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Securities Act File No.
As filed with the Securities and Exchange Commission on May 30, 2002
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
SECURITY EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
One Security Benefit Place, Topeka, Kansas 66636
(Address of Principal Executive Offices) (Zip Code)
(785) 438-3000
(Registrant's Area Code and Telephone Number)
Amy J. Lee
Security Management Company, LLC
One Security Benefit Place
Topeka, Kansas 66636
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective on June 29, 2002 pursuant
to Rule 488 under the Securities Act of 1933.
No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
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Total Return Series of
Security Equity Fund
One Security Benefit Place
Topeka, KS 66636
(800) 888-2461
____, 2002
Dear Shareholder:
Your Board of Directors has called a special meeting of Shareholders of the
Total Return Series ("Total Return Fund") of Security Equity Fund, to be held at
9:30 a.m., local time, on August 20, 2002, at the offices of Security Equity
Fund, Security Benefit Group Building, One Security Benefit Place, Topeka,
Kansas 66636.
The Board of Directors of Security Equity Fund has approved a reorganization of
the Total Return Fund, into the Equity Series ("Equity Fund") of Security Equity
Fund, which is managed by Security Management Company, LLC and is part of the
Security Group of Mutual Funds (the "Reorganization"). The Equity Fund has
investment objectives and policies that are similar in many respects to those of
the Total Return Fund. The Reorganization is expected to result in operating
expenses that are lower for Total Return Fund's shareholders.
You are asked to vote to approve a Plan of Reorganization. The accompanying
document describes the proposed transaction and compares the policies and
expenses of the Funds for your evaluation.
After careful consideration, the Board of Directors of Security Equity Fund
unanimously approved this proposal with respect to Total Return Fund and
recommended that shareholders of the Fund vote "FOR" the proposal.
A Proxy Statement/Prospectus that describes the Reorganization is enclosed. We
urge you to vote your shares by completing and returning the enclosed proxy in
the envelope provided, or vote by Internet or telephone, at your earliest
convenience.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN AUGUST _, 2002.
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
Sincerely,
James R. Schmank
President
Total Return Series of
Security Equity Fund
One Security Benefit Place
Topeka, KS 66636
(800) 888-2461
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
TOTAL RETURN SERIES
OF SECURITY EQUITY FUND
TO BE HELD ON AUGUST 20, 2002
To the Shareholders:
A special meeting of Shareholders of the Total Return Series ("Total Return
Fund") of Security Equity Fund will be held on August 20, 2002 at 9:30 a.m.,
local time, at the Security Benefit Group Building, One Security Benefit Place,
Topeka, Kansas 66636.
The purposes of the special meeting of the Total Return Fund are as follows:
1. To approve a Plan of Reorganization providing for the acquisition of all of
the assets and liabilities of the Total Return Fund by the Equity Series
("Equity Fund") of Security Equity Fund solely in exchange for shares of
the Equity Fund, followed by the complete liquidation of the Total Return
Fund; and
2. To transact such other business as may properly come before the special
meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on June 24, 2002 are entitled to
notice of, and to vote at, the meeting. Your attention is called to the
accompanying Proxy Statement/Prospectus. Regardless of whether you plan to
attend the meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD OR VOTE BY TELEPHONE OR INTERNET so that a quorum will be present and a
maximum number of shares may be voted. If you are present at the meeting, you
may change your vote, if desired, at that time.
By Order of the Board of Directors
Amy J. Lee
Secretary
______, 2002
TABLE OF CONTENTS
INTRODUCTION........................................................... 5
SUMMARY................................................................ 6
The Proposed Reorganization......................................... 6
Purchase, Redemption, and Exchange Information...................... 7
Federal Income Tax Consequences of the Reorganization............... 7
COMPARISON OF RISKS INVOLVED IN INVESTING IN THE FUNDS................. 7
INVESTMENT OBJECTIVES AND POLICIES..................................... 8
Comparison of Objectives and Primary Investment Strategies.......... 8
Comparison of Portfolio Characteristics............................. 9
Relative Performance................................................ 9
Comparisons of Securities and Investment Techniques................. 10
COMPARISON OF FEES AND EXPENSES........................................ 12
Operating Expenses.................................................. 12
General Information................................................. 13
ADDITIONAL INFORMATION ABOUT EQUITY FUND............................... 14
Investment Manager.................................................. 14
Investment Personnel................................................ 14
Performance of Equity Fund.......................................... 14
INFORMATION ABOUT THE REORGANIZATION................................... 15
The Reorganization Plan............................................. 15
Reasons for the Reorganization...................................... 16
Board Consideration................................................. 16
Tax Considerations.................................................. 16
Expenses of the Reorganization...................................... 17
ADDITIONAL INFORMATION ABOUT THE FUNDS................................. 17
Form of Organization................................................ 17
Dividends and Other Distributions................................... 17
Capitalization...................................................... 17
GENERAL INFORMATION ABOUT THE PROXY STATEMENT.......................... 18
Solicitation of Proxies............................................. 18
Voting Rights....................................................... 18
Other Matters to Come Before the Meeting............................ 18
Shareholder Proposals............................................... 18
Information about the Funds......................................... 19
Reports to Shareholders............................................. 19
MORE INFORMATION REGARDING THE FUNDS................................... 20
APPENDIX A............................................................. 30
APPENDIX B............................................................. 40
APPENDIX C............................................................. 41
PROXY STATEMENT/PROSPECTUS
SECURITY EQUITY FUND
ONE SECURITY BENEFIT PLACE
TOPEKA, KANSAS 66636
(800) 888-2461
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
AUGUST 20, 2002
TOTAL RETURN SERIES
OF SECURITY EQUITY FUND
RELATING TO THE REORGANIZATION INTO
EQUITY SERIES
OF SECURITY EQUITY FUND (COLLECTIVELY, THE "FUNDS")
INTRODUCTION
This Proxy Statement/Prospectus provides you with information about the proposed
transactions. The transactions involve the transfer of all of the assets and
liabilities of Total Return Series ("Total Return Fund") to Equity Series
("Equity Fund") of Security Equity Fund, an open-end management investment
company, solely in exchange for shares of Equity Fund (the "Reorganization").
The Total Return Fund would then distribute to you your portion of the shares of
Equity Fund it received in the Reorganization. The result would be a liquidation
of Total Return Fund. You would receive shares of the Equity Fund having an
aggregate value equal to the aggregate value of the shares of Total Return Fund
held by you as of the close of business on the business day preceding the
closing of the Reorganization. You are being asked to vote on the Plan of
Reorganization through which these transactions would be accomplished.
Because you, as a shareholder of Total Return Fund, are being asked to approve a
transaction that will result in your holding shares of Equity Fund, this Proxy
Statement also serves as a Prospectus for Equity Fund.
This Proxy Statement/Prospectus, which you should retain for future reference,
contains important information about Equity Fund that you should know before
investing. A Statement of Additional Information dated ____, 2002, containing
additional information about the Reorganization has been filed with the SEC and
is available, without charge, by calling (800) 888-2461. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of
each of the Funds, see the Prospectus (the "Security Equity Fund Prospectus")
and the Statement of Additional Information for the Funds dated February 1,
2002, as supplemented May 1, 2002, which may be obtained, without charge, by
calling (800) 888-2461. Each of the Funds also provides periodic reports to its
shareholders, which highlight certain important information about the Funds,
including investment results and financial information. The annual report for
the Funds dated September 30, 2001, is included herewith and is incorporated
herein by reference.
You may also obtain proxy materials, reports and other information filed by
Equity Fund from the SEC's Public Reference Room (1-800-SEC-0330) or from the
SEC's internet website at www.sec.gov.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES, OR DETERMINED THAT THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DATE: ____, 2002
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For additional
information, you should consult the Security Equity Fund Prospectus and the Plan
of Reorganization, which is attached hereto as Appendix A.
THE PROPOSED REORGANIZATION -- On May 3, 2002, the Board of Directors of
Security Equity Fund approved with respect to each of the Funds a Plan of
Reorganization (the "Reorganization Plan"). Subject to approval of Total Return
Fund shareholders, the Reorganization Plan provides for:
o the transfer of all of the assets of Total Return Fund to Equity Fund, in
exchange for shares of Equity Fund;
o the assumption by Equity Fund of all of the liabilities of Total Return
Fund;
o the distribution of shares of Equity Fund to the shareholders of Total
Return Fund; and
o the complete liquidation of Total Return Fund.
The Reorganization is expected to be effective upon the opening of business on
August 28, 2002, or on a later date as the parties may agree (the "Closing"). As
a result of the Reorganization, each shareholder of Class A, Class B, and Class
C shares of Total Return Fund would become a shareholder of the same class of
shares of Equity Fund. Each shareholder would hold, immediately after the
Closing, shares of each class of Equity Fund having an aggregate value equal to
the aggregate value of the shares of that same class of shares of Total Return
Fund held by that shareholder as of the close of business on the business day
preceding the Closing.
The Reorganization is intended to eliminate duplication of costs and other
inefficiencies arising from having two substantially similar mutual funds within
the same group of funds, as well as to assist in achieving economies of scale.
Shareholders in Total Return Fund are expected to benefit from the elimination
of this duplication and from the larger asset base that will result from the
Reorganization.
Approval of the Reorganization Plan with respect to Total Return Fund requires
the affirmative vote of a majority of the outstanding shares of the Fund. In the
event that the shareholders of Total Return Fund do not approve the
Reorganization, the Fund would continue to operate as a separate entity, and the
Fund's Board of Directors would determine what further action, if any, to take.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF SECURITY EQUITY FUND
UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATION. THE BOARD RECOMMENDS THAT YOU
VOTE "FOR" THE PROPOSED REORGANIZATION.
In considering whether to approve the Reorganization, you should note that:
o Total Return Fund has investment objectives and policies that are similar
in many respects to the investment objectives and policies of Equity Fund.
Total Return Fund seeks high total return, consisting of capital
appreciation and current income. Equity Fund seeks long-term capital
growth. Each Fund invests primarily in equity securities of U.S. companies.
o The proposed Reorganization offers actual reductions in total operating
expenses for shareholders of Total Return Fund. This chart compares the
current operating expenses, management fees, and distribution and
shareholder service fees of the Funds.
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MANAGEMENT DISTRIBUTION AND OTHER
FEES SERVICE FEES(1) EXPENSES
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CLASS OF ALL
SHARES CLASSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- --------------- ------------- ---------- --------- --------- --------- --------- --------
Total Return 0.75% 0.00% 1.00% 1.00% 0.76% 0.76% 0.71%
- --------------- ------------- ---------- --------- --------- --------- --------- --------
Equity 0.75%(2) 0.25%(2) 1.00% 1.00% 0.20% 0.20% 0.20%
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1. Fees are expressed as an annual rate of average daily net assets.
2. The expense information for Equity Fund has been restated to reflect its
new investment advisory fee and new Class A distribution fee, which fees
were effective May 1, 2002.
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This chart shows an estimate of the likely expenses after the Reorganization.
Combining the Funds should lower expenses because of economies of scale realized
from a larger asset base.
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MANAGEMENT DISTRIBUTION AND OTHER
FEES SERVICE FEES EXPENSES
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CLASS OF ALL
SHARES CLASSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---------------------------- ---------- --------- --------- --------- --------- ---------
PRO FORMA -
Equity
including 0.75% 0.25% 1.00% 1.00% 0.20% 0.20% 0.20%
Total Return
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o The current sales load structure for the each of the Funds is identical,
except with regard to the Class A distribution fee which applies only
Equity Fund. See the "Comparison of Fees and Expenses," page 12.
For further information on fees and expenses, see "Comparison of Fees and
Expenses."
o The Funds have the same investment manager, Security Management Company,
LLC ("Security Management"), One Security Benefit Place, Topeka, Kansas,
66636.
PURCHASE, REDEMPTION, AND EXCHANGE INFORMATION -- The purchase, redemption and
exchange provisions and privileges for the Funds are the same. For additional
information on purchase, redemption and exchange procedures see "Comparison of
Fees and Expenses," page 12 and "More Information Regarding the Funds," page 20.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION -- The Funds expect that
the Reorganization will be considered a tax-free reorganization within the
meaning of section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). As such you will not recognize gain or loss as a result of the
Reorganization. See "Information About The Reorganization - Tax Considerations."
COMPARISON OF RISKS INVOLVED IN INVESTING IN THE FUNDS
Because the Funds have similar investment objectives and policies, the risks of
an investment in the Funds are substantially similar. The principal risk of an
investment in one of the Funds is fluctuation in the net asset value of the
Fund's shares. Market conditions, investment policies, portfolio management, and
other factors affect such fluctuations.
Each Fund is subject to risks associated with investing in equity securities,
the prices of which tend to fluctuate more dramatically over the shorter term
than do the prices of other asset classes. These movements may result from
factors affecting individual companies, or from broader influences like changes
in interest rates, market conditions, investor confidence or announcements of
economic, political or financial information.
o Each Fund invests primarily in growth stocks. Growth stocks can offer
greater or more rapid capital appreciation than value stocks, but may lack
the dividend yield that can cushion stock prices in market downturns.
o Each Fund may invest in value stocks to attempt to reduce the Fund's
potential volatility and possibly add to current income. Value stocks are
subject to the risk that the market may never recognize their intrinsic
values, and their prices may go down. While investments in value stocks may
limit downside risk over time, the Funds may, as a trade-off, produce more
modest gains than riskier stock funds.
o Each Fund may invest in dollar-denominated foreign securities. Investing in
foreign securities involves additional risks such as differences in
financial reporting standards, a lack of adequate company information and
political instability. These risks may be particularly acute in
underdeveloped capital markets.
o Each Fund may invest in options and futures. Options and futures are used
to hedge a Fund's portfolio, to increase returns, or to maintain exposure
to a market without buying individual securities. These transactions may
result in reduced returns or increased volatility, and may also entail
transaction expenses.
o Each Fund may invest in investment companies, which could include
index-based investments such as SPDRs (based on the S&P 500), MidCap SPDRs
(based on the S&P MidCap 400 Index), Select Sector SPDRs (based on sectors
or industries of the S&P 500 Index), Nasdaq-100 Index Tracking Stocks
(based on the Nasdaq-100 index), and DIAMONDS (based on the Dow Jones
Industrial Average). To the extent each Fund invests in other investment
companies, it will incur its pro rata share of the underlying investment
companies' expenses. In addition, a Fund will be subject to the effects of
business and regulatory developments that affect an underlying investment
company or the investment company industry generally.
o Total Return Fund may invest in fixed-income securities, which present
risks because the market value of fixed-income investments generally is
affected by changes in interest rates. When interest rates rise, the market
value of a fixed-income security declines. Generally, the longer a bond's
maturity, the greater the risk. A bond's value can also be affected by
changes in the credit rating or financial condition of its issuer.
Investments in higher yielding, high risk debt securities may present
additional risk because these securities may be less liquid than investment
grade bonds. They also tend to be more susceptible to high interest rates
and to real or perceived adverse economic and competitive industry
conditions. Because bond values fluctuate, an investor may receive more or
less money than originally invested.
INVESTMENT OBJECTIVES AND POLICIES
COMPARISON OF OBJECTIVES AND PRIMARY INVESTMENT STRATEGIES -- The investment
objectives, policies and restrictions of the Funds are similar, although there
are certain differences. There can be no assurance that either Fund will achieve
its stated objective.
INVESTMENT OBJECTIVE. The Funds have similar investment objectives and policies.
o Total Return Fund seeks high total return, consisting of capital appreciation
and current income.
o Equity Fund seeks long-term capital growth.
