UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01136 SECURITY EQUITY FUND (Exact name of registrant as specified in charter) ONE SECURITY BENEFIT PLACE, TOPEKA, KANSAS 66636-0001 (Address of principal executive offices) (Zip code) JAMES R. SCHMANK, PRESIDENT SECURITY EQUITY FUND ONE SECURITY BENEFIT PLACE TOPEKA, KANSAS 66636-0001 (Name and address of agent for service) Registrant's telephone number, including area code: (785) 438-3000 Date of fiscal year end: September 30 Date of reporting period: September 30, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.ITEM 1. REPORTS TO STOCKHOLDERS.
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SECURITY EQUITY FUND SEPTEMBER 30, 2003 ANNUAL REPORT TABLE OF CONTENTS Security Equity Fund Alpha Opportunity Series .............................................3 Enhanced Index Series ................................................6 Equity Series .......................................................16 Global Series .......................................................20 International Series ................................................25 Large Cap Growth Series .............................................29 Mid Cap Value Series ................................................33 Select 25(R)Series ..................................................38 Small Cap Growth Series .............................................41 Social Awareness Series .............................................46 Technology Series ...................................................50 Security Large Cap Value Fund .........................................53 Security Mid Cap Growth Fund ..........................................57 Statements of Assets and Liabilities ..................................61 Statements of Operations ..............................................64 Statements of Changes in Net Assets ...................................67 Financial Highlights ..................................................73 Notes to Financial Statements ........................................100 Report of Independent Auditors .......................................111 Special Shareholder Meeting ..........................................112 Director Disclosure ..................................................113 - -------------------------------------------------------------------------------- 2SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- AGRICULTURAL PRODUCTS - 0.9% Bunge, Ltd. .......................... 300 $ 8,250 Delta & Pine Land Company ............ 2,100 48,321 ---------- 56,571 ALUMINUM - 1.7% Alcoa, Inc. .......................... 2,700 70,632 Imco Recycling, Inc.* ................ 6,000 36,900 ---------- 107,532 APPAREL, ACCESSORIES & LUXURY GOODS - 1.3% Columbia Sportswear Company* ......... 1,100 58,025 Kellwood Company ..................... 700 23,415 ---------- 81,440 CATALOG RETAIL - 0.6% InterActiveCorp* ..................... 1,200 39,660 COMMODITY CHEMICALS - 0.4% NL Industries, Inc. .................. 1,700 27,659 COMMUNICATIONS EQUIPMENT - 0.1% 3Com Corporation* .................... 700 4,130 ADC Telecommunications, Inc. ......... 700 1,631 ---------- 5,761 CONSTRUCTION & ENGINEERING - 2.3% Chicago Bridge & Iron Company N.V. ...................... 1,200 32,592 Fluor Corporation .................... 3,100 115,723 ---------- 148,315 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS - 5.8% Agco Corporation* .................... 100 1,714 Caterpillar, Inc. .................... 2,000 137,680 CNH Global N.V. ...................... 1,500 19,230 Cummins, Inc. ........................ 1,000 44,430 Deere & Company ...................... 1,400 74,634 Lindsay Manufacturing Company ........ 1,300 26,130 Navistar International Corporation* .. 1,200 44,736 Volvo AB ADR ......................... 1,000 23,280 ---------- 371,834 CONSTRUCTION MATERIALS - 0.6% LaFarge S.A. ADR ..................... 2,200 35,970 DIVERSIFIED CAPITAL MARKETS - 0.8% J.P. Morgan Chase & Company .......... 1,500 51,495 DIVERSIFIED CHEMICALS - 0.7% Eastman Chemical Company ............. 1,200 40,200 Engelhard Corporation ................ 200 5,534 ---------- 45,734 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- DIVERSIFIED METALS & MINING - 2.6% Anglo American plc ADR ............... 400 $ 7,260 Arch Coal, Inc. ...................... 1,200 26,652 Consol Energy, Inc. .................. 600 11,148 Massey Energy Company ................ 400 5,320 Noranda, Inc. ........................ 9,000 92,340 Peabody Energy Corporation ........... 300 9,411 Penn Virginia Resource Partners, L.P. .............................. 100 2,989 Rio Tinto plc ADR .................... 100 8,775 ---------- 163,895 ELECTRICAL COMPONENTS & EQUIPMENT - 1.7% Emerson Electric Company ............. 600 31,590 Rockwell Automation, Inc. ............ 3,000 78,750 ---------- 110,340 ELECTRONIC EQUIPMENT MANUFACTURERS - 0.1% Thermo Electron Corporation* ......... 400 8,680 ELECTRONIC MANUFACTURING SERVICES - 0.6% Molex, Inc. .......................... 1,300 37,167 FERTILIZERS & AGRICULTURAL CHEMICALS - 1.2% Monsanto Company ..................... 3,200 76,608 FOOD RETAIL - 0.1% Wild Oats Markets, Inc.* ............. 600 6,558 FOREST PRODUCTS - 2.5% Louisiana-Pacific Corporation* ....... 3,800 52,364 Rayonier, Inc. ....................... 400 16,240 Weyerhaeuser Company ................. 1,500 87,675 ---------- 156,279 GOLD - 1.4% Placer Dome, Inc. .................... 6,400 88,000 HOME FURNISHINGS - 1.5% Furniture Brands International, Inc.* ............................. 1,100 26,510 Kimball International, Inc. (Cl. B) .. 4,800 70,368 ---------- 96,878 HOTELS, RESORTS & CRUISE LINES - 0.4% Fairmont Hotels & Resorts, Inc. ...... 900 23,175 HOUSEHOLD APPLIANCES - 0.6% Snap-On Inc. ......................... 1,300 35,945 INDUSTRIAL CONGLOMERATES - 1.0% Carlisle Companies, Inc. ............. 1,500 65,430 INDUSTRIAL GASES - 0.9% Praxair, Inc. ........................ 900 55,755 - -------------------------------------------------------------------------------- 3 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- INDUSTRIAL MACHINERY - 5.6% Flowserve Corporation* ............... 300 $ 6,090 Gardner Denver, Inc.* ................ 400 8,404 Harsco Corporation ................... 600 23,082 Idex Corporation ..................... 900 32,796 Ingersoll-Rand Company ............... 1,400 74,816 Joy Global, Inc.* .................... 2,000 31,400 Kennametal, Inc. ..................... 1,300 48,620 Lincoln Electric Holdings, Inc. ...... 1,400 31,094 Manitowoc Company, Inc. .............. 900 19,521 Metso Corporation ADR ................ 800 8,112 SPX Corporation* ..................... 900 40,752 Watts Industries, Inc. ............... 1,700 29,954 ---------- 354,641 INTEGRATED OIL & GAS - 1.4% Norsk Hydro ASA ADR .................. 1,532 78,684 Tesoro Petroleum Corporation* ........ 1,200 10,152 ---------- 88,836 INTERNET SOFTWARE & SERVICES - 0.3% Covad Communications Group, Inc.* ............................. 3,700 20,461 LEISURE FACILITIES - 0.1% Vail Resorts, Inc.* .................. 600 8,580 LEISURE PRODUCTS - 0.4% Brunswick Corporation ................ 900 23,112 MARINE - 2.1% Alexander & Baldwin, Inc. ............ 4,756 133,548 OIL & GAS DRILLING - 1.1% Pride International, Inc.* ........... 600 10,170 Rowan Companies, Inc.* ............... 2,400 58,992 ---------- 69,162 OIL & GAS EQUIPMENT & SERVICES - 0.7% Halliburton Company .................. 1,800 43,650 OIL & GAS REFINING, MARKETING & TRANSPORTATION - 1.9% Premcor, Inc.* ....................... 500 11,585 Sunoco, Inc. ......................... 1,000 40,220 Valero Energy Corporation ............ 1,900 72,713 ---------- 124,518 OTHER DIVERSIFIED FINANCIAL SERVICES - 0.8% Brascan Corporation .................. 1,700 42,857 St. Joe Company ...................... 300 9,624 ---------- 52,481 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PACKAGED FOODS & MEATS - 0.4% Cresud S.A. ADR* ..................... 2,400 $ 21,624 Pilgrims Pride Corporation (Cl. B) ... 500 6,250 ---------- 27,874 PAPER PACKAGING - 0.9% Longview Fibre Company ............... 1,600 15,632 Smurfit-Stone Container Corporation* ...................... 2,800 41,944 ---------- 57,576 PAPER PRODUCTS - 2.2% International Paper Company .......... 3,600 140,472 RAILROADS - 2.6% CSX Corporation ...................... 1,500 43,875 Kansas City Southern* ................ 600 6,642 Union Pacific Corporation ............ 2,000 116,340 ---------- 166,857 REAL ESTATE INVESTMENT TRUSTS - 0.3% Plum Creek Timber Company, Inc. ...... 800 20,352 SEMICONDUCTOR EQUIPMENT - 0.1% Mykrolis Corporation* ................ 600 7,284 SPECIALTY CHEMICALS - 0.8% Minerals Technologies, Inc. .......... 801 40,771 RPM International, Inc. .............. 1,000 13,060 ---------- 53,831 SPECIALTY STORES - 0.3% Barnes & Noble, Inc.* ............ 700 17,787 STEEL - 1.6% AK Steel Holding Corporation* ........ 1,100 2,200 Metal Management, Inc.* .............. 2,100 40,950 NN, Inc. ............................. 4,704 60,493 ---------- 103,643 TRADING COMPANIES & DISTRIBUTORS - 0.7% Applied Industrial Technology, Inc. .. 500 9,935 W.W. Grainger, Inc. .................. 700 33,285 ---------- 43,220 TRUCKING - 1.3% Heartland Express, Inc. .............. 1,700 40,834 Knight Transportation, Inc. .......... 1,600 40,112 ---------- 80,946 ---------- Total common stocks - 55.4% ........................... 3,535,512 - -------------------------------------------------------------------------------- 4 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT OR NUMBER MARKET U.S. GOVERNMENT & AGENCIES OF SHARES VALUE - -------------------------------------------------------------------------------- Federal Home Loan Bank, 1.017%, 11-05-03 .................. $375,000 $ 374,639 Federal Home Loan Mortgage Corporation: 0.98%, 10-02-03 ................... $150,000 149,996 1.098%, 12-04-03 .................. $250,000 249,538 ---------- 399,534 Federal National Mortgage Association: 1.00%, 10-15-03 ................... $275,000 274,890 1.07%, 11-13-03 ................... $125,000 124,846 1.06%, 12-10-03 ................... $450,000 449,090 ---------- 848,826 ---------- Total U.S. government & agencies - 25.4% .............. 1,622,999 ASSET BACKED SECURITIES - ----------------------- AUTO - 6.3% Ford Credit Auto Owner Trust, 1.24% - 2006(1) ................... $400,000 400,570 CREDIT CARDS - 6.2% First USA Credit Card Master Trust, 1.25% - 2007(1) ................... $400,000 400,213 ---------- Total asset backed securities -12.5% .................. 800,783 REPURCHASE AGREEMENT - 3.4% - --------------------------- State Street, 10-01-03 (Collateralized by FHLMC, 1.25%, 08-27-04 with a value of $225,430 and a repurchase amount of $219,501) ...................... $219,499 219,499 ---------- Total investments - 96.7% ............................. 6,178,793 SHORT POSITIONS - --------------- BREWERS - (0.8%) Anheuser-Busch Companies, Inc. ....... (1,100) (54,274) DISTILLERS & VINTERS - (0.2%) Brown-Forman Corporation (CI. B) ..... (200) (15,824) DIVERSIFIED COMMERCIAL SERVICES -(0.2%) DeVry, Inc.* ......................... (500) (11,830) HEALTH CARE DISTRIBUTORS - (0.2%) Cardinal Health, Inc. ................ (200) (11,678) HEALTH CARE SERVICES - (0.2%) Express Scripts, Inc.* ............... (200) (12,230) INTEGRATED TELECOMMUNICATION SERVICES - (0.3%) Alltel Corporation ................... (400) (18,536) LIFE & HEALTH INSURANCE - (0.3%) Aflac, Inc. .......................... (200) (6,460) MetLife, Inc. ........................ (400) (11,220) ---------- (17,680) MULTI-UTILITIES & UNREGULATED POWER - (0.1%) Questar Corporation .................. (200) (6,162) PRINCIPAL AMOUNT OR NUMBER MARKET SHORT POSITIONS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PERSONAL PRODUCTS - (0.1%) Chattem, Inc. ........................ (300) $ (4,164) UNIT INVESTMENT TRUST - (0.1%) iShares Lehman 20+ Year Treasury Bond Fund ......................... (100) (8,822) ---------- Total short positions - (2.5%) ........................ (161,200) Cash & other assets, less liabilities - 5.8% .......... 371,618 ---------- Total net assets - 100.0% ............................. $6,389,211 ========== For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $6,262,835. * Non-income producing security (1) Variable rate security. Rate indicated is rate effective at September 30, 2003. ADR (American Depositary Receipt) plc (public limited company) The Alpha Opportunity Fund's hybrid structure combines an actively managed long/short component with a passively managed Standard & Poor's 500 Composite Stock Price Index component. Approximately 50 percent of the portfolio is invested in a long/short strategy managed by Mainstream Investment Advisers, LLC; the remainder is independently invested in an index strategy managed by Security Management Company, LLC. - -------------------------------------------------------------------------------- 5 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - ENHANCED INDEX SERIES NOVEMBER 15, 2003
