.43 1.33 0.73 2.84 (3.23) (7.63) ------ ------ ------ ------ ------- ------- Less distributions: Distributions from realized gains -- -- -- -- -- (0.47) ------ ------ ------ ------ ------- ------- Total distributions -- -- -- -- -- (0.47) ------ ------ ------ ------ ------- ------- Net asset value, end of period $20.50 $19.07 $17.74 $17.01 $ 14.17 $ 17.40 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 7.50% 7.50% 4.29% 20.04% (18.56%) (30.39%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $1,653 $1,611 $1,614 $1,548 $ 1,123 $ 1,126 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (1.60%) (0.51%) (1.30%) (1.51%) (1.48%) (1.33%) Total expenses(b) 2.78% 2.79% 2.68% 2.80% 2.57% 2.45% Net expenses(d) 2.53% 2.54% 2.51% 2.80% 2.57% 2.45% Expenses prior to custodian earnings credits and net of expense waivers 2.53% 2.54% 2.52% 2.80% 2.57% 2.45% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 24% 42% 28% 26% 3% 17%
(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 and C. (b) Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager. (c) Net investment income (loss) was computed using average shares outstanding throughout the period. (d) Net expense information reflects expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable. (e) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (f) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 88 See accompanying notes. SECURITY LARGE CAP VALUE FUND (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 89 SECURITY Performance Summary LARGE CAP VALUE FUND May 15, 2006 (unaudited) PERFORMANCE SECURITY LARGE CAP VALUE FUND VS. RUSSELL 1000 VALUE INDEX (PERFORMANCE GRAPH) LARGE CAP VALUE INVESTMENT 3/31/96 9,425.00 6/30/96 9,796.99 9/30/96 10,206.97 12/31/96 10,528.26 3/31/97 10,502.11 6/30/97 11,957.15 9/30/97 13,810.55 12/31/97 13,864.25 3/31/98 14,990.97 6/30/98 14,499.61 9/30/98 12,712.91 12/31/98 13,821.28 3/31/99 13,821.28 6/30/99 15,807.10 9/30/99 14,238.30 12/31/99 14,168.09 3/31/00 13,325.00 6/30/00 12,605.29 9/30/00 13,201.62 12/31/00 13,141.75 3/31/01 12,250.43 6/30/01 12,747.91 9/30/01 11,131.10 12/31/01 12,407.69 3/31/02 12,261.97 6/30/02 10,929.60 9/30/02 8,847.77 12/31/02 9,409.86 3/31/03 8,931.04 6/30/03 10,263.41 9/30/03 10,638.14 12/31/03 11,975.25 3/31/04 12,350.78 6/30/04 12,204.74 9/30/04 11,912.66 12/31/04 13,185.30 3/31/05 13,039.26 6/30/05 13,060.12 9/30/05 14,144.99 12/31/05 14,453.53 3/31/06 15,397.52
RUSSELL 1000 VALUE INDEX 3/31/1996 10,000.00 6/30/96 10,171.61 9/30/96 10,467.70 12/31/96 11,511.81 3/31/97 11,806.66 6/30/97 13,547.53 9/30/97 14,896.23 12/31/97 15,562.19 3/31/98 17,375.74 6/30/98 17,453.86 9/30/98 15,433.01 12/31/98 17,995.72 3/31/99 18,254.11 6/30/99 20,311.94 9/30/99 18,322.72 12/31/99 19,319.25 3/31/00 19,411.52 06/30/00 18,501.78 09/30/00 19,956.53 12/31/00 20,675.28 3/31/2001 19,464.64 6/30/2001 20,414.34 9/30/2001 18,177.93 12/31/2001 19,518.67 3/31/2002 20,316.96 6/30/2002 18,586.36 9/30/2002 15,097.11 12/31/2002 16,489.30 3/31/2003 15,687.27 6/30/2003 18,397.46 9/30/2003 18,777.02 12/31/2003 21,441.32 3/31/2004 22,089.49 6/30/2004 22,284.10 9/30/2004 22,627.24 12/31/2004 24,976.38 3/31/2005 24,996.60 6/30/2005 25,414.83 9/30/2005 26,401.39 12/31/2005 26,736.80 3/31/2006 28,320.85
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Security Large Cap Value Fund on March 31, 1996, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Value Index is an unmanaged index representing the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. AVERAGE ANNUAL RETURNS
SINCE PERIODS ENDED 3-31-06 1 YEAR 5 YEARS 10 YEARS INCEPTION - --------------------- ------ ------- -------- --------- A Shares 18.09% 4.68% 5.03% -- A Shares with sales charge 11.32% 3.45% 4.42% -- B Shares 17.29% 3.85% 4.06% -- B Shares with CDSC 12.29% 3.50% 4.06% -- C Shares 17.30% 3.84% N/A 0.83% (1-29-99) C Shares with CDSC 16.30% 3.84% N/A 0.83% (1-29-99)
The performance data above represent past performance that 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 maxi- mum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a share- holder would pay on distributions or redemption of Fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 7.76% Consumer Staples 12.94 Energy 13.43 Financials 15.34 Health Care 7.52 Industrials 18.49 Information Technology 5.88 Materials 6.04 Telecommunication Services 3.01 Utilities 1.56 Exchange Traded Funds 5.94 Commercial Paper 1.60 Repurchase Agreement 0.60 Liabilities, less cash & other assets (0.11) ------ Total net assets 100.00% ======
90 See accompanying notes. SECURITY Performance Summary LARGE CAP VALUE FUND May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. FUND EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Security Large Cap Value Fund - Class A Actual $1,000.00 $1,088.60 $ 7.97 Hypothetical 1,000.00 1,017.30 7.70 Security Large Cap Value Fund - Class B Actual 1,000.00 1,084.60 11.85 Hypothetical 1,000.00 1,013.56 11.45 Security Large Cap Value Fund - Class C Actual 1,000.00 1,086.30 11.86 Hypothetical 1,000.00 1,013.56 11.45
(1) The actual ending account value is based on the actual total return of the Fund for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 8.86%, 8.46% and 8.63%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Fund's annualized expense ratio (1.53%, 2.28% and 2.28% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 91 SECURITY Schedule of Investments LARGE CAP VALUE FUND March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ----------- COMMON STOCKS - 97.9% AEROSPACE & DEFENSE - 3.0% United Technologies Corporation 32,800 $ 1,901,416 ----------- AGRICULTURAL PRODUCTS - 2.5% Archer-Daniels-Midland Company 47,100 1,584,915 ----------- ALUMINUM - 0.7% Alcoa, Inc. 14,800 452,288 ----------- BROADCASTING & CABLE TV - 2.0% CBS Corporation (Cl.B)* 15,100 362,098 Clear Channel Communications, Inc. 31,800 922,518 ----------- 1,284,616 ----------- COMMUNICATIONS EQUIPMENT - 2.1% 3Com Corporation* 260,000 1,331,200 ----------- COMPUTER HARDWARE - 2.1% Hewlett-Packard Company 40,900 1,345,610 ----------- CONSTRUCTION & ENGINEERING - 7.0% McDermott International, Inc.* 47,700 2,597,265 Shaw Group, Inc.* 61,400 1,866,560 ----------- 4,463,825 ----------- CONSUMER FINANCE - 0.4% PHH Corporation* 9,500 253,650 ----------- DIVERSIFIED CHEMICALS - 3.4% Dow Chemical Company 30,100 1,222,060 E.I. du Pont de Nemours & Company 22,100 932,841 ----------- 2,154,901 ----------- DRUG RETAIL - 3.2% CVS Corporation 69,400 2,072,978 ----------- ELECTRIC UTILITIES - 1.6% Edison International 24,300 1,000,674 ----------- EXCHANGE TRADED FUNDS - 5.9% iShares Russell 1000 Value Index Fund 25,900 1,891,218 iShares S&P 500 Value Index Fund 27,800 1,909,860 ----------- 3,801,078 ----------- HEALTH CARE EQUIPMENT - 3.0% Fisher Scientific International, Inc.* 27,900 1,898,595 ----------- HEALTH CARE SERVICES - 2.1% Medco Health Solutions, Inc.* 23,500 1,344,670 ----------- HYPERMARKETS & SUPERCENTERS - 3.2% Costco Wholesale Corporation 38,100 2,063,496 ----------- INDUSTRIAL CONGLOMERATES - 6.0% General Electric Company 57,000 1,982,460 Tyco International, Ltd. 68,900 1,852,032 ----------- 3,834,492 ----------- INTEGRATED OIL & GAS - 6.3% Chevron Corporation 21,700 $ 1,257,949 ConocoPhillips 15,400 972,510 Exxon Mobil Corporation 29,300 1,783,198 ----------- 4,013,657 ----------- IT CONSULTING & OTHER SERVICES - 1.7% Unisys Corporation* 157,400 1,084,486 ----------- MANAGED HEALTH CARE - 2.5% WellPoint, Inc.* 20,300 1,571,829 ----------- MOVIES & ENTERTAINMENT - 5.7% News Corporation 74,100 1,230,801 Time Warner, Inc. 111,100 1,865,369 Viacom, Inc. (Cl.B)* 15,100 585,880 ----------- 3,682,050 ----------- MULTI-LINE INSURANCE - 4.0% American International Group, Inc. 39,100 2,584,119 ----------- OIL & GAS EQUIPMENT & SERVICES - 2.6% Halliburton Company 22,400 1,635,648 ----------- OIL & GAS REFINING & MARKETING - 2.6% Sasol, Ltd. ADR 44,600 1,687,218 ----------- OIL & GAS STORAGE & TRANSPORTATION - 2.0% Williams Companies, Inc. 58,800 1,257,732 ----------- OTHER DIVERSIFIED FINANCIAL SERVICES - 7.8% Citigroup, Inc. 34,000 1,606,160 First Marblehead Corporation(3) 45,000 1,946,250 JP Morgan Chase & Company 34,500 1,436,580 ----------- 4,988,990 ----------- PACKAGED FOODS & MEATS - 2.0% Tyson Foods, Inc. 95,600 1,313,544 ----------- PROPERTY & CASUALTY INSURANCE - 3.1% Berkshire Hathaway, Inc.* 22 1,987,700 ----------- RAILROADS - 2.5% Union Pacific Corporation 17,500 1,633,625 ----------- SPECIALTY CHEMICALS - 2.0% Rohm & Haas Company 25,800 1,260,846 ----------- TOBACCO - 1.9% Altria Group, Inc. 17,600 1,247,136 ----------- WIRELESS TELECOMMUNICATION SERVICE - 3.0% Alltel Corporation 7,400 479,150 Sprint Nextel Corporation 56,000 1,447,040 ----------- 1,926,190 ----------- TOTAL COMMON STOCKS (cost $55,048,865) 62,663,174 -----------
92 See accompanying notes. SECURITY Schedule of Investments LARGE CAP VALUE FUND March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE ---------- ----------- CORPORATE BOND - 0.0% SERVICES - 0.0% American Eco Corporation, 9.625% - 2008*(1,2) $ 125,000 $ -- ----------- TOTAL CORPORATE BOND (cost $125,000) -- ----------- COMMERCIAL PAPER - 1.6% BROKERAGE - 1.6% Morgan Stanley, 4.75%, 04-03-06 1,000,000 999,736 ----------- TOTAL COMMERCIAL PAPER (cost $999,736) 999,736 ----------- REPURCHASE AGREEMENT - 0.6% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $398,145 (Collateralized by GNMA, 4.50%, 11-16-31 with a value of $405,997) 398,000 398,000 ----------- TOTAL REPURCHASE AGREEMENT (cost $398,000) 398,000 ----------- TOTAL INVESTMENTS - 100.1% (cost $56,571,601) 64,060,910 LIABILITIES, LESS CASH & OTHER ASSETS - (0.1%) (71,920) ----------- TOTAL NET ASSETS - 100.0% $63,988,990 ===========
For federal income tax purposes the identified cost of investments owned at March 31, 2006 was $56,626,325. * Non-income producing security ADR (American Depositary Receipt) (1) Security is in default due to bankruptcy. (2) Security is fair valued by the Board of Directors and is illiquid. The total mar- ket value of fair valued and illiquid securities amounts to $0 or 0.0% of total assets. (3) Security is segregated as collateral for open written option contracts. 93 See accompanying notes. SECURITY LARGE CAP VALUE FUND (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ......................................... $64,060,910 Cash ............................................................. 709 Receivables: Fund shares sold .............................................. 22,142 Dividends ..................................................... 67,337 Prepaid expenses ................................................. 51,674 ----------- Total assets ..................................................... 64,202,772 ----------- LIABILITIES: Payable for: Fund shares redeemed .......................................... 100,651 Written options, at value (premiums received, $23,243) ........ 29,640 Management fees ............................................... 32,241 Custodian fees ................................................ 3,200 Transfer agent and administration fees ........................ 10,556 Professional fees ............................................. 14,015 12b-1 distribution plan fees .................................. 20,909 Director's fees ............................................... 2,570 ----------- Total liabilities ................................................ 213,782 ----------- NET ASSETS ....................................................... $63,988,990 =========== NET ASSETS CONSIST OF: Paid in capital .................................................. $62,280,035 Accumulated net investment loss .................................. (21,493) Accumulated net realized loss on sale of investments and written options ....................................................... (5,752,464) Net unrealized appreciation in value of investments and options written ....................................................... 7,482,912 ----------- Net assets ....................................................... $63,988,990 =========== CLASS A: Capital shares outstanding (unlimited number of shares authorized) ....................... 7,443,040 Net assets ....................................................... $54,666,451 Net asset value and redemption price per share ................... $ 7.34 =========== Maximum offering price per share (net asset value divided by 94.25%) ........................... $ 7.79 =========== CLASS B: Capital shares outstanding (unlimited number of shares authorized) ....................... 904,109 Net assets ....................................................... $ 6,258,656 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 6.92 =========== CLASS C: Capital shares outstanding (unlimited number of shares authorized) ....................... 434,588 Net assets ....................................................... $ 3,063,883 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ... $ 7.05 =========== (1)Investments, at cost .......................................... $56,571,601