PRIMARY INVESTMENT STRATEGIES.
o To choose equity securities for the Funds, Security Management uses a
blended approach, investing in growth stocks and value stocks. Security
Management typically chooses stock of larger, growth-oriented companies.
The Funds also may invest in value-oriented securities to attempt to reduce
the Fund's potential volatility and possibly add to current income. In
choosing the balance of growth stocks and value stocks, Security Management
compares the potential risks and rewards of each category.
TOTAL RETURN FUND.
o Total Return Fund, under normal circumstances, invests in a
well-diversified portfolio of equity securities of U.S. companies in
different capitalization ranges. The Fund may also invest in equity
securities offering the potential for current income and in fixed income
securities in any rating category, including restricted securities eligible
for resale to qualified institutional investors under Rule 144A.
o Total Return Fund typically sells a security when the reasons for buying it
no longer apply, or when the company begins to show deteriorating
fundamentals or poor relative performance.
o Total Return Fund also may invest a portion of its assets in options and
futures contracts. These instruments may be used to hedge the Fund's
portfolio, to increase returns or to maintain exposure to the equity
markets.
o Total Return Fund may invest in a variety of investment companies,
including those that seek to track the composition and performance of a
specific index. The Fund may use these index-based investments as a way of
managing its cash position or to gain exposure to the equity markets or a
particular sector of the equity market, while maintaining liquidity.
o Under adverse conditions, Total Return Fund could invest some or all of its
assets in cash or money market securities.
EQUITY FUND.
o Equity Fund pursues its objective by investing, under normal circumstances,
at least 80% of its net assets in a widely-diversified portfolio of equity
securities, whose total market value is $5 billion or greater at the time
of purchase and which may include American Depositary Receipts ("ADRs") and
convertible securities.
o Equity Fund may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
maintain exposure to the equity markets or to increase returns.
o Equity Fund may invest in a variety of investment companies, including
those that seek to track the composition and performance of a specific
index. The Fund may use these index-based investments as a way of managing
its cash position or to gain exposure to the equity markets or a particular
sector of the equity markets, while maintaining liquidity.
o Equity Fund typically sells a security when the reasons for buying it no
longer apply, or when the company begins to show deteriorating fundamentals
or poor relative performance.
o Under adverse conditions, Equity Fund could invest some or all of its
assets in cash or money market securities.
Following the Reorganization and in the ordinary course of business as a mutual
fund, certain holdings of the Total Return Fund that were transferred to the
Equity Fund in connection with the Reorganization may be sold. Such sales may
result in increased transactional costs for Equity Fund, and the realization of
taxable gains or losses.
COMPARISON OF PORTFOLIO CHARACTERISTICS -- The following tables compare certain
characteristics of the portfolios of the Funds as of September 30, 2001:
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TOTAL RETURN FUND EQUITY FUND
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Net Assets $5,475,169 $663,962,435
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Number of Holdings 95 109
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Portfolio Turnover Rate
(12 months ended 9/30/01) 35% 23%
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TOP 10 HOLDINGS (AS A % OF NET ASSETS)
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TOTAL RETURN FUND EQUITY FUND
- ----------------------------------- -------- -------------------------------------- ------
General Electric Company 4.7% General Electric Company 5.0%
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Microsoft Corporation 4.0% Standard & Poor's 500 Index Fund 4.1%
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American International Group, Inc. 2.9% Microsoft Corporation 3.5%
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Wal-Mart Stores, Inc. 2.6% Exxon Mobil Corporation 3.0%
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Exxon Mobil Corporation 2.5% American International Group, Inc. 2.8%
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Johnson & Johnson 2.2% Citigroup, Inc. 2.4%
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Citigroup, Inc. 2.2% Pfizer, Inc. 2.4%
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Merck & Company, Inc. 2.2% S & P Mid-Cap 400 Depositary Receipts 2.4%
- ----------------------------------- -------- -------------------------------------- ------
Dell Computer Corporation 2.2% Wal-mart Stores, Inc. 2.2%
- ----------------------------------- -------- -------------------------------------- ------
J.P. Morgan Chase & Company 2.1% International Business Machines
Corporation 2.2%
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RELATIVE PERFORMANCE -- The following table shows, for each calendar year since
1996 in the case of Total Return Fund and for each calendar year since 1992 in
the case of Equity Fund, the average annual total return for (a) Class A shares
of Total Return Fund, (b) Class A shares of Equity Fund, and (c) the S&P 500
Index. Performance of the Funds in the table below does not reflect the
deduction of sales loads. The S&P 500 Index has an inherent performance
advantage over the Funds, since an index has no cash in its portfolio, and
incurs no operating expenses. An investor cannot invest in an index. Total
return is calculated assuming reinvestment of all dividends and capital gain
distributions at net asset value and excluding the deduction of any sales
charges.
- --------------------- --------------------- --------------- -----------------
CALENDAR YEAR/
PERIOD ENDED TOTAL RETURN FUND EQUITY FUND S&P 500 INDEX
- --------------------- --------------------- --------------- -----------------
12/31/92 --- 10.72% 7.61%
- --------------------- --------------------- --------------- -----------------
12/31/93 --- 14.60% 10.06%
- --------------------- --------------------- --------------- -----------------
12/31/94 --- -2.56% 1.31%
- --------------------- --------------------- --------------- -----------------
12/31/95 7.78%1 38.42% 37.53%2
- --------------------- --------------------- --------------- -----------------
12/31/96 13.18% 22.67% 22.95%
- --------------------- --------------------- --------------- -----------------
12/31/97 6.08% 29.60% 33.35%
- --------------------- --------------------- --------------- -----------------
12/31/98 12.06% 26.47% 28.60%
- --------------------- --------------------- --------------- -----------------
12/31/99 15.92% 10.99% 21.03%
- --------------------- --------------------- --------------- -----------------
12/31/00 -12.49% -12.52% -9.10%4
- --------------------- --------------------- --------------- -----------------
12/31/01 -14.48% -11.85% -11.88%
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1. For the period from June 1, 1995 (Total Return Fund's date of inception) to
December 31, 1995.
2. S&P 500 Index performance for the period June 1, 1995 to December 31, 1995
was 31.05%.
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COMPARISON OF SECURITIES AND INVESTMENT TECHNIQUES -- The following is a summary
of the types of securities in which the Funds may invest and strategies the
Funds may employ in pursuit of their investment objectives. As with any
security, an investment in a Fund's shares involves certain risks, including
loss of principal. The Funds are subject to varying degrees of financial, market
and credit risk. An investment in the Funds is not a deposit of a bank and is
not insured by the Federal Deposit Insurance Corporation or any other government
agency.
FOREIGN SECURITIES. Each Fund may invest in dollar denominated foreign
securities, which involve certain special risks, including, but not limited to:
(i) adverse political and economic developments; (ii) unreliable or untimely
information; (iii) limited legal recourse; (iv) limited markets; and (v) higher
operational expenses.
Foreign investments may be subject to the risks of seizure by a foreign
government, imposition of restrictions on the exchange or transport of foreign
currency, and tax increases. There may also be less information publicly
available about a foreign company than about most U.S. companies, and foreign
companies are usually not subject to accounting, auditing and financial
reporting standards and practices comparable to those in the United States. The
legal remedies for investors in foreign investments may be more limited than
those available in the United States. Certain foreign investments may be less
liquid (harder to buy and sell) and more volatile than domestic investments,
which means a Fund may at times be unable to sell its foreign investments at
desirable prices. For the same reason, a Fund may at times find it difficult to
value its foreign investments. Brokerage commissions and other fees are
generally higher for foreign investments than for domestic investments. The
procedures and rules for settling foreign transactions may also involve delays
in payment, delivery or recovery of money or investments. Foreign withholding
taxes may reduce the amount of income available to distribute to shareholders of
the Funds.
SMALLER COMPANIES. Each Fund may invest in small or medium-sized companies.
Small- or medium-sized companies are more likely than larger companies to have
limited product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies may trade less
frequently and in limited volume, and their prices may fluctuate more than
stocks of other companies. Stocks of these companies may therefore be more
vulnerable to adverse developments than those of larger companies.
CONVERTIBLE SECURITIES AND WARRANTS. Each Fund may invest in debt or preferred
equity securities convertible into, or exchangeable for, equity securities.
Traditionally, convertible securities have paid dividends or interest at rates
higher than common stocks but lower than nonconvertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. In recent years,
convertible securities have been developed which combine higher or lower current
income with options and other features. Warrants are options to buy a stated
number of shares of common stock at a specified price anytime during the life of
the warrants (generally, two or more years).
RESTRICTED SECURITIES. Each Fund may invest in restricted securities, which
cannot be sold to the public without registration under the Securities Act of
1933 ("1933 Act"). Unless registered for sale, restricted securities can be sold
only in privately negotiated transactions or pursuant to an exemption from
registration. Restricted securities are generally considered illiquid and,
therefore, subject to each Fund's limitation on illiquid securities.
Restricted securities (including Rule 144A Securities) may involve a high degree
of business and financial risk, which may result in substantial losses. The
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund.
In particular, Rule 144A Securities may be resold only to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933. Rule 144A permits the resale to "qualified institutional buyers" of
"restricted securities" that, when issued, were not of the same class as
securities listed on a U.S. securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation System (the "Rule 144A
Securities"). A "qualified institutional buyer" is defined by Rule 144A
generally as an institution, acting for its own account or for the accounts of
other qualified institutional buyers, that in the aggregate owns and invests on
a discretionary basis at least $100 million in securities of issuers not
affiliated with the institution.
Investing in Rule 144A Securities and other restricted securities could have the
effect of increasing the amount of a Fund's assets invested in illiquid
securities to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
INITIAL PUBLIC OFFERING. Each Fund may invest in initial public offerings
(IPOs). A Fund's investment in securities offered through IPOs may have a
magnified performance impact, either positive or negative, on the Funds due to
their small asset base. There is no guarantee that as a Fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs. A Fund's investments in IPOs may make it subject to more erratic price
movements than the overall equity market.
HIGH YIELD SECURITIES. Total Return Fund may invest in higher yielding debt
securities in the lower rating (higher risk) categories of the recognized rating
services, which are commonly referred to as "junk bonds." The total return and
yield of junk bonds can be expected to fluctuate more than the total return and
yield of higher-quality bonds. Junk bonds (those rated below BBB or in default)
are regarded as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in lower-medium and low-quality bonds involves greater investment
risk and is highly dependent on Security Management's credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices by lessening the ability of issuers to make principal and
interest payments. These bonds are often thinly traded and can be more difficult
to sell and value accurately than high-quality bonds. Because objective pricing
data may be less available, judgment may play a greater role in the valuation
process. In addition, the entire junk bond market can experience sudden and
sharp price swings due to a variety of factors, including changes in economic
forecasts, stock market activity, large or sustained sales by major investors, a
high-profile default, or just a change in the market's psychology. This type of
volatility is usually associated more with stocks than bonds, but junk bond
investors should be prepared for it.
CASH RESERVES. Each Fund maintains cash reserves, which may include domestic,
foreign money market instruments, as well as certificates of deposit, bank
demand accounts and repurchase agreements. The Funds may establish and maintain
reserves as Security Management believes is advisable to facilitate the Fund's
cash flow needs (e.g., redemptions, expenses and purchases of portfolio
securities) or for temporary, defensive purposes.
BORROWING. Each Fund may borrow money. Borrowings may be collateralized with
Fund assets. To the extent that a Fund purchases securities while it has
outstanding borrowings, it is using leverage, i.e., using borrowed funds for
investment. Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money borrowed
for leveraging will be subject to interest costs that may or may not be
recovered by appreciation of the securities purchased; in certain cases,
interest costs may exceed the return received on the securities purchased. A
Fund also may be required to maintain minimum average balances in connection
with such borrowing or to pay a commitment or other fee to maintain a line of
credit; either of these requirements would increase the cost of borrowing over
the stated interest rate.
FUTURES AND OPTIONS. Each Fund may utilize futures contracts and options on
futures and may purchase call and put options and write call and put options on
a "covered" basis. Futures (a type of potentially high-risk derivative) are
often used to manage or hedge risk because they enable the investor to buy or
sell an asset in the future at an agreed-upon price. Options (another type of
potentially high-risk derivative) give the investor the right (where the
investor purchases the options), or the obligation (where the investor writes
(sells) the options), to buy or sell an asset at a predetermined price in the
future. The instruments listed above may be bought or sold for any number of
reasons, including: to manage exposure to changes in securities prices, to
manage exposure to changes in interest rates and bond prices, as an efficient
means of adjusting overall exposure to certain markets, in an effort to enhance
income, to protect the value of portfolio securities, and to adjust portfolio
duration. Futures contracts and options may not always be successful hedges;
their prices can be highly volatile. Using them could lower a Fund's total
return, and the potential loss from the use of futures can exceed the Fund's
initial investment in such contracts.
SHARES OF OTHER INVESTMENT COMPANIES. Each Fund may invest in shares of other
investment companies. Such investment may not exceed immediately after purchase
10% of the Fund's total assets, and no more than 5% of its total assets may be
invested in the shares of any one investment company. Investment in the shares
of other investment companies has the effect of requiring shareholders to pay
the operating expenses of two mutual funds.
SWAPS, CAPS, FLOORS AND COLLARS. Each Fund may enter into interest rate, total
return and index swaps. The Funds would enter into these transactions primarily
to preserve a return or spread on a particular investment or portion of its
portfolio as a technique for managing the portfolio's duration (i.e., the price
sensitivity to changes in interest rates) or to protect against any increase in
the price of securities the Funds anticipate purchasing at a later date. To the
extent the Funds enters into these types of transactions, it will be done to
hedge and not as a speculative investment, and the Funds will not sell interest
rate caps or floors if they do not own securities or other instruments providing
the income the Funds may be obligated to pay. Interest rate swaps involve the
exchange by a Fund with another party of their respective commitments to pay or
receive interest on a notional amount of principal. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling the cap to the extent that a specified index exceeds a
predetermined interest rate. The purchase of an interest rate floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling the floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS. Each Fund may purchase
and sell securities on a "when issued," "forward commitment" or "delayed
delivery" basis. The price of these securities is fixed at the time of the
commitment to buy, but delivery and payment can take place a month or more
later. During the interim period, the market value of the securities can
fluctuate, and no interest accrues to the purchaser. At the time of delivery,
the value of the securities may be more or less than the purchase or sale price.
When a Fund purchases securities on this basis, there is a risk that the
securities may not be delivered and that the Fund may incur a loss.
COMPARISON OF FEES AND EXPENSES
The following describes and compares the fees and expenses that you may pay if
you buy and hold shares of the Funds. It is expected that combining the Funds
would allow shareholders to realize economies of scale. For further information
on the fees and expenses of Equity Fund, see "More Information Regarding the
Funds," page 20.
OPERATING EXPENSES -- The total fund operating expenses of each class of Total
Return Fund, expressed as a ratio of expenses to average daily net assets
("expense ratio), currently are higher than the expenses of the corresponding
classes of Equity Fund."
o The net expense ratio for the Class A shares of Equity Fund for the year
ended September 30, 2001, was lower by 0.31% than that of the Class A
shares of the Total Return Fund.
o The net expense ratio for the Class B shares of Equity Fund for the year
ended September 30, 2001, was lower by 0.56% than that of the Class B
shares of the Total Return Fund.
o The net expense ratio for the Class C shares of Equity Fund for the year
ended September 30, 2001, was lower by 0.61% than that of the Class C
shares of the Total Return Fund.
o The management fee for the Equity Fund is the same as that of the Total
Return Fund.
o The fee for distribution and shareholder servicing for Class A shares of
Equity Fund is higher by 0.25% than that of the Total Return Fund.
o The fee for distribution and shareholder servicing for Class B and Class C
shares of Equity Fund is the same as that for Total Return Fund.