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SUBADVISOR, NORTHERN TRUST TO OUR SHAREHOLDERS: The Enhanced Index Series of Security Equity Fund began operations January 29, 1999. The core portfolio is designed to outperform the S&P 500 Index while retaining similar risk characteristics as the Index. Through the use of a proprietary multi-factor model, stocks which in our view have above-average potential for appreciation are overweighted, while stocks that have less than average potential are underweighted. During the one year period ended September 30, 2003, the portfolio was up 22.06% versus 24.40% for the benchmark, the Standard and Poor's 500 Stock Index. Since the inception of the series on January 29, 1999, the fund is down 5.08% versus a negative 3.87% for the benchmark.1 OPERATION OF THE PROPRIETARY SCREENS The Northern Trust Investments Quantitative Management group uses a proprietary model to overweight or underweight stocks relative to the index. Based on our model, stocks are overweighted when: the company reports a positive earnings surprise, the company becomes an acquisition target, it is announced that the company will be added to the S&P Index, the stock has a high dividend yield or a zero dividend yield (if further research shows that the company uses the funds for internal investment). Conversely, stocks are underweighted if there is a negative earnings surprise, negative financial statement trends, negative price downward price momentum, or it is announced that the company will be deleted from the S&P 500 Index. If none of these positive or negative factors apply, we will hold a neutral position in the stock. The Fund underperformed its benchmark during the 12 months ended September 30, 2003. The performance of most of the model's quantitative factors was weak this past year. Factors based on valuation and earnings characteristics tended to underperform this year as the market rewarded higher priced, smaller companies with weaker historical fundamentals. Earnings announcements did not elicit much market reaction for either positive or negative news as skepticism of earnings estimates continued to affect investor behavior. Indeed, companies with higher expected, but not necessarily realized growth, outperformed more value oriented stocks; a sharp contrast to prior years and most longer-term periods. Quickly changing market conditions resulted in mid- and long-term momentum strategies' weaker performance through most of the year. Effective trading of index changes, though, boosted performance in the past year; however, this year's changes were few and small relative to the index capitalization. Similarly, the relative scarcity of companies engaging in merger and acquisition activity resulted in few opportunities to benefit from trading in these stocks, although some benefit was captured through the year. MARKET OUTLOOK While as index fund managers we don't manage the portfolio according to a given outlook for the equity markets or the economy, we do monitor economic conditions and how they affect the financial markets. Global equity markets performed well in the third quarter, building on their strong gains of the previous three months. While the rally has been fueled in part by an improvement in investor sentiment, it also appears to have a sound basis in fundamentals. First, economic growth may be gathering momentum now that the concerns over corporate governance abuses, geopolitical tensions and the aftereffects of the bubble in technology stocks may be dissipating. Additionally, the benefits of low interest rates, tax reductions and increased government spending are being felt. A positive trend has become visible in some key measurements of the economy, and indicators of future activity may be pointing to a strong second half. Second, there appears to be an improvement in corporate profits, with the S&P 500 operating earnings growing by about 10 percent in the second quarter and beating analysts' reduced expectations. Third quarter and full-year estimates are now generally holding, and in some instances, increasing. Cost-cutting initiatives could produce strong profits if the economy accelerates. Sincerely, Enhanced Index Team (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduced Fund expenses and in the absence of such waivers, the performance quoted would be reduced. - -------------------------------------------------------------------------------- 6MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - ENHANCED INDEX SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
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$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Enhanced Index Series on January 29, 1999, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $7,388. By comparison, the same $10,000 investment would have been $8,319, based on the S&P 500 Index performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Microsoft Corporation 3.1% General Electric Company 3.1% Wal-Mart Stores, Inc. 2.6% Exxon Mobil Corporation 2.6% Pfizer, Inc. 2.5% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR SINCE INCEPTION ------ --------------- A Shares 22.06% (5.08%) (1-29-99) A Shares with sales charge 15.12% (6.28%) (1-29-99) B Shares 21.11% (5.85%) (1-29-99) B Shares with CDSC 16.11% (6.26%) (1-29-99) C Shares 21.24% (5.80%) (1-29-99) C Shares with CDSC 20.24% (5.80%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Fund and in the absence of such waiver, the performance quoted would be reduced. - -------------------------------------------------------------------------------- 7SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- ADVERTISING - 0.2% Interpublic Group of Companies, Inc. .............................. 557 $ 7,865 Omnicom Group, Inc. .................. 279 20,046 ---------- 27,911 AEROSPACE & DEFENSE - 1.6% Boeing Company ....................... 1,475 50,637 General Dynamics Corporation ......... 282 22,013 Goodrich Corporation ................. 138 3,345 Honeywell International, Inc. ........ 1,242 32,727 Lockheed Martin Corporation .......... 651 30,044 Northrop Grumman Corporation ......... 88 7,587 Raytheon Company ..................... 605 16,940 Rockwell Collins ..................... 264 6,666 United Technologies Corporation ...... 715 55,255 ---------- 225,214 AGRICULTURAL PRODUCTS - 0.1% Archer-Daniels-Midland Company ....... 1,030 13,503 AIR FREIGHT & LOGISTICS - 1.0% FedEx Corporation .................... 467 30,089 Ryder System, Inc. ................... 75 2,199 United Parcel Service, Inc. .......... 1,700 108,460 ---------- 140,748 AIRLINES - 0.2% Delta Air Lines, Inc. ................ 148 1,968 Southwest Airlines Company ........... 1,099 19,452 ---------- 21,420 ALUMINUM - 0.2% Alcoa, Inc. .......................... 1,233 32,255 APPAREL RETAIL - 0.3% Gap, Inc. ............................ 1,348 23,078 Limited Brands ....................... 1,300 19,604 TJX Companies, Inc. .................. 157 3,049 ---------- 45,731 APPAREL, ACCESSORIES & LUXURY GOODS - 0.3% Jones Apparel Group, Inc. ............ 474 14,187 Liz Claiborne, Inc. .................. 168 5,720 V.F. Corporation ..................... 390 15,175 ---------- 35,082 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- APPLICATION SOFTWARE - 0.4% AutoDesk, Inc. ....................... 52 $ 885 Citrix Systems, Inc.* ................ 247 5,454 Compuware Corporation* ............... 516 2,766 Intuit, Inc.* ........................ 528 25,470 Mercury Interactive Corporation* ..... 134 6,085 Parametric Technology Corporation* ...................... 315 983 PeopleSoft, Inc.* .................... 547 9,950 Siebel Systems, Inc.* ................ 724 7,037 ---------- 58,630 ASSET MANAGEMENT & CUSTODY BANKS - 0.8% Bank of New York Company, Inc. ....... 1,126 32,778 Federated Investors, Inc. (Cl. B) .... 144 3,989 Franklin Resources, Inc. ............. 366 16,181 Janus Capital Group, Inc. ............ 322 4,498 Mellon Financial Corporation ......... 622 18,747 T. Rowe Price Group, Inc. ............ 168 6,932 State Street Corporation ............. 710 31,950 ---------- 115,075 AUTO PARTS & EQUIPMENT - 0.2% Dana Corporation ..................... 195 3,009 Delphi Corporation ................... 807 7,303 Johnson Controls, Inc. ............... 236 22,326 Visteon Corporation .................. 200 1,320 ---------- 33,958 AUTOMOBILE MANUFACTURERS - 0.4% Ford Motor Company ................... 2,716 29,251 General Motors Corporation ........... 833 34,095 ---------- 63,346 BIOTECHNOLOGY - 1.2% Amgen, Inc.* ......................... 1,901 122,747 Biogen, Inc.* ........................ 221 8,449 Chiron Corporation* .................. 282 14,577 Genzyme Corporation* ................. 317 14,661 MedImmune, Inc.* ..................... 383 12,643 ---------- 173,077 BREWERS - 0.5% Anheuser-Busch Companies, Inc. ....... 1,265 62,415 Adolph Coors Company ................. 65 3,494 ---------- 65,909 BROADCASTING & CABLE TV - 1.0% Clear Channel Communications, Inc. .............................. 906 34,700 Comcast Corporation* ................. 3,366 103,942 Univision Communications, Inc.* ............................. 334 10,665 ---------- 149,307 - -------------------------------------------------------------------------------- 8 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED OF SHARES VALUE - -------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.3% American Standard Companies, Inc.* ............................. 238 $ 20,051 Masco Corporation .................... 708 17,332 ---------- 37,383 CASINOS & GAMING - 0.2% Harrah's Entertainment, Inc. ......... 156 6,569 International Game Technology ........ 873 24,575 ---------- 31,144 COMMERCIAL PRINTING - 0.0% R. R. Donnelley & Sons Company ....... 191 4,750 COMMUNICATIONS EQUIPMENT - 2.5% ADC Telecommunications, Inc.* ............................. 1,093 2,547 Andrew Corporation* .................. 182 2,237 Avaya, Inc.* ......................... 454 4,949 Ciena Corporation* ................... 700 4,137 Cisco Systems, Inc.* ................. 10,550 206,147 Comverse Technology, Inc.* ........... 856 12,806 Corning, Inc.* ....................... 1,840 17,333 JDS Uniphase Corporation* ............ 2,047 7,369 Lucent Technologies, Inc.* ........... 6,067 13,105 Motorola, Inc. ....................... 1,891 22,635 Qlogic Corporation* .................. 146 6,863 Qualcomm, Inc. ....................... 1,190 49,552 Scientific-Atlanta, Inc. ............. 236 7,351 Tellabs, Inc.* ....................... 618 4,196 ---------- 361,227 COMPUTER & ELECTRONICS RETAIL - 0.3% Best Buy Company, Inc.* .............. 474 22,524 Circuit City Stores, Inc. ............ 1,182 11,264 RadioShack Corporation ............... 250 7,103 ---------- 40,891 COMPUTER HARDWARE - 3.3% Apple Computer, Inc.* ................ 531 10,954 Dell, Inc.* .......................... 3,854 128,685 Gateway, Inc.* ....................... 400 2,264 Hewlett-Packard Company .............. 4,555 88,185 International Business Machines Corporation ....................... 2,575 227,450 NCR Corporation* 131 4,151 Sun Microsystems, Inc.* .............. 4,764 15,769 ---------- 477,458 COMPUTER STORAGE & PERIPHERALS - 0.5% EMC Corporation* ..................... 3,300 41,679 Lexmark International, Inc.* ......... 194 12,224 Network Appliance, Inc.* ............. 506 10,388 ---------- 64,291 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% Fluor Corporation .................... 53 $ 1,978 CONSTRUCTION & FARM MACHINERY - 0.5% Caterpillar, Inc. .................... 665 45,779 Cummins, Inc. ........................ 49 2,177 Deere & Company ...................... 94 5,011 Navistar International Corporation* .. 80 2,982 Paccar, Inc. ......................... 191 14,266 ---------- 70,215 CONSTRUCTION MATERIALS - 0.0% Vulcan Materials Company ............. 138 5,508 CONSUMER FINANCE - 1.3% American Express Company ............. 1,964 88,498 Capital One Financial Corporation .... 327 18,652 MBNA Corporation ..................... 2,271 51,779 Providian Financial Corporation* ..... 484 5,706 SLM Corporation ...................... 692 26,960 ---------- 191,595 DATA PROCESSING & OUTSOURCED SERVICE - 1.1% Automatic Data Processing, Inc. ...... 887 31,799 Computer Sciences Corporation* ....... 274 10,294 Concord EFS, Inc.* ................... 