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends ..................................................... $ 414,830 Interest ...................................................... 24,586 ---------- Total investment income ....................................... 439,416 ---------- EXPENSES: Management fees ............................................... 177,466 Transfer agent/maintenance fees ............................... 82,136 Administration fees ........................................... 25,691 Custodian fees ................................................ 2,194 Directors' fees ............................................... 14,478 Professional fees ............................................. 8,859 Reports to shareholders ....................................... 12,171 Registration fees ............................................. 19,448 Other expenses ................................................ 8,317 12b-1 distribution plan fees - Class A ........................ 56,147 12b-1 distribution plan fees - Class B ........................ 35,380 12b-1 distribution plan fees - Class C ........................ 13,057 ---------- Total expenses ................................................ 455,344 Less: Earnings credits ........................................ (29) ---------- Net expenses .................................................. 455,315 ---------- Net investment loss ........................................... (15,899) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain during the period on: Investments ................................................... 2,019,359 Options written ............................................... 65,271 ---------- Net realized gain ............................................. 2,084,630 ---------- Net unrealized appreciation (depreciation) during the period on: Investments ................................................... 2,529,131 Options written ............................................... (9,973) ---------- Net unrealized appreciation ................................... 2,519,158 ---------- Net realized and unrealized gain .............................. 4,603,788 ---------- Net increase in net assets resulting from operations .......... $4,587,889 ==========
94 See accompanying notes. SECURITY Statement of Changes in Net Assets LARGE CAP VALUE FUND
SIX MONTHS ENDED MARCH YEAR ENDED 31, 2006 SEPTEMBER (unaudited) 30, 2005 ----------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) .................. $ (15,899) $ 226,529 Net realized gain during the period on investments and options written ............ 2,084,630 6,823,643 Net unrealized appreciation during the period on investments and options written ......... 2,519,158 2,430,519 ----------- ------------ Net increase in net assets resulting from operations ................................. 4,587,889 9,480,691 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A .................................... (232,389) -- ----------- ------------ Total distributions to shareholders ........... (232,389) -- ----------- ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A .................................... 14,364,497 6,416,077 Class B .................................... 445,078 1,294,323 Class C .................................... 740,110 1,300,122 Distributions reinvested Class A .................................... 214,200 -- Cost of shares redeemed Class A .................................... (8,801,884) (11,718,072) Class B .................................... (3,252,406) (4,481,711) Class C .................................... (770,082) (1,393,049) ----------- ------------ Net increase (decrease) from capital share transactions ............................... 2,939,513 (8,582,310) ----------- ------------ Net increase in net assets .................... 7,295,013 898,381 ----------- ------------ NET ASSETS: Beginning of period ........................... 56,693,977 55,795,596 ----------- ------------ End of period ................................. $63,988,990 $ 56,693,977 =========== ============ Accumulated undistributed net investment income (loss) at end of period .................... $ (21,493) $ 226,795 =========== ============ CAPITAL SHARE ACTIVITY: Shares sold Class A .................................... 1,992,219 1,026,323 Class B .................................... 67,430 220,087 Class C .................................... 108,557 213,510 Shares reinvested Class A .................................... 30,999 -- Shares redeemed Class A .................................... (1,261,588) (1,883,545) Class B .................................... (495,678) (763,775) Class C .................................... (120,403) (231,421)
95 See accompanying notes. Financial Highlights Selected data for each share of capital stock outstanding SECURITY throughout each period LARGE CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, -------------------------------------------------- CLASS A 2006(i) 2005(g) 2004 2003 2002(d, f) 2001(c) - -------- ---------------- ------- ------- ------- ---------- ------- PER SHARE DATA Net asset value, beginning of period $ 6.78 $ 5.71 $ 5.11 $ 4.25 $ 5.37 $ 6.42 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income(b) -- 0.03 0.01 0.02 0.01 0.03 Net gain (loss) on securities (realized and unrealized) 0.60 1.04 0.60 0.84 (1.10) (1.03) ------- ------- ------- ------- ------- ------- Total from investment operations 0.60 1.07 0.61 0.86 (1.09) (1.00) ------- ------- ------- ------- ------- ------- Less distributions: Dividends from net investment income (0.04) -- (0.01) -- (0.03) (0.05) ------- ------- ------- ------- ------- ------- Total distributions (0.04) -- (0.01) -- (0.03) (0.05) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 7.34 $ 6.78 $ 5.71 $ 5.11 $ 4.25 $ 5.37 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 8.86% 18.74% 11.98% 20.24% (20.51%) (15.68%) ------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $54,666 $45,295 $43,071 $45,858 $32,997 $45,006 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment income 0.08%(h) 0.56% 0.19% 0.41% 0.20% 0.49% Total expenses 1.53% 1.61% 1.52% 1.45% 1.37% 1.32% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 44% 110% 75% 76% 68% 180%
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, --------------------------------------------------- CLASS B 2006(i) 2005(g) 2004 2003 2002(d, f) 2001(c) - ------- ---------------- ------- ------- ------- ---------- ------- PER SHARE DATA Net asset value, beginning of period $ 6.38 $ 5.42 $ 4.87 $ 4.08 $ 5.18 $ 6.21 ------ ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.02) (0.01) (0.03) (0.02) (0.04) (0.03) Net gain (loss) on securities (realized and unrealized) 0.56 0.97 0.58 0.81 (1.06) (1.00) ------ ------- ------- ------- ------- ------- Total from investment operations 0.54 0.96 0.55 0.79 (1.10) (1.03) ------ ------- ------- ------- ------- ------- Net asset value, end of period $ 6.92 $ 6.38 $ 5.42 $ 4.87 $ 4.08 $ 5.18 ====== ====== ======= ======= ======= ======= TOTAL RETURN(a) 8.46% 17.71% 11.29% 19.36% (21.24%) (16.59%) ------ ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $6,259 $8,500 $10,164 $11,687 $ 4,905 $ 5,657 ------ ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (0.71%) (0.16%) (0.57%) (0.42%) (0.71%) (0.51%) Total expenses 2.28% 2.36% 2.27% 2.20% 2.27% 2.32% ------ ------- ------- ------- ------- ------- Portfolio turnover rate 44% 110% 75% 76% 68% 180%
96 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY outstanding throughout each period LARGE CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- CLASS C 2006(i) 2005(g) 2004 2003 2002(d, e, f) 2001(c) - ------- ---------------- ------- ------- ------- ------------- ------- PER SHARE DATA Net asset value, beginning of period $ 6.49 $ 5.52 $ 4.96 $ 4.16 $ 5.28 $ 6.32 ------ ------ ------ ------ ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.02) (0.01) (0.03) (0.02) (0.04) (0.03) Net gain (loss) on securities (realized and unrealized) 0.58 0.98 0.59 0.82 (1.08) (1.01) ------ ------ ------ ------ ------- ------- Total from investment operations 0.56 0.97 0.56 0.80 (1.12) (1.04) ------ ------ ------ ------ ------- ------- Net asset value, end of period $ 7.05 $ 6.49 $ 5.52 $ 4.96 $ 4.16 $ 5.28 ====== ====== ====== ====== ======= ======= TOTAL RETURN(a) 8.63% 17.57% 11.29% 19.23% (21.21%) (16.46%) ------ ------ ------ ------ ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $3,064 $2,899 $2,561 $2,130 $ 1,510 $ 904 ------ ------ ------ ------ ------- ------- Ratios to average net assets: Net investment loss (0.67%) (0.18%) (0.57%) (0.33%) (0.72%) (0.55%) Total expenses 2.28% 2.36% 2.28% 2.20% 2.25% 2.33% ------ ------ ------ ------ ------- ------- Portfolio turnover rate 44% 110% 75% 76% 68% 180%
(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 and C. (b) Net investment income (loss) was computed using average shares outstanding throughout the period. (c) The Dreyfus Corporation became sub-adviser of Security Large Cap Value Fund effective January 1, 2001. Prior to January 1, 2001, advisory services were provided by Security Management Company, LLC (SMC). (d) As required, effective October 1, 2001, the Funds adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on fixed income securities. The effect of this change for the period ended September 30, 2002, was to increase net investment income per share by less than 1/2 of a cent, decrease net realized and unrealized gains and losses per share by less than 1/2 of a cent and increase the ratio of net investment income to average net assets from 0.06% to 0.07%. Per share, ratios and supplemental data for periods prior to October 1, 2001 have not been restated to reflect this change in presentation. (e) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (f) Effective May 1, 2002 the fee structure for Security Large Cap Value Fund changed. Per share information reflects this change. (g) Security Management Company, LLC (SMC) became the advisor of Security Large Cap Value Fund effective June 30, 2005. Prior to June 30, 2005, SMC paid Dreyfus Corporation for sub-advisory services. (h) Net investment income is less than $0.01 per share. (i) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 97 See accompanying notes. This page left blank intentionally. 98 SECURITY MID CAP GROWTH FUND (SECURITY BENEFIT(SM) LOGO) Security Management Company, LLC ADVISER, SECURITY MANAGEMENT COMPANY, LLC 99 SECURITY Performance Summary MID CAP GROWTH FUND May 15, 2006 (unaudited) PERFORMANCE SECURITY MID CAP GROWTH FUND VS. RUSSELL 2500 GROWTH INDEX (PERFORMANCE GRAPH) MID CAP GROWTH FUND 3/31/96 9,425.00 6/30/96 10,197.75 9/30/96 10,451.11 12/31/96 10,391.25 3/31/97 9,573.04 6/30/97 10,923.08 9/30/97 12,600.41 12/31/97 12,243.13 3/31/98 13,512.15 6/30/98 13,238.16 9/30/98 11,031.80 12/31/98 14,293.07 3/31/99 14,256.84 6/30/99 16,575.61 9/30/99 16,648.07 12/31/99 22,821.53 3/31/00 27,302.99 6/30/00 25,815.45 9/30/00 28,771.70 12/31/00 26,570.49 3/31/01 21,935.86 6/30/01 24,452.40 9/30/01 17,783.56 12/31/01 22,688.67 3/31/02 23,257.99 6/30/02 19,125.11 9/30/02 14,823.54 12/31/02 16,426.09 3/31/03 16,236.31 6/30/03 20,917.43 9/30/03 22,857.36 12/31/03 25,624.71 3/31/04 27,065.28 6/30/04 26,999.80 9/30/04 24,053.17 12/31/04 28,082.16 3/31/05 25,998.57 6/30/05 27,202.42 9/30/05 29,286.01 12/31/05 30,058.38 3/31/06 33,787.52
RUSSELL 2500 GROWTH INDEX 3/31/1996 10,000.00 6/30/96 10,512.03 9/30/96 10,656.76 12/31/96 10,756.72 3/31/97 9,896.09 6/30/97 11,505.44 9/30/97 13,419.54 12/31/97 12,345.05 3/31/98 13,719.44 6/30/98 13,050.06 9/30/98 10,152.32 12/31/98 12,726.02 3/31/99 12,592.58 6/30/99 14,708.76 9/30/99 14,198.98 12/31/99 19,789.04 3/31/00 22,784.72 06/30/00 21,211.95 09/30/00 20,588.05 12/31/00 16,605.50 3/31/2001 13,299.44 6/30/2001 16,127.16 9/30/2001 11,761.36 12/31/2001 14,806.65 3/31/2002 14,370.28 6/30/2002 11,980.54 9/30/2002 9,697.38 12/31/2002 10,500.30 3/31/2003 10,164.50 6/30/2003 12,474.01 9/30/2003 13,716.53 12/31/2003 15,362.63 3/31/2004 16,208.62 6/30/2004 16,230.82 9/30/2004 15,320.38 12/31/2004 17,604.79 3/31/2005 16,843.24 6/30/2005 17,443.56 9/30/2005 18,540.14 12/31/2005 19,044.31 3/31/2006 21,296.64
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Security Mid Cap Growth Fund on March 31, 1996, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2500 Growth Index is an unmanaged index that measures the performance of securities of small-to-mid U.S. companies with greater-than-average growth orientation. AVERAGE ANNUAL RETURNS