It is expected that combining the Funds will adjust the operating expense ratio
to a lower level for Total Return Fund and the same level for Equity Fund. With
respect to Class A shares, the operating expense ratio of Total Return Fund is
currently 1.51% and the PRO FORMA expense ratio assuming combination of the
Funds would be 1.20%, or a decrease of 0.31% for Class A shareholders of Total
Return Fund. With respect to Class B shares, the operating expense ratio of
Total Return Fund is currently 2.51% and the PRO FORMA expense ratio assuming
combination of the Funds would be 1.95%, or a decrease of 0.56% for Class B
shareholders of Total Return Fund. With respect to Class C shares, the operating
expense ratio of Total Return Fund is currently 2.56% and the PRO FORMA expense
ratio assuming combination of the Funds would be 1.95%, or a decrease of 0.61%
for Class C shareholders of Total Return Fund. For more information, see
estimated PRO FORMA expenses in the table, "Annual Fund Operating Expenses."
The current expenses of each Fund and estimated PRO FORMA expenses giving effect
to the proposed Reorganization are shown in the table below. Expenses for the
Funds are based on the operating expenses incurred for the year ended September
30, 2001. PRO FORMA fees and expenses show estimated fees and expenses of Equity
Fund after giving effect to the proposed Reorganization. PRO FORMA numbers are
estimated in good faith and are hypothetical.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, shown as a ratio of expenses to
average daily net assets)(1)
- -----------------------------------------------------------------------------------------
DISTRIBUTION
AND
SHAREHOLDER TOTAL
SERVICING FUND
MANAGEMENT (12b-1) OTHER OPERATING
FEES FEES(2) EXPENSES EXPENSES
- -------------------------- ---------------- ---------------- ------------- --------------
CLASS A
- -------------------------- ---------------- ---------------- ------------- --------------
Total Return Fund 0.75% 0.00% 0.76% 1.51%
- -------------------------- ---------------- ---------------- ------------- --------------
Equity Fund 0.75%(3) 0.25%(3) 0.20% 1.20%
- -------------------------- ---------------- ---------------- ------------- --------------
PRO FORMA - Equity
including Total Return 0.75%(3) 0.25%(3) 0.20% 1.20%
- -------------------------- ---------------- ---------------- ------------- --------------
CLASS B
- -------------------------- ---------------- ---------------- ------------- --------------
Total Return Fund 0.75% 1.00% 0.76% 2.51%
- -------------------------- ---------------- ---------------- ------------- --------------
Equity Fund 0.75%(3) 1.00% 0.20% 1.95%
- -------------------------- ---------------- ---------------- ------------- --------------
PRO FORMA - Equity
including Total Return 0.75%(3) 1.00% 0.20% 1.95%
- -------------------------- ---------------- ---------------- ------------- --------------
CLASS C
- -------------------------- ---------------- ---------------- ------------- --------------
Total Return Fund 0.75% 1.00% 0.71% 2.56%
- -------------------------- ---------------- ---------------- ------------- --------------
Equity Fund 0.75%(3) 1.00% 0.20% 1.95%
- -------------------------- ---------------- ---------------- ------------- --------------
PRO FORMA - Equity
including Total Return 0.75%(3) 1.00% 0.20% 1.95%
- ------------------------------------------ ------------------------------ ---------------
1. Expenses are shown for each Fund, and on a pro forma basis, based upon
expenses incurred by each Fund for the 12 months ended September 30, 2001.
2. As a result of distribution (Rule 12b-1) fees, a long term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc. (NASD).
3. The expense information for Equity Fund has been restated to reflect its
new investment advisory fee and new Class A distribution fee, which fees
were effective May 1, 2002.
- --------------------------------------------------------------------------------
EXAMPLE.
This example is intended to help you compare the cost of investing in the Funds
and in the combined Funds on a PRO FORMA basis. The example assumes that you
invest $10,000 in each Fund and in the surviving Fund after the Reorganization
for the time periods indicated. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. The 5% return is an assumption and is not intended to portray past or
future investment results. Based on the above assumptions, you would pay the
following expenses if you redeemed your shares at the end of such period shown;
your actual costs may be higher or lower.
- -------------------------- ------------------------- --------------------------
1 YEAR 3 YEARS
- -------------------------- ------------------------- --------------------------
CLASS CLASS B CLASS CLASS CLASS B CLASS
A C A C
- -------------------------- -------- -------- ------- -------- -------- --------
Total Return Fund 720 754 359 1025 1082 796
- -------------------------- -------- -------- ------- -------- -------- --------
Equity Fund 690 698 298 934 912 612
- -------------------------- -------- -------- ------- -------- -------- --------
PRO FORMA - Equity 690 698 298 934 912 612
including Total Return
- -------------------------- -------- -------- ------- -------- -------- --------
- -------------------------- ------------------------- -------------------------
5 YEARS 10 YEARS
- -------------------------- ------------------------- -------------------------
CLASS CLASS B CLASS CLASS CLASS B CLASS
A C A C
- -------------------------- -------- ------- -------- -------- -------- -------
Total Return Fund 1351 1535 1360 2273 2600 2895
- -------------------------- -------- ------- -------- -------- -------- -------
Equity Fund 1197 1252 1052 1946 2080 2275
- -------------------------- -------- ------- -------- -------- -------- -------
PRO FORMA - Equity 1197 1252 1052 1946 2080 2275
including Total Return
- -------------------------- -------- ------- -------- -------- -------- -------
You would pay the following expenses if you did not redeem your shares:
- -------------------------- ------------------------- --------------------------
1 YEAR 3 YEARS
- -------------------------- ------------------------- --------------------------
CLASS CLASS B CLASS CLASS CLASS B CLASS
A C A C
- -------------------------- -------- -------- ------- -------- -------- --------
Total Return Fund 720 254 259 1025 782 796
- -------------------------- -------- -------- ------- -------- -------- --------
Equity Fund 690 198 198 934 612 612
- -------------------------- -------- -------- ------- -------- -------- --------
PRO FORMA - Equity 690 198 198 934 612 612
including Total Return
- -------------------------- -------- -------- ------- -------- -------- --------
- -------------------------- ------------------------- -------------------------
5 YEARS 10 YEARS
- -------------------------- ------------------------- -------------------------
CLASS CLASS B CLASS CLASS CLASS B CLASS
A C A C
- -------------------------- -------- ------- -------- -------- -------- -------
Total Return Fund 1351 1335 1360 2273 2600 2895
- -------------------------- -------- ------- -------- -------- -------- -------
Equity Fund 1197 1052 1052 1946 2080 2275
- -------------------------- -------- ------- -------- -------- -------- -------
PRO FORMA - Equity 1197 1052 1052 1946 2080 2275
including Total Return
- -------------------------- -------- ------- -------- -------- -------- -------
GENERAL INFORMATION -- Class A, Class B, and Class C shares of Equity Fund
issued to a shareholder in connection with the Reorganization will be subject to
the same contingent deferred sales charge, if any, applicable to the
corresponding shares of Total Return Fund held by that shareholder immediately
prior to the Reorganization.
In addition, the period that the shareholder held shares of Total Return Fund
would be included in the holding period of Equity Fund shares for purposes of
calculating any contingent deferred sales charge. Purchases of shares of Equity
Fund after the Reorganization will be subject to the sales load structure
described in the table below. This is the same sales load structure that is
currently in effect for the Total Return Fund.
- --------------------------------------------------------------------------------------
TRANSACTION FEES ON NEW INVESTMENTS (fees paid directly from your investment)
- --------------------------------------------------- ----------- ----------- ----------
CLASS A CLASS B(1) CLASS C
- --------------------------------------------------- ----------- ----------- ----------
Maximum sales charge (load) imposed on purchases 5.75% None None
(as a percentage of offering price)
- --------------------------------------------------- ----------- ----------- ----------
Maximum deferred sales charge (load) (as a
percentage of the lower of original purchase
price or redemption proceeds) None(2) 5%(3) 1%(4)
- --------------------------------------------------- ----------- ----------- ----------
1. Class B shares convert tax-free to Class A shares automatically after eight
years.
2. Purchases of Class A shares in amounts of $1,000,000 or more are not
subject to an initial sales load; however, a deferred sales charge of 1% is
imposed in the event of redemption within one year of purchase.
3. 5% during the first year, decreasing to 0% in the sixth and following
years.
4. A deferred sales charge of 1% is imposed in the event of redemption within
one year of purchase.
- --------------------------------------------------------------------------------
Neither Fund has any redemption fees, exchange fees or sales charges on
reinvested dividends.
ADDITIONAL INFORMATION ABOUT EQUITY FUND
INVESTMENT MANAGER -- Security Management, Equity Fund's investment manager, is
a Kansas limited liability company. On December 31, 2001, the aggregate assets
of all of the mutual funds under the investment management of Security
Management were approximately $7.9 billion. Security Management has overall
responsibility for the management of the Funds. Security Equity Fund and
Security Management have entered into an agreement that requires Security
Management to provide investment advisory, statistical and research services to
the Equity Fund, supervise and arrange for the purchase and sale of securities
on behalf of the Fund, and provide for the maintenance and compilation of
records pertaining to the investment advisory function. The agreement with
Security Management can be canceled by the Board of Directors of Security Equity
Fund upon 60 days' written notice. Investment management fees are computed and
accrued daily and paid monthly.
INVESTMENT PERSONNEL -- The following individual has responsibility for the
day-to-day management of Equity Fund:
o TERRY A. MILBERGER, Senior Portfolio Manager of Security Management, has
been the manager of Equity Fund since 1981and of Total Return Fund since
May 1999. He has more than 25 years of investment experience. He began his
career as an investment analyst in the insurance industry, and from 1974
through 1978, he served as an assistant portfolio manager for Security
Management. He was then employed as Vice President of Texas Commerce Bank
and managed its pension assets until he returned to Security Management in
1981. Mr. Milberger holds a bachelor's degree in business and a M.B.A. from
the University of Kansas and is a Chartered Financial Analyst
charterholder.
PERFORMANCE OF EQUITY FUND -- The bar chart and table shown below provide an
indication of the risks of investing in the Equity Fund by showing (on a
calendar year basis) changes in the Equity Fund's annual total return from year
to year and by showing (on a calendar year basis) how Equity Fund's average
annual returns for one year, five years and ten years compare to those of a
broad-based securities market index--the S&P 500 Index. The information in the
bar chart and table reflects the Fund's performance. The information in the bar
chart is based on the performance of the Class A shares of Equity Fund, although
the bar chart does not reflect the deduction of the sales load on Class A
shares. If the bar chart included the sales load, returns would be less than
those shown. The Fund's past performance is not an indication of how the Fund
will perform in the future.
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
10.7% 14.6% -2.5% 38.4% 22.7% 29.6% 26.5% 11.0% -12.5% -11.9%
*During the period shown in the chart, the Fund's best quarterly performance was
20.90% for the quarter ended December 31, 1998, and the Fund's worst quarterly
performance was -14.97% for the quarter ended September 30, 2001.
The table below shows the average annual total returns of Equity Fund if you
average out actual performance over various lengths of time, compared to the S&P
500 Index. An index has an inherent performance advantage over the Equity Fund
since it has no cash in its portfolio, imposes no sales charges and incurs no
operating expenses. An investor cannot invest directly in an index. The Equity
Fund's performance reflected in the table assumes the deduction of the maximum
sales charge in all cases.
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (through December 31, 2001)
- ------------------------------------------------------------------------------
- -------------------------- ---------------- ----------------- ----------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- -------------------------- ---------------- ----------------- ----------------
Class A -16.92% 5.74% 10.74%
- -------------------------- ---------------- ----------------- ----------------
Class B -17.13% 5.59% 9.94%(1)
- -------------------------- ---------------- ----------------- ----------------
Class C -13.41% -6.60%(2) N/A
- -------------------------- ---------------- ----------------- ----------------
S&P 500 Index -11.88% 10.70%(3) 12.93%(3)
- -------------------------- ---------------- ----------------- ----------------
- ------------------------------------------------------------------------------
1. For the period beginning October 19, 1993 (date of inception) to December
31, 2001.
2. For the period beginning January 29, 1999 (date of inception) to December
31, 2001.
3. Index performance information is only available to the Fund at the
beginning of each month. The performance for the S&P 500 for the period
October 1, 1993 to December 31, 2001 was 13.84% and for the period January
1, 1999 to December 31, 2001 was -1.03%.
- --------------------------------------------------------------------------------
The table below shows the non-standardized performance of Equity Fund, which
does not reflect deduction of sales charges. If sales charges were reflected,
the performance figures would be lower than those shown. The Fund's past
performance is not an indication of how the Fund will perform in the future.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS for the periods ended December 31, 2001
- ------------------------ ------------- ------------- ------------- -------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
- ------------------------ ------------- ------------- ------------- -------------
Equity, Class A -11.85% 7.00% 11.41% ---
- ------------------------ ------------- ------------- ------------- -------------
Equity, Class B -12.77% 3.91% --- 9.94%(1)
- ------------------------ ------------- ------------- ------------- -------------
Equity, Class C -12.53% --- --- -6.60%(2)
- ------------------------ ------------- ------------- ------------- -------------
1. Since October 19, 1993 (inception date of Class B shares) to December 31,
2001.
2. Since January 29, 1999 (inception date of Class C shares) to December 31,
2001.
- --------------------------------------------------------------------------------
Additional information about Equity Fund is included in the section, "More
Information Regarding the Funds," page 20.
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION PLAN -- The Reorganization Plan provides for the transfer of
all of the assets and liabilities of Total Return Fund to Equity Fund solely in
exchange for Class A, B, and C shares of Equity Fund. Total Return Fund will
distribute the shares of Equity Fund received in the exchange to its
shareholders, and then Total Return Fund will be liquidated.
After the Reorganization, each shareholder of Total Return Fund will own shares
in Equity Fund having an aggregate value equal to the aggregate value of each
respective class of shares of Total Return Fund held by that shareholder as of
the close of business on the business day preceding the Closing. Shareholders of
Class A, B, and C shares of Total Return Fund will receive shares of the
corresponding class of Equity Fund. In the interest of economy and convenience,
shares of Equity Fund generally will not be represented by physical
certificates.
Until the Closing, shareholders of Total Return Fund will continue to be able to
redeem their shares. Redemption requests received after the Closing will be
treated as requests received by the Equity Fund for the redemption of its shares
received by the shareholder in the Reorganization.
The obligations of the Funds under the Reorganization Plan are subject to
various conditions, including approval of the shareholders of the Total Return
Fund. The Reorganization Plan also requires that the Funds take, or cause to be
taken, all actions, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Reorganization Plan. The Reorganization Plan may be
terminated by mutual agreement of the parties or on certain other grounds. For a
complete description of the terms and conditions of the Reorganization, see the
Reorganization Plan at Appendix A.
REASONS FOR THE REORGANIZATION -- The Funds have similar investment objectives,
strategies and risks, and Total Return Fund is relatively small in asset size.
Because the Total Return Fund may invest in substantially the same types of
securities as Equity Fund, the Funds are duplicative in the same group of funds.
In addition, the reorganization would create a larger Fund, which should benefit
shareholders of the Funds by spreading costs across a larger, combined asset
base. Also, a larger fund offers the benefit of a more diversified portfolio of
securities and may improve trading efficiency. Based upon these considerations,
the Board of Directors of Security Equity Fund determined that the Funds should
be reorganized.
The proposed Reorganization was presented to the Board of Directors of Security
Equity Fund for consideration and approval at a meeting held May 3, 2002. For
the reasons discussed below, the Directors, including all of the Directors who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of Security Equity Fund, determined that the interests of the shareholders of
the respective Funds would not be diluted as a result of the proposed
Reorganization, and that the proposed Reorganization was in the best interests
of each of the Funds and its shareholders.