718 9,815 Convergys Corporation* ............... 712 13,058 Electronic Data Systems Corporation ....................... 129 2,606 First Data Corporation ............... 1,114 44,515 Fiserv, Inc.* ........................ 281 10,181 Paychex, Inc. ........................ 121 4,105 Sabre Holdings Corporation ........... 202 4,341 Sungard Data Systems, Inc.* .......... 731 19,233 ---------- 149,947 DEPARTMENT STORES - 0.6% Federated Department Stores, Inc. .... 274 11,481 J.C. Penney Company, Inc. ............ 383 8,185 Kohl's Corporation* .................. 501 26,804 May Department Stores Company ........ 73 1,798 Nordstrom, Inc. ...................... 544 13,497 Sears, Roebuck & Company ............. 462 20,203 ---------- 81,968 DISTILLERS & VINTNERS - 0.1% Brown-Forman Corporation (Cl. B) 82 .. 6,488 DISTRIBUTORS - 0.0% Genuine Parts Company ................ 60 1,919 - -------------------------------------------------------------------------------- 9 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- DIVERSIFIED BANKS - 4.2% Bank of America Corporation .......... 2,368 $ 184,799 Bank One Corporation ................. 1,736 67,096 Comerica, Inc. ....................... 251 11,697 Fleetboston Financial Corporation ....................... 1,556 46,913 U.S. Bancorp ......................... 2,894 69,427 Wachovia Corporation ................. 2,029 83,574 Wells Fargo & Company ................ 2,523 129,935 ---------- 593,441 DIVERSIFIED CAPITAL MARKETS - 0.7% J.P. Morgan Chase & Company .......... 3,015 103,505 DIVERSIFIED CHEMICALS - 0.9% Dow Chemical Company ................. 1,394 45,361 E.I. du Pont de Nemours & Company ........................... 1,136 45,451 Eastman Chemical Company ............. 100 3,350 Engelhard Corporation ................ 211 5,838 Hercules, Inc.* ...................... 129 1,462 PPG Industries, Inc. ................. 424 22,141 ---------- 123,603 DIVERSIFIED COMMERCIAL SERVICES - 0.6% Apollo Group, Inc.* .................. 411 27,138 Cendant Corporation* ................. 2,022 37,791 Cintas Corporation ................... 43 1,584 Deluxe Corporation ................... 73 2,930 Equifax, Inc. ........................ 220 4,899 H&R Block, Inc. ...................... 260 11,219 ---------- 85,561 DIVERSIFIED METALS & MINING - 0.1% Freeport-McMoran Copper & Gold, Inc. (Cl. B) ................ 239 7,911 Phelps Dodge Corporation* ............ 148 6,926 ---------- 14,837 DRUG RETAIL - 0.2% CVS Corporation ...................... 97 3,013 Walgreen Company ..................... 824 25,247 ---------- 28,260 ELECTRIC UTILITIES - 2.3% Allegheny Energy, Inc.* .............. 50 457 Ameren Corporation ................... 238 10,213 American Electric Power Company, Inc. ..................... 590 17,700 CMS Energy Corporation ............... 214 1,577 CenterPoint Energy, Inc. ............. 1,527 14,003 Cinergy Corporation .................. 259 9,505 Consolidated Edison, Inc. ............ 329 13,410 DTE Energy Company ................... 248 9,149 Dominion Resources, Inc. ............. 465 28,784 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (CONTINUED) Edison International* ................ 963 $ 18,393 Entergy Corporation .................. 336 18,194 Exelon Corporation ................... 635 40,323 FPL Group, Inc. ...................... 274 17,317 FirstEnergy Corporation .............. 446 14,227 PG&E Corporation* .................... 607 14,507 PPL Corporation ...................... 252 10,319 Pinnacle West Capital Corporation .... 134 4,757 Progress Energy, Inc. ................ 359 15,961 Progress Energy, Inc. - Contingent Value Obligation* ................. 400 64 Public Service Enterprise Group, Inc ........................ 547 22,974 Southern Company ..................... 1,078 31,607 Teco Energy, Inc. .................... 261 3,607 TXU Corporation ...................... 485 11,427 Xcel Energy, Inc. .................... 118 1,825 ---------- 330,300 ELECTRICAL COMPONENTS & EQUIPMENT - 0.4% American Power Conversion Corporation ....................... 355 6,085 Cooper Industries, Inc. .............. 167 8,021 Emerson Electric Company ............. 811 42,699 Power-One, Inc.* ..................... 100 1,029 Rockwell Automation, Inc. ............ 100 2,625 Thomas & Betts Corporation* .......... 71 1,125 ---------- 61,584 ELECTRONIC EQUIPMENT MANUFACTURERS - 0.3% Agilent Technologies, Inc.* .......... 1,059 23,414 PerkinElmer, Inc. .................... 167 2,557 Symbol Technologies, Inc. ............ 424 5,067 Tektronix, Inc.* ..................... 126 3,119 Thermo Electron Corporation* ......... 290 6,293 Waters Corporation* .................. 186 5,102 ---------- 45,552 ELECTRONIC MANUFACTURING SERVICES - 0.1% Jabil Circuit, Inc.* ................. 249 6,486 Sanmina-Sci Corporation* ............. 607 5,888 Solectron Corporation* ............... 985 5,762 ---------- 18,136 EMPLOYMENT SERVICES - 0.1% Monster Worldwide, Inc.* ............. 166 4,180 Robert Half International, Inc.* ..... 241 4,700 ---------- 8,880 ENVIRONMENTAL SERVICES - 0.2% Allied Waste Industries, Inc.* ....... 248 2,678 Waste Management, Inc. ............... 843 22,061 ---------- 24,739 - -------------------------------------------------------------------------------- 10 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- FERTILIZERS & AGRICULTURAL CHEMICALS - 0.1% Monsanto Company ..................... 742 $ 17,763 FOOD DISTRIBUTORS - 0.2% Sysco Corporation .................... 965 31,565 FOOD RETAIL - 0.3% Albertson's, Inc. .................... 87 1,790 Kroger Company* ...................... 1,114 19,907 Safeway, Inc.* ....................... 647 14,842 Supervalu, Inc. ...................... 53 1,265 ---------- 37,804 FOOTWEAR - 0.2% Nike, Inc. (Cl. B) ................... 400 24,328 Reebok International, Ltd. ........... 90 3,009 ---------- 27,337 FOREST PRODUCTS - 0.2% Louisiana-Pacific Corporation* ....... 211 2,908 Weyerhaeuser Company ................. 470 27,472 ---------- 30,380 GAS UTILITIES - 0.3% KeySpan Corporation .................. 234 8,209 Kinder Morgan, Inc. .................. 223 12,044 Nicor, Inc. .......................... 53 1,862 NiSource, Inc. ....................... 385 7,692 Peoples Energy Corporation ........... 73 3,021 Sempra Energy ........................ 307 9,014 ---------- 41,842 GENERAL MERCHANDISE STORES - 0.5% Big Lots, Inc.* ...................... 156 2,466 Dollar General Corporation ........... 480 9,600 Family Dollar Stores, Inc. ........... 262 10,451 Target Corporation ................... 1,362 51,252 ---------- 73,769 GOLD - 0.2% Newmont Mining Corporation Holding Company ................... 618 24,158 HEALTH CARE DISTRIBUTORS - 0.4% AmerisourceBergen Corporation ........ 174 9,405 Cardinal Health, Inc. ................ 661 38,596 McKesson Corporation ................. 426 14,182 ---------- 62,183 HEALTH CARE EQUIPMENT - 1.8% Applera Corporation - Applied Biosystems Group .................. 338 7,541 Baxter International, Inc. ........... 281 8,166 Becton, Dickinson & Company .......... 384 13,870 Biomet, Inc. ......................... 392 13,175 Boston Scientific Corporation* ....... 617 39,365 C.R. Bard, Inc. ...................... 85 6,035 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT (CONTINUED) Guidant Corporation .................. 468 $ 21,926 Medtronic, Inc. ...................... 1,831 85,911 St. Jude Medical, Inc.* .............. 262 14,088 Stryker Corporation .................. 323 24,325 Zimmer Holdings, Inc.* ............... 294 16,199 ---------- 250,601 HEALTH CARE FACILITIES - 0.2% HCA, Inc. ............................ 312 11,500 Health Management Association, Inc. ................. 373 8,135 Manor Care, Inc. ..................... 143 4,290 Tenet Healthcare Corporation* ........ 683 9,890 ---------- 33,815 HEALTH CARE SERVICES - 0.3% Express Scripts, Inc.* ............... 100 6,115 IMS Health, Inc. ..................... 377 7,955 Medco Health Solutions, Inc.* ........ 401 10,398 Quest Diagnostics, Inc. .............. 304 18,435 ---------- 42,903 HEALTH CARE SUPPLIES - 0.1% Bausch & Lomb, Inc. .............. 86 3,797 Millipore Corporation* ............... 59 2,718 ---------- 6,515 HOME ENTERTAINMENT SOFTWARE - 0.1% Electonic Arts, Inc.* ................ 222 20,475 HOME FURNISHINGS - 0.0% Leggett & Platt, Inc. ............ 275 5,948 HOME IMPROVEMENT RETAIL - 1.3% Home Depot, Inc. ..................... 3,439 109,532 Lowe's Companies, Inc. ............... 1,328 68,923 Sherwin-Williams Company ............. 221 6,500 ---------- 184,955 HOMEBUILDING - 0.2% Centex Corporation ................... 96 7,476 KB Home .............................. 231 13,781 Pulte Homes, Inc. .................... 92 6,257 ---------- 27,514 HOTELS, RESORTS & CRUISE LINES - 0.3% Carnival Corporation ................. 316 10,393 Hilton Hotels Corporation ............ 538 8,726 Marriott International, Inc. ......... 340 14,630 Starwood Hotels & Resorts Worldwide, Inc. ................... 300 10,440 ---------- 44,189 - -------------------------------------------------------------------------------- 11 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED OF SHARES VALUE - -------------------------------------------------------------------------------- HOUSEHOLD APPLIANCES - 0.1% Black & Decker Corporation ........... 112 $ 4,542 Snap-On, Inc. ........................ 86 2,378 Whirlpool Corporation ................ 104 7,048 ---------- 13,968 HOUSEHOLD PRODUCTS - 1.8% Clorox Company ....................... 337 15,458 Colgate-Palmolive Company ............ 816 45,606 Kimberly-Clark Corporation ........... 423 21,708 Procter & Gamble Company ............. 1,934 179,514 ---------- 262,286 HOUSEWARES & SPECIALTIES - 0.1% American Greetings Corporation* ...... 113 2,196 Fortune Brands, Inc. ................. 207 11,747 Newell Rubbermaid, Inc. .............. 71 1,539 Tupperware Corporation ............... 100 1,338 ---------- 16,820 HYPERMARKETS & SUPERCENTERS - 2.7% Costco Wholesale Corporation* ........ 674 20,948 Wal-Mart Stores, Inc. ................ 6562 366,488 ---------- 387,436 INDUSTRIAL CONGLOMERATES - 4.2% General Electric Company ............. 14,944 445,481 3M Company ........................... 1,190 82,193 Textron, Inc. ........................ 200 7,890 Tyco International, Ltd. ............. 2,987 61,024 ---------- 596,588 INDUSTRIAL GASES - 0.2% Air Products & Chemicals, Inc. ....... 359 16,191 Praxair, Inc. ........................ 252 15,611 ---------- 31,802 INDUSTRIAL MACHINERY - 0.8% Crane Company ........................ 69 1,615 Danaher Corporation .................. 244 18,022 Dover Corporation .................... 267 9,444 Eaton Corporation .................... 124 10,989 Illinois Tool Works, Inc. ............ 477 31,606 Ingersoll-Rand Company ............... 228 12,184 ITT Industries, Inc. ................. 121 7,241 Pall Corporation ..................... 515 11,557 Parker-Hannifin Corporation .......... 200 8,940 ---------- 111,598 INSURANCE BROKERS - 0.3% Aon Corporation ...................... 435 9,070 Marsh & McLennan Companies, Inc. ................... 812 38,659 ---------- 47,729 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- INTEGRATED OIL & GAS - 3.9% ChevronTexaco Corporation ............ 1,585 $113,248 ConocoPhillips ....................... 1,022 55,955 Exxon Mobil Corporation .............. 9,982 365,341 Marathon Oil Corporation ............. 51 1,454 Occidental Petroleum Corporation 598 21,068 ---------- 557,066 INTEGRATED TELECOMMUNICATION SERVICES - 2.8% Alltel Corporation ................... 488 22,614 AT&T Corporation ..................... 1,118 24,093 BellSouth Corporation ................ 2,728 64,599 CenturyTel, Inc. ..................... 496 16,809 Citizens Communications Company* ..... 337 3,778 Qwest Communications International, Inc.* .............. 2,370 8,058 SBC Communications, Inc. ............. 4,940 109,915 Sprint Corporation (FON Group) ....... 1,286 19,419 Verizon Communications, Inc. ......... 4,091 132,712 ---------- 401,997 INTERNET RETAIL - 0.4% Ebay, Inc.* .......................... 1,096 58,417 INTERNET SOFTWARE & SERVICES - 0.2% Yahoo!, Inc.* ........................ 898 31,771 INVESTMENT BANKING & BROKERAGE - 2.0% Bear Stearns Companies, Inc. ......... 282 21,094 Charles Schwab Corporation ........... 1965 23,403 Goldman Sachs Group, Inc. ............ 812 68,127 Lehman Brothers Holdings, Inc. ....... 505 34,885 Merrill Lynch & Company, Inc. ........ 1573 84,203 Morgan Stanley ....................... 1178 59,442 ---------- 291,154 IT CONSULTING & OTHER SERVICES - 0.1% Unisys Corporation* .................. 492 6,657 LEISURE PRODUCTS - 0.1% Brunswick Corporation ................ 122 3,133 Hasbro, Inc. ......................... 