SINCE PERIODS ENDED 3-31-06 1 YEAR 5 YEARS 10 YEARS INCEPTION - --------------------- ------ ------- -------- --------- A Shares 29.96% 9.02% 13.62% -- A Shares with sales charge 22.44% 7.74% 12.95% -- B Shares 29.06% 8.19% 12.63% -- B Shares with CDSC 24.06% 7.89% 12.63% -- C Shares 29.12% 8.23% N/A 11.20% (1-29-99) C Shares with CDSC 28.12% 8.23% N/A 11.20% (1-29-99)
The performance data above represent past performance that 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 the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. PORTFOLIO COMPOSITION BY SECTOR Consumer Discretionary 4.26% Consumer Staples 1.47 Energy 10.78 Financials 3.29 Health Care 9.22 Industrials 22.93 Information Technology 30.50 Materials 4.65 Utilities 6.65 Exchange Traded Funds 2.01 Warrants 0.10 Commercial Paper 3.00 Asset Backed Commercial Paper 4.10 Repurchase Agreement 0.30 Liabilities, less cash & other assets (3.26) ------ Total net assets 100.00% ======
100 See accompanying notes. SECURITY Performance Summary MID CAP GROWTH FUND May 15, 2006 (unaudited) PERFORMANCE INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, October 1, 2005 - March 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. FUND EXPENSES
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING 10-01-05 03-31-06(1) PERIOD(2) ------------- ------------- ------------- Security Mid Cap Growth Fund - Class A Actual $1,000.00 $1,153.70 $ 7.46 Hypothetical 1,000.00 1,018.00 6.99 Security Mid Cap Growth Fund - Class B Actual 1,000.00 1,150.40 11.47 Hypothetical 1,000.00 1,014.26 10.75 Security Mid Cap Growth Fund - Class C Actual 1,000.00 1,150.50 11.47 Hypothetical 1,000.00 1,014.26 10.75
(1) The actual ending account value is based on the actual total return of the Fund for the period October 1, 2005 to March 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period October 1, 2005 to March 31, 2006 was 15.37%, 15.04% and 15.05%, for Class A, B and C shares, respectively. (2) Expenses are equal to the Fund's annualized expense ratio (1.39%, 2.14% and 2.14% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). 101 SECURITY Schedule of Investments MID CAP GROWTH FUND March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS - 95.6% APPLICATION SOFTWARE - 2.3% Tibco Software, Inc.* 307,000 $ 2,566,520 Tyler Technologies, Inc.* 325,000 3,575,000 6,141,520 ----------- ASSET MANAGEMENT & CUSTODY BANKS - 2.3% Northern Trust Corporation 116,000 6,090,000 ----------- BIOTECHNOLOGY - 3.5% Cell Genesys, Inc.* 178,000 1,420,440 Charles River Laboratories International, Inc.* 34,000 1,666,680 Human Genome Sciences, Inc.* 159,800 1,737,026 Incyte Corporation* 255,000 1,535,100 Kosan Biosciences, Inc.* 169,100 995,999 Strategic Diagnostics, Inc.* 206,300 684,916 ZymoGenetics, Inc.* 55,900 1,208,558 ----------- 9,248,719 ----------- BROADCASTING & CABLE TV - 0.4% WorldSpace, Inc.* 146,300 1,104,565 ----------- COAL & CONSUMABLE FUELS - 0.5% Hydrogen Corporation* (2) 233,722 1,308,843 ----------- COMMUNICATIONS EQUIPMENT - 8.2% ADC Telecommunications, Inc.* 171,428 4,386,842 Adtran, Inc. 154,000 4,031,720 Extreme Networks, Inc.* 290,000 1,455,800 Finisar Corporation* 1,565,900 7,751,205 PC-Tel, Inc.* 136,700 1,301,384 Symmetricom, Inc.* 360,000 3,078,000 ----------- 22,004,951 ----------- COMPUTER STORAGE & PERIPHERALS - 1.9% Mobility Electronics, Inc.* 127,300 1,060,409 M-Systems Flash Disk Pioneers, Ltd.* 100,000 2,586,000 Novatel Wireless, Inc.* 159,300 1,425,735 ----------- 5,072,144 ----------- CONSTRUCTION & ENGINEERING - 4.6% Insituform Technologies, Inc.* 168,000 4,468,800 Shaw Group, Inc.* 253,700 7,712,480 ----------- 12,181,280 ----------- CONSTRUCTION MATERIALS - 1.5% Headwaters, Inc.* 100,000 3,979,000 ----------- DATA PROCESSING & OUTSOURCED SERVICES - 0.4% Hewitt Associates, Inc.* 36,000 1,070,640 ----------- DEPARTMENT STORES - 0.4% Maidenform Brands, Inc.* 87,500 963,375 ----------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 2.6% ChoicePoint, Inc.* 70,000 3,132,500 Equifax, Inc. 41,390 1,541,364 Navigant Consulting, Inc.* 110,000 2,348,500 ----------- 7,022,364 ----------- ELECTRIC UTILITIES - 6.6% KFx, Inc.* 976,100 $17,765,020 ----------- ELECTRICAL COMPONENTS & EQUIPMENT - 7.9% Electric City Corporation*(2) 1,068,000 683,520 Millennium Cell, Inc.* 141,500 226,400 Plug Power, Inc.* 504,000 2,520,000 Power-One, Inc.* 1,335,800 9,617,760 Roper Industries, Inc. 117,000 5,689,710 UQM Technologies, Inc.*(2) 477,816 2,145,394 Ultralife Batteries, Inc.* 6,800 87,380 ----------- 20,970,164 ----------- ELECTRONIC EQUIPMENT MANUFACTURERS - 6.5% Aeroflex, Inc.* 230,700 3,167,511 FLIR Systems, Inc.* 239,000 6,789,990 Identix, Inc.* 59,400 472,824 Maxwell Technologies, Inc.* 360,700 7,037,257 ----------- 17,467,582 ----------- EXCHANGE TRADED FUNDS - 2.0% iShares Russell 200 Growth Index Fund 33,900 2,701,830 iShares S&P MidCap 400/ Barra Growth Index Fund 33,200 2,672,600 ----------- 5,374,430 ----------- GENERAL MERCHANDISE STORES - 0.7% Fred's, Inc. 133,400 1,768,884 ----------- HEALTH CARE FACILITIES - 1.6% U.S. Physical Therapy, Inc.* 97,000 1,659,670 United Surgical Partners International, Inc.* 75,000 2,655,750 ----------- 4,315,420 ----------- HEALTH CARE SERVICES - 1.0% Providence Service Corporation* 78,900 2,565,828 ----------- HEALTH CARE SUPPLIES - 0.6% Orthovita, Inc.* 375,000 1,552,500 ----------- HOME FURNISHINGS - 0.3% Kirkland's, Inc.* 118,825 839,202 ----------- HOUSEWARES & SPECIALTIES - 0.3% Jarden Corporation* 24,100 791,685 ----------- INDUSTRIAL MACHINERY - 0.8% Quixote Corporation 50,100 1,239,975 Tennant Company 17,100 894,672 ----------- 2,134,647 ----------- INTERNET SOFTWARE & SERVICES - 0.7% RealNetworks, Inc.* 230,000 1,897,500 ----------- IT CONSULTING & OTHER SERVICES - 2.8% Acxiom Corporation 175,000 4,522,000 Keane, Inc.* 182,000 2,866,500 ----------- 7,388,500 -----------
102 See accompanying notes. SECURITY Schedule of Investments MID CAP GROWTH FUND March 31, 2006 (unaudited)
NUMBER MARKET OF SHARES VALUE --------- ----------- COMMON STOCKS (CONTINUED) METAL & GLASS CONTAINERS - 3.1% Pactiv Corporation* 340,000 $ 8,343,600 ----------- MOVIES & ENTERTAINMENT - 1.3% Lions Gate Entertainment Corporation*(1) 346,700 3,519,005 ----------- OIL & GAS DRILLING - 1.6% Ensco International, Inc. 82,300 4,234,335 ----------- OIL & GAS EQUIPMENT & SERVICES - 1.2% BJ Services Company 80,000 2,768,000 Superior Energy Services, Inc.* 15,700 420,603 ----------- 3,188,603 ----------- OIL & GAS EXPLORATION & PRODUCTION - 4.5% Rentech, Inc.*(2) 2,166,800 9,425,580 Syntroleum Corporation* 320,000 2,646,400 ----------- 12,071,980 ----------- OIL & GAS REFINING & MARKETING - 1.5% Western Gas Resources, Inc.(1) 81,000 3,908,250 ----------- OIL & GAS STORAGE & TRANSPORTATION - 1.5% Williams Companies, Inc. 190,000 4,064,100 ----------- PACKAGED FOODS & MEATS - 1.5% Hormel Foods Corporation(1) 116,000 3,920,800 ----------- PHARMACEUTICALS - 2.6% Combinatorx, Inc.* 152,000 1,808,800 Hollis-Eden Pharmaceuticals, Inc.* 257,744 1,587,703 Iomai Corporation* 174,000 1,010,940 Ligand Pharmaceuticals, Inc. (Cl.B)* 196,900 2,530,165 ----------- 6,937,608 ----------- RAILROADS - 1.3% Kansas City Southern* 141,000 3,482,700 ----------- REGIONAL BANKS - 1.0% Boston Private Financial Holdings, Inc. 80,000 2,703,200 ----------- SEMICONDUCTOR EQUIPMENT - 1.7% Mindspeed Technologies, Inc.* 1,150,000 4,577,000 ----------- SEMICONDUCTORS - 3.7% Applied Micro Circuits Corporation* 750,000 3,052,500 hi/fn, Inc.* 152,800 1,191,840 IXYS Corporation* 610,000 5,624,200 QuickLogic Corporation* 6,600 37,884 ----------- 9,906,424 ----------- SPECIALTY STORES - 0.9% Tractor Supply Company*(1) 36,000 2,388,240 ----------- SYSTEMS SOFTWARE - 2.2% BEA Systems, Inc.* 384,000 5,041,920 Sybase, Inc.* 40,800 861,696 ----------- 5,903,616 -----------
PRINCIPAL AMOUNT OR NUMBER MARKET OF SHARES VALUE ----------- ---------- COMMON STOCKS (CONTINUED) TRADING COMPANIES & DISTRIBUTORS - 2.6% MSC Industrial Direct Company, Inc. 130,000 $ 7,022,600 ------------ TRUCKING - 3.0% J.B. Hunt Transport Services, Inc.(1) 240,000 5,169,600 Old Dominion Freight Line, Inc.* 92,500 2,492,875 Universal Truckload Services, Inc.* 18,300 458,415 ------------ 8,120,890 ------------ TOTAL COMMON STOCKS (cost $180,700,105) 255,311,714 ------------ PREFERRED STOCK - 0.1% ENVIRONMENTAL & FACILITIES SERVICES - 0.1% ThermoEnergy Corporation PIPE (2, 3, 4) 745,000 337,932 ------------ TOTAL PREFERRED STOCK (cost $702,947) 337,932 ------------ WARRANTS - 0.1% Bioject Medical Technologies, Inc., $11.00, 05-23-06(3) 5,625 -- Electric City Corporation, $0.40, 03-19-09(2, 3) 311,500 94,767 Hollis-Eden Pharmaceuticals, Inc., $15.45, 06-19-07(3) 8,143 1,293 Orthovita, Inc., $4.00, 06-26-08(3) 75,000 77,387 Syntroleum Corporation, $7.60, 05-26-08 14,100 49,632 ThermoEnergy Corporation, $1.50, 07-14-08 (2, 3 ,4) 745,000 97,670 ------------ 320,749 ------------ TOTAL WARRANTS (cost $670,177) 320,749 ------------ COMMERCIAL PAPER - 3.0% BANKING - 0.6% Westpac Banking Corporation, 4.73%, 04-17-06 $1,500,000 1,496,847 ------------ BROKERAGE - 0.7% Merrill Lynch & Company, Inc.: 4.65%, 04-05-06 $1,000,000 999,480 4.69%, 04-10-06 $1,000,000 998,828 ------------ 1,998,308 ------------ ELECTRIC - 0.4% Florida Power & Light Company, 4.72%, 04-24-06 $1,000,000 996,984 ------------
103 See accompanying notes. SECURITY Schedule of Investments MID CAP GROWTH FUND March 31, 2006 (unaudited)
PRINCIPAL MARKET AMOUNT VALUE ---------- ------------ COMMERCIAL PAPER (CONTINUED) NON U.S. BANKING - 1.3% Danske Corporation: 4.62%, 04-04-06 $1,000,000 $ 999,615 4.63%, 04-06-06 1,200,000 1,199,220 Societe Generale, 4.72%, 05-02-06 1,194,000 1,189,147 ------------ 3,387,982 ------------ TOTAL COMMERCIAL PAPER (cost $7,880,121) 7,880,121 ------------ ASSET BACKED COMMERCIAL PAPER - 4.1% FINANCIAL COMPANIES - DIVERSIFIED - 0.8% Amsterdam Funding Corporation: 4.75%, 04-19-06 1,000,000 997,625 4.75%, 04-21-06 1,000,000 997,361 ------------ 1,994,986 ------------ FINANCIAL COMPANIES - MISCELLANEOUS RECEIVABLES - 2.2% Falcon Asset Securitization Corporation, 4.75%, 04-25-06 1,000,000 996,833 Jupiter Securitization Corporation: 4.60%, 04-03-06 1,000,000 999,745 4.63%, 04-07-06 1,000,000 999,213 4.76%, 04-11-06 1,000,000 998,678 4.66%, 04-12-06 1,000,000 998,555 4.75%, 04-18-06 1,000,000 997,757 ------------ 5,990,781 ------------ FINANCIAL COMPANIES - TRADE RECEIVABLES - 1.1% Eureka Securitization, 4.71%, 04-13-06 912,000 910,568 Old Line Funding Corporation, 4.64%, 04-20-06 1,000,000 997,498 Sheffield Receivables Corporation, 4.76%, 04-27-06 1,000,000 996,562 ------------ 2,904,628 ------------ TOTAL ASSET BACKED COMMERCIAL PAPER (cost $10,890,395) 10,890,395 ------------ REPURCHASE AGREEMENT - 0.3% United Missouri Bank, 4.36%, dated 03-31-06, matures 04-03-06; repurchase amount of $705,256 (Collateralized by FHLMC, 4.35% 06-02-08 with a value of $719,288) 705,000 705,000 ------------ TOTAL REPURCHASE AGREEMENT (cost $705,000) 705,000 ------------ TOTAL INVESTMENTS - 103.2% (cost $201,548,745) 275,445,911 LIABILITIES, LESS CASH & OTHER ASSETS - (3.2%) (8,501,525) ------------ TOTAL NET ASSETS - 100.0% $266,944,386 ============