The Reorganization would allow shareholders of Total Return Fund to continue to
participate in a professionally-managed portfolio which invests primarily in
equity securities of U.S. companies. As Class A, B, and C shareholders of Equity
Fund, these shareholders would continue to be able to exchange into other mutual
funds in the larger Security Group of Mutual Funds that offer the same class of
shares in which such shareholder is currently invested. A list of the current
Security Group of Mutual Funds, and their available classes, is attached as
Appendix B.
BOARD CONSIDERATION -- The Board of Directors of Security Equity Fund, in
recommending the proposed transaction, considered a number of factors, including
the following:
1. expense ratios and information regarding fees and expenses of Total Return
Fund and Equity Fund;
2. estimates that show that combining the Funds should result in lower expense
ratios because of economies of scale;
3. elimination of duplication of costs and inefficiencies of having two
similar funds;
4. the Reorganization would not dilute the interests of the Funds' current
shareholders;
5. the relative investment performance and risks of Equity Fund as compared to
Total Return Fund;
6. the similarity of Equity Fund's investment objectives, policies and
restrictions to those of Total Return Fund and the fact that the Funds are
duplicative within the overall group of funds;
7. the tax-free nature of the Reorganization to Total Return Fund and its
shareholders.
THE BOARD OF DIRECTORS OF SECURITY EQUITY FUND RECOMMENDS THAT SHAREHOLDERS OF
THE TOTAL RETURN FUND APPROVE THE REORGANIZATION.
TAX CONSIDERATIONS -- The Reorganization is intended to qualify for Federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, pursuant to
this treatment, neither the Total Return Fund, nor its respective shareholders,
nor the Equity Fund is expected to recognize any gain or loss for federal income
tax purposes from the transactions contemplated by the Reorganization Plan. As a
condition to the closing of the Reorganization, the Funds will receive an
opinion from the law firm of Dechert to the effect that the Reorganization will
qualify as a tax-free reorganization for Federal income tax purposes. That
opinion will be based in part upon certain assumptions and upon certain
representations made by the Funds.
Immediately prior to the Reorganization, the Total Return Fund will pay a
dividend or dividends which, together with all previous dividends, will have the
effect of distributing to their respective shareholders all of the Total Return
Fund's investment company taxable income for taxable years ending on or prior to
the Reorganization (computed without regard to any deduction for dividends paid)
and all of its net capital gains, if any, realized in taxable years ending on or
prior to the Reorganization (after reduction for any available capital loss
carryforward). Such dividends will be included in the taxable income of the
Total Return Fund's shareholders.
As of September 30, 2001, Total Return Fund had accumulated capital loss
carryforwards in the amount of approximately $40,498. After the Reorganization,
these losses will be available to Equity Fund to offset its capital gains,
although the amount of these losses which may offset Equity Fund's capital gains
in any given year may be limited. As a result of this limitation, it is possible
that Equity Fund may not be able to use these losses as rapidly as Total Return
Fund might have, and part of these losses may not be useable at all. The ability
of Equity Fund to absorb losses in the future depends upon a variety of factors
that cannot be known in advance, including the existence of capital gains
against which these losses may be offset. In addition, the benefits of any
capital loss carryforwards currently are available only to shareholders of Total
Return Fund. After the Reorganization, however, these benefits will inure to the
benefit of all shareholders of Equity Fund.
EXPENSES OF THE REORGANIZATION -- Security Management will bear one-third, and
the Funds will bear two-thirds, of the expenses relating the Reorganization,
including but not limited to the costs of the proxy solicitation. The Funds'
share of the expenses will be allocated ratably on the basis of their relative
net asset values immediately before Closing.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FORM OF ORGANIZATION -- Each of the Funds is a series of Security Equity Fund, a
Kansas corporation. Security Equity Fund is governed by a Board of Directors,
which consists of six directors.
DIVIDENDS AND OTHER DISTRIBUTIONS -- Each Fund pays dividends from net
investment income, and distributes net capital gains, if any, at least annually.
Dividends and distributions of each Fund are automatically reinvested in
additional shares of the respective class of that Fund, unless the shareholder
elects to receive distributions in cash.
If the Reorganization Plan is approved by shareholders of Total Return Fund,
then as soon as practicable before the Closing, Total Return Fund will pay its
shareholders a cash distribution of all undistributed 2002 net investment income
and undistributed realized net capital gains.
CAPITALIZATION -- The following table shows on an unaudited basis the
capitalization of each Fund as of September 30, 2001 and on a PRO FORMA basis as
of September 30, 2001, giving effect to the Reorganization:
- ----------------------- -------------------- -------------------- -----------------
NET NET ASSET SHARES
ASSETS VALUE PER SHARE OUTSTANDING
- ----------------------- -------------------- -------------------- -----------------
EQUITY FUND
- ----------------------- -------------------- -------------------- -----------------
Class A $563,553,120 $6.36 88,597,232
- ----------------------- -------------------- -------------------- -----------------
Class B 96,066,781 5.86 16,407,703
- ----------------------- -------------------- -------------------- -----------------
Class C 4,230,396 6.16 686,429
- ----------------------- -------------------- -------------------- -----------------
TOTAL RETURN FUND
- ----------------------- -------------------- -------------------- -----------------
Class A 2,797,290 8.07 346,616
- ----------------------- -------------------- -------------------- -----------------
Class B 2,518,893 7.81 322,742
- ----------------------- -------------------- -------------------- -----------------
Class C 157,250 7.83 20,077
- ----------------------- -------------------- -------------------- -----------------
PRO FORMA -
EQUITY INCLUDING
TOTAL RETURN
- ----------------------- -------------------- -------------------- -----------------
Class A 564,972,843 6.36 88,820,459
- ----------------------- -------------------- -------------------- -----------------
Class B 97,290,518 5.86 16,616,826
- ----------------------- -------------------- -------------------- -----------------
Class C 4,387,599 6.16 711,949
- ----------------------- -------------------- -------------------- -----------------
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES -- Proxies are being solicited at the request of the
Board of Directors of Security Equity Fund. Solicitation of proxies is being
made primarily by the mailing of this Notice and Proxy Statement with its
enclosures on or about _______, 2002. Shareholders of Total Return Fund whose
shares are held by nominees, such as brokers, can vote their proxies by
contacting their respective nominee. In addition to the solicitation of proxies
by mail, employees of Security Management and its affiliates, without additional
compensation, may solicit proxies in person or by telephone, telegraph,
facsimile, or oral communication.
A shareholder may revoke the accompanying proxy at any time prior to its use by
filing with Total Return Fund a written revocation or duly executed proxy
bearing a later date. In addition, any shareholder who attends the meeting of
Total Return Fund shareholders in person may vote by ballot at the Meeting,
thereby canceling any proxy previously given. The cost of soliciting proxies
will be borne by Security Management, two-thirds of which cost will be
reimbursed by the Funds. The persons named in the accompanying proxy will vote
as directed by the proxy, but in the absence of voting directions in any proxy
that is signed and returned, they intend to vote "FOR" the Reorganization
proposal and may vote in their discretion with respect to other matters not now
known to the Board of Directors of Security Equity Fund that may be presented at
the meeting.
VOTING RIGHTS -- Shares of the Funds entitle their holders to one vote per share
as to any matter on which the holder is entitled to vote, and each fractional
share shall be entitled to a proportionate fractional vote. Shares have
cumulative voting rights and no preemptive or subscription rights.
Shareholders of the Total Return Fund at the close of business on June 24, 2002
(the "Record Date") will be entitled to be present and give voting instructions
for the Fund at the meeting with respect to their shares owned as of that Record
Date. As of the Record Date, __________ shares of the Total Return Fund were
outstanding and entitled to vote. Approval of the Reorganization with respect to
Total Return Fund requires the affirmative vote of a majority of the outstanding
shares of the Fund.
Total Return Fund must have a quorum to conduct its business at the meeting. The
holders of a MAJORITY of outstanding shares present in person or by proxy shall
constitute a quorum. In the absence of a quorum, a majority of outstanding
shares of the Fund entitled to vote, in person or by proxy, may adjourn the
meeting from time to time until a quorum shall be present.
If a shareholder abstains from voting as to any matter, or if a broker returns a
"non-vote" proxy, indicating a lack of authority to vote on a matter, the shares
represented by the abstention or non-vote will be deemed present at the meeting
for purposes of determining a quorum. However, abstentions and broker non-votes
will not be deemed represented at the meeting for purposes of calculating the
vote on any matter. As a result, an abstention or broker non-vote will have the
same effect as a vote against the Reorganization. Prior to the meeting, the Fund
expects that broker-dealer firms holding their shares of the Fund in "street
name" for their customers will request voting instructions from their customers
and beneficial owners.
To the knowledge of Security Equity Fund, as of June 24, 2002, no Director of
Security Equity Fund owns 1% or more of the outstanding shares of the Total
Return Fund, and the officers and Directors of Security Equity Fund own, as a
group, less than 1% of the shares of Total Return Fund.
Appendix C hereto lists the persons that, as of June 24, 2002, owned
beneficially or of record 5% or more of the outstanding shares of Total Return
Fund.
OTHER MATTERS TO COME BEFORE THE MEETING -- The Fund does not know of any
matters to be presented at the Meeting other than those described in this Proxy
Statement/Prospectus. If other business should properly come before the Meeting,
the proxy holders will vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS -- The Funds are not required to hold regular annual
meetings and, in order to minimize their costs, do not intend to hold meetings
of shareholders unless so required by applicable law, regulation, regulatory
policy or if otherwise deemed advisable by the Funds' management. Therefore it
is not practicable to specify a date by which shareholder proposals must be
received in order to be incorporated in an upcoming proxy statement for an
annual meeting or to be submitted to shareholders of the Funds.
INFORMATION ABOUT THE FUNDS -- Proxy materials, reports and other information
filed by the Funds can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, NW, Washington, DC 20549.
The SEC maintains an Internet World Wide Web site (at http://www.sec.gov) which
contains other information about the Funds.
REPORTS TO SHAREHOLDERS -- Security Management will furnish, without charge, a
copy of the most recent Annual Report regarding the Funds upon request. Requests
for such reports should be directed to Security Management at One Security
Benefit Place, Topeka, KS 66636 or at (800) 888-2461.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED, PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Amy J. Lee, Secretary
_______, 2002
One Security Benefit Place
Topeka, KS 66636
MORE INFORMATION REGARDING THE FUNDS
SHAREHOLDER GUIDE
PURCHASE OPTIONS -- This Proxy Statement/Prospectus relates to the separate
classes of Equity Fund: Class A, B, and C, each of which represents an identical
interest in the Fund's investment portfolio, but is offered with different sales
charges and distribution fee (Rule 12b-1) arrangements. As described below and
elsewhere in this Proxy Statement/Prospectus, the contingent deferred sales load
structure and conversion characteristics of the Equity Fund shares issued to you
in the Reorganization will be the same as those that applied to the Total Return
Fund shares held by you immediately prior to the Reorganization, and the period
that you held the Total Return Fund shares will be included in the holding
period of the Equity Fund shares for purposes of calculating contingent deferred
sales charges and determining conversion rights. Purchases of the shares of
Equity Fund after the Reorganization will be subject to the sales load structure
and conversion rights discussed below.
The sales charges and fees for Class A, B, and C shares are shown and contrasted
in the chart below.
- ---------------------------------- -------------- ------------- -------------
CLASS A CLASS B(1) CLASS C
- ---------------------------------- -------------- ------------- -------------
Maximum Initial Sales
Charge on Purchases 5.75% None None
- ---------------------------------- -------------- ------------- -------------
Contingent Deferred
Sales Charge ("CDSC") None(2) 5%(3) 1%(4)
- ---------------------------------- -------------- ------------- -------------
Annual Distribution (12b-1)
Fee and Service Fee 0.25% 1.00% 1.00%
- ---------------------------------- -------------- ------------- -------------
Automatic Conversion
to Class A N/A 8 years(5) N/A
- ---------------------------------- -------------- ------------- -------------
- -----------------------------------------------------------------------------
1. Class B shares convert tax-free to Class A shares automatically after eight
years.
2. Purchases of Class A shares in amounts of $1,000,000 or more are not
subject to an initial sales load; however, a deferred sales charge of 1% is
imposed in the event of redemption within one year of purchase.
3. 5% during the first year, decreasing to 0% in the sixth and following
years.
4. A deferred sales charge of 1% is imposed in the event of redemption within
one year of purchase.
5. Class B shares of the Equity Fund issued to shareholders of the Total
Return Fund in the Reorganization will convert to Class A shares in the
eighth year from the original date of purchase of the Class B shares of the
Total Return Fund.
- --------------------------------------------------------------------------------
The relative impact of the initial sales charges and ongoing annual expenses
will depend on the length of time a share is held.
CLASS A SHARES.
INITIAL SALES CHARGE ALTERNATIVE. Class A shares of the Funds are sold at the
net asset value ("NAV") per share in effect plus a sales charge as described in
the following table. For waivers or reductions of the Class A shares sales
charges, see "Special Purchases without a Sales Charge" and "Reduced Sales
Charges."
- ----------------------- ------------------ ----------------- -----------------------
DEALERS'
REALLOWANCE
AS A % OF AS A % AS A %
YOUR INVESTMENT OFFERING PRICE OF NAV OF OFFERING PRICE
- ----------------------- ------------------ ----------------- -----------------------
Less than $50,000 5.75% 6.10% 5.00%
- ----------------------- ------------------ ----------------- -----------------------
$50,000 - $99,999 4.75% 4.99% 4.00%
- ----------------------- ------------------ ----------------- -----------------------
$100,000 - $249,999 3.75% 3.90% 3.00%
- ----------------------- ------------------ ----------------- -----------------------
$250,000 - $499,999 2.75% 2.04% 2.25%
- ----------------------- ------------------ ----------------- -----------------------
$500,000 but less
than $1,000,000 2.00% 2.04% 1.75%
- ----------------------- ------------------ ----------------- -----------------------
$1,000,000 or more None None (See below)
- ----------------------- ------------------ ----------------- -----------------------
There is no initial sales charge on purchases of $1,000,000 or more. However,
the Funds' Distributor will pay Authorized Dealers of record commissions as
follows: 1.00% on purchases of $1,000,000 up to $5,000,000, plus 0.50% on
amounts above $5,000,000 up to $10,000,000, plus 0.10% for any amount above
$10,000,000. If shares are redeemed within one year of purchase, a CDSC of 1.00%
will be imposed. Class A shares of the Funds are subject to a distribution
(12b-1) fee at an annual rate of 0.25% of the average daily net assets of the
Class. The Distributor uses the fee to pay for activities related to the sale of
Class A shares and services provided to shareholders.
REDUCED SALES CHARGES. An investor may immediately qualify for a reduced sales
charge on a purchase of Class A shares of the Funds or other funds in the
Security Group of Mutual Funds which offer Class A shares, by completing a
Statement of Intention to purchase Fund shares. Executing the Statement of
Intention expresses an intention to invest during the next 13 months (or 36
months for purchases of $1,000,000 or more) a specified amount, which, if made
at one time, would qualify for a reduced sales charge. An amount equal to five
percent of the amount specified in the Statement of Intention will be restricted
within your account to cover additional sales charges that may be due if your
actual total investment fails to qualify for the reduced sales charges. See the
Statement of Additional Information for the Funds for details on the Statement
of Intention option or contact Security Management at (800) 888-2461 for more
information.
A sales charge may also be reduced by taking into account your previous
purchases of Class A shares of the Funds or any other funds in the Security
Group of Mutual Funds (excluding Security Cash Fund) ("Rights of Accumulation").