68 1,270 Mattel, Inc. ......................... 142 2,692 ---------- 7,095 LIFE & HEALTH INSURANCE - 1.0% Aflac, Inc. .......................... 794 25,646 Jefferson-Pilot Corporation .......... 225 9,986 John Hancock Financial Services, Inc. .................... 414 13,993 Lincoln National Corporation ......... 250 8,845 MetLife, Inc. ........................ 1,561 43,786 Prudential Financial, Inc. ........... 828 30,934 Torchmark Corporation ................ 190 7,722 UNUMProvident Corporation ............ 125 1,846 ---------- 142,758 - -------------------------------------------------------------------------------- 12 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- MANAGED HEALTH CARE - 0.9% Aetna, Inc. .......................... 237 $ 14,464 Anthem, Inc.* ........................ 206 14,694 Humana, Inc.* ........................ 774 13,971 UnitedHealth Group, Inc. 1,078 54,245 WellPoint Health Networks, Inc.* ............................. 338 26,053 ---------- 123,427 METAL & GLASS CONTAINERS - 0.2% Ball Corporation ..................... 289 15,606 Pactiv Corporation* .................. 741 15,027 ---------- 30,633 MOTORCYCLE MANUFACTURERS - 0.2% Harley-Davidson, Inc. ................ 459 22,124 MOVIES & ENTERTAINMENT - 1.9% AOL Time Warner, Inc.* ............... 7,259 109,683 Viacom, Inc. (Cl. B) ................. 2,623 100,461 Walt Disney Company .................. 3,032 61,155 ---------- 271,299 MULTI-LINE INSURANCE - 1.7% American International Group, Inc. ... 3,890 224,453 Hartford Financial Group, Inc. ....... 71 3,737 Loews Corporation .................... 287 11,586 ---------- 239,776 MULTI-UTILITIES & UNREGULATED POWER - 0.4% AES Corporation* ..................... 735 5,454 Calpine Corporation* ................. 452 2,210 Constellation Energy Group, Inc. .............................. 496 17,747 Duke Energy Corporation .............. 1,345 23,954 Dynegy, Inc.* ........................ 443 1,595 Williams Companies, Inc. ............. 614 5,784 ---------- 56,744 OFFICE ELECTRONICS - 0.1% Xerox Corporation .................... 1,146 11,758 OFFICE SERVICES & SUPPLIES - 0.1% Avery Dennison Corporation ........... 52 2,627 Pitney Bowes, Inc. ................... 381 14,600 ---------- 17,227 OIL & GAS DRILLING - 0.2% Nabors Industries, Inc.* ............. 241 8,980 Noble Corporation* ................... 229 7,784 Rowan Companies, Inc.* ............... 172 4,228 Transocean, Inc. ..................... 441 8,820 ---------- 29,812 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- OIL & GAS EQUIPMENT & SERVICES - 0.5% Baker Hughes, Inc. ................... 536 $ 15,860 BJ Services Company* ................. 264 9,021 Halliburton Company .................. 174 4,220 Schlumberger, Ltd. ................... 853 41,285 ---------- 70,386 OIL & GAS EXPLORATION & PRODUCTION - 0.8% Anadarko Petroleum Corporation ....... 398 16,620 Apache Corporation ................... 258 17,890 Burlington Resources, Inc. ........... 318 15,328 Devon Energy Corporation ............. 365 17,589 EOG Resources, Inc. .................. 409 17,072 Kerr-McGee Group ..................... 335 14,954 Unocal Corporation ................... 356 11,221 ---------- 110,674 OIL & GAS REFINING,MARKETING & TRANSPORTATION - 0.0% Ashland, Inc. ........................ 45 1,478 Sunoco, Inc. ......................... 45 1,810 ---------- 3,288 OTHER DIVERSIFIED FINANCIAL SERVICES - 2.6% Citigroup, Inc. ...................... 7,714 351,064 Principal Financial Group, Inc. ...... 486 15,061 ---------- 366,125 PACKAGED FOODS & MEATS - 1.0% Campbell Soup Company ................ 588 15,582 ConAgra Foods, Inc. .................. 780 16,567 General Mills, Inc. .................. 564 26,547 H.J. Heinz Company ................... 510 17,483 Hershey Foods Corporation ............ 48 3,489 Kellogg Company ...................... 594 19,810 McCormick & Company, Inc. ............ 199 5,457 Sara Lee Corporation ................. 1,178 21,628 Wm. Wrigley Jr. Company .............. 341 18,857 ---------- 145,420 PAPER PACKAGING - 0.1% Sealed Air Corporation* .............. 149 7,037 Temple-Inland, Inc. .................. 68 3,301 ---------- 10,338 PAPER PRODUCTS - 0.3% Boise Cascade Corporation ............ 69 1,904 Georgia-Pacific Corporation .......... 341 8,266 International Paper Company .......... 715 27,899 ---------- 38,069 PERSONAL PRODUCTS - 0.5% Alberto-Culver Company (Cl. B) ....... 97 5,706 Avon Products, Inc. .................. 360 23,242 Gillette Company ..................... 1,518 48,546 ---------- 77,494 - -------------------------------------------------------------------------------- 13 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PHARMACEUTICALS - 8.3% Abbott Laboratories .................. 2,324 $ 98,886 Allergan, Inc. ....................... 200 15,746 Bristol-Myers Squibb Company ......... 2,889 74,132 Eli Lilly & Company .................. 1,685 100,089 Forest Laboratories, Inc.* ........... 548 28,195 Johnson & Johnson .................... 4,116 203,824 King Pharmaceuticals, Inc.* .......... 339 5,136 Merck & Company, Inc. ................ 3,363 170,235 Pfizer, Inc. ......................... 11,847 359,912 Schering-Plough Corporation .......... 1,089 16,596 Watson Pharmaceuticals, Inc.* ........ 166 6,921 Wyeth ................................ 2,187 100,821 ---------- 1,180,493 PHOTOGRAPHIC PRODUCTS - 0.1% Eastman Kodak Company ................ 756 15,831 PROPERTY & CASUALTY INSURANCE - 1.4% Ace, Ltd. ............................ 397 13,133 Allstate Corporation ................. 1,074 39,233 Ambac Financial Group, Inc. .......... 171 10,944 Chubb Corporation .................... 393 25,498 Cincinnati Financial Corporation ..... 256 10,230 MBIA, Inc. ........................... 225 12,368 Progressive Corporation .............. 334 23,083 Safeco Corporation ................... 220 7,757 St. Paul Companies, Inc. ............. 322 11,924 Travelers Property Casualty Corporation (Cl. B) ............... 1,504 23,884 XL Capital, Ltd. ..................... 202 15,643 ---------- 193,697 PUBLISHING & PRINTING - 0.6% Dow Jones & Company, Inc. ............ 126 5,966 Gannett Company, Inc. ................ 406 31,489 Knight-Ridder, Inc. .................. 126 8,404 McGraw-Hill Companies, Inc. .......... 279 17,334 Meredith Corporation ................. 67 3,093 Tribune Company ...................... 461 21,160 ---------- 87,446 RAILROADS - 0.5% Burlington Northern Santa Fe Corporation 604 17,437 CSX Corporation ...................... 358 10,472 Norfolk Southern Corporation ......... 645 11,933 Union Pacific Corporation ............ 544 31,644 ---------- 71,486 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS - 0.4% Apartment Investment & Management Company ........................... 117 $ 4,605 Equity Office Properties Trust ....... 635 17,482 Equity Residential ................... 427 12,503 Plum Creek Timber Company, Inc. ...... 251 6,385 Prologis ............................. 267 8,077 Simon Property Group, Inc. ........... 292 12,725 ---------- 61,777 REGIONAL BANKS - 1.7% Amsouth Bancorporation ............... 562 11,926 BB&T Corporation ..................... 832 29,877 Charter One Financial, Inc. .......... 600 18,360 Fifth Third Bancorp .................. 569 31,449 First Tennessee National Corporation ....................... 201 8,534 Huntington Bancshares, Inc. .......... 366 7,243 Keycorp .............................. 654 16,723 Marshall & Ilsley Corporation ........ 319 10,055 National City Corporation ............ 930 27,398 PNC Financial Services ............... 412 19,603 Regions Financial Corporation ........ 348 11,919 Southtrust Corporation ............... 529 15,547 Suntrust Banks, Inc. ................. 142 8,573 Synovus Financial Corporation ........ 434 10,846 Union Planters Corporation ........... 312 9,872 Zions Bancorporation ................. 124 6,925 ---------- 244,850 RESTAURANTS - 0.4% Darden Restaurants, Inc. ............. 226 4,294 McDonald's Corporation ............... 1,147 27,000 Starbucks Corporation* ............... 595 17,136 Wendy's International, Inc. .......... 43 1,389 Yum! Brands, Inc.* ................... 430 12,737 ---------- 62,556 SEMICONDUCTOR EQUIPMENT - 0.5% Applied Materials, Inc.* ............. 2,461 44,643 KLA-Tencor Corporation* .............. 291 14,957 Novellus Systems, Inc.* .............. 217 7,324 Teradyne, Inc.* ...................... 273 5,078 ---------- 72,002 - -------------------------------------------------------------------------------- 14 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- SEMICONDUCTORS - 3.3% Advanced Micro Devices, Inc.* ........ 475 $ 5,277 Altera Corporation* .................. 559 10,565 Analog Devices, Inc.* ................ 540 20,531 Applied Micro Circuits Corporation* .. 400 1,948 Broadcom Corporation* ................ 756 20,125 Intel Corporation .................... 9,793 269,405 LSI Logic Corporation* ............... 1,322 11,885 Linear Technology Corporation ........ 461 16,508 Maxim Integrated Products, Inc. ...... 479 18,921 Micron Technology, Inc.* ............. 1,536 20,613 National Semiconductor Corporation* .. 259 8,363 Nvidia Corporation* .................. 224 3,564 PMC-Sierra, Inc.* .................... 227 2,994 Texas Instruments, Inc. .............. 1,860 42,408 Xilinx, Inc.* ........................ 504 14,369 ---------- 467,476 SOFT DRINKS - 2.0% Coca-Cola Company .................... 3,305 141,983 Coca-Cola Enterprises, Inc. .......... 707 13,475 Pepsi Bottling Group, Inc. ........... 435 8,952 PepsiCo, Inc. ........................ 2,581 118,287 ---------- 282,697 SPECIALIZED FINANCE - 0.1% Moody's Corporation .................. 388 21,328 SPECIALTY CHEMICALS - 0.2% Ecolab, Inc. ......................... 409 10,327 International Flavors & Fragrances, Inc. .................. 45 1,489 Rohm & Haas Company .................. 348 11,641 Sigma-Aldrich Corporation ............ 115 5,973 ---------- 29,430 SPECIALTY STORES - 0.7% AutoNation, Inc.* .................... 880 15,435 AutoZone, Inc.* ...................... 138 12,355 Bed Bath & Beyond, Inc.* ............. 449 17,143 Office Depot, Inc.* .................. 949 13,333 Staples, Inc.* ....................... 1,101 26,149 Tiffany & Company .................... 446 16,649 Toys 'R' Us, Inc.* ................... 316 3,801 ---------- 104,865 STEEL - 0.0% Allegheny Technologies, Inc. ......... 97 635 Worthington Industries, Inc. ......... 162 2,035 ---------- 2,670 SYSTEMS SOFTWARE - 4.4% Adobe Systems, Inc. .................. 355 13,937 BMC Software, Inc.* .................. 365 5,084 Computer Associates International, Inc. ............... 855 22,324 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- SYSTEMS SOFTWARE (CONTINUED) Microsoft Corporation ................ 16,066 $ 446,474 Novell, Inc.* ........................ 470 2,505 Oracle Corporation* .................. 7,874 88,346 Symantec Corporation* ................ 385 24,263 Veritas Software Corporation* ........ 888 27,883 ---------- 630,816 THIRFTS & MORTGAGE FINANCE - 1.7% Countrywide Financial Corporation .... 201 15,734 Freddie Mac .......................... 1,022 53,502 Fannie Mae ........................... 1,463 102,703 Golden West Financial Corporation .... 234 20,945 Washington Mutual, Inc. .............. 1,411 55,551 ---------- 248,435 TIRES & RUBBER - 0.0% Cooper Tire & Rubber Company ......... 93 1,476 Goodyear Tire & Rubber Company ....... 221 1,452 ---------- 2,928 TOBACCO - 1.1% Alteria Group, Inc. .................. 3251 142,394 UST, Inc. ............................ 530 18,645 ---------- 161,039 TRADING COMPANIES & DISTRIBUTORS - 0.1% W.W. Grainger, Inc. .................. 142 6,752 UNIT INVESTMENT TRUST - 1.0% S&P Depositary Receipts .............. 1460 145,883 WIRELESS TELECOMMUNICATION SERVICES - 0.5% AT&T Wireless Services* .............. 3,920 32,066 Nextel Communications, Inc.* ......... 1,591 31,327 Sprint Corporation (PCS Group)* ...... 1,344 7,701 ---------- 71,094 ----------- Total common stocks - 97.1% ........................... 13,885,329 U.S. GOVERNMENT SECURITIES - 0.4% - --------------------------------- U.S. Treasury Bill, 1.175%, 10-16-03(1) $50,000 49,984 REPURCHASE AGREEMENT - 3.6% - --------------------------- United Missouri Bank, 0.65%, 10-01-03 (Collateralized by FNMA, 10-01-03 with a value of $529,000 and a repurchase amount of $518,010) ............... $518,000 518,000 ---------- Total investments - 101.1% ............................ 14,453,313 Liabilities, less cash & other assets - (1.1%) ........ (155,934) ----------- Total net assets - 100.0% ............................. $14,297,379 =========== For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $15,511,420. *Non-income producing security (1) Security is segregated as collateral for futures, options or forward exchange contracts. - -------------------------------------------------------------------------------- 15 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - EQUITY SERIES NOVEMBER 15, 2003