For federal income tax purposes the identified cost of investments owned at March 31, 2006 was $202,441,284. * Non-income producing security PIPE-Private Investment in Public Equity - is the term used for stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration in a secondary public offering. (1) Security is segregated as collateral for open written option contracts. (2) Security is illiquid. The total market value of illiquid securities is $14,093,706 (cost $9,408,749), or 5.3% of total net assets. (3) Security is fair valued by the Board of Directors. The total market value is $609,049 (cost $1,372,983), or 0.2% of total net assets. (4) Security is restricted. The total market value of restricted securities is $435,602 (cost $894,000), or 0.2% of total net assets. The acquisition date is July 14, 2005. 104 SECURITY MID CAP GROWTH FUND (unaudited) Statement of Assets and Liabilities March 31, 2006 ASSETS: Investments, at value(1) ........................................ $275,445,911 Cash ............................................................ 695 Receivables: Fund shares sold ............................................. 112,366 Dividends .................................................... 33,995 Prepaid expenses ................................................ 62,674 ------------ Total assets .................................................... 275,655,641 ------------ LIABILITIES: Payable for: Securities purchased ......................................... 7,842,695 Fund shares redeemed ......................................... 291,796 Written options, at value (premiums received, $397,101) ............................. 222,765 Management fees .............................................. 158,635 Custodian fees ............................................... 6,000 Transfer agent and administration fees ....................... 34,666 Professional fees ............................................ 18,365 12b-1 distribution plan fees ................................. 134,090 Director's fees .............................................. 2,243 ------------ Total liabilities ............................................... 8,711,255 ------------ NET ASSETS ...................................................... $266,944,386 ============ NET ASSETS CONSIST OF: Paid in capital ................................................. $184,342,591 Accumulated net investment loss ................................. (1,252,193) Accumulated undistributed net realized gain on sale of investments and options written .............................................. 9,782,486 Net unrealized appreciation in value of investments and options written .............................. 74,071,502 ------------ Net assets ...................................................... $266,944,386 ============ CLASS A: Capital shares outstanding (unlimited number of shares authorized) ...................... 16,472,336 Net assets ...................................................... $222,457,894 Net asset value and redemption price per share .................. $ 13.50 ============ Maximum offering price per share (net asset value divided by 94.25%) .......................... $ 14.32 ============ CLASS B: Capital shares outstanding (unlimited number of shares authorized) ...................... 2,387,371 Net assets ...................................................... $ 27,212,568 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ....................................... $ 11.40 ============ CLASS C: Capital shares outstanding (unlimited number of shares authorized) ...................... 1,378,605 Net assets ...................................................... $ 17,273,924 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) ....................................... $ 12.53 ============ (1)Investments, at cost ......................................... $201,548,745
Statement of Operations For the Six Months Ended March 31, 2006 INVESTMENT INCOME: Dividends .................................................... $ 325,302 Interest ..................................................... 178,718 ------------ Total investment income ...................................... 504,020 ------------ EXPENSES: Management fees .............................................. 859,941 Transfer agent/maintenance fees .............................. 226,018 Administration fees .......................................... 108,591 Custodian fees ............................................... 9,854 Directors' fees .............................................. 14,173 Professional fees ............................................ 25,073 Reports to shareholders ...................................... 31,021 Registration fees ............................................ 24,847 Other expenses ............................................... 11,347 12b-1 distribution plan fees - Class A ....................... 233,747 12b-1 distribution plan fees - Class B ....................... 130,263 12b-1 distribution plan fees - Class C ....................... 81,338 ------------ Total expenses ............................................... 1,756,213 ------------ Net investment loss .......................................... (1,252,193) ------------ NET REALIZED AND UNREALIZED GAIN: Net realized gain during the period on: Investments .................................................. 17,504,813 Options written .............................................. 661,708 ------------ Net realized gain ............................................ 18,166,521 ------------ Net unrealized appreciation during the period on: Investments .................................................. 16,296,147 Options written .............................................. 473,448 ------------ Net unrealized appreciation .................................. 16,769,595 ------------ Net realized and unrealized gain ................................ 34,936,116 ------------ Net increase in net assets resulting from operations .................................... $ 33,683,923 ============
105 See accompanying notes. SECURITY Statement of Changes in Net Assets MID CAP GROWTH FUND
SIX MONTHS ENDED MARCH 31, YEAR ENDED 2006 SEPTEMBER 30, (unaudited) 2005 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ................................ $ (1,252,193) $ (2,111,085) Net realized gain during the period on investments and options written .............. 18,166,521 12,943,161 Net unrealized appreciation during the period on investments and options written ................. 16,769,595 30,372,234 ------------ ------------ Net increase in net assets resulting from operations 33,683,923 41,204,310 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain Class A ......................................... (13,404,927) (9,955,799) Class B ......................................... (2,137,907) (2,023,316) Class C ......................................... (1,288,551) (1,044,883) ------------ ------------ Total distributions to shareholders ................ (16,831,385) (13,023,998) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares Class A ......................................... 43,833,488 39,688,683 Class B ......................................... 1,867,337 4,639,146 Class C ......................................... 1,626,840 3,851,285 Distributions reinvested Class A ......................................... 12,899,625 9,564,132 Class B ......................................... 2,106,540 1,981,156 Class C ......................................... 1,195,749 955,741 Cost of shares redeemed Class A ......................................... (32,293,155) (38,532,269) Class B ......................................... (5,367,047) (9,060,461) Class C ......................................... (2,898,652) (5,198,188) ------------ ------------ Net increase from capital share transactions ....... 22,970,725 7,889,225 ------------ ------------ Net increase in net assets ......................... 39,823,263 36,069,537 ------------ ------------ NET ASSETS: Beginning of period ................................ 227,121,123 191,051,586 ------------ ------------ End of period ...................................... $266,944,386 $227,121,123 ============ ============ Accumulated net investment loss at end of period ... $ (1,252,193) $ -- ============ ============ CAPITAL SHARE ACTIVITY: Shares sold Class A ......................................... 3,426,637 3,433,535 Class B ......................................... 172,494 459,016 Class C ......................................... 137,251 352,361 Shares reinvested Class A ......................................... 1,075,865 797,012 Class B ......................................... 207,746 191,231 Class C ......................................... 107,242 84,579 Shares redeemed Class A ......................................... (2,550,062) (3,301,939) Class B ......................................... (490,151) (917,791) Class C ......................................... (244,721) (473,376)
106 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY outstanding throughout each period MID CAP GROWTH FUND
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------------- CLASS A 2006(f) 2005 2004(e) 2003 2002(d) 2001 - ------- ---------- -------- -------- -------- ------- -------- PER SHARE DATA Net asset value, beginning of period $ 12.65 $ 11.02 $ 10.84 $ 7.03 $ 8.48 $ 15.28 -------- -------- -------- -------- ------- -------- Income (loss) from investment operations: Net investment loss(b) (0.06) (0.10) (0.13) (0.10) (0.09) (0.07) Net gain (loss) on securities (realized and unrealized) 1.88 2.46 0.71 3.91 (1.30) (5.38) -------- -------- -------- -------- ------- -------- Total from investment operations 1.82 2.36 0.58 3.81 (1.39) (5.45) -------- -------- -------- -------- ------- -------- Less distributions: Distributions from realized gains (0.97) (0.73) (0.40) -- (0.06) (1.35) -------- -------- -------- -------- ------- -------- Total distributions (0.97) (0.73) (0.40) -- (0.06) (1.35) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 13.50 $ 12.65 $ 11.02 $ 10.84 $ 7.03 $ 8.48 ======== ======== ======== ======== ======= ======== TOTAL RETURN(a) 15.37% 21.76% 5.23% 54.20% (16.64%) (38.19%) -------- -------- -------- -------- ------- -------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $222,458 $183,676 $149,715 $134,208 $90,948 $131,498 -------- -------- -------- -------- ------- -------- Ratios to average net assets: Net investment loss (0.95%) (0.85%) (1.11%) (1.14%) (0.92%) (0.64%) Total expenses 1.39% 1.42% 1.41% 1.41% 1.20% 1.09% -------- -------- -------- -------- ------- -------- Portfolio turnover rate 38% 31% 50% 57% 47% 48%
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, --------------------------------------------------- CLASS B 2006(f) 2005 2004(e) 2003 2002(d) 2001 - ------- ---------- ------- ------- ------- ------- ------- PER SHARE DATA Net asset value, beginning of period $ 10.86 $ 9.61 $ 9.57 $ 6.26 $ 7.62 $ 14.02 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.09) (0.16) (0.19) (0.15) (0.16) (0.17) Net gain (loss) on securities (realized and unrealized) 1.60 2.14 0.63 3.46 (1.14) (4.88) ------- ------- ------- ------- ------- ------- Total from investment operations 1.51 1.98 0.44 3.31 (1.30) (5.05) ------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains (0.97) (0.73) (0.40) -- (0.06) (1.35) ------- ------- ------- ------- ------- ------- Total distributions (0.97) (0.73) (0.40) -- (0.06) (1.35) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 11.40 $ 10.86 $ 9.61 $ 9.57 $ 6.26 $ 7.62 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 15.04% 20.95% 4.44% 52.88% (17.35%) (38.83%) -------- -------- -------- -------- ------- -------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $27,213 $27,115 $26,578 $26,459 $17,502 $28,580 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (1.70%) (1.61%) (1.86%) (1.89%) (1.84%) (1.64%) Total expenses 2.14% 2.17% 2.16% 2.16% 2.11% 2.09% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 38% 31% 50% 57% 47% 48%
107 See accompanying notes. Financial Highlights Selected data for each share of capital stock SECURITY outstanding throughout each period MID CAP GROWTH FUND
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- CLASS C 2006(f) 2005 2004(e) 2003 2002(c, d) 2001 - ------- ---------- ------- ------- ------- ---------- ------- PER SHARE DATA Net asset value, beginning of period $ 11.84 $ 10.43 $ 10.34 $ 6.76 $ 8.22 $ 14.99 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment loss(b) (0.10) (0.18) (0.21) (0.16) (0.16) (0.18) Net gain (loss) on securities (realized and unrealized) 1.76 2.32 0.70 3.74 (1.24) (5.24) ------- ------- ------- ------- ------- ------- Total from investment operations 1.66 2.14 0.49 3.58 (1.40) (5.42) ------- ------- ------- ------- ------- ------- Less distributions: Distributions from realized gains (0.97) (0.73) (0.40) -- (0.06) (1.35) ------- ------- ------- ------- ------- ------- Total distributions (0.97) (0.73) (0.40) -- (0.06) (1.35) ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 12.53 $ 11.84 $ 10.43 $ 10.34 $ 6.76 $ 8.22 ======= ======= ======= ======= ======= ======= TOTAL RETURN(a) 15.05% 20.83% 4.59% 52.96% (17.30%) (38.78%) ------- ------- ------- ------- ------- ------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $17,274 $16,330 $14,759 $11,279 $ 5,883 $ 4,194 ------- ------- ------- ------- ------- ------- Ratios to average net assets: Net investment loss (1.70%) (1.60%) (1.86%) (1.89%) (1.85%) (1.66%) Total expenses 2.14% 2.17% 2.16% 2.16% 2.12% 2.09% ------- ------- ------- ------- ------- ------- Portfolio turnover rate 38% 31% 50% 57% 47% 48%