The reduced sales charges apply to quantity purchases made at one time or on a
cumulative basis over any period of time. See the Statement of Additional
Information for the Funds for details or contact Security Management at (800)
888-2461 for more information.
SPECIAL PURCHASE WITHOUT A SALES CHARGE. Class A shares may be purchased at NAV
without a sales charge by certain individuals and institutions. For additional
information, contact Security Management at (800) 888-2461, or see the Funds'
Statement of Additional Information.
CLASS B SHARES.
DEFERRED SALES CHARGE ALTERNATIVE. Class B shares may be purchased at their NAV
per share without an initial sales charge at the time of purchase. Class B
shares that are redeemed within five years of purchase, however, will be subject
to a CDSC as described in the table that follows. Class B shares of the Funds
are subject to a distribution (12b-1) fee at an annual rate of 1.00% of the
average daily net assets of the Class, which is higher than the distribution
fees of Class A shares. The higher distribution (12b-1) fees mean a higher
expense ratio, so Class B shares pay correspondingly lower dividends and may
have a lower NAV than Class A shares. In connection with sales of Class B
shares, the Distributor compensates Authorized Dealers at a rate of 4% of
purchase payments subject to a CDSC. The amount of the CDSC is determined as a
percentage of the lesser of the NAV of the Class B shares at the time of
original purchase or redemption. No charge will be imposed for any net increase
in the value of shares purchased during the preceding six years in excess of the
purchase price of such shares or for shares acquired either by reinvestment of
net investment income dividends or capital gain distributions. The percentage
used to calculate the CDSC will depend on the number of years since you invested
the dollar amount being redeemed according to the following table:
- --------------------------------------------- ----------
YEAR OF REDEMPTION AFTER PURCHASE CDSC
- --------------------------------------------- ----------
First 5%
- --------------------------------------------- ----------
Second 4%
- --------------------------------------------- ----------
Third 3%
- --------------------------------------------- ----------
Fourth 3%
- --------------------------------------------- ----------
Fifth 2%
- --------------------------------------------- ----------
Sixth and following 0%
- --------------------------------------------- ----------
Class B shares will automatically convert into Class A shares eight years after
purchase, except that Class B shares of the Equity Fund issued in connection
with the Reorganization with respect to Class B shares of the Total Return Fund
will convert to Class A shares eight years after the purchase of the original
shares of the Total Return Fund, as applicable. For additional information on
the CDSC and the conversion of Class B shares, see the Funds' Statement of
Additional Information.
CLASS C SHARES.
LOW LOAD ALTERNATIVE. Class C shares are offered at net asset value, without an
initial sales charge. With certain exceptions, the Funds may impose a deferred
sales charge on shares redeemed within one year of the date of purchase. No
deferred sales charge is imposed on amounts redeemed thereafter. If imposed, the
deferred sales charge is deducted from the redemption proceeds otherwise
payable. The deferred sales charge is retained by the Distributor.
Each Fund bears some of the costs of selling its Class C shares under a
Distribution Plan adopted with respect to its Class C shares ("Class C
Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act. This Plan
provides for payments at an annual rate of 1.00% of the average daily net asset
value of Class C shares. Amounts paid by the Fund are currently used to pay
dealers and other firms that make Class C shares available to their customers
(1) a commission at the time of purchase normally equal to .75% of the value of
each share sold, and for each year thereafter, quarterly, in an amount equal to
...75% annually of the average daily net asset value of Class C shares sold by
such dealers and other firms and remaining outstanding on the books of the Fund
and (2) a service fee payable for the first year initially, and for each year
thereafter, quarterly, in an amount equal to .25% annually of the average daily
net asset value of Class C shares sold by such dealers and other firms and
remaining outstanding on the books of the Fund. The service fee may also be used
to pay for sub-administration and/or sub-transfer agency services provided for
the benefit of the Fund.
WAIVERS OF CDSC. The CDSC on Class A and Class B shares will be waived in the
following cases. In determining whether a CDSC is applicable, it will be assumed
that shares held in the shareholder's account that are not subject to such
charge are redeemed first.
o Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
o Upon the disability of the shareholder prior to age 65 if shares are
redeemed within one year of the shareholder becoming disabled and the
shareholder was not disabled when the shares were purchased
o In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal
Revenue Code
o In connection with distributions from retirement plans qualified under
Section 401(a) or 401(k) of the Internal Revenue Code for:
>> returns of excess contributions to the plan
>> retirement of a participant in the plan
>> a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
o Upon the financial hardship (as defined in regulations under the Code) of a
participant in a plan
o Upon termination of employment of a participant in a plan
o Upon any other permissible withdrawal under the terms of the plan.
If you think you may be eligible for a CDSC waiver, contact Security Management
at (800) 888-2461.
REINSTATEMENT PRIVILEGE. Class A shareholders who have redeemed their shares in
any fund in the Security Group of Mutual Funds may reinvest some or all of the
proceeds in the same share class within 30 days without a sales charge. See the
Statement of Additional Information for the Funds for details or contact
Security Management at (800) 888-2461.
RULE 12B-1 PLAN. Each Fund has a Class B and Class C distribution plan, and
Equity Fund has a Class A distribution plan, pursuant to Rule 12b-1 under the
1940 Act ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plans, the Distributor may
receive from each Fund an annual fee in connection with the offering, sale and
shareholder servicing of the Fund's Class A, Class B and Class C shares.
OTHER EXPENSES. In addition to the management fee and other fees described
previously, each Fund pays other expenses, such as legal, audit, transfer agency
and custodian fees, proxy solicitation costs, and the compensation of Directors
who are not affiliated with Security Management. Most Fund expenses are
allocated proportionately among all of the outstanding shares of the Fund.
However, the Rule 12b-1 Plan fees for each class of shares are charged
proportionately only to the outstanding shares of that class.
PURCHASING SHARES -- The minimum initial investment in the Funds is $100.
Subsequent investments must be $100 (or $20 under an Accumulation Plan). The
Funds and the Distributor reserve the right to reject any order to purchase
shares. Purchase and sale requests are executed at the NAV next determined after
the order is received in proper form by the Transfer Agent or the Distributor
plus any applicable sales charge.
PRICE OF SHARES. When you buy shares, you pay the NAV plus any applicable sales
charge. When you sell shares, you receive the NAV minus any applicable CDSC.
Exchange orders are effected at NAV.
RETIREMENT PLANS. The Funds have available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Funds' Statement of Additional Information. For further information,
contact Security Management at (800) 888-2461.
DETERMINATION OF NET ASSET VALUE. The NAV per share of each Fund is computed as
of the close of regular trading hours on the New York Stock Exchange (normally 3
p.m. Central time) on days when the Exchange is open. The Exchange is open
Monday through Friday, except on observation of the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each Fund's NAV is generally based upon the market value of securities held in
the Fund's portfolio. If market prices are not available, the fair value of
securities is determined using procedures approved by the Fund's Board of
Directors. In addition, if between the time trading ends on a particular
security and the close of trading on the New York Stock Exchange, events occur
that materially affect the value of the security, the Funds may value the
security at its fair value as determined in good faith by Security Management
under procedures approved by the Board of Directors. In such a case, the Fund's
net asset value will be subject to the judgment of Security Management rather
than being determined by the market.
EXCHANGE PRIVILEGES AND RESTRICTIONS. Shareholders who own shares of the Funds
may exchange those shares for shares of another of the funds in the Security
Group of Mutual Funds, including Security Social Awareness, Diversified Income,
Municipal Bond and High Yield Funds.
Shareholders who hold their shares in a tax-qualified retirement plan may
exchange shares of the Funds for shares of Security Capital Preservation Fund,
but may not exchange into Security Municipal Bond Fund. Shareholders also may
exchange their shares of the Funds for shares of Security Cash Fund, provided
that exchanges to Security Cash Fund are not available to shareholders who have
purchased through the following custodial accounts of the Investment Manager:
403(b)(7) accounts, SEPP accounts and SIMPLE plans. All exchanges are made at
the relative net asset values of the Funds on the date of the exchange.
Exchanges may be made only in those states where shares of the fund into which
an exchange is to be made are qualified for sale. No service fee or sales charge
is presently imposed on such an exchange. Shares of a particular class of a Fund
may be exchanged only for shares of the same class of another available fund or
for Class A shares of Security Cash Fund, if available. At present, Municipal
Bond Fund does not offer Class C shares. Any applicable CDSC will be imposed
upon redemption and calculated from the date of the initial purchase without
regard to the time shares were held in Cash Fund.
For tax purposes, an exchange is a sale of shares which may result in a taxable
gain or loss. Special rules may apply to determine the amount of gain or loss on
an exchange occurring within ninety days after purchase of the exchanged shares.
To exchange shares by telephone, a shareholder must hold shares in
non-certificate form and must either have completed the Telephone Exchange
section of the application or a Telephone Transfer Authorization form which may
be obtained from Security Management. Once authorization has been received by
Security Management, a shareholder may exchange shares by telephone by calling
the Funds at 1-800-888-2461, extension 3127, on weekdays (except holidays)
between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange requests
received by telephone after the close of the New York Stock Exchange (normally
3:00 p.m. Central time) will be treated as if received on the next business day.
The exchange privilege, including telephone exchanges, may be changed or
discontinued at any time by either Security Management or the Fund upon 60 days'
notice to shareholders.
SELLING SHARES -- Shares of the Funds will be redeemed at the NAV (less any
applicable CDSC and/or federal income tax withholding) next determined after
receipt of a redemption request in good form on any day the New York Stock
Exchange is open for business. Any share certificates representing fund shares
sold must be returned with a request to sell the shares.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who wish to receive regular monthly,
bi-monthly, quarterly, semiannual, or annual payments of $25 or more may
establish a Systematic Withdrawal Program. A shareholder may elect a payment
that is a specified percentage of the initial or current account value or a
specified dollar amount. A Systematic Withdrawal Program will be allowed only if
shares with a current aggregate net asset value of $5,000 or more are deposited
with the Security Management, which will act as agent for the shareholder under
the Program. Shares are liquidated at net asset value. The Program may be
terminated on written notice, or it will terminate automatically if all shares
are liquidated or redeemed from the account.
A shareholder may establish a Systematic Withdrawal Program with respect to
Class B or Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10% of the
value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10% of the
value of the account in any Program year and, as a result, all withdrawals under
such a Program would be subject to any applicable contingent deferred sales
charge. Free Systematic Withdrawals will be made first by redeeming those shares
that are not subject to the contingent deferred sales charge and then by
redeeming shares held the longest. The contingent deferred sales charge
applicable to a redemption of Class B or Class C shares requested while Free
Systematic Withdrawals are being made will be calculated as described under
"Class B Shares" or "Class C Shares," as applicable. A Systematic Withdrawal
form may be obtained from the Funds.
PAYMENTS. Payments may be made by check. Redemption proceeds will be sent to the
shareholder(s) of record at the address of record within seven days after
receipt of a valid redemption request. For a charge of $15 deducted from
redemption proceeds, Security Management will provide a certified or cashier's
check, or send the redemption proceeds by express mail, upon the shareholder's
request.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER -- Security Management, each Fund's investment manager, is a
Kansas limited liability company. On December 31, 2001, the aggregate assets of
all of the mutual funds under the investment management of Security Management
were approximately $7.9 billion. Security Management has overall responsibility
for the management of the Funds. Security Equity Fund and Security Management
have entered into an agreement that requires Security Management to provide
investment advisory, statistical and research services to the Funds, supervise
and arrange for the purchase and sale of securities on behalf of the Funds, and
provide for the maintenance and compilation of records pertaining to the
investment advisory function. The agreement with Security Management can be
canceled by the Board of Directors of Security Equity Fund upon 60 days' written
notice. Investment management fees are computed and accrued daily and paid
monthly. For the year ended September 30, 2001, Equity Fund paid investment
management fees of $8,523,319 to Security Management.
PARENT COMPANY AND DISTRIBUTOR -- Security Management is controlled by its
members, Security Benefit Life Insurance Company and Security Benefit Group,
Inc. ("SBG"). SBG is an insurance and financial services holding company
wholly-owned by Security Benefit Life Insurance Company, One Security Benefit
Place, Topeka, Kansas 66636. Security Benefit Life, a life insurance company, is
incorporated under the laws of Kansas. Security Management is a direct, and the
Distributor, the Fund's principal underwriter, is an indirect, wholly-owned
subsidiary of Security Benefit Life Insurance Company ("Security Benefit").
ADMINISTRATIVE AGENT -- Security Management also acts as the administrative
agent for the Fund and as such performs administrative functions and the
bookkeeping, accounting and pricing functions for the Funds. For these services
Security Management receives, on an annual basis, a fee of 0.09% of the average
net assets of each Fund, calculated daily and payable monthly.
Security Management also acts as the transfer agent for the Funds. As such,
Security Management performs all shareholder servicing functions, including
transferring record ownership, processing purchase and redemption transactions,
answering inquiries, mailing shareholder communications and acting as the
dividend disbursing agent. For these services, the Investment Manager receives
an annual maintenance fee of $8.00 per account, a fee of $1.00 per shareholder
transaction, and a fee of $1.00 per dividend transaction.
PORTFOLIO TRANSACTIONS -- Security Management will place orders to execute
securities transactions that are designed to implement each Fund's investment
objectives and policies. Security Management uses its reasonable efforts to
place all purchase and sale transactions with brokers and dealers ("brokers")
that provide "best execution" of these orders. In placing purchase and sale
transactions, Security Management may consider brokerage and research services
provided by a broker to Security Management or its affiliates, and the Fund may
pay a commission for effecting a securities transaction that is in excess of the
amount another broker would have charged if Security Management determines in
good faith that the amount of commission is reasonable in relation to the value
of the brokerage and research services provided by the broker viewed in terms of
either that particular transaction or the overall responsibilities of Security
Management with respect to all accounts as to which it exercises investment
discretion. Security Management may use all, none, or some of such information
and services in providing investment advisory services to each of the mutual
funds under its management, including each Fund. In addition, Security
Management also may consider a broker's sale of Fund shares if Security
Management is satisfied that the Fund would receive best execution of the
transaction from that broker.
Securities held by the Funds may also be held by other investment advisory
clients of Security Management, including other investment companies. In
addition, Security Management's parent company, Security Benefit, may also hold
some of the same securities as the Funds. When selecting securities for purchase
or sale for a Fund, Security Management may at the same time be purchasing or
selling the same securities for one or more of such other accounts. Subject to
Security Management's obligation to seek best execution, such purchases or sales
may be executed simultaneously or "bunched." It is the policy of Security
Management not to favor one account over the other. Any purchase or sale orders
executed simultaneously (which may also include orders from Security Benefit)
are allocated at the average price and as nearly as practicable on a pro rata
basis (transaction costs will also generally be shared on a pro rata basis) in
proportion to the amounts desired to be purchased or sold by each account. In
those instances where it is not practical to allocate purchase or sale orders on
a pro rata basis, then the allocation will be made on a rotating or other
equitable basis. While it is conceivable that in certain instances this
procedure could adversely affect the price or number of shares involved in a
Fund's transaction, it is believed that the procedure generally contributes to
better overall execution of the Funds' portfolio transactions.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS -- Each Fund pays its shareholders dividends from
its net investment income, and distributes any net capital gains that it has
realized, at least annually. Your dividends and distributions will be reinvested
in shares of the Fund, unless you instruct Security Management otherwise. There
are no fees or sales charges on reinvestments.
FEDERAL TAXES -- Fund dividends and distributions are taxable to shareholders
(unless your investment is in an Individual Retirement Account ("IRA") or other
tax-advantaged retirement account) whether you reinvest your dividends or
distributions or take them in cash.