![]() Terry Milberger Senior Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: Following the most severe bear market since the early 1970s, equity investors were finally rewarded with positive returns for the one-year period ended September 30, 2003. Security Equity Fund returned a positive 17.49% for the period, lagging the benchmark S&P 500 index's return of 24.40% and the Fund's peer group median return of 20.72% for the period.1 Our strategy for Equity Fund continues to be one of owning a mixture of growth and value stocks, skewing the mix based upon the relative value of growth and value categories. When this fiscal year began, the Fund emphasized consistent growth names with visibility given our view that the economy would be slow to recover. With the majority of the market falling into this line of thinking, the valuation gap between quality names with consistent growth prospects and cyclical names with earnings leverage became stretched to extremes, especially around the start of the Iraqi war. While in hindsight this created an opportunity to skew the portfolio to more cyclical and value names, we kept the Fund focused on growth given our views that the economic recovery would be muted. This is the main reason the Fund underperformed versus its benchmark during the period. INDUSTRIALS AND ENERGY STOCKS BOOST PERFORMANCE Despite a slightly underweighted position to its benchmark, the industrials sector returned 23% for the Fund compared to a 21% return for the benchmark. United Technologies, a diversified industrial company that makes Otis elevators, helicopters and aircraft engines among other products, benefited from the economic recovery. The stock returned 38% for the period. General Electric, another good performer, gained 24%. Stock selection in energy helped the Fund return 20% compared to a 16% return for the benchmark. Apache, an exploration and production company, returned 23%. Halliburton, an energy equipment and service firm, advanced 57%. HEALTH CARE AND TECHNOLOGY DAMPEN TOTAL RETURN An overweighted position in health care hurt the Fund's performance with the exception of a strong performance by Amgen, a leading biotech company with important new drugs to treat rheumatoid arthritis and cancer. The stock gained 54% for the period. Expectations were that health care stocks would grow earnings between 10% and 15% during 2003. However, with a muted economic recovery and political uncertainty surrounding the health care industry, the health care sector did not look as interesting to investors. An underweight position in the information technology sector relative to the index also dampened overall performance. The technology sector returned 59% for the benchmark compared to 48% for the Fund. Technology stocks are typically cyclical by nature and tend to outperform as investors perceive the economy is recovering. In reality, the economic recovery has been moderate due to a lack of corporate spending. GREAT COMPANIES MAKE GREAT STOCKS OVER TIME Looking forward, we expect cyclical stocks to cool down and the economic recovery to moderate. Driven primarily by the mortgage refinancing boom and federal tax cuts, we anticipate that for a strong economic recovery to continue, it will require corporate capital spending to drive job growth and manufacturing orders. With this outlook and the performance of cyclicals during the last six months, we are holding our course by continuing our ownership of consistent growth names. While this approach underperformed over the last six months, we believe it will offer outperformance in the future. As always, we remain convinced that long-term investing in equities is the best way for investors to meet their financial goals. We believe that patience will be rewarded. Sincerely, Terry Milberger Senior Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or redemptions of shares. - -------------------------------------------------------------------------------- 16MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - EQUITY SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/equityseries.jpg)
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Equity Series on September 30, 1993, and reflects deduction of the 5.75% sales load. On September 30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $19,035. By comparison, the same $10,000 investment would have grown to $26,072 based on the S&P 500 Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Microsoft Corporation 4.5% General Electric Company 4.2% Pfizer, Inc. 4.1% S&P Depositary Receipts 3.9% Citigroup, Inc. 3.7% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION --------------------------------------- A Shares 17.49% (2.63%) 7.28% N/A A Shares with sales charge 10.74% (3.78%) 6.65% N/A B Shares 16.59% (3.57%) N/A 6.34% (10-19-93) B Shares with CDSC 11.59% (3.96%) N/A 6.34% (10-19-93) C Shares 16.60% N/A N/A (7.89%) (1-29-99) C Shares with CDSC 15.60% N/A N/A (7.89%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 17SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - EQUITY SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- ADVERTISING - 1.1% Omnicom Group, Inc. .................. 80,000 $ 5,748,000 AEROSPACE & DEFENSE - 2.3% General Dynamics Corporation ......... 60,000 4,683,600 United Technologies Corporation ...... 90,400 6,986,112 ----------- 11,669,712 ALUMINUM - 0.8% Alcoa, Inc. .......................... 145,000 3,793,200 APPLICATIONS SOFTWARE - 1.4% Intuit, Inc.* ........................ 140,000 6,753,600 ASSET MANAGEMENT & CUSTODY BANKS - 0.9% Bank of New York Company, Inc. ....... 150,000 4,366,500 BIOTECHNOLOGY - 1.3% Amgen, Inc.* ......................... 100,000 6,457,000 BREWERS - 1.2% Anheuser-Busch Companies, Inc. ....... 120,000 5,920,800 BROADCASTING & CABLE TV - 2.2% Comcast Corporation* ................. 350,000 10,808,000 COMMUNICATIONS EQUIPMENT - 2.7% Cisco Systems, Inc.* ................. 500,000 9,770,000 Nokia OYJ ADR ........................ 225,000 3,510,000 ----------- 13,280,000 COMPUTER HARDWARE - 3.5% Dell, Inc.* .......................... 200,900 6,708,051 International Business Machines Corporation ....................... 120,000 10,599,600 ----------- 17,307,651 CONSUMER FINANCE - 0.8% MBNA Corporation ..................... 180,900 4,124,520 DATA PROCESSING & OUTSOURCED SERVICE - 1.3% First Data Corporation 165,000 6,593,400 DIVERSIFIED BANKS - 2.7% Bank of America Corporation .......... 70,000 5,462,800 Wells Fargo & Company ................ 160,000 8,240,000 ----------- 13,702,800 DRUG RETAIL - 0.4% Walgreen Company ..................... 65,000 1,991,600 ELECTRONIC MANUFACTURING SERVICES - 0.6% Molex, Inc. .......................... 100,000 2,859,000 GENERAL MERCHANDISE STORES - 1.1% Target Corporation ................... 150,000 5,644,500 HEALTH CARE DISTRIBUTORS - 1.9% Cardinal Health, Inc. ................ 160,000 9,342,400 HEALTH CARE EQUIPMENT - 1.7% Medtronic, Inc. ...................... 175,800 8,248,536 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- HOME IMPROVEMENT RETAIL - 2.1% Home Depot, Inc. ..................... 240,000 $ 7,644,000 Lowe's Companies, Inc. ............... 50,000 2,595,000 ----------- 10,239,000 HOTELS, RESORTS & CRUISE LINES - 0.8% Carnival Corporation ................. 120,000 3,946,800 HOUSEHOLD PRODUCTS - 3.2% Colgate-Palmolive Company ............ 100,000 5,589,000 Procter & Gamble Company ............. 110,000 10,210,200 ----------- 15,799,200 HYPERMARKETS & SUPERCENTERS - 2.5% Wal-Mart Store, Inc. ................. 220,000 12,287,000 INDUSTRIAL CONGLOMERATES - 5.6% 3M Company ........................... 100,000 6,907,000 General Electric Company ............. 700,000 20,867,000 ----------- 27,774,000 INDUSTRIAL GASES - 1.0% Praxair, Inc. ........................ 80,000 4,956,000 INSURANCE BROKERS - 0.7% Marsh & McLennan Companies, Inc. .............................. 70,000 3,332,700 INTEGRATED OIL & GAS - 3.6% ChevronTexaco Corporation ............ 70,000 5,001,500 Exxon Mobil Corporation .............. 350,000 12,810,000 ----------- 17,811,500 INTEGRATED TELECOMMUNICATIONS SERVICES - 1.5% SBC Communications, Inc. ............. 200,000 4,450,000 Verizon Communications, Inc. ......... 100,000 3,244,000 ----------- 7,694,000 INVESTMENT BANKING & BROKERAGE - 2.7% Goldman Sachs Group, Inc. ............ 50,000 4,195,000 Merrill Lynch & Company, Inc. ........ 90,500 4,844,465 Morgan Stanley ....................... 90,000 4,541,400 ----------- 13,580,865 LEISURE PRODUCTS - 0.8% Mattel, Inc. ......................... 200,000 3,792,000 LIFE & HEALTH INSURANCE - 1.9% Aflac, Inc. .......................... 160,000 5,168,000 MetLife, Inc. ........................ 160,000 4,488,000 ----------- 9,656,000 MANAGED HEALTH CARE - 0.7% UnitedHealth Group, Inc. ............. 70,000 3,522,400 MOTORCYCLE MANUFACTURERS - 1.9% Harley-Davidson, Inc. ................ 198,000 9,543,600 - -------------------------------------------------------------------------------- 18 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - EQUITY SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- MOVIES & ENTERTAINMENT - 2.9% Time Warner, Inc* .................... 440,000 $6,648,400 Viacom, Inc. (Cl. B) ................. 200,000 7,660,000 ----------- 14,308,400 MULTI-LINE INSURANCE - 2.5% American International Group, Inc. ....................... 220,000 12,694,000 OIL & GAS EQUIPMENT & SERVICES - 1.3% BJ Services Company* ................. 50,000 1,708,500 Halliburton Company .................. 200,000 4,850,000 ----------- 6,558,500 OIL & GAS EXPLORATION & PRODUCTION - 1.8% Apache Corporation ................... 70,000 4,853,800 Devon Energy Corporation ............. 90,000 4,337,100 ----------- 9,190,900 OTHER DIVERSIFIED FINANCIAL SERVICES - 3.7% Citigroup, Inc. ...................... 401,766 18,284,371 PHARMACEUTICALS - 10.4% Abbott Laboratories .................. 140,000 5,957,000 Eli Lilly & Company .................. 50,000 2,970,000 Johnson & Johnson .................... 240,000 11,884,800 Merck & Company, Inc. ................ 120,000 6,074,400 Pfizer, Inc. ......................... 668,840 20,319,359 Wyeth ................................ 100,000 4,610,000 ----------- 51,815,559 PROPERTY & CASUALTY INSURANCE - 1.0% Chubb Corporation .................... 80,000 5,190,400 PUBLISHING - 1.1% Belo Corporation ..................... 110,000 2,667,500 Gannett Company, Inc ................. 40,000 3,102,400 ----------- 5,769,900 SEMICONDUCTOR EQUIPMENT - 0.6% Applied Materials, Inc.* ............. 181,000 3,283,340 SEMICONDUCTORS - 2.4% Analog Devices, Inc.* ................ 65,000 2,471,300 Intel Corporation .................... 350,000 9,628,500 ----------- 12,099,800 SOFT DRINKS - 2.7% Coca-Cola Company .................... 100,000 4,296,000 PepsiCo, Inc. ........................ 200,000 9,166,000 ----------- 13,462,000 SYSTEMS SOFTWARE - 4.5% Microsoft Corporation ................ 810,000 22,509,900 THRIFTS & MORTGAGE FINANCE - 1.6% Fannie Mae ........................... 115,000 8,073,000 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- UNIT INVESTMENT TRUST - 3.9% S&P Depositary Receipts Trust ........ 194,200 $ 19,404,464 ------------ Total common stocks - 97.3% ....... 485,190,818 U. S. GOVERNMENT & AGENCIES - ------------------------------- Federal Home Loan Bank: 1.0%, 10-17-03 .................... $1,100,000 1,099,511 Federal Home Loan Mortgage Corporation: 1.03%, 10-28-03 ................... $3,600,000 3,597,219 Federal National Mortgage Association: 1.01%, 10-03-03 ................... $2,300,000 2,299,871 1.03%, 10-06-03 ................... $1,700,000 1,699,761 1.02%, 10-09-03 ................... $1,400,000 1,399,683 1.03%, 10-22-03 ................... $1,700,000 1,698,979 ------------ 7,098,294 ------------ Total U. S. government & agencies - 2.4% .............. 11,795,024 ------------ Total investments - 99.7% ............................. 496,985,842 Cash & other assets, less liabilities - 0.3% .......... 1,559,108 ------------ Total net assets - 100.0% ............................. $498,544,950 ============ The identified cost of investments owned at September 30, 2003 was the same for federal income tax and financial statement purposes. *Non-income producing security ADR (American Depositary Receipt) - -------------------------------------------------------------------------------- 19 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - GLOBAL SERIES NOVEMBER 15, 2003