(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 and C. (b) Net investment loss was computed using average shares outstanding throughout the period. (c) The financial highlights for Class C shares exclude the historical financial highlights of Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (d) Effective May 1, 2002 the fee structure for Security Mid Cap Growth Fund changed. Per share information reflects this change. (e) The financial highlights for the Security Mid Cap Growth Fund exclude the historical financial highlights of the Technology Series Class A, B and C shares. The assets of the Technology Series were acquired by the Security Mid Cap Growth Fund on October 3, 2003. (f) Unaudited figures for the six months ended March 31, 2006. Percentage amounts for the period, except total return, have been annualized. 108 See accompanying notes. Notes to Financial Statements March 31, 2006 (unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Security Large Cap Value, Equity and Mid Cap Growth Funds (the Funds) are registered under the Investment Company Act of 1940, as amended, as open-end management investment companies. The shares of Security Equity Fund are currently issued in multiple Series, with each Series, in effect, representing a separate fund. The Equity Fund accounts for the assets of each Series separately. Class "A" shares are generally sold with a sales charge at the time of purchase. Class "A" shares are not subject to a sales charge when they are redeemed, except for purchases of $1 million or more. Class "A" shares sold without a front-end sales charge are subject to a contingent deferred sales charge if redeemed within one year of purchase. Class "B" shares are offered without a front-end sales charge but incur additional class-specific expenses. Class B shares may be subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years. Redemptions of Class "B" shares within five years of acquisition incur a contingent deferred sales charge. Class "C" shares are offered without a front-end sales charge but incur additional class-specific expenses. Redemptions of the shares within one year 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. A. SECURITY VALUATION - Valuations of the Funds' securities are supplied by pricing services approved by the Board of Directors. The Funds' officers, under the general supervision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing services. Each security owned by the Funds that is listed on a securities exchange is valued at its last sale price on that exchange on the date as of which assets are valued. Where the security is listed on more than one exchange, the Funds will use the price of that exchange that it generally considers to be the principal exchange on which the stock is traded. Securities listed on the Nasdaq Stock Market, Inc. ("Nasdaq") will be valued at the Nasdaq Official Closing Price. Securities for which market quotations are not readily available are valued by a pricing service considering securities with similar yields, quality, type of issue, coupon, duration and rating. If there is no bid price or if the bid price is deemed to be unsatisfactory by the Board of Directors or by 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 value. If events occur that will affect the value of a fund's portfolio securities before the NAV has been calculated (a "significant event"), the security will generally be priced using a fair value procedure. If the Valuation Committee determines a significant event has occurred, it will evaluate the impact of that event on an affected security or securities, to determine whether a fair value adjustment would materially affect the fund's NAV per share. Some of the factors which may be considered by the Board of Directors in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the securities are purchased and sold. The Funds generally will value short-term debt securities at prices based on market quotations for such securities or 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. Investments in foreign securities may involve risks not present in domestic investments. The Valuation Committee will determine the current value of such foreign securities by taking into consideration certain factors which may include those discussed above, as well as the following factors, among others: the value of the securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign securities such as WEBS(R). In addition, the Board of Directors has authorized the Valuation Committee and Administrator to use prices and other information supplied by IDC's Fair Value Information Service in valuing such securities. 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 Series/Fund 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. REPURCHASE AGREEMENTS - In connection with transactions in repurchase agreements, it is the Funds' policy that its custodian take possession of the underlying collateral and that the fair value of the collateral exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Funds may be delayed or limited. C. 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. 109 Notes to Financial Statements March 31, 2006 (unaudited) 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. D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Global Series may enter into forward foreign exchange contracts in order to manage foreign currency risk from purchase or sale of securities denominated in foreign currency. The 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 Statement of Assets and Liabilities. The face or contract amount in U.S. dollars reflects the total exposure these funds 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. E. FUTURES - Large Cap Value Fund, Equity Series, Social Awareness Series, Small Cap Growth Series, Enhanced Index Series, Alpha Opportunity Series and Mid Cap Growth Fund utilize futures contracts to a limited extent, with the objectives of maintaining full exposure to the underlying stock market, enhancing returns, maintaining liquidity, and minimizing transaction costs. These Funds or Series, as applicable, 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 Funds or Series, as applicable, 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 and maintain as collateral either cash or securities, representing the initial margin, equal to a certain percentage of the contract value. Cash deposits are shown as restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted in the Schedule of Investments. Subsequent changes in the value of the contract are recorded as unrealized gains or losses. 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. F. OPTIONS WRITTEN - The Funds may purchase put and call options and write such options on a covered basis on securities that are traded on recognized securities exchanges and over-the-counter markets. Call and put options on securities give the holder the right to purchase or sell (and the writer the obligation to sell or purchase), respectively, a security at a specified price, until a certain date. Options may be used to hedge the Funds' portfolio, to increase returns or to maintain exposure to the equity markets. The primary risks associated with the use of options are an imperfect correlation between the change in market value of the securities held by the series and the price of the option, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The premium received for a written option is recorded as an asset with an equal liability which is marked to market based on the option's quoted daily settlement price. Fluctuations in the value of such instruments are recorded as unrealized appreciation (depreciation) until terminated, at which time realized gains and losses are recognized. G. SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Dividend income is accrued as of ex-dividend date, except that certain dividends for foreign securities where the ex-dividend date may have passed are recorded as soon as the Fund is informed of the dividend in the exercise of reasonable diligence. Interest income is recognized on the accrual basis including the amortization of premiums and accretion of discounts on debt securities. H. EXPENSES - Expenses that are directly related to one of the Funds are charged directly to that Fund or Series. Other operating expenses are allocated to the Funds on the basis of relative net assets. Class specific expenses, such as 12b-1 fees, are borne by that class. Income, other expenses and realized and unrealized gains and losses of a Fund are allocated to each respective class in proportion to the relative net assets of each class. I. 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. J. 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. K. EARNINGS CREDITS - Under the fee schedule with the custodian, the Funds earn credits based on overnight custody cash balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statement of Operations are before the reduction in expense from the related earnings credits. L. USE OF ESTIMATES - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and 110 Notes to Financial Statements March 31, 2006 (unaudited) assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. M. SHORT SALES - The Funds or Series may make short sales "against the box," in which a Fund or Series enters into a short sale of a security it owns. At no time will more than 15% of the value of a Fund's net assets be in deposits on short sales against the box. If a Fund makes a short sale, the Fund does not immediately deliver from its own account the securities sold and does not receive the proceeds from the sale. To complete the sale, the Fund or Series must borrow the security (generally from the broker through which the short sale is made) in order to make delivery to the buyer. The Fund or Series must replace the security borrowed by purchasing it at the market price at the time of replacement or delivering the security from its own portfolio. The Fund or Series is said to have a "short position" in securities sold until it delivers them to the broker, at which time it receives the proceeds of the sale. Certain Funds or Series may make short sales that are not "against the box," which create opportunities to increase the Fund's return but, at the same time, involve specific risk considerations and may be considered a speculative technique. Such short sales theoretically involve unlimited loss potential, as the market price of securities sold short may continually increase, although a Fund may mitigate such losses by replacing the securities sold short before the market price has increased significantly. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of securities sold, but not yet purchased, may require purchasing the securities at prices which differ from the market value reflected on the Statement of Assets and Liabilities. The Funds are liable for any dividends or interest payable on securities while those securities are in a short position. As collateral for its short positions, the Funds are required under the Investment Company Act of 1940 to maintain segregated assets consisting of cash, cash equivalents or liquid securities. These segregated assets are valued consistent with Note 1a above. These segregated assets are required to be adjusted daily to reflect changes in the market value of the securities sold short. N. INDEMNIFICATIONS - Under the Funds' organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that provide general indemnification to other parties. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred, and may not occur. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote. 2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Management fees are payable to Security Management Company, LLC (SMC or Investment Manager) as follows:
MANAGEMENT MANAGEMENT FEE WAIVERS FEES (AS A % (AS A % OF OF NET ASSETS) OF NET ASSETS) -------------- -------------- Security Equity Fund: Alpha Opportunity Series* 2.10%(1) N/A Enhanced Index Series 0.75% 0.25% Equity Series 0.75% N/A Global Series 1.00% N/A Large Cap Growth Series 1.00% 0.25% Mid Cap Value Series 0.83%(2) N/A Select 25 Series 0.75% N/A Small Cap Growth Series 1.00% N/A Social Awareness Series 1.00% 0.25% Security Large Cap Value Fund 0.65% N/A Security Mid Cap Growth Fund 0.75% N/A