In addition to federal tax, dividends and distributions may be subject to state
and local taxes. If a Fund declares a dividend or distribution in October,
November or December but pays it in January, you may be taxed on that dividend
or distribution as if you received it in the previous year. In general,
dividends and distributions from the Funds are taxable as follows:
- ------------------------------- --------------------------- -------------------------
TAX RATE
FOR 28%
TYPE OF TAX RATE FOR BRACKET
DISTRIBUTION 15% BRACKET OR ABOVE
- ------------------------------- --------------------------- -------------------------
Income dividends Ordinary Income rate Ordinary Income rate
- ------------------------------- --------------------------- -------------------------
Short-term capital gains Ordinary Income rate Ordinary Income rate
- ------------------------------- --------------------------- -------------------------
Long-term capital gains 10% 20%
- ------------------------------- --------------------------- -------------------------
Long-term capital gains (held
for 5 or more years) 8% 18%
- ------------------------------- --------------------------- -------------------------
A Fund has "short-term capital gains" when it sells a security within 12 months
after buying it. A Fund has "long-term capital gains" when it sells a security
that it has owned for more than 12 months. When a Fund earns interest from bonds
and other debt securities and distributes these earnings to shareholders, the
Fund has "ordinary income." The Funds expect that their distributions will
consist primarily of capital gains. You generally are required to report all
Fund distributions on your federal income tax return.
Tax-deferred retirement accounts do not generate a tax liability unless you are
taking a distribution or making a withdrawal.
The Funds mail information concerning the tax status of the distributions for
each calendar year on or before January 31 of the following year.
This is a brief summary of some of the tax laws that affect your investment in
the Funds. Please see the Funds' Statement of Additional Information and your
tax adviser for further information.
FINANCIAL HIGHLIGHTS FOR TOTAL RETURN FUND AND EQUITY FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Funds'
financial performance for their Class A, B, and C shares during the past five
years, or the period since commencement of a Fund. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund assuming reinvestment of all dividends and
distributions. This information has been derived from financial statements
that have been audited by Ernst & Young LLP, whose report, along with the
Funds' financial statements, are included in the annual report, which is
available upon request.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS A)
- ------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------
2001(c) 2000(c) 1999(b)(c)(f) 1998(b)(c) 1997(b)(c)(d)
------- ------- ------------- ---------- -------------
PER SHARE DATA
Net asset value
beginning of period..... $11.81 $11.69 $10.73 $12.58 $11.06
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income (loss)........... (0.06) (0.07) (0.03) 0.08 0.17
Net gain (loss)
on securities
(realized and
unrealized)........... (3.64) 0.83 1.90 (0.98) 1.86
------- ------- ------- ------- ------
Total from investment
operations.............. (3.70) 0.76 1.87 (0.90) 2.03
LESS DISTRIBUTIONS:
Dividends (from net
investment income)...... --- --- (0.16) (0.20) (0.26)
Distributions
(from realized gains)... (0.04) (0.64) (0.75) (0.75) (0.25)
------- ------- ------- ------- -------
Total distributions...... (0.04) (0.64) (0.91) (0.95) (0.51)
------- ------- ------- ------- -------
NET ASSET VALUE END
OF PERIOD............... $ 8.07 $11.81 $11.69 $10.73 $12.58
======= ====== ====== ====== =====
TOTAL RETURN (a)......... (31.43)% 6.49% 17.84% (7.19)% 19.00%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period (thousands)...... $2,797 $3,928 $3,587 $3,294 $3,906
Ratio of expenses
to average net assets... 1.51% 1.49% 2.00% 2.00% 1.68%
Ratio of net investment
income (loss) to
average net assets...... (0.58)% (0.61)% (0.29)% 0.65% 1.52%
Portfolio turnover rate.. 35% 55% 121% 45% 79%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS B)
- ------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------
2001(c) 2000(c) 1999(b)(c)(f)) 1998(b)(c) 1997(b)(c)(d)
------- ------- -------------- ---------- -------------
PER SHARE DATA
Net asset value
beginning of period...... $11.55 $11.56 $10.62 $12.45 $10.97
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income (loss)............ (0.16) (0.19) (0.14) (0.03) 0.07
Net gain (loss)
on securities
(realized and
unrealized)............ (3.54) 0.82 1.88 (0.96) 1.84
------- ------- ------- ------- ------
Total from investment
operations............... (3.70) 0.63 1.74 (0.99) 1.91
LESS DISTRIBUTIONS:
Dividends (from net
investment income)....... --- --- (0.05) (0.09) (0.18)
Distributions
(from realized gains).... (0.04) (0.64) (0.75) (0.75) (0.25)
------- ------- ------- ------- -------
Total distributions....... (0.04) (0.64) (0.80) (0.84) (0.43)
------- ------- ------- ------- -------
NET ASSET VALUE END
OF PERIOD................ $ 7.81 $11.55 $11.56 $10.62 $12.45
======= ====== ====== ====== =====
TOTAL RETURN (a).......... (32.14)% 5.39% 16.68% (7.99)% 17.95%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period (thousands)....... $2,519 $3,903 $3,652 $3,304 $3,851
Ratio of expense
to average net assets ... 2.51% 2.49% 2.94% 2.94% 2.58%
Ratio of net investment
income (loss) to
average net assets....... (1.58)% (1.61)% (1.23)% (0.29)% 0.61%
Portfolio turnover rate... 35% 55% 121% 45% 79%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS C)
- ------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-- --------------------------------------------
2001(c) 2000(c) 1999(b)(c)(d)(e)
------- ------- ----------------
PER SHARE DATA
Net asset value beginning of period...... $11.60 $11.58 $11.48
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. (0.15) (0.16) (0.11)
Net gain (loss) on securities
(realized and unrealized)............. (3.58) 0.82 0.21
------- ------- -------
Total from investment operations......... (3.73) 0.66 0.10
LESS DISTRIBUTIONS:
Dividends (from net investment income)... --- --- ---
Distributions (from realized gains)...... (0.04) (0.64) ---
------- ------- --------
Total distributions...................... (0.04) (0.64) ---
------- ------- --------
NET ASSET VALUE END OF PERIOD............ $ 7.83 $11.60 $11.58
======= ====== =====
TOTAL RETURN (a)......................... (32.26)% 5.65% 0.87%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)..... $157 $59 $8
Ratio of expenses to average net assets.. 2.56% 2.30% 2.93%
Ratio of net investment income
(loss) to average net assets.......... (1.62)% (1.45)% (1.84)%
Portfolio turnover rate.................. 35% 55% 149%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS A)
- ------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------------
2001(c) 2000(c) 1999(c) 1998(c) 1997(c)
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value
beginning of period..... $10.26 $ 9.96 $ 8.86 $ 9.09 $ 7.54
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income (loss)........... --- --- 0.02 0.04 0.04
Net gain (loss)
on securities
(realized and
unrealized)........... (2.49) 0.66 1.80 0.56 2.20
------- ------- ------ ------ -----
Total from investment
operations.............. (2.49) 0.66 1.82 0.60 2.24
LESS DISTRIBUTIONS:
Dividends (from net
investment income)...... --- --- (0.04) (0.03) (0.04)
Distributions
(from realized gains)... (1.40) (0.36) (0.68) (0.80) (0.65)
Return of Capital........ (0.01) --- --- --- ---
------- -------- ------- ------- ------
Total distributions...... (1.41) (0.36) (0.72) (0.83) (0.69)
------- ------- ------ ------ ------
NET ASSET VALUE END
OF PERIOD............... $ 6.36 $10.26 $ 9.96 $ 8.86 $ 9.09
======== ====== ====== ====== =====
TOTAL RETURN (a)......... (27.66)% 6.64% 20.66% 7.38% 32.08%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period (thousands)...... $563,553 $853,126 $917,179 $773,606 $757,520
Ratio of expenses
to average net assets... 1.02% 1.02% 1.02% 1.02% 1.03%
Ratio of net investment
income (loss) to
average net assets...... 0.03% 0.03% 0.19% 0.39% 0.46%
Portfolio turnover rate.. 23% 54% 36% 47% 66%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS B)
- ------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------
2001(c) 2000(c) 1999(c) 1998(c) 1997(c)
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value
beginning of period..... $ 9.65 $ 9.47 $ 8.52 $ 8.82 $ 7.36
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income (loss)........... (0.07) (0.10) (0.08) (0.05) (0.04)
Net gain (loss)
on securities
(realized and
unrealized)........... (2.31) 0.64 1.71 0.55 2.15
------ ----- ------ ------ -----
Total from investment
operations.............. (2.38) 0.54 1.63 0.50 2.11
LESS DISTRIBUTIONS:
Dividends (from net
investment income)...... --- --- --- --- ---
Distributions
(from realized gains)... (1.40) (0.36) (0.68) (0.80) (0.65)
Return of Capital........ (0.01) --- --- --- ---
------ ------- ------- ------- ------
Total distributions...... (1.41) (0.36) (0.68) (0.80) (0.65)
------ ------ ------ ------ ------
NET ASSET VALUE END
OF PERIOD............... $ 5.86 $ 9.65 $ 9.47 $ 8.52 $ 8.82
====== ====== ====== ====== =====
TOTAL RETURN (a)......... (28.34)% 5.69% 19.23% 6.38% 30.85%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period (thousands)...... $96,067 $156,633 $159,872 $112,978 $89,336
Ratio of expenses
to average net assets... 2.02% 2.02% 2.02% 2.02% 2.03%
Ratio of net investment
income (loss) to
average net assets...... (0.97)% (0.97)% (0.82)% (0.61)% (0.54)%
Portfolio turnover rate.. 23% 54% 36% 47% 66%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS C)
- ------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
----------------------------------------------
2001(c) 2000(c) 1999(c)(e)
------- ------- ----------
PER SHARE DATA
Net asset value beginning of period...... $10.07 $ 9.89 $10.13
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. (0.07) (0.10) (0.05)
Net gain (loss) on securities
(realized and unrealized)............. (2.43) 0.64 (0.19)
------- ------- -------
Total from investment operations......... (2.50) 0.54 (0.24)
LESS DISTRIBUTIONS:
Dividends (from net investment income)... --- --- ---
Distributions (from realized gains)...... (1.40) (0.36) ---
Return of Capital (0.01) --- ---
------- --------- --------
Total distributions...................... (1.41) (0.36) ---
------- ------- --------
NET ASSET VALUE END OF PERIOD............ $ 6.16 $10.07 $ 9.89
======= ====== ======
TOTAL RETURN (a)......................... (28.35)% 5.55% (2.37)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)..... $4,230 $5,426 $4,507
Ratio of expenses to average net assets.. 2.02% 2.02% 2.02%
Ratio of net investment income
(loss) to average net assets.......... (0.97)% (0.96)% (0.89)%
Portfolio turnover rate.................. 23% 54% 45%
- ------------------------------------------------------------------------------------------
(a) Total return information does reflect deduction of any sales charges
imposed at the time of purchase for Class A shares or upon redemption for
Class B, C and S shares.
(b) Fund expenses were reduced by the Investment Manager during the period, and
expense ratios absent such reimbursement would have been as follows:
- --------------------------------------------------------------------------------------
CLASS 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------
Total Return Fund A --- 2.3% 2.5% 2.4%
- --------------------------------------------------------------------------------------
B --- 3.2% 3.4% 3.3%
- --------------------------------------------------------------------------------------
C --- 3.2% --- ---
- --------------------------------------------------------------------------------------
S --- --- --- --- ---
- --------------------------------------------------------------------------------------
(c) Net investment income (loss) was computed using average shares outstanding
throughout the period.
(d) Meridian Investment Management Corporation (Meridian) became the
sub-advisor of Total Return Fund effective August 1, 1997. Prior to August
1, 1997 Security Management Company, LLC (SMC) paid Templeton/Franklin
Investment Services, Inc. and Meridian for research services provided to
Total Return Fund.
(e) Class "C" Shares were initially offered for sale on January 29, 1999.
Percentage amounts for the period, except total return, have been
annualized.
(f) Prior to May 15, 1999 SMC paid Meridian for sub-advisory services provided
to Total Return Fund. Effective May 15, 1999 the sub-advisory contract with
Meridian was terminated and SMC continued to provide advisory services to
the Total Return Fund.
APPENDIX A
FORM OF PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Plan") is adopted as of this 3rd day of May,
2002, by Security Equity Fund (the "Company") with its principal place of
business at One Security Benefit Place, Topeka, Kansas 66636, on behalf of
Equity Series (the "Acquiring Fund"), a separate series of the Company, and
Total Return Series (the "Acquired Fund"), another separate series of the
Company.
This Plan is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, B, and C
voting shares ($0.25 par value per share) of the Acquiring Fund (the "Acquiring
Fund Shares"), the assumption by the Acquiring Fund of all liabilities of the
Acquired Fund, and the distribution of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in complete liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Plan.
WHEREAS, the Company is an open-end, registered investment company of the
management type and the Acquired Fund owns securities which generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Directors of the Company have determined that the exchange of all
of the assets of the Acquired Fund for Acquiring Fund Shares and the assumption
of all liabilities of the Acquired Fund by the Acquiring Fund is in the best
interests of the Acquiring Fund and its shareholders and that the interests of
the existing shareholders of the Acquiring Fund would not be diluted as a result
of this transaction; and
WHEREAS, the Directors of the Company also have determined, with respect to the
Acquired Fund, that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund
by the Acquiring Fund is in the best interests of the Acquired Fund and its
shareholders and that the interests of the existing shareolders of the Acquired
Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, the Company, on behalf of the Acquiring Fund and the Acquired
Fund separately, hereby approves the Plan on the following terms and conditions:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approvals of the shareholders of the
Acquired Fund and Acquiring Fund and the other terms and
conditions herein set forth and on the basis of the
representations and warranties contained herein, the Company will
transfer all of the Acquired Fund's assets, as set forth in
paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund
agrees in exchange therefor: (i) to deliver to the Acquired Fund
the number of full and fractional Class A, B, and C Acquiring Fund
Shares determined by dividing the value of the Acquired Fund's net
assets with respect to each class, computed in the manner and as
of the time and date set forth in paragraph 2.1, by the net asset
value of one Acquiring Fund Share of the same class, computed in
the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume all liabilities of the Acquired Fund. Such
transactions shall take place at the closing provided for in
paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all assets and property, including, without
limitation, all cash, securities, commodities and futures
interests and dividends or interests receivable that are owned by
the Acquired Fund and any deferred or prepaid expenses shown as an
asset on the books of the Acquired Fund on the closing date
provided for in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall also assume all of the liabilities of the
Acquired Fund, whether accrued or contingent, known or unknown,
existing at the Valuation Date. On or as soon as practicable prior
to the Closing Date, the Acquired Fund will declare and pay to its
shareholders of record one or more dividends and/or other
distributions that, together with all previous distributions,
shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net
realized capital gains, if any, for the period from the close of
its last taxable year to the end of the business day on the
Closing; and (ii) any undistributed investment company taxable
income and net capital gain from any period to the extent not
otherwise distributed.