![]() William L. Wilby Portfolio Manager | ![]() Subadvisor OppenheimerFunds, Inc. |
TO OUR SHAREHOLDERS: Over the last 12 months, the Security Global Fund continued to seek to capitalize on global growth trends of mass affluence, new technologies, corporate restructuring and aging populations. Within each trend, we looked for reasonably priced companies with strong growth prospects. Our contrarian stock selection process often led us to out of favor, but well-managed companies whose stock price had declined in the marketplace. The Fund returned 23.08% for the 12-month period ended September 30, 2003, versus 26.07% for the Fund's benchmark, the MSCI World Index1. During the period, the Fund benefited from its selective investments in the technology and consumer staples sectors. KDDI Corp., the number two wireless carrier in Japan, was the Fund's best performing stock during the period on strong demand for wireless products. National Semiconductor Corp. also performed very well after completing a long restructuring, as the company was able to focus on higher-margin segments of its product line. In addition, the Fund received favorable performance from its holdings in Qualcomm, Inc., Vodafone Group plc and Yahoo Japan Corp. During the latter half of the period, we sold portions of the Fund's holdings in Ericsson and National Semiconductor, replacing them with more stable growth companies. In consumer staples, Reckitt Benckiser plc and Wella AG performed very well as consumer spending continued to be strong. However, we did trim these holdings as the markets declined in the first quarter of 2003. Two companies in particular detracted from the Fund's overall return. Although we had sold most of our position, Sony Corp. detracted from performance due to management's inability to turn around a slide in the brand quality and reputation. Tandberg ASA, a carrier in video conferencing, had disappointing earnings during the year and was punished in the marketplace. The financial services sector as a whole was a slight drag on the Fund's relative performance. Financial stocks were hit very hard during the bear market, particularly in Europe, where many of the insurance companies held large equity portfolios that declined in the first half of the period. One area in which we drastically reduced the Fund's investment over the last 12-months was video games. As the product cycle for video game software ended, we believed it was a good idea to decrease weightings in this sector. Throughout 2002 and into early 2003, Electronic Arts, Inc. was our largest holding in video game software, but that position was trimmed back during the period. From a country perspective, the United States was the biggest contributor to performance as most of the Fund's technology holdings were based there. The Fund also did well in Japan, where we generally kept a market weight throughout the period, but solid stock selection led to good performance in the country versus the benchmark. Finally, the Fund received positive returns from Brazil, which is not part of the MSCI World Index, where we have a holding in Empresa Brasileira de Aeronautica SA (Embraer), the regional jet manufacturer. Please remember, country, sector and market capitalization weightings were the result of individual stock selection and do not reflect predetermined target allocations. The Fund's holdings, allocations, management and strategies are subject to change. Investing in foreign securities poses additional risks, such as currency fluctuations and higher expenses. Sincerely, William L. Wilby Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charge or taxes that a shareholder would pay on distributions or the redemption of shares. - -------------------------------------------------------------------------------- 20MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - GLOBAL SERIES NOVEMBER 15, 2003 - --------------------------------- PERFORMANCE ----------------------------------
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/globalseries.jpg)
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Global Series on October 31, 1993, and reflects deduction of the 5.75% sales load. On September 30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $20,596. By comparison, the same $10,000 investment would have grown to $18,462 based on the MSCI World Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Sirius Satellite Radio, Inc. 3.4% KDDICorporation 2.8% Cadence Design Systems, Inc. 2.8% Qualcomm, Inc. 2.2% Reckitt Benckiser plc 2.1% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ---------------------------------------- A Shares 23.08% 8.64% 8.13% N/A A Shares with sales charge 15.99% 7.35% 7.49% N/A B Shares 22.95% 8.17% N/A 7.48% (10-19-93) B Shares with CDSC 17.95% 7.87% N/A 7.48% (10-19-93) C Shares 22.21% N/A N/A 3.88% (1-29-99) C Shares with CDSC 21.21% N/A N/A 3.88% (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 21SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - GLOBAL SERIES - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT OR NUMBER MARKET CONVERTIBLE BOND OF SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.2% Nektar Therapeutics, 3.00% - 2010 .... $ 117,000 $ 149,029 FOREIGN BOND - ------------ INDIA - 0.0% Hindustan Lever, Ltd., 9.00% - 2005(1) 1,036,800 1,448 COMMON STOCKS - ------------- AUSTRALIA - 0.5% Australia & New Zealand Banking Group, Ltd. ............... 25,920 314,914 BERMUDA - 0.8% Ace, Ltd. ............................ 15,990 528,949 BRAZIL - 1.6% Companhia de Bebidas das Americas ADR .................. 17,857 386,604 Empresa Brasileira de Aeronautica S.A. ADR .............. 29,468 621,775 ---------- 1,008,379 CANADA - 2.5% Bombardier, Inc. (Cl. B) ............. 48,300 202,943 EnCana Corporation ................... 11,208 406,144 Husky Energy, Inc. ................... 43,390 659,154 Manulife Financial Corporation ....... 11,773 340,509 ---------- 1,608,750 FRANCE - 8.0% Alcatel S.A.* ........................ 33,770 399,954 Aventis S.A. ......................... 8,850 459,144 Carrefour S.A. ....................... 5,890 296,317 Essilor International S.A. ........... 5,620 243,073 France Telecom S.A.* ................. 23,650 543,947 JC Decaux S.A.* ...................... 15,530 218,291 Orange S.A.* ......................... 33,380 340,136 Sanofi-Synthelabo S.A. ............... 19,564 1,189,286 Societe BIC S.A. ..................... 7,420 316,259 Societe Generale ..................... 13,040 868,624 Total S.A. ........................... 1,880 283,740 ---------- 5,158,771 GERMANY - 1.3% Allianz AG ........................... 7,191 634,770 MLP AG*,** ........................... 12,703 193,792 ---------- 828,562 HONG KONG - 2.4% Hong Kong & China Gas Company, Ltd. ..................... 293,400 394,039 Hutchison Whampoa, Ltd. .............. 52,000 379,400 Television Broadcasts, Ltd. .......... 169,991 763,926 ---------- 1,537,365 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- INDIA - 3.5% Hindustan Lever, Ltd. ................ 143,300 $ 574,014 Icici Bank, Ltd. ADR ................. 55,050 581,328 Infosys Technologies, Ltd. ........... 6,508 643,433 Zee Telefilms, Ltd. .................. 161,300 434,974 ---------- 2,233,749 ISRAEL - 0.5% TEVA PHARMACEUTICAL Industries, Ltd. ADR .............. 5,700 325,755 ITALY - 0.4% Eni SpA .............................. 17,400 265,853 JAPAN - 11.1% Canon, Inc. .......................... 8,000 390,995 Chugai Pharmaceutical Company, Ltd. ..................... 8,500 105,988 Credit Saison Company, Ltd.** ........ 17,600 367,077 KDDI Corporation ..................... 355 1,798,595 Keyence Corporation .................. 1,100 233,559 Murata Manufacturing Company, Ltd. ..................... 7,800 402,166 Resona Holdings, Inc.* ............... 402,000 564,955 Seven-Eleven Japan Company, Ltd. ..................... 12,000 383,476 Sharp Corporation .................... 45,000 658,596 Shionogi & Company, Ltd. ............. 46,000 798,818 Shiseido Company, Ltd. ............... 26,000 296,504 Trend Micro, Inc.* ................... 19,000 387,772 Yahoo Japan Corporation* ............. 56 792,015 ---------- 7,180,516 KOREA - 1.9% SK Telecom Company, Ltd. ............. 1,590 254,367 SK Telecom Company, Ltd. ADR ......... 12,400 221,216 Samsung Electronics Company, Ltd. ..................... 2,300 783,898 ---------- 1,259,481 MEXICO - 1.8% Fomento Economico Mexicano S.A. de C.V. ...................... 90,100 342,865 Grupo Modelo, S.A. de C.V. (Cl. C) ................... 121,400 299,733 Grupo Televisa S.A. ADR .............. 13,464 492,648 ---------- 1,135,246 NETHERLANDS - 3.3% ABN Amro Holding N.V. ................ 47,700 880,452 Aegon N.V. ........................... 53,402 621,271 Qiagen N.V.* ......................... 26,761 291,077 Wolters Kluwer N.V. .................. 23,788 341,293 ---------- 2,134,093 - -------------------------------------------------------------------------------- 22 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - GLOBAL SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- NORWAY - 0.8% Tandberg ASA* ........................ 85,200 $ 505,943 SINGAPORE - 0.8% Singapore Press Holdings, Ltd. ....... 49,729 526,476 SPAIN - 0.4% Amadeus Global Travel Distribution S.A. ................. 46,572 292,871 SWEDEN - 0.9% Hennes & Mauritz AB (Cl. B) .......... 13,100 297,211 Telefonaktiebolaget LM Ericsson (Cl. B)* ................. 209,100 305,457 ---------- 602,668 SWITZERLAND - 2.1% Novartis AG .......................... 12,991 502,681 Roche Holding AG ..................... 10,198 845,586 ---------- 1,348,267 UNITED KINGDOM - 11.4% 3i Group plc** ....................... 29,420 291,437 Amersham plc ......................... 28,880 248,783 Boots Group plc ...................... 31,572 339,376 BP plc ADR ........................... 13,167 554,331 Cadbury Schweppes plc ................ 46,937 288,725 Diageo plc ........................... 13,030 140,604 Dixons Group plc ..................... 287,970 643,493 Pearson plc .......................... 63,430 603,052 Reckitt Benckiser plc ................ 65,820 1,326,456 Reed Elsevier plc .................... 65,305 510,482 Rentokil Initial plc ................. 94,947 336,785 Royal Bank of Scotland Group plc ......................... 29,809 758,718 Smith & Nephew plc ................... 42,970 282,706 Vodafone Group plc ................... 353,720 706,674 WPP Group plc ........................ 35,470 299,069 ---------- 7,330,691 UNITED STATES - 42.5% Advanced Micro Devices, Inc.* ........ 62,200 691,042 Affymetrix, Inc.* .................... 13,500 283,365 Amdocs, Ltd.* ........................ 13,300 250,040 American Express Company ............. 13,600 612,816 Amgen, Inc.* ......................... 8,800 568,216 Applera Corporation - Applied Biosystems Group .................. 15,700 350,267 Bank One Corporation ................. 30,459 1,177,240 Berkshire Hathaway, Inc. (Cl. B)* .... 230 574,080 Boeing Company ....................... 9,100 312,403 Broadcom Corporation* ................ 11,500 306,130 Burlington Resources, Inc. ........... 5,300 255,460 Cadence Design Systems, Inc.* ........ 134,164 1,797,798 Charles Schwab Corporation ........... 28,900 344,199 ChevronTexaco Corporation ............ 7,583 541,805 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- UNITED STATES (CONTINUED) Circuit City Stores, Inc. ............ 41,271 $ 393,313 Cisco Systems, Inc.* ................. 17,500 341,950 Citigroup, Inc. ...................... 6,466 294,268 Electronic Arts, Inc.* ............... 4,064 374,823 Everest Re Group, Ltd. ............... 4,100 308,156 Express Scripts, Inc.* ............... 5,300 324,095 Fannie Mae ........................... 3,800 266,760 Gap, Inc. ............................ 17,100 292,752 Genentech, Inc.* ..................... 2,100 168,294 Gilead Sciences, Inc.* ............... 11,400 637,602 Gillette Company ..................... 16,800 537,264 Human Genome Sciences, Inc.* ......... 9,900 135,234 IDEC Pharmaceuticals Corporation* .... 6,200 205,530 IMS Health, Inc. ..................... 17,200 362,920 International Business Machines Corporation ....................... 3,867 341,572 International Flavors & Fragrances, Inc. .................. 10,202 337,482 International Game Technology ........ 20,000 563,000 JDS Uniphase Corporation* ............ 147,100 529,560 Johnson & Johnson .................... 10,352 512,631 Juniper Networks, Inc.* .............. 10,300 153,676 Lockheed Martin Corporation .......... 7,700 355,355 MBNA Corporation ..................... 13,800 314,640 Millennium Pharmaceuticals, Inc.* .... 9,500 146,205 Mylan Laboratories, Inc. ............. 