* Alpha Opportunity Series' management fee will range from 1.25% to 2.75% of average daily net assets as discussed below. (1) SMC receives a management fee from the Alpha Opportunity Series that consists of two components. The first component is an annual base fee equal to 2.00% of Alpha Opportunity Series average daily net assets. The second component is a base fee adjustment that either increases or decreases the base fee, depending on how Alpha Opportunity Series (calculated by reference to its Class A shares) performed relative to the S&P 500 Index over the prior 12-month period (the "Measuring Period"). SMC will receive the base fee of 2.00% without adjustment if the performance of Alpha Opportunity Series (calculated by reference to its Class A shares) matches the performance of the S&P500 Index. The maximum base fee adjustment at each calculation period is 0.75% up or down in the event that Alpha Opportunity Series outperforms or underperforms the S&P 500 Index by 15% or more. SMC calculates the base fee adjustment each month based upon Alpha Opportunity Series' performance relative to the S&P500 Index over the Measuring Period ending on the last day of the month. If Alpha Opportunity Series outperforms the S&P 500 Index over the Measuring Period, the base fee is adjusted upward. The upward adjustment is equal to the amount by which Alpha Opportunity Series' performance exceeds that of the S&P 500 Index divided by 15 and multiplied by the average daily net assets of Alpha Opportunity Series during the Measuring Period to determine the base fee adjustment for the month. If Alpha Opportunity Series underperforms the Index, the base fee is adjusted downward on the same basis. SMC will determine the dollar amount of any performance adjustment each month by multiplying the adjustment percentage by the average daily net assets of the Alpha Opportunity Series during the Measuring Period and dividing that number by the number of days in the Measuring Period and then multiplying that amount by the number of days in the current month. (2) Management fees are payable at an annual rate of 1.00% of the average daily net assets of $200 million or less, plus an additional annual rate of 0.75% of the average daily net assets of the Mid Cap Value Series in excess of $200 million. 111 Notes to Financial Statements March 31, 2006 (unaudited) SMC also acts as the administrative agent and transfer agent for the Funds, and as such performs administrative functions, transfer agency and dividend disbursing services, and the bookkeeping, accounting and pricing functions for each Fund or Series. At a meeting held on November 18, 2005, the Board of Directors approved a new administrative fee schedule. This new fee schedule was effective December 1, 2005. For these services, the Investment Manager receives the following:
ADMINISTRATIVE FEES (AS A % OF NET ASSETS)* ----------------------- EFFECTIVE PRIOR TO 12-1-05* 12-1-05* --------- -------- Security Equity Fund: Alpha Opportunity Series 0.15% 0.145% Enhanced Index Series 0.095% 0.09% Equity Series 0.095% 0.09% Global Series 0.05%+ 0.045%+ greater of 0.10% or $60,000 Large Cap Growth Series 0.095% 0.09% Mid Cap Value Series 0.095% 0.09% Select 25 Series 0.095% 0.09% Small Cap Growth Series 0.095% 0.09% Social Awareness Series 0.095% 0.09% Security Large Cap Value Fund 0.095% 0.09% Security Mid Cap Growth Fund 0.095% 0.09%
* The minimum annual charge for administrative fees is $25,000 for each Series or Fund. SMC is paid the following for providing transfer agent services to the Funds:
EFFECTIVE FEBRUARY 1, 2004 ---------------- Annual per account charge $5.00 - $8.00 Transaction fee $0.60 - $1.10 Annual minimum charge (per Series or Fund) $25,000 Certain out-of-pocket charges Varies
SMC has agreed to limit the total expenses for each class of the Enhanced Index and Select 25 Series to 1.75%, Social Awareness, Mid Cap Value, Small Cap Growth and Large Cap Growth Series to 2.00% exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees for the aforementioned Series. SMC has agreed to limit the total other expenses of Alpha Opportunity Series to 0.50%. The expense limits other than those for Enhanced Index and Select 25 Series are voluntary limits that may be terminated at any time without notice to shareholders. The Funds have adopted Distribution Plans related to the offering of Class A, Class B and Class C shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The plans provide for payments at an annual rate of 1.00% of the average daily net assets of each Fund's Class B, Class C shares, and 0.25% of the average daily net assets of each Fund's Class A shares. Effective August 25, 2005, Global Series ceased charging 12b-1 fees on Class B shares in accordance with the NASD sales cap regulations. This fee may be reinstated at any time. Security Distributors, Inc. (SDI), a wholly-owned subsidiary of Security Benefit Corporation and the distributor of the Funds, received net underwriting commissions on sales of shares after allowances to brokers and dealers as follows:
SDI UNDERWRITING COMMISSIONS ------------ Security Equity Fund: Alpha Opportunity Series $ 3,351 Enhanced Index Series 420 Equity Series 16,084 Global Series 35,519 Large Cap Growth Series 1,441 Mid Cap Value Series 217,908 Select 25 Series 1,757 Small Cap Growth Series 4,460 Social Awareness Series 2,232 Security Large Cap Value Fund 3,617 Security Mid Cap Growth Fund 20,434
Certain officers and directors of the Funds are also officers and/or directors of Security Benefit Life Insurance Company and its affiliates, which include SMC and SDI. At March 31, 2006, Security Benefit Corporation and its subsidiaries owned over five percent of the outstanding shares of the Funds or Series, as follows:
PERCENT OF OUTSTANDING FUND OR SERIES SHARES OWNED - -------------- ---------------------- Security Equity Fund: Alpha Opportunity Series 43.06% Enhanced Index Series 24.77% Equity Series 13.39% Global Series 9.41% Large Cap Growth Series 38.88% Select 25 Series 9.31% Small Cap Growth Series 19.28% Social Awareness Series 9.80% Security Large Cap Value Fund 26.44% Security Mid Cap Growth Fund 5.87%
112 Notes to Financial Statements March 31, 2006 (unaudited) 3. UNREALIZED APPRECIATION/DEPRECIATION For federal income tax purposes, the amounts of unrealized appreciation (depreciation) on investments at March 31, 2006, were as follows:
GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION (DEPRECIATION) (DEPRECIATION) ------------ -------------- -------------- Security Equity Fund: Alpha Opportunity Series $ 238,793 $ (119,048) $ 119,745 Enhanced Index Series 1,009,491 (335,076) 674,415 Equity Series 104,567,436 (8,725,458) 95,841,978 Global Series 41,624,207 (1,177,695) 40,446,512 Large Cap Growth Series 2,143,153 (408,045) 1,735,108 Mid Cap Value Series 231,676,479 (18,966,773) 212,709,706 Select 25 Series 6,518,459 (741,189) 5,777,270 Small Cap Growth Series 9,554,952 (244,616) 9,310,336 Social Awareness Series 2,903,613 (2,142,009) 761,604 Security Large Cap Value Fund 8,753,085 (1,318,500) 7,434,585 Security Mid Cap Growth Fund 80,975,083 (7,970,456) 73,004,627
4. INVESTMENT TRANSACTIONS Investment transactions for the six months ended March 31, 2006, (excluding overnight investments and short-term commercial paper) were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Security Equity Fund: Alpha Opportunity Series $106,491,128 $111,836,869 Enhanced Index Series 6,815,563 7,620,947 Equity Series 74,348,554 100,545,627 Global Series 22,203,366 55,242,203 Large Cap Growth Series 3,703,661 2,599,271 Mid Cap Value Series 148,529,000 68,282,201 Select 25 Series 4,360,093 2,678,609 Small Cap Growth Series 28,421,509 25,310,198 Social Awareness Series 1,962,768 3,246,807 Security Large Cap Value Fund 14,932,692 11,915,875 Security Mid Cap Growth Fund 42,357,726 46,760,924
5. OPEN FUTURES CONTRACTS Open futures contracts for Alpha Opportunity Series and Enhanced Index Series as of March 31, 2006, were as follows:
ALPHA OPPORTUNITY SERIES ENHANCED INDEX SERIES S&P 500 Index Futures S&P 500 E-Mini Futures ------------------------ ---------------------- POSITION Long Long NUMBER OF CONTRACTS 37 2 EXPIRATION DATE 6-16-2006 6-16-2006 CONTRACT AMOUNT $12,001,991 $131,906 MARKET VALUE $12,055,525 $130,330 UNREALIZED GAIN (LOSS) $ 53,534 $ (1,576)
6. OPTIONS WRITTEN The following options written were outstanding for Equity Series at March 31, 2006: EQUITY SERIES PUT OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- -------- Transocean, Inc. 5-19-06 $80.00 512 $194,560 --- -------- Total put options outstanding (premiums received, $152,571) 512 $194,560 === ========
Transactions in options written for Equity Series for the six months ended March 31, 2006 were as follows: EQUITY SERIES CALL OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2005 1,194 $ 240,933 Opened 1,282 106,743 Bought Back (2,476) (347,676) ------ --------- Balance at March 31, 2006 -- $ -- ====== =========
EQUITY SERIES PUT OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2005 -- $ -- Opened 3,745 396,860 Expired (3,233) (244,289) ------ --------- Balance at March 31, 2006 512 $ 152,571 ====== =========
The following options written were outstanding for Mid Cap Value Series at March 31, 2006: MID CAP VALUE SERIES CALL OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- ---------- Archer-Daniels-Midland Company 9-18-06 $35.00 1,050 $ 241,500 Community Health Systems, Inc. 4-24-06 40.00 885 4,425 Computer Sciences Corporation 6-19-06 60.00 600 60,000 Computer Sciences Corporation 9-18-06 55.00 630 258,300 Duke Energy Corporation 4-24-06 45.00 1,300 130,000 Granite Construction, Inc. 6-19-06 45.00 849 526,380 H.B. Fuller Company 5-22-06 45.00 633 455,760 Inco, Ltd. 4-24-06 45.00 600 306,000 Inco, Ltd. 5-22-06 50.00 600 138,000 Keane, Inc. 8-21-06 15.00 1,540 223,300 McDermott International, Inc. 8-21-06 55.00 650 318,500 Shaw Group, Inc. 4-24-06 35.00 880 4,400 Triad Hospitals, Inc. 5-22-06 45.00 600 21,000 United Rentals, Inc. 5-22-06 35.00 259 36,260 Universal Health Services, Inc. 7-24-06 50.00 1,000 290,000 W.R. Berkley Corporation 4-24-06 36.63 550 181,500 ------ ---------- Total call options outstanding (premiums received, $2,651,433) 12,626 $3,195,325 ====== ==========
113 Notes to Financial Statements March 31, 2006 (unaudited) 6. OPTIONS WRITTEN (CONTINUED) MID CAP VALUE SERIES PUT OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- -------- Epiq Systems, Inc. 5-22-06 $17.50 2,100 $ 52,500 Newfield Exploration Company 6-19-06 35.00 1,010 40,400 Regis Corporation 5-22-06 35.00 1,050 136,500 Williams Companies, Inc. 5-22-06 20.00 1,800 72,000 ----- -------- Total put options outstanding (premiums received, $581,032) 5,960 $301,400 ===== ========
Transactions in options written for Mid Cap Value Series for the six months ended March 31, 2006 were as follows: MID CAP VALUE SERIES CALL OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- ---------- Balance at September 30, 2005 6,504 $1,134,237 Opened 15,010 3,042,407 Expired (6,488) (928,611) Exercised (2,400) (596,600) ------ ---------- Balance at March 31, 2006 12,626 $2,651,433 ====== ==========
MID CAP VALUE SERIES PUT OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- ----------- Balance at September 30, 2005 4,066 $ 523,507 Opened 12,380 1,607,447 Expired (8,966) (1,408,567) Exercised (1,520) (141,355) ------ ----------- Balance at March 31, 2006 5,960 $ 581,032 ====== ===========
The following options written were outstanding for Security Large Cap Value Fund at March 31, 2006: SECURITY LARGE CAP VALUE FUND PUT OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- ------- Transocean, Inc. 5-19-06 $80.00 78 $29,640 --- ------- Total put options outstanding (premiums received, $23,243) 78 $29,640 === =======
Transactions in options written for Security Large Cap Value Fund for the six months ended March 31, 2006 were as follows: SECURITY LARGE CAP VALUE FUND CALL OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- -------- Balance at September 30, 2005 264 $ 23,375 Opened 586 53,405 Expired (507) (42,329) Exercised (343) (34,451) ---- -------- Balance at March 31, 2006 -- $ -- ==== ========
SECURITY LARGE CAP VALUE FUND PUT OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- -------- Balance at September 30, 2005 -- $ -- Opened 188 46,185 Expired (110) (22,942) ---- -------- Balance at March 31, 2006 78 $ 23,243 ==== ========
The following options written were outstanding for Security Mid Cap Growth Fund at March 31, 2006: SECURITY MID CAP GROWTH FUND CALL OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- -------- J.B. Hunt Transportation Services, Inc. 4-21-06 $25.00 500 $ 2,500 Lions Gate Enertainment Corporation 6-16-06 10.00 1,167 87,525 Tractor Supply Company 7-21-06 65.00 180 97,200 Western Gas Resources, Inc. 4-21-06 50.00 249 14,940 ----- -------- Total call options outstanding (premiums received, $281,979) 2,096 $202,165 ===== ========
Transactions in options written for Security Mid Cap Growth Fund for the six months ended March 31, 2006 were as follows: SECURITY MID CAP GROWTH FUND PUT OPTIONS WRITTEN OUTSTANDING
EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE - ------------ ---------- -------- --------- ------- Transocean, Inc. 5-19-06 $70.00 200 $14,000 Trex Company, Inc. 4-21-06 25.00 264 6,600 --- ------- Total put options outstanding (premiums received, $115,122) 464 $20,600 === =======
Transactions in options written for Security Mid Cap Growth Fund for the six months ended March 31, 2006 were as follows: SECURITY MID CAP GROWTH FUND CALL OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2005 1,555 $ 412,720 Opened 3,470 571,133 Expired (1,749) (317,047) Exercised (1,180) (384,827) ------ --------- Balance at March 31, 2006 2,096 $ 281,979 ====== =========
SECURITY MID CAP GROWTH FUND PUT OPTIONS WRITTEN
NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2005 1,227 $ 81,323 Opened 2,062 407,193 Expired (2,403) (344,661) Exercised (422) (28,733) ------ --------- Balance at March 31, 2006 464 $ 115,122 ====== =========