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Fund will distribute to the Acquired Fund's
shareholders of record with respect to each class of its shares,
determined as of immediately after the close of business on the
Closing Date (the "Acquired Fund Shareholders"), on a pro rata
basis within that class, the Acquiring Fund Shares of the same
class received by the Acquired Fund pursuant to paragraph 1.1, and
will completely liquidate. Such distribution and liquidation will
be accomplished, with respect to each class of the Acquired Fund's
shares, by the transfer of the Acquiring Fund Shares then credited
to the account of the Acquired Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net
asset value of Class A, B, and C Acquiring Fund Shares to be so
credited to Class A, B, and C Acquired Fund Shareholders shall,
with respect to each class, be equal to the aggregate net asset
value of the Acquired Fund shares of that same class owned by such
shareholders on the Closing Date. All issued and outstanding
shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund, although share certificates
representing interests in Class A, B, and C shares of the Acquired
Fund will represent a number of the same class of Acquiring Fund
Shares after the Closing Date, as determined in accordance with
Section 2.3. The Acquiring Fund shall not issue certificates
representing the Class A, B, and C Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund
will be issued in the manner described in the Acquiring Fund's
then-current prospectus and statement of additional information.
1.6 Any reporting responsibility of the Acquired Fund including, but
not limited to, the responsibility for filing of regulatory
reports, tax returns, or other documents with the Securities and
Exchange Commission (the "Commission"), any state securities
commission, and any federal, state or local tax authorities or any
other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets
computed as of immediately after the close of business of the New
York Stock Exchange and after the declaration of any dividends on
the Closing Date (such time and date being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the
Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"), and the then-current prospectus or statement of
additional information with respect to the Acquiring Fund, and
valuation procedures established by the Company's Board of
Directors.
2.2 The net asset value of a Class A, B, and C Acquiring Fund Share
shall be the net asset value per share computed with respect to
that class as of immediately after the close of business of the
New York Stock Exchange and after the declaration of any dividends
on the Valuation Date, using the valuation procedures set forth in
the Company's Articles of Incorporation and the then-current
prospectus or statement of additional information with respect to
the Acquiring Fund, and valuation procedures established by the
Company's Board of Directors.
2.3 The number of the Class A, B, and C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined with respect to each
such class by dividing the value of the net assets with respect to
the Class A, B, and C shares of the Acquired Fund, as the case may
be, determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of an Acquiring Fund Share,
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by the Acquiring
Fund's designated record keeping agent.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be August 31, 2002, or such other date as
the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of
immediately after the close of business on the Closing Date unless
otherwise agreed to by the parties. The close of business on the
Closing Date shall be as of 4:00 p.m., Eastern Time. The Closing
shall be held at the offices of the Company or at such other time
and/or place as the Board of Directors or officers of the Company
may designate.
3.2 The Company shall direct UMB Bank, N.A., as custodian for the
Acquired Fund (the "Custodian"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Acquired
Fund's portfolio securities, cash, and any other assets ("Assets")
shall have been delivered in proper form to the Acquiring Fund
within two business days prior to or on the Closing Date, and (ii)
all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made. The
Acquired Fund's portfolio securities represented by a certificate
or other written instrument shall be transferred and delivered by
the Acquired Fund as of the Closing Date for the account of the
Acquiring Fund duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof. The Acquired
Fund shall direct the Custodian to deliver portfolio securities
and instruments deposited with a securities depository, as defined
in Rule 17f-4 under the Investment Company Act of 1940, as amended
(the "1940 Act") as of the Closing Date by book entry in
accordance with the customary practices of such depositories and
the custodian for Acquiring Fund.
3.3 Security Management Company, LLC, as transfer agent for the
Acquired Fund (the "Transfer Agent"), shall deliver, on behalf of
the Acquired Fund, at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, B, and C shares owned by each
such shareholder immediately prior to the Closing.
3.4 In the event that on the Valuation Date (a) the New York Stock
Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereupon shall be restricted, or (b)
trading or the reporting of trading on such Exchange or elsewhere
shall be disrupted so that, in the judgment of the Board of
Directors of the Company, accurate appraisal of the value of the
net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired Fund is duly organized as a series of the
Company, which is a corporation duly organized and validly
existing under the laws of the State of Kansas, with power
under the Company's Articles of Incorporation to own all of
its properties and assets and to carry on its business as
it is now being conducted;
(b) The Company is a registered investment company classified
as a management company of the open-end type, and its
registration with the Commission as an investment company
under the 1940 Act, and the registration of its shares
under the Securities Act of 1933, as amended ("1933 Act"),
are in full force and effect;
(c) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation
by the Acquired Fund of the transactions contemplated
herein, except such as have been obtained under the 1933
Act, the Securities Exchange Act of 1934, as amended (the
"1934 Act") and the 1940 Act, and such as may be required
by state securities laws;
(d) The current prospectus and statement of additional
information of the Acquired Fund and each prospectus and
statement of additional information of the Acquired Fund
used during the three years previous to the date of this
Plan conforms or conformed at the time of its use in all
material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and does not or did not at the
time of its use include any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made,
not materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be
transferred to the Acquiring Fund pursuant to paragraph 1.2
and full right, power, and authority to sell, assign,
transfer and deliver such assets hereunder free of any
liens or other encumbrances, and upon delivery and payment
for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the
full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the
Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the
execution, delivery and performance of this Plan will not
result, in (i) a material violation of the Company's
Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking
to which the Acquired Fund is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment or decree to which
the Acquired Fund is a party or by which it is bound;
(g) The Acquired Fund has no material contracts or other
commitments (other than this Plan) that will be terminated
with liability to it prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by
the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or, to its
knowledge, threatened against the Acquired Fund or any of
its properties or assets that, if adversely determined,
would materially and adversely affect its financial
condition or the conduct of its business. The Acquired Fund
knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and
adversely affects its business or its ability to consummate
the transactions herein contemplated;
(i) The financial statements of the Acquired Fund as of and for
the year ended September 30, 2001 have been audited by
Ernst & Young, LLP, independent accountants. Such
statements are in accordance with accounting principles
generally accepted in the United States ("GAAP")
consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) present fairly,
in all material respects, the financial condition of the
Acquired Fund as of such date in accordance with GAAP, and
there are no known contingent liabilities of the Acquired
Fund required to be reflected on the balance sheet or in
the notes thereto;
(j) Since September 30, 2001, there has not been any material
adverse change in the Acquired Fund's financial condition,
assets, liabilities or business, other than changes
occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing
more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by
the Acquiring Fund. For the purposes of this subparagraph
(j), a decline in net asset value per share of the Acquired
Fund due to declines in market values of securities in the
Acquired Fund's portfolio, the discharge of Acquired Fund
liabilities, or the redemption of Acquired Fund shares by
shareholders of the Acquired Fund shall not constitute a
material adverse change;
(k) On the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been
filed by such date (including any extensions) shall have
been filed and are or will be correct in all material
respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for
the payment thereof, and to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(l) For each taxable year of its operation (including the
taxable year ending on the Closing Date), the Acquired Fund
has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has
elected to be treated as such, has been eligible to and has
computed its Federal income tax under Section 852 of the
Code, and will have distributed all of its investment
company taxable income and net capital gain (as defined in
the Code) that has accrued through the Closing Date, and
before the Closing Date will have declared dividends
sufficient to distribute all of its investment company
taxable income and net capital gain for the period ending
on the Closing Date;
(m) All issued and outstanding shares of the Acquired Fund are,
and on the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable by the
Company and have been offered and sold in every state and
the District of Columbia in compliance in all material
respects with applicable registration requirements of the
1933 Act and state securities laws. All of the issued and
outstanding shares of the Acquired Fund will, at the time
of Closing, be held by the persons and in the amounts set
forth in the records of the Transfer Agent, on behalf of
the Acquired Fund, as provided in paragraph 3.3. The
Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any
of the shares of the Acquired Fund, nor is there
outstanding any security convertible into any of the
Acquired Fund shares;
(n) The adoption and performance of this Plan will have been
duly authorized prior to the Closing Date by all necessary
action, if any, on the part of the Directors of the
Company, and, subject to the approval of the shareholders
of the Acquired Fund, this Plan will constitute a valid and
binding obligation of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and
to general equity principles;
(o) The information to be furnished by the Acquired Fund for
use in registration statements, proxy materials and other
documents filed or to be filed with any federal, state or
local regulatory authority (including the National
Association of Securities Dealers, Inc.), which may be
necessary in connection with the transactions contemplated
hereby, shall be accurate and complete in all material
respects and shall comply in all material respects with
Federal securities and other laws and regulations
thereunder applicable thereto.
4.2 The Company, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Acquiring Fund is duly organized as a series of the
Company, which is a corporation duly organized and validly
existing under the laws of the State of Kansas, with power
under the Company's Articles of Incorporation to own all of
its properties and assets and to carry on its business as
it is now being conducted;
(b) The Company is a registered investment company classified
as a management company of the open-end type, and its
registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under
the 1933 Act, including the shares of the Acquiring Fund,
are in full force and effect;
(c) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation
by the Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933
Act, the 1934 Act and the 1940 Act and such as may be
required by state securities laws;
(d) The current prospectus and statement of additional
information of the Acquiring Fund and each prospectus and
statement of additional information of the Acquiring Fund
used during the three years previous to the date of this
Plan conforms or conformed at the time of its use in all
material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and does not or did not at the
time of its use include any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made,
not materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of
any liens of other encumbrances, except those liens or
encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the
Closing;
(f) The Acquiring Fund is not engaged currently, and the
execution, delivery and performance of this Plan will not
result, in (i) a material violation of the Company's
Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking
to which the Acquiring Fund is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment or decree to which
the Acquiring Fund is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by
the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or, to its
knowledge, threatened against the Acquiring Fund or any of
its properties or assets that, if adversely determined,
would materially and adversely affect its financial
condition or the conduct of its business. The Acquiring
Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and
adversely affects its business or its ability to consummate
the transactions herein contemplated;
(h) The financial statements of the Acquiring Fund as of and
for the year ended September 30, 2001 have been audited by
Ernst & Young LLP, independent accountants. Such statements
are in accordance with GAAP consistently applied, and such
statements (copies of which have been furnished to the
Acquired Fund) present fairly, in all material respects,
the financial condition of the Acquiring Fund as of such
date in accordance with GAAP, and there are no known
contingent liabilities of the Acquiring Fund required to be
reflected on the balance sheet or in the notes thereto;
(i) Since September 30, 2001, there has not been any material
adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business, other than changes
occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by
the Acquired Fund. For purposes of this subparagraph (i), a
decline in net asset value per share of the Acquiring Fund
due to declines in market values of securities in the
Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by
shareholders of the Acquiring Fund, shall not constitute a
material adverse change;
(j) On the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law to have been
filed by such date (including any extensions) shall have
been filed and are or will be correct in all material
respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for
the payment thereof, and to the best of the Acquiring
Fund's knowledge no such return is currently under audit
and no assessment has been asserted with respect to such
returns;
(k) For each taxable year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has
elected to be treated as such, has been eligible to and has
computed its Federal income tax under Section 852 of the
Code, has distributed all of its investment company taxable
income and net capital gain (as defined in the Code) for
periods ending prior to the Closing Date, and will do so
for the taxable year including the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and
on the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Company
and have been offered and sold in every state and the
District of Columbia in compliance in all material respects
with applicable registration requirements of the 1933 Act
and state securities laws. The Acquiring Fund does not have
outstanding any options, warrants or other rights to
subscribe for or purchase any Acquiring Fund Shares, nor is
there outstanding any security convertible into any
Acquiring Fund Shares;
(m) The adoption and performance of this Plan will have been
fully authorized prior to the Closing Date by all necessary
action, if any, on the part of the Directors of the Company
on behalf of the Acquiring Fund and this Plan will
constitute a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(n) The Class A, B, and C Acquiring Fund Shares to be issued
and delivered to the Acquired Fund, for the account of the
Acquired Fund Shareholders, pursuant to the terms of this
Plan, will on the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly
issued Acquiring Fund Shares, and will be fully paid and
non-assessable by the Company;
(o) The information to be furnished by the Acquiring Fund for
use in the registration statements, proxy materials and
other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all
material respects with Federal securities and other laws
and regulations applicable thereto; and
(p) That insofar as it relates to Company or the Acquiring
Fund, the Registration Statement relating to the Acquiring
Fund Shares issuable hereunder, and the proxy materials of
the Acquired Fund to be included in the Registration
Statement, and any amendment or supplement to the
foregoing, will, from the effective date of the
Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein (i)
not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
materially misleading provided, however, that the
representations and warranties in this subparagraph (p)
shall not apply to statements in or omissions from the
Registration Statement made in reliance upon and in
conformity with information that was furnished by the
Acquired Fund for use therein, and (ii) comply in all
material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations
thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of
business will include the declaration and payment of customary
dividends and distributions, and any other distribution that may
be advisable.
5.2 To the extent required by applicable law, the Company will call a
meeting of the shareholders of the Acquired Fund to consider and
act upon this Plan and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, B, and C Acquiring
Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in
accordance with the terms of this Plan.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares.
5.5 Subject to the provisions of this Plan, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the
transactions contemplated by this Plan.
5.6 As soon as is reasonably practicable after the Closing, the
Acquired Fund will make a liquidating distribution to its
shareholders consisting of the Class A, B, and C Acquiring Fund
Shares received at the Closing.
5.7 The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of
the conditions precedent to effect the transactions contemplated
by this Plan as promptly as practicable.
5.8 The Acquired Fund covenants that it will, from time to time, as
and when reasonably requested by the Acquiring Fund, execute and
deliver or cause to be executed and delivered all such assignments
and other instruments, and will take or cause to be taken such
further action as the Acquiring Fund may reasonably deem necessary
or desirable in order to vest in and confirm the Acquiring Fund's
title to and possession of all the assets and otherwise to carry
out the intent and purpose of this Plan.
5.9 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940
Act and such of the state blue sky or securities laws as may be
necessary in order to continue its operations after the Closing
Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at the Acquired Fund's election, to
the performance by the Acquiring Fund of all the obligations to be
performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:
6.1 All representations and warranties of the Acquiring Fund and the
Company contained in this Plan shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Plan, as of the
Closing Date, with the same force and effect as if made on and as
of the Closing Date;
6.2 The Company and the Acquiring Fund shall have performed all of the
covenants and complied with all of the provisions required by this
Plan to be performed or complied with by the Company and the
Acquiring Fund on or before the Closing Date; and
6.3 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class
to be issued in connection with the Reorganization after such
number has been calculated in accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at the Acquiring Fund's election,
to the performance by the Acquired Fund of all of the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions:
7.1 All representations and warranties of the Company and the Acquired
Fund contained in this Plan shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Plan, as of the
Closing Date, with the same force and effect as if made on and as
of the Closing Date;
7.2 The Company and the Acquired Fund shall have performed all of the
covenants and complied with all of the provisions required by this
Plan to be performed or complied with by the Company or the
Acquired Fund on or before the Closing Date;
7.3 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class
to be issued in connection with the Reorganization after such
number has been calculated in accordance with paragraph 1.1;
7.4 The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all
previous distributions, shall have the effect of distributing to
its shareholders (i) all of its investment company taxable income
and all of its net realized capital gains, if any, for the period
from the close of its last taxable year to 4:00 p.m. Eastern Time
on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to
the extent not otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Plan shall, at its option, not be required to
consummate the transactions contemplated by this Plan:
8.1 The Plan and the transactions contemplated herein shall have been
approved by the requisite vote, if any, of the holders of the
outstanding shares of the Acquired Fund in accordance with the
provisions of the Company's Articles of Incorporation, By-Laws,
applicable Kansas law and the 1940 Act, and certified copies of
the resolutions evidencing such approval shall have been delivered
to the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or
governmental agency in which it is sought to restrain or prohibit,
or obtain damages or other relief in connection with, this Plan or
the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under
the 1933 Act; and
8.5 Dechert shall deliver an opinion addressed to the Company
substantially to the effect that, based upon certain facts,
assumptions, and representations, the transaction contemplated by
this Plan shall constitute a tax-free reorganization for Federal
income tax purposes, unless, based on the circumstances existing
at the time of the Closing, Dechert determines that the
transaction contemplated by this Plan does not qualify as such.