9,400 363,310 National Semiconductor Corporation* ...................... 28,800 929,952 Northern Trust Corporation ........... 3,700 157,028 Northrop Grumman Corporation ......... 4,100 353,502 Novellus Systems, Inc.* .............. 8,000 270,000 Nvidia Corporation* .................. 5,800 92,284 Oxford Health Plans, Inc.* ........... 7,000 289,170 Panera Bread Company* ................ 4,100 167,936 Pfizer, Inc. ......................... 16,938 514,576 Qualcomm, Inc. ....................... 34,120 1,420,757 Quest Diagnostics, Inc.* ............. 8,900 539,696 RadioShack Corporation ............... 10,100 286,941 Raytheon Company ..................... 18,900 529,200 SanDisk Corporation* ................. 4,100 261,334 Schering-Plough Corporation .......... 26,800 408,432 Scientific-Atlanta, Inc. ............. 10,200 317,730 Sirius Satellite Radio, Inc. ......... 1,186,296 2,170,922 Starbucks Corporation* ............... 10,900 313,920 Sybase, Inc.* ........................ 18,562 315,740 Symantec Corporation* ................ 2,200 138,644 Synopsys, Inc.* ...................... 19,370 596,015 Veritas Software Corporation* ........ 5,900 185,260 Wachovia Corporation ................. 19,408 799,415 ----------- 27,383,707 ----------- Total common stocks - 98.5% ........................... 63,511,006 - -------------------------------------------------------------------------------- 23 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - GLOBAL SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET PREFERRED STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- BRAZIL - 1.0% Tele Norte Leste Participacoes S.A. .. 45,176,222 $ 624,983 GERMANY - 1.6% Fresenius AG ......................... 6,022 383,957 Porsche AG ........................... 1,566 659,116 ----------- 1,043,073 ----------- Total preferred stocks - 2.6% ......................... 1,668,056 ----------- Total investments - 101.3% ............................ 65,329,539 Liabilities, less cash & other assets - (1.3%) ........ (832,136) ----------- Total net assets - 100.0% ............................. $64,497,403 =========== INVESTMENT CONCENTRATION - -------------------------------------------------------------------------------- At September 30, 2003, Global Series' investment concentration by industry was as follows: Aerospace/Defense ..................................... 0.3% Air Freight & Logistics ............................... 3.4% Automobiles ........................................... 1.0% Beverages ............................................. 2.3% Biotechnology ......................................... 3.8% Capital Markets ....................................... 1.2% Chemicals ............................................. 0.5% Commercial Banks ...................................... 2.3% Commercial Services & Supplies ........................ 1.4% Communications Equipment .............................. 6.2% Computers & Peripherals ............................... 0.9% Consumer Finance ...................................... 2.0% Diversified Financial Services ........................ 8.5% Diversified Telecommunications ........................ 4.6% Electrical Equipment .................................. 0.2% Electronic Equipment & Instruments .................... 1.0% Food & Staples Retailing .............................. 1.6% Gas Utilities ......................................... 0.6% Health Care Equipment & Services ...................... 1.6% Health Care Providers & Services ...................... 2.3% Hotels, Restaurants & Leisure Products ................ 2.1% Household Durables .................................... 3.2% Household Products .................................... 2.1% IT Services ........................................... 1.0% Insurance ............................................. 4.7% Internet Software & Services .......................... 1.8% Media ................................................. 10.2% Oil & Gas ............................................. 4.6% Personal Products ..................................... 2.2% Pharmaceuticals ....................................... 9.8% Semiconductors & Semiconductor Equipment .............. 3.5% Software .............................................. 5.7% Specialty Retail ...................................... 1.0% Textiles, Apparel & Luxury Goods ...................... 0.9% Thrifts & Mortgage Finance ............................ 0.4% Wireless Telecommunications ........................... 2.4% Liabilities, less cash & other assets ................. (1.3%) ------- 100.0% ======= For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $60,937,121. *Non-income producing security **Passive Foreign Investment Company ADR (American Depositary Receipt) plc (public limited company) (1)Principal amount on foreign bond is reflected in local currency (e.g. Indian Rupee)while market value is reflected in U.S. dollars. - -------------------------------------------------------------------------------- 24 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - INTERNATIONAL SERIES NOVEMBER 15, 2003
![]() Tony Docal Portfolio Manager | ![]() |
TO OUR SHAREHOLDERS: In the belief that tomorrow should be better than yesterday, optimistic investors propelled global stock prices to a 16-month high by the end of September. Most local stock market indices delivered double-digit gains since the rally in global equities began in March of this year. As of September 30, 2003, the one-year total return for the Security Equity Fund - International Series was 17.54% versus the MSCI All Country World Free ex U.S. Index return of 29.04% and the MSCI EAFE Index return of 26.64%(1). The strong performance in equity markets reflects investors' improved expectations and confidence in a global economic recovery. Global equity markets rallied in the last few months of 2002. The Fund benefited on absolute terms from a pick-up in the materials and industrials sectors, which traditionally have performed well during cyclical recoveries and which have remained overweight within the Fund. Global equity markets continued to be volatile in the first quarter of 2003, primarily due to investor anxiety about the war in Iraq, particularly its potential destabilizing effect on the global economic recovery. An uncertain employment outlook and the rise in oil and gasoline prices complicated the situation. A drop in confidence led consumers and corporations to postpone major purchases. On a sector basis, we believe that the strong relative performance of utility stocks, during this first quarter, demonstrated the markets' risk-averse sentiment. Attractive dividends and relatively predictable earnings growth have traditionally made utilities sought after investments during periods of uncertainty. The underperformance of sectors closely tied to the economic cycle such as materials and industrials confirmed the predominantly cautionary investment outlook of the first quarter. The net relative effect was detrimental to the Fund, which maintained overweight positions in these sectors. However, we remained comfortable with the Fund's sector overweights. These relative exposures were the result of our bottom-up search for undervalued securities. All sectors within the Fund had a positive impact on performance during the second quarter. Our holdings in the industrials and materials sectors, which had detracted from the Fund's performance in the first quarter of the year, produced strong absolute returns that outperformed the Fund's benchmark. The better returns can be attributed to investor expectations that an economic rebound would improve both the extremely low valuations accorded to the stocks as well as their earnings and cash flow prospects. For the third quarter, information technology, materials, and industrials led the rally. This is consistent with a cyclical rebound, as high-beta, cyclical stocks typically are regarded as early beneficiaries during an economic upturn. The Fund maintained overweight positions versus its MSCI benchmark in materials and industrials stocks and as a result benefited from the strong performance in these sectors. We believe that after three years of intense restructuring, many companies in cyclical areas such as chemicals, pulp and paper, construction materials, metals and mining, and industrial machinery are well positioned to benefit from the cyclical rebound. Although we believe the potential for improvement in operating leverage and EPS growth is on the horizon, this potential might take longer to materialize than some investors may be anticipating. On a micro level, we view these comments as an indication that the economy is still in the early, uneven stages of recovery. Sincerely, Tony Docal Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduced Fund expenses and in the absence of such waivers the performance quoted would be reduced. Investing in foreign countries may involve risks, such as non-uniform accounting practices and political instability, not associated with investing exclusively in the U.S. - -------------------------------------------------------------------------------- 25MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - INTERNATIONAL SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/internationalseries.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of International Series on January 29, 1999, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $6,381. By comparison, the same $10,000 investment would have been $8,194, based on the Morgan Stanley Capital International EAFE Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Telefonica S.A. 2.4% Nestle S.A. 2.1% ENI SpA 2.0% Unilever N.V. CVA 2.0% Deutsche Post AG 1.9% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR SINCE INCEPTION ----------------------------- A Shares 17.54% (8.01%) (1-29-99) A Shares with sales charge 10.73% (9.17%) (1-29-99) B Shares 16.91% (8.65%) (1-29-99) B Shares with CDSC 11.91% (9.04%) (1-29-99) C Shares 16.85% (8.59%) (1-29-99) C Shares with CDSC 15.85% (8.59%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Fund and in the absence of such waiver, the performance quoted would be reduced. - -------------------------------------------------------------------------------- 26SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - INTERNATIONAL SERIES - -------------------------------------------------------------------------------- NUMBER MARKET FOREIGN STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- AUSTRALIA - 1.1% Australia & New Zealand Banking Group, Ltd. ............... 8,725 $ 106,004 BERMUDA - 2.6% Ace, Ltd. ............................ 4,050 133,974 XL Capital, Ltd. ..................... 1,345 104,157 ----------- 238,131 CANADA - 1.2% Husky Energy, Inc. ................... 7,490 113,783 FINLAND - 1.5% Stora Enso Oyj ....................... 11,180 138,399 FRANCE - 5.3% Aventis S.A. ......................... 3,020 156,680 Axa 6,750 113,744 PECHINEY S.A. ........................ 1,264 69,551 Total S.A. ........................... 945 142,625 ----------- 482,600 GERMANY - 4.0% BASF AG .............................. 2,885 126,662 Deutsche Post AG ..................... 10,396 177,605 Muenchener Rueckversicherungs- Gesellschaft AG ................... 600 59,609 ----------- 363,876 HONG KONG - 1.4% Hutchison Whampoa, Ltd. .............. 18,082 131,929 ISRAEL - 1.2% Teva Pharmaceutical Industries, Ltd. ADR .............. 1,870 106,871 ITALY - 2.0% Eni SpA .............................. 12,089 184,706 JAPAN - 4.0% NEC Corporation* ..................... 16,750 125,945 Nippon Telegraph & Telephone Corporation ....................... 28 126,823 Sony Corporation ..................... 3,200 111,713 ----------- 364,481 KOREA - 1.7% Samsung Electronics Company, Ltd. .... 447 152,349 MEXICO - 1.6% Cemex S.A. de C.V. ADR ............... 1 25 Telefonos de Mexico S.A. de C.V. ADR ....................... 4,850 148,168 ----------- 148,193 PRINCIPAL AMOUNT OR NUMBER MARKET FOREIGN STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- NETHERLANDS - 6.6% ING Groep N.V. ....................... 7,142 $ 130,830 Koninklijke (Royal) Philips Electronics N.V. .................... 7,680 174,045 Unilever N.V. ........................ 3,140 184,663 Wolters Kluwer N.V. .................. 7,740 111,048 ----------- 600,586 SPAIN - 4.8% Endesa S.A. .......................... 6,380 98,594 Iberdrola S.A. ....................... 7,380 124,189 Telefonica S.A. ...................... 18,503 218,493 ----------- 441,276 SWITZERLAND - 3.6% Nestle S.A. .......................... 851 196,221 Swiss Re ............................. 