114 Notes to Financial Statements March 31, 2006 (unaudited) 7. FEDERAL TAX MATTERS The tax character of distributions paid during the fiscal years ended September 30, 2005 and 2004, was the same as that reported in the Statement of Changes in Net Assets, except as follows:
ORDINARY CAPITAL INCOME GAIN TOTAL ---------- -------- ---------- 2005 Security Equity Fund: Alpha Opportunity Series $1,099,071 $186,310 $1,285,381 2004 Security Equity Fund: Alpha Opportunity Series 341,942 80,496 422,438 Equity Series 607,081 77,431 684,512
Note: For federal income tax purposes, short term capital gain distributions are treated as ordinary income distributions. As of September 30, 2005 the components of distributable earnings on a tax basis were:
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ORDINARY LONG-TERM CAPITAL AND APPRECIATION DISTRIBUTABLE INCOME GAIN OTHER LOSSES* (DEPRECIATION)** EARNINGS ------------- ------------- ------------- ---------------- ------------- Security Equity Fund: Alpha Opportunity Series $1,709,969 $ 310,649 $ -- $ 178,620 $ 2,199,238 Enhanced Index Series 33,715 -- (4,110,950) 552,130 (3,525,105) Equity Series 2,106,508 4,630,774 -- 82,843,838 89,581,120 Global Series -- -- (4,564,594) 38,425,318 33,860,724 Large Cap Growth Series -- -- (2,312,370) 861,891 (1,450,479) Mid Cap Value Series -- 26,848,438 -- 147,603,023 174,451,461 Select 25 Series -- -- (11,459,603) 4,726,510 (6,733,093) Small Cap Growth Series -- -- (3,925,468) 6,525,087 2,599,619 Social Awareness Series -- -- (1,551,431) (43,243) (1,594,674) Security Large Cap Value Fund 226,795 -- (7,782,370) 4,909,030 (2,646,545) Security Mid Cap Growth Fund -- 12,192,009 (2,852,119) 56,409,367 65,749,257
* Certain Funds had net capital loss carryovers and deferred post October losses as identified elsewhere in the Notes. ** The differences between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of wash sale losses, the differences between book and tax basis passive foreign investment companies and bond discount accretion. As of September 30, 2005, the accumulated net realized loss on sales of investments for federal income tax purposes which are available to offset future taxable gains and post-October losses that are deferred to the first day of the next fiscal year are as follows: 115 Notes to Financial Statements March 31, 2006 (unaudited)
CAPITAL LOSS DEFERRED POST- CARRYOVERS EXPIRES IN OCTOBER LOSSES ------------ ---------- -------------- Security Equity Fund: Enhanced Index Series $ 58,582 2010 $ -- 1,591,954 2011 2,460,414 2012 ----------- 4,110,950 Global Series 1,094,503 2009 67,499 908,640 2010 96,592 2011 2,397,360 2012 ----------- 4,497,095 Large Cap Growth Series 268,343 2010 -- 1,736,216 2011 307,811 2012 ----------- 2,312,370 Select 25 Series 2,083,530 2009 -- 3,363,943 2010 2,960,418 2011 3,051,712 2012 ----------- 11,459,603 SmallCap Growth Series 3,925,468 2010 -- Social Awareness Series 309,787 2009 52,255 132,011 2010 1,018,739 2011 38,639 2012 ----------- 1,499,176 Security Large Cap Value Fund 7,782,370 2011 -- Security Mid Cap Growth Fund 2,268,140 2009 -- 567,035 2010 16,944 2011 ----------- 2,852,119
The Security Equity Fund - Global Series obtained approximately $2,885,458 of capital losses (included above) from its merger with Security Equity Fund - International Series (see Note 8), which may be applied against realized net taxable capital gains in future years or until September 30, 2010, subject to certain limitations imposed by Section 382 of the Internal Revenue Code. Security Mid Cap Growth fund obtained approximately $3,419,154 of capital losses (included above) from its merger with Security Equity Fund - Technology Series, which may be applied against realized net taxable capital gains in future years or until September 30, 2011, subject to certain limitations imposed by Section 382 of the Internal Revenue Code. Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to post-October losses, losses deferred due to wash sales, foreign currency gains and losses, and the "mark-to-market" of certain passive foreign investment companies (PFICs) for tax purposes. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. 8. AFFILIATED TRANSACTIONS* Investments representing 5% or more of the outstanding voting securities of a portfolio company of a fund result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act. The aggregate market value of all securities of affiliated companies held in the Mid Cap Value Series of the Security Equity Fund as of March 31, 2006 amounted to $16,069,977 which represents 2.11% of net assets. There were no affiliated companies held in any other Fund or Series. Transactions in the Mid Cap Value Series during the six months ended March 31, 2006 in which the portfolio company is an "affiliated person" are as follows:
HYDROGEN THERMOENERGY THERMOENERGY CORPORATION, CORPORATION CORPORATION OPTEUM, LLC PIPES WARRANTS INC. ------------ ------------ ------------ ----------- SEPTEMBER 30, 2005 Balance Shares 547,442 1,745,000 1,745,000 -- Cost $2,443,018 $1,646,500 $ 447,500 $ -- Gross Additions Shares -- -- -- 1,400,000 Cost $ -- $ -- $ -- $15,682,076 Gross Reductions Shares -- -- -- -- Cost $ -- $ -- $ -- $ -- MARCH 31, 2006 Balance Shares 547,442 1,745,000 1,745,000 -- Cost $2,443,018 $1,646,500 $ 447,500 $ -- Gross Additions Shares 547,442 1,745,000 1,745,000 1,400,000 Cost $2,443,018 $1,646,500 $ 447,500 $15,682,076 Realized Gain/(Loss) -- -- -- -- Investment Income -- -- -- --
* As a result of the Mid Cap Values Series' beneficial ownership of the common stock of these portfolio companies, applicable regulations require that the Series state that it may be deemed an affiliate of the respective portfolio company. The Series disclaims that the "affiliated persons" are affiliates of the Distributor, Advisor, Series or any other client of the Advisor. 9. SUBSEQUENT EVENT At a meeting held on November 18, 2005, the Board of Directors of the Security Equity Fund (the "Fund") approved a plan of reorganization for the Security Equity Fund, Enhanced Index Series, Large Cap Growth Series and Social Awareness Series. Under the proposed plan of reorganization, all the assets and liabilities of the Enhanced Index Series, Large Cap Growth Series and Social Awareness Series would be merged into the Security Equity Fund Select 25 Series on approximately June 16, 2006. The plan of reorganization is contingent upon the approval of shareholders of record in Enhanced Index Series, Large Cap Growth Series and Social Awareness Series as of April 3, 2006. 116 Director's Disclosure DIRECTOR APPROVAL OF INVESTMENT ADVISORY AGREEMENT At an in-person meeting of the Funds' Boards of Directors held on November 17-18, 2005, called for the purpose of, among other things, voting on the renewal of the investment advisory and sub-advisory agreements applicable to the Funds, each Fund's Board of Directors, including the Independent Directors, unanimously approved the continuation for a one-year period of the investment advisory agreement between the Fund and Security Management Company, LLC ("SMC"), as well as each investment sub-advisory agreement applicable to the Fund. In reaching this conclusion, the Directors requested and obtained from SMC and each investment sub-adviser such information as the Directors deemed reasonably necessary to evaluate the proposed renewal of the agreements. Each Fund's Board of Directors carefully evaluated this information, and was advised by legal counsel with respect to its deliberations. In considering the proposed continuation of the investment advisory and sub-advisory agreements, the Independent Directors evaluated a number of considerations, including, among others, (1) the nature, extent, and quality of the advisory services to be provided by SMC and the investment sub-advisers; (2) the investment performance of the Funds, SMC and the various investment sub-advisers; (3) the costs of the services to be provided and profits to be realized by SMC and its affiliates from the relationship with the Funds; (4) the extent to which economies of scale would be realized as the Funds grow; and (5) whether advisory and sub-advisory fee levels reflect these economies of scale for the benefit of Fund investors. Each Board of Directors also took into account other considerations that it believed, in light of the legal advice furnished to the Independent Directors by their independent legal counsel and the Directors' own business judgment, to be relevant. Following its review, each Fund's Board of Directors determined that the investment advisory agreement and each investment sub-advisory agreement applicable to the Fund (if any) will enable Fund shareholders to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of shareholders. Accordingly, the Directors, including the Independent Directors, unanimously approved the renewal of the investment advisory and investment sub-advisory agreements based upon the following considerations, among others: - THE NATURE, EXTENT AND QUALITY OF THE ADVISORY SERVICES TO BE PROVIDED. Each Board of Directors concluded that SMC and the investment sub-advisers retained to provide portfolio management services with respect to certain of the Funds are capable of providing high quality services to each Fund, as indicated by the nature and quality of services provided in the past, SMC's management capabilities demonstrated with respect to the Funds and other mutual funds managed by SMC, the professional qualifications and experience of SMC's and the various sub-advisers' portfolio managers, and SMC's investment and management oversight processes. The Directors also determined that SMC and the sub-advisers proposed to provide investment and related services that were of the same quality and quantity as services provided to the Funds in the past, and that these services are appropriate in scope and extent in light of the Funds' operations, the competitive landscape of the investment company business and investor needs. - THE INVESTMENT PERFORMANCE OF THE FUNDS. With respect to each Fund, the Directors concluded on the basis of information supplied by Lipper and Morningstar that SMC and the investment sub-advisers had achieved investment performance that was acceptable, and competitive or superior relative to comparable funds over trailing periods. With respect to the Large Cap Value Fund, the Directors noted significantly improved performance concluding that the fund's performance fell within a range that was reasonable and competitive with comparable funds. On the basis of the Directors' assessment of the nature, extent and quality of advisory services to be provided or procured by SMC, the Directors concluded that SMC is capable of generating a level of long-term investment performance that is appropriate in light of the Funds' investment objectives, policies and strategies and competitive with many other investment companies. - THE COST OF ADVISORY SERVICES PROVIDED AND THE LEVEL OF PROFITABILITY. On the basis of each Board's review of the fees to be charged by SMC for investment advisory and other services, and the estimated profitability of SMC's relationship with each Fund, each Board concluded that the level of investment advisory fees and SMC's profitability are appropriate in light of the management fees and overall expense ratios of comparable investment companies and the anticipated profitability of the relationship between each Fund and SMC and its affiliates. On the basis of comparative information supplied by Lipper and Morningstar, the Directors determined that the advisory fees and estimated overall expense ratio of each Fund are consistent with, and often below, industry medians, particularly with respect to mutual funds of comparable size. With respect to the Alpha Opportunity Series and Small Cap Growth Series of Security Equity Fund, the Directors noted that each of these Funds had a strong performance record, which helped to compensate for each such Fund's higher-than-median expense ratio. Further, the Directors noted that the Alpha Opportunity Series' investment advisory fee and expense ratio were above median due, at least in part, to its strong performance relative to its benchmark index, which increased the advisory fee payable under that Fund's "fulcrum" advisory fee arrangement. - WHETHER THE ADVISORY FEES REFLECT ECONOMIES OF SCALE. The Directors concluded that the Funds' investment advisory fees appropriately reflect the current economic environment for SMC and the competitive nature of the mutual fund market. The Directors further determined that the Funds have yet to achieve meaningful 117 Director's Disclosure economies of