The delivery of such opinion is conditioned upon receipt by
Dechert of representations it shall request of the Company.
Notwithstanding anything herein to the contrary, the Company may
not waive the condition set forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund represents and warrants to the other that there
are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 The expenses relating to the proposed Reorganization will be paid
by the Acquired Fund and the Acquiring Fund pro rata based upon
the relative net assets of the Funds as of the close of business
on the record date for determining the shareholders of the
Acquired Fund entitled to vote on the Reorganization. The costs of
the Reorganization shall include, but not be limited to, costs
associated with obtaining any necessary order of exemption from
the 1940 Act, preparation of the Registration Statement, printing
and distributing the Acquiring Fund's prospectus and the Acquired
Fund's proxy materials, legal fees, accounting fees, securities
registration fees, and expenses of holding the shareholders'
meeting. Notwithstanding any of the foregoing, expenses will in
any event be paid by the party directly incurring such expenses if
and to the extent that the payment by the other party of such
expenses would result in the disqualification of such party as a
"regulated investment company" within the meaning of Section 851
of the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
The representations, warranties and covenants contained in this Plan or
in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Plan and the transactions contemplated hereby may be terminated and
abandoned by resolution of the Board of Directors, at any time prior to
the Closing Date, if circumstances should develop that, in the opinion of
the Board, make proceeding with the Plan inadvisable.
12. AMENDMENTS
This Plan may be amended, modified or supplemented in such manner as may
be set forth in writing by the authorized officers of the Company;
provided, however, that following any meeting of the shareholders called
by the Acquired Fund pursuant to paragraph 5.2 of this Plan, no such
amendment may have the effect of changing the provisions for determining
the number of the Class A, B, or C Acquiring Fund Shares to be issued to
the Acquired Fund Shareholders under this Plan to the detriment of such
shareholders without their further approval.
13. HEADINGS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Plan are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Plan.
13.2 This Plan shall be governed by and construed in accordance with
the laws of the State of Kansas without regard to its principles
of conflicts of laws.
13.3 This Plan shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent
of the other party. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or
by reason of this Plan.
13.4 It is expressly agreed that the obligations of the parties
hereunder shall not be binding upon any of the Directors,
shareholders, nominees, officers, agents, or employees of the
Company personally, but shall bind only property of such party.
The execution and delivery by such officers shall not be deemed to
have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the
property of each party.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Plan
to be approved on behalf of the Acquiring Fund and the Acquired Fund.
SECURITY EQUITY FUND
By:
-------------------------------------
Name:
Title:
APPENDIX B
The following is a list of the current funds in the Security Group of Mutual
Funds and the classes of shares that are currently offered by each fund:
- --------------------------------------------- -------------------
FUND CLASSES OFFERED
- --------------------------------------------- -------------------
Security Equity Fund A, B, and C
- --------------------------------------------- -------------------
Security Global Fund A, B, and C
- --------------------------------------------- -------------------
Security International Fund A, B, and C
- --------------------------------------------- -------------------
Security Mid Cap Value Fund A, B, and C
- --------------------------------------------- -------------------
Security Small Cap Growth Fund A, B, and C
- --------------------------------------------- -------------------
Security Enhanced Index Fund A, B, and C
- --------------------------------------------- -------------------
Security Select 25 Fund A, B, and C
- --------------------------------------------- -------------------
Security Social Awareness Fund A, B, and C
- --------------------------------------------- -------------------
Security Technology Fund A, B, and C
- --------------------------------------------- -------------------
Security Ultra Fund A, B, and C
- --------------------------------------------- -------------------
Security Growth and Income Fund A, B, and C
- --------------------------------------------- -------------------
Security Diversified Income Fund A, B, and C
- --------------------------------------------- -------------------
Security Municipal Bond Fund A, B, and C
- --------------------------------------------- -------------------
Security High Yield Fund A, B, and C
- --------------------------------------------- -------------------
Security Cash Fund A
- --------------------------------------------- -------------------
Security Capital Preservation Fund A, B, and C
- --------------------------------------------- -------------------
APPENDIX C
As of June 24, 2002, the following persons owned beneficially or of record 5% or
more of the outstanding shares of the Equity Fund:
- ------------------------------- ------- ---------------------- -------------------------
% OF EQUITY FUND % OF EQUITY FUND
NAME AND ADDRESS CLASS BEFORE REORGANIZATION AFTER REORGANIZATION
- ------------------------------- ------- ---------------------- -------------------------
- ------------------------------- ------- ---------------------- -------------------------
- ------------------------------- ------- ---------------------- -------------------------
- -------------------------------------- ------- ------------------------ ----------------
As of June 24, 2002, the following persons owned beneficially or of record 5% or
more of the outstanding shares of the Total Return Fund:
- ------------------------------- ------- ---------------------- -------------------------
% OF RETURN FUND % OF RETURN FUND
NAME AND ADDRESS CLASS BEFORE REORGANIZATION AFTER REORGANIZATION
- ------------------------------- ------- ---------------------- -------------------------
- ------------------------------- ------- ---------------------- -------------------------
- ------------------------------- ------- ---------------------- -------------------------
- -------------------------------------- ------- ------------------------ ----------------
SECURITY EQUITY FUND, TOTAL RETURN SERIES
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON AUGUST 20, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) James R. Schmank, Donald Chubb and John D.
Cleland or any one or more of them, proxies, with full power of substitution, to
vote all shares of the Security Equity Fund, Total Return Series (the "Fund")
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of the Fund at One Security Benefit Place,
Topeka, Kansas 66636, on August 20, 2002 at 9:30 a.m., local time, and at any
adjournment thereof.
This proxy will be voted as instructed. If no specification is made, the proxy
will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the enclosed
envelope.
Please indicate your vote by an "x" in the appropriate box below.
PROXY VOTING INSTRUCTIONS
THE SECURITY BENEFIT GROUP OF COMPANIES ENCOURAGES ALL SHAREHOLDERS TO VOTE
THEIR PROXIES. WE NOW PROVIDE THREE CONVENIENT METHODS OF VOTING:
1. PROXY CARD: COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD ATTACHED BELOW
IN THE ENCLOSED POSTAGE-PAID ENVELOPE;
- --------------------------------------------------------------------------------
2. TELEPHONE: CALL TOLL-FREE ON A TOUCH-TONE PHONE 1-800-690-6903, 7 DAYS A
WEEK, 24 HOURS A DAY; OR
- --------------------------------------------------------------------------------
3. INTERNET: LOG ON TO THE WEB SITE www.proxyvote.com.
- --------------------------------------------------------------------------------
IF YOU CHOOSE TO VOTE BY TELEPHONE OR INTERNET, YOU WILL BE GIVEN INSTRUCTIONS
AND ASKED TO ENTER THE TWELVE-DIGIT CONTROL NUMBER LOCATED ON THE PROXY CARD.
CHOOSING EITHER OF THESE OPTIONS ELIMINATES THE NEED TO RETURN YOUR PROXY CARD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. To approve a Plan of Reorganization providing for the acquisition of all of
the assets and liabilities of the Total Return Fund by the Equity Fund of
Security Equity Fund solely in exchange for shares of the Equity Fund,
followed by the complete liquidation of the Total Return Fund.
For __ Against __ Abstain __
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
- ----------------------------------- ------------------------------------
Signature Date
- ----------------------------------- ------------------------------------
Signature (if held jointly) Date
PART B
SECURITY EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Additional Information
___________, 2002
- --------------------------------------------------------------------------------
Acquisition of the Assets and Liabilities of By and in Exchange for Shares of
Total Return Series ("Total Return Fund") of Equity Series ("Equity Fund") of
Security Equity Fund Security Equity Fund
One Security Benefit Place One Security Benefit Place
Topeka, Kansas 66636 Topeka, Kansas 66636
This Statement of Additional Information is available to the Shareholders of
Total Return Fund in connection with a proposed transaction whereby all of the
assets and liabilities of Total Return Fund will be transferred to Equity Fund
in exchange for shares of Equity Fund.
This Statement of Additional Information of the Equity Fund consists of this
cover page and the following documents, each of which was filed electronically
with the Securities and Exchange Commission and is incorporated by reference
herein:
1. The Statement of Additional Information for Equity Fund and Total Return
Fund dated February 1, 2002, as supplemented May 1, 2002.
2. The Financial Statements of Equity Fund and Total Return Fund are included
in the Funds' Annual Report filed on Form N-30D for the year ended
September 30, 2001, Registration No. 2-19458 (filed December 7, 2001).
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated ________, 2002 relating to the reorganization of Total Return
Fund may be obtained, without charge, by writing to Security Management at One
Security Benefit Place, Topeka, Kansas 66636 or calling (800) 888-2461. This
Statement of Additional Information should be read in conjunction with the
Prospectus/Proxy Statement.
Pro forma financial statements of the Funds are not presented as the net assets
of Total Return Fund are less than 10 percent of the net assets of Equity Fund
and will represent less than 10 percent of the net assets of the combined Fund.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
A policy of insurance covering Security Management Company, LLC, its affiliate
Security Distributors, Inc., and all of the registered investment companies
advised by Security Management Company, LLC insures the Registrant's directors
and officers against liability arising by reason of an alleged breach of duty
caused by any negligent act, error or accidental omission in the scope of their
duties.
Article Tenth of Registrant's Articles of Incorporation provides in provides in
relevant part as follows:
"(5) Each director and officer (and his heirs, executors and administrators)
shall be indemnified by the Corporation against reasonable costs and expenses
incurred by him in connection with any action, suit or proceeding to which he is
made a party by reason of his being or having been a Director or officer of the
Corporation, except in relation to any action, suit or proceeding in which he
has been adjudged liable because of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. In the absence of an adjudication which expressly absolves the Director
or officer of liability to the Corporation or its stockholders for willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, or in the event of a settlement, each
Director and officer (and his heirs, executors and administrators) shall be
indemnified by the Corporation against payment made, including reasonable costs
and expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel that the Director or officer has no liability by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The indemnity provided
herein shall, in the event of settlement of any such action, suit or proceeding,
not exceed the costs and expenses (including attorneys' fees) which would
reasonably have been incurred if such action, suit or proceeding had been
litigated to a final conclusion. Such a determination by independent counsel and
the payment of amounts by the Corporation on the basis thereof shall not prevent
a stockholder from challenging such indemnification by appropriate legal
proceeding on the grounds that the officer or Director was liable because of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnification shall not be exclusive of any other rights to which the officers
and Directors may be entitled according to law."
Article Sixteenth of Registrant's Articles of Incorporation, as amended December
10, 1987, provides as follows:
"A director shall not be personally liable to the corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this sentence shall not eliminate nor limit the liability of a
director:
A. for any breach of his or her duty of loyalty to the corporation or to its
stockholders;
B. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the provisions
of Kansas Statutes Annotated (K.S.A.) 17-6424 and amendments thereto; or
D. for any transaction from which the director derived an improper personal
benefit."
Item Thirty of Registrant's Bylaws, dated February 3, 1995, provides, in
relevant part, as follows:
"Each person who is or was a Director or officer of the Corporation or is or was
serving at the request of the Corporation as a Director or officer of another
corporation (including the heirs, executors, administrators and estate of such
person) shall be indemnified by the Corporation as of right to the full extent
permitted or authorized by the laws of the State of Kansas, as now in effect and
is hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expense (including attorneys' fees) asserted or threatened
against and incurred by such person in his/her capacity as or arising out of
his/her status as a Director or officer of the Corporation or, if serving at the
request of the Corporation, as a Director or officer of another corporation. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, under any other bylaw or under any agreement, vote of
stockholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnification with respect to the same or different persons or classes of
persons.
No person shall be liable to the Corporation for any loss, damage, liability or
expense suffered by it on account of any action taken or omitted to be taken by
him/her as a Director or officer of the Corporation or of any other corporation
which (s)he serves as a Director or officer at the request of the Corporation,
if such person (a) exercised the same degree of care and skill as a prudent
person would have exercised under the circumstances in the conduct of his/her
own affairs, or (b) took or omitted to take such action in reliance upon advice
of counsel for the Corporation, or for such other corporation, or upon statement
made or information furnished by Directors, officers, employees or agents of the
Corporation, or of such other corporation, which (s)he had no reasonable grounds
to disbelieve.
In the event any provision of this section 30 shall be in violation of the
Investment Company Act of 1940, as amended, or of the rules and regulations
promulgated thereunder, such provisions shall be void to the extent of such
violations."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(1) Articles of Incorporation(a)
(2) Bylaws(b)
(3) Not Applicable
(4) See Appendix A - Form of Plan of Reorganization(c)
(5) Certificate of Designation of Series and Classes of Common Stock(a)
(6) Investment Management and Services Agreement
(7) (a) Distribution Agreement
(b) Class B Distribution Agreement(d)
(c) Class C Distribution Agreement(d)
(d) Underwriter-Dealer Agreement(a)
(8) Not Applicable
(9) Form of Custodian Agreement(f)
(10) (a) Class A Distribution Plan
(b) Class B Distribution Plan(e)
(c) Class C Distribution Plan(e)
(d) Brokerage Enhancement Plan(d)
(e) Form of Shareholder Service Agreement(f)
(f) Security Funds Multiple Class Plan
(11) Opinion of Counsel
(12) Opinion and Consent of Counsel supporting tax matters and consequences
(to be filed by amendment)
(13) Not applicable.
(14) Consent of Independent Auditors
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 90 to Registration Statement
No. 2-19458 on Form N-1A as filed on November 20, 2000.
(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 86 to Registration Statement
No. 2-19458 on Form N-1A as filed on November 29, 1999.
(c) See Appendix A to the prospectus.
(d) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 89 to Registration Statement
No. 2-19458 on Form N-1A as filed on May 1, 2000.
(e) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 92 to Registration Statement
No. 2-19458 on Form N-1A as filed on January 15, 2002.
(f) Incorporated herein by reference to the Exhibits filed with Security
Income Fund's Post-Effective Amendment No. 71 to Registration Statement
No. 2-38414 on Form N-1A as filed on January 11, 2002.
ITEM 17. UNDERTAKINGS
1. The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act 17
CFR 230.145(c), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
2. The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
3. The undersigned registrant undertakes to file a post-effective amendment
to this registration statement upon the closing of the Reorganization
described in this registration statement that contains an opinion of
counsel supporting the tax matters discussed in this registration
statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Topeka and State of Kansas on the 3rd day of May, 2002.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
----------------------------------------------
James R. Schmank
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
JAMES R. SCHMANK Director and President
(Principal Executive Officer) May 3, 2002
- -------------------------------------
James R. Schmank
JOHN D. CLELAND Director May 3, 2002
- -------------------------------------
John D. Cleland
DONALD A. CHUBB, JR. Director May 3, 2002
- -------------------------------------
Donald A. Chubb, Jr.
PENNY A. LUMPKIN Director May 3, 2002
- -------------------------------------
Penny A. Lumpkin
MARK L. MORRIS, JR. Director May 3, 2002
- -------------------------------------
Mark L. Morris, Jr.
MAYNARD OLIVERIUS Director May 3, 2002
- -------------------------------------
Maynard Oliverius
EXHIBIT INDEX
(1) None
(2) None
(3) None
(4) None
(5) None
(6) Investment Management and Services Agreement
(7) (a) Distribution Agreement
(b) None
(c) None
(d) None
(8) None
(9) None
(10) (a) Class A Distribution Plan
(b) None
(c) None
(d) None
(e) None
(f) Security Funds Multiple Class Plan
(11) Opinion of Counsel
(12) None
(13) None
(14) Consent of Independent Auditors
(15) None
(16) None
(17) None