scale, which, therefore, cannot be reflected in the investment advisory fees. - THE EXTENT TO WHICH ECONOMIES OF SCALE WILL BE REALIZED AS THE FUNDS GROW. While the Funds' investment advisory fees do not reduce should Fund assets grow meaningfully, the Directors determined that the investment advisory fees payable by the Funds other than Security Equity Fund Alpha Opportunity Series (whose investment advisory fee varies depending on that Fund's performance relative to its benchmark index) already reflect potential future economies of scale to some extent by virtue of their competitive levels (determined with reference to industry standards as reported by Lipper and SMC's estimated profitability at current or foreseeable asset levels). The Directors also considered that they will have the opportunity to periodically re-examine whether a Fund has achieved economies of scale, and the appropriateness of investment advisory fees payable to SMC and fees payable by SMC to the investment sub-advisers, in the future. - BENEFITS (SUCH AS SOFT DOLLARS) TO SMC FROM ITS RELATIONSHIP WITH THE FUNDS (AND ANY CORRESPONDING BENEFITS TO THE FUNDS). The Directors concluded that other benefits described by SMC and the investment sub-advisers from their relationships with the Funds, including "soft dollar" benefits in connection with Fund brokerage transactions, are reasonable and fair, and consistent with industry practice and the best interests of the Funds and their shareholders. In addition, the Directors determined that the administration, transfer agency and fund accounting fees paid by the Funds to SMC are reasonable, fair and in the best interests of Fund shareholders in light of the nature and quality of the services provided, the associated costs, and the necessity of the services for the Funds' operations. - OTHER CONSIDERATIONS: In approving the investment advisory and sub-advisory agreements, the Directors determined that SMC has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the Funds in a professional manner that is consistent with the best interests of the Funds and their shareholders. In this regard, the Directors favorably considered the compliance track record of the Funds and SMC. The Directors also concluded that SMC has made a significant entrepreneurial commitment to the management and success of the Funds, which entails a substantial financial and professional commitment, including investment advisory fee waivers and expense limitation arrangements with respect to several of the Funds to the benefit of Fund shareholders. 118 Directors and Officers (unaudited) The business address of each director and officer is One Security Benefit Place, Topeka, KS 66636-0001. DIRECTORS
NAME (DATE OF BIRTH) YEAR ELECTED*** PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - --------------- ------------------------------------------- Donald A. Chubb, Jr.** Business broker, Griffith & Blair Realtors (12-14-46) Director - Jayhawk Area Boy Scouts Council 1994 Harry W. Craig, Jr.** Chairman, CEO, Secretary & Director, (05-11-39) The Martin Tractor Company, Inc.; 2004 Director - Stormont Vail Corporation Director - Concerned Citizens for Topeka Director - Oscar S. Stauffer Executive in Residence Jerry B. Farley** President, Washburn University (09-20-46) President, J&J Bonanza 2005 Penny A. Lumpkin** Partner, Vivians' Gift Shop (Corporate Retail) (08-20-39) Vice President, Palmer Companies, Inc. 1993 (Small Business and Shopping Center Development) Vice President, PLB (Real Estate Equipment Leasing) Vice President, Town Crier (Retail) Prior to 2002: Vice President, Bellaire Shopping Center (Managing and Leasing) Partner, Goodwin Enterprises (Retail) Maynard F. Oliverius** President & Chief Executive Officer, (12-18-43) Stormont-Vail HealthCare 1998 Director - VHA Mid-America Director - Go Topeka John D. Cleland* Retired. Prior to January 1, 2003, Senior Vice (05-01-36) President, Security Benefit Group, Inc. & 1991 (Director) Security Benefit Life Insurance Company 2000 (Chairman of the Board) Michael G. Odlum* President & Managing Member Representative, (01-12-52) Security Management Company, LLC 2004 (President) Senior Vice President and Chief Investment Officer, 2004 (Director) Security Corporation and Security Benefit Life Insurance Company Director, Security Distributors, Inc. Director, Vice President and Chief Investment Officer, First Security Benefit Life Insurance and Annuity Company of New York
* These directors are deemed to be "interested persons" of the Funds under the Investment Company Act of 1940, as amended, by reason of their positions with the Funds' Investment Manager and/or the parent of the Investment Manager. ** These directors serve on the Fund's joint audit committee, the purpose of which is to meet with the independent auditors, to review the work of the auditors, and to oversee the handling by Security Management Company, LLC of the accounting function for the Fund. *** Each director oversees 34 Security Fund portfolios and serves until the next annual meeting, or until a successor has been duly elected and qualified. 119 Directors and Officers (unaudited) (continued) OFFICERS
NAME (DATE OF BIRTH) TITLE YEAR ELECTED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - --------------- ------------------------------------------- Steven M. Bowser Vice President & Senior Portfolio Manager, Security (02-11-60) Management Company, LLC; Vice President Vice President & Senior Portfolio Manager, Security 2003 Benefit Life Insurance Company Christina Fletcher Portfolio Manager, Security Management Company, LLC (07-25-72) Credit Analyst/Portfolio Manager, Horizon Cash Vice President Management 2005 Senior Money Market Trader, Scudder Investments Brenda M. Harwood Assistant Vice President, Chief Compliance Officer & (11-03-63) Treasurer, Security Management Company, LLC; Treasurer Assistant Vice President, Security Benefit Life 1988 Insurance Company Vice President & Director, Security Distributors, Inc. Richard J. King Vice President & Head of Fixed Income Asset (03-59) Management, Security Management Company, LLC; Vice President Partner, Head of Portfolio Management, INVESCO 2005 Mark Lamb Vice President, Security Management Company, LLC, (02-03-60) Vice President, Security Benefit Life Insurance Vice President Company 2003 Amy J. Lee Secretary, Security Management Company, LLC & Security (06-05-61) Distributors, Inc.; Secretary Secretary, Security Distributors, Inc. 1987 Vice President, Associate General Counsel & Assistant Secretary, Security Benefit Life Insurance Company Mark Mitchell Vice President & Portfolio Manager, Security (08-24-64) Management Company, LLC Vice President 2003 Christopher Phalen Vice President & Portfolio Manager, Security Management (11-9-70) Company, LLC; Vice President Vice President, Security Benefit Life Insurance Company 2002 James P. Schier Vice President & Senior Portfolio Manager, Security (12-28-57) Management Company, LLC; Vice President Vice President, Security Benefit Life Insurance Company 1998 Cindy L. Shields Vice President & Head of Equity Asset Management, (06-05-67) Security Management Company, LLC, Vice President Vice President, Security Benefit Life Insurance Company 1988 Christopher D. Swickard Assistant Secretary, Security Management Company, LLC; (10-09-65) Second Vice President & Counsel, Assistant Secretary Security Benefit Life Insurance Company 1996 David G. Toussaint Assistant Vice President & Portfolio Manager, (10-10-66) Security Management Company, LLC; Vice President Assistant Vice President, Security Benefit Lfe 2001 Insurance Company
* Officers serve until the next annual meeting or until a successor has been duly elected and qualified. 120 Each of the Security Funds files a complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Forms N-Q of each such Fund are available on the Commission's website at www.sec.gov. The Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The portfolio holdings of each of the Security Funds are available on their website, www.securitybenefit.com or by calling 1-800-888-2461. A description of the policies and procedures that the Security Funds use to determine how to vote proxies relating to portfolio securities is available upon request, free of charge by calling 1-800-888-2461, or accessing the U.S. Securities and Exchange Commission website at www.sec.gov. Information regarding how the Security Funds voted proxies relating to portfolio securities during the 12 month period ended June 30, 2005 is available upon request, free of charge by calling 1-800-888-2461, or accessing the U.S. Securities and Exchange Commission website at www.sec.gov. The statement of additional information ("SAI") includes additional information about the Funds' Directors and is available upon request without charge by calling 1-800-888-2461. THE SECURITY GROUP OF MUTUAL FUNDS Security Equity Fund - Alpha Opportunity Series - Enhanced Index Series - Equity Series - Global Series - Large Cap Growth Series - Mid Cap Value Series - Select 25 Series - Small Cap Growth Series - Social Awareness Series Security Large Cap Value Fund Security Mid Cap Growth Fund Security Income Fund - Capital Preservation Series - Diversified Income Series - High Yield Series - Income Opportunity Series Security Cash Fund SECURITY FUNDS OFFICERS AND DIRECTORS DIRECTORS Donald A. Chubb, Jr. John D. Cleland Harry W. Craig, Jr. Jerry B. Farley Penny A. Lumpkin Michael G. Odlum Maynard F. Oliverius OFFICERS John D. Cleland, Chairman of the Board Michael G. Odlum, President Steve M. Bowser, Vice President Christina Fletcher, Vice President Richard J. King, Vice President Mark Lamb, Vice President Mark Mitchell, Vice President Christopher Phalen, Vice President James P. Schier, Vice President Cindy L. Shields, Vice President David G. Toussaint, Vice President Amy J. Lee, Secretary Christopher D. Swickard, Assistant Secretary Brenda M. Harwood, Chief Compliance Officer & Treasurer 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 BENEFIT(SM) LOGO) Security Distributors, Inc. One Security Benefit Place - Topeka, Kansas 66636-0001 - securitybenefit.com ITEM 2. CODE OF ETHICS. Not required at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not required at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The Schedule of Investments is included under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant does not currently have in place procedures by which shareholders may recommend nominees to the registrant's board. There have been no changes to the procedures by which shareholders may recommend nominees to the registrant's board. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's President and Treasurer have concluded that the registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR. (b) There were no significant changes in the registrant's internal controls, or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 11. EXHIBITS. (a) (1) Not required at this time. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SECURITY EQUITY FUND By: MICHAEL G. ODLUM ------------------------------------ Michael G. Odlum, President Date: May 26, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: MICHAEL G. ODLUM ------------------------------------ Michael G. Odlum, President Date: May 26, 2006 By: BRENDA M. HARWOOD ------------------------------------ Brenda M. Harwood, Treasurer Date: May 26, 2006 EX-99.CERT 2 c05598aexv99wcert.txt CERTIFICATION EX-99.CERT Item 11 (a)(2) CERTIFICATIONS I, Michael G. Odlum, certify that: 1. I have reviewed this report on Form N-CSR of Security Equity Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 26, 2006 MICHAEL G. ODLUM Date ---------------------------------------- Michael G. Odlum, President CERTIFICATIONS I, Brenda M. Harwood, certify that: 1. I have reviewed this report on Form N-CSR of Security Equity Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 26, 2006 BRENDA M. HARWOOD Date ---------------------------------------- Brenda M. Harwood, Treasurer EX-99.906CERT 3 c05598aexv99w906cert.txt 906 CERTIFICATION EX-99.906 CERT Item 11(b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) In connection with the attached Report of Security Equity Fund (the "Fund") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Fund does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act"); and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund as of, and for, the periods presented in the Report. By: MICHAEL G. ODLUM ------------------------------------ Michael G. Odlum, President Date: May 26, 2006 By: BRENDA M. HARWOOD ------------------------------------ Brenda M. Harwood, Treasurer Date: May 26, 2006 A signed original of this written statement required by Section 906 has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----