2,061 130,939 ----------- 327,160 UNITED KINGDOM - 6.3% Amersham plc ......................... 13,880 119,567 BAE Systems plc ...................... 52,255 146,069 Cable & Wireless plc ................. 40,260 76,085 Lloyds TSB Group plc ................. 14,880 102,347 Shell Transport & Trading Company plc ....................... 21,262 131,319 ----------- 575,387 ----------- Total foreign stocks - 48.9% 4,475,731 U.S. GOVERNMENT & AGENCIES - 47.6% - ---------------------------------- Federal National Mortgage Association, 0.97%, 10-01-03 ................... $4,360,000 4,360,000 ----------- Total investments - 96.5% 8,835,731 Cash & other assets, less liabilities - 3.5% 323,362 ----------- Total net assets - 100.0% ............................. $9,159,093 =========== For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $8,722,687. *Non-income producing security ADR (American Depositary Receipt) plc (public limited company) - -------------------------------------------------------------------------------- 27 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - INTERNATIONAL SERIES (CONTINUED) - -------------------------------------------------------------------------------- INVESTMENT CONCENTRATION - -------------------------------------------------------------------------------- At September 30, 2003, International Series' investment concentration, by industry, was as follows: Aerospace/Defense ..................................... 1.6% Air Freight & Logistics ............................... 1.9% Chemicals ............................................. 1.4% Communications Equipment .............................. 1.6% Diversified Financial Services ........................ 5.1% Diversified Telecommunication Services ................ 4.6% Electronic Equipment & Instruments .................... 1.4% Electric Utilities .................................... 2.4% Food Products ......................................... 4.2% Health Care Equipment & Supplies ...................... 1.3% Household Durables .................................... 4.8% Insurance ............................................. 5.9% Media ................................................. 1.2% Metals & Mining ....................................... 0.8% Oil & Gas ............................................. 6.3% Paper & Forest Products ............................... 1.5% Pharmaceuticals ....................................... 2.9% U.S. Government & Agencies ............................ 47.6% Cash & other assets, less liabilities ................. 3.5% ------- 100.0% ======= - -------------------------------------------------------------------------------- 28 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES NOVEMBER 15, 2003
![]() Mark Mitchell Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: Fiscal 2003 marked the first positive year for most growth investors since 2000. The Security Large Cap Growth Fund's performance for the one-year period ended September 30, 2003, was positive with the Fund returning 22.17%.(1) Although the Fund outperformed its peer group's median return of 20.00%, it lagged its benchmark, the S&P Barra Growth Index's return of 25.92%. Throughout this difficult period in the equity market, we have remained focused on our strategy. Our strategy involves identifying good companies whose growth prospects we believe are currently being mispriced by the market. Over the long term, we believe that companies with good management teams, access to resources and strong opportunities for growth in their industries, outperform. While over the longer term this strategy has been successful, the market has favored lower quality names over the last six months; the rationale being that lower quality names had more leverage to an economic recovery and were mispriced relative to higher quality companies with more visibility. This focus dampened the Fund's total return for the one-year period. INDUSTRIALS AND CONSUMER STOCKS TOP PERFORMERS The Fund's industrial holdings were up 29% compared to 22% for the index. Overweighted positions compared to the benchmark in United Technologies, General Dynamics, and General Electric gave the Fund a boost as they benefited from a recovering U.S. economy and strong defense-related spending. The Fund's consumer discretionary stocks also turned in a solid performance and were roughly in line with the benchmark's return of 27%. Key holdings Target and Home Depot advanced 25% and 23% respectively. Hit hard by concerns about future growth, Target and Home Depot are representative of our "bottom-up" analysis to identify high quality companies whose growth prospects we believe have been misjudged by the market. Additionally, Harley-Davidson, Carnival (cruise lines), and Omnicom (advertising) all contributed gains we believe were driven in part by the recovering economy. TECHNOLOGY AND TELECOMMUNICATIONS DISAPPOINT Technology stocks led the market's recovery over the last 12 months, just as they led the market decline over the last few years. Our strategy of focusing on paying the right price for potential growth led us to bypass many of the most recent outperformers. Although up substantially, the Fund's technology stocks returned 53% compared to 59% returned by the index. Positions in Cisco, Microsoft, Analog Devices, Oracle, and Molex all contributed strong performance, but were unable to offset equally strong or better results from a majority of technology companies. Our slightly underweighted position in the sector relative to the benchmark somewhat hindered the Fund's performance. The Fund's underweighting in telecommunications stocks also had a negative impact on performance. The lower-quality, higher-risk nature of these companies does not conform to our investment discipline of buying high-quality companies with good growth prospects at attractive valuations. After a prolonged period of decline, telecommunication companies such as Nextel Communications surprisingly rose 161% and AT&T wireless gained 99%. While we believe conceptually in the future of wireless, we have significant near-term concerns about weak balance sheets, substantial customer penetration levels, aggressive pricing, and uncertainty over the technology platform that will ultimately prevail in the telecommunications industry. LONG-TERM INVESTING GOOD STRATEGY Patience is key to successful long-term investing. After three years of market declines, many long-term investors were rewarded in 2003 with positive returns. Although evidence of a strong economic recovery is mixed, ongoing negatives such as high unemployment and wavering consumer confidence should be offset by positives such as an improved GDP, favorable fiscal and monetary policies, and improved corporate earnings. Although there will always be uncertainties surrounding the equity markets, we believe that over time, equities present the best opportunity for investors to grow their assets. We also continue to believe in a disciplined dollar cost - -------------------------------------------------------------------------------- 29MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES NOVEMBER 15, 2003 averaging strategy. While it does not assure profits or protect against losses in a declining market, we believe it is the best way to take advantage of the natural highs and lows in a market cycle. We look forward to helping you meet your financial goals in the future. Sincerely, Mark Mitchell Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or redemptions of shares. ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/largecap.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Large Cap Growth Series on May 1, 2000, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $5,297. By comparison, the same $10,000 investment would have been $5,128, based on the S&P Barra Growth Index performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Pfizer, Inc. 7.1% General Electric Company 6.3% Microsoft Corporation 5.6% Cisco Systems, Inc. 4.1% Johnson & Johnson 3.5% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR SINCE INCEPTION --------------------------- A Shares 22.17% (15.51%) (5-1-00) A Shares with sales charge 15.16% (16.96%) (5-1-00) B Shares 21.11% (16.27%) (5-1-00) B Shares with CDSC 16.11% (17.01%) (5-1-00) C Shares 21.24% (16.13%) (5-1-00) C Shares with CDSC 20.24% (16.13%) (5-1-00) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 30SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- ADVERTISING - 1.3% Omnicom Group, Inc. .................. 4,700 $ 337,695 AEROSPACE & DEFENSE - 3.7% General Dynamics Corporation ......... 3,500 273,210 United Technologies Corporation ...... 9,000 695,520 ---------- 968,730 APPLICATION SOFTWARE - 1.9% Intuit, Inc.* ........................ 10,100 487,224 BIOTECHNOLOGY - 2.5% Amgen, Inc.* ......................... 10,200 658,614 BREWERS - 1.4% Anheuser-Busch Companies, Inc. ....... 7,300 360,182 BROADCASTING & CABLE TV - 2.3% Comcast Corporation* ................. 19,700 608,336 COMMUNICATIONS EQUIPMENT - 6.1% ADC Telecommunications, Inc.* ........ 121,500 283,095 Cisco Systems, Inc.* ................. 54,900 1,072,746 Nokia OYJ ADR ........................ 7,100 110,760 Qualcomm, Inc. ....................... 3,200 133,248 ---------- 1,599,849 COMPUTER HARDWARE - 3.2% Dell, Inc.* .......................... 14,400 480,816 International Business Machines Corporation .............. 4,000 353,320 ---------- 834,136 CONSUMER FINANCE - 0.8% MBNA Corporation ..................... 8,800 200,640 DATA PROCESSING & OUTSOURCED SERVICE - 2.5% Concord EFS, Inc.* ................... 11,100 151,737 First Data Corporation ............... 12,400 495,504 ---------- 647,241 DEPARTMENT STORES - 0.6% KOHL'S CORPORATION* .................. 3,150 168,525 DIVERSIFIED BANKS - 0.7% Wells Fargo & Company ................ 3,700 190,550 DRUG RETAIL - 0.3% Walgreen Company ..................... 2,500 76,600 ELECTRONIC MANUFACTURING SERVICES - 1.1% Molex, Inc. .......................... 10,500 300,195 GENERAL MERCHANDISE STORES - 2.7% Target Corporation ................... 18,800 707,444 HEALTH CARE DISTRIBUTORS - 2.8% Cardinal Health, Inc. ................ 12,800 747,392 HEALTH CARE EQUIPMENT - 2.2% Medtronic, Inc. ...................... 12,600 591,192 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- HOME IMPROVEMENT RETAIL - 3.6% Home Depot, Inc. ..................... 22,500 $ 716,625 Lowe's Companies, Inc. ............... 4,200 217,980 ---------- 934,605 HOTELS, RESORTS & CRUISE LINES - 1.1% Carnival Corporation ................. 8,800 289,432 HOUSEHOLD PRODUCTS - 1.7% Colgate-Palmolive Company ............ 4,200 234,738 Procter & Gamble Company ............. 2,200 204,204 ---------- 438,942 HYPERMARKETS & SUPERCENTERS - 2.8% Wal-Mart Stores, Inc. ................ 13,100 731,635 INDUSTRIAL CONGLOMERATES - 7.3% 3M Company ........................... 3,600 248,652 General Electric Company ............. 55,600 1,657,436 ---------- 1,906,088 INSURANCE BROKERS - 1.4% Marsh & McLennan Companies, Inc. ..... 7,600 361,836 INVESTMENT BANKING & BROKERAGE - 0.9% Goldman Sachs Group, Inc. ............ 3,000 251,700 LIFE & HEALTH INSURANCE - 1.0% Aflac, Inc. .......................... 8,100 261,630 MOTORCYCLE MANUFACTURERS - 2.3% Harley-Davidson, Inc. ................ 12,500 602,500 MOVIES & ENTERTAINMENT - 1.7% Time Warner, Inc.* ................... 5,000 75,550 Viacom, Inc. (Cl. B) ................. 9,400 360,020 ---------- 435,570 MULTI-LINE INSURANCE - 2.4% American International Group, Inc. ... 11,000 634,700 OIL & GAS EQUIPMENT & SERVICES - 1.2% BJ Services Company* ................. 9,200 314,364 OIL & GAS EXPLORATION & PRODUCTION - 1.0% Devon Energy Corporation ............. 5,200 250,588 OTHER DIVERSIFIED FINANCIAL SERVICES - 1.0% Citigroup, Inc. ...................... 5,600 254,856 PERSONAL PRODUCTS - 0.9% Avon Products, Inc. .................. 3,600 232,416 PHARMACEUTICALS - 16.0% Abbott Laboratories .................. 10,700 455,285 Eli Lilly & Company .................. 4,900 291,060 Johnson & Johnson .................... 18,500 916,120 Merck & Company, Inc. ................ 8,700 440,394 Pfizer, Inc. ......................... 61,300 1,862,294 Wyeth ................................ 5,100 235,110 ---------- 4,200,263 - -------------------------------------------------------------------------------- 31 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT OR NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT - 0.4% Applied Materials, Inc.* ............. 5,500 $ 99,770 SEMICONDUCTORS - 4.0% ANALOG DEVICES, INC.* ................ 8,600 326,972 Intel Corporation .................... 20,200 555,702 Texas Instruments, Inc. .............. 7,200 164,160 ----------- 1,046,834 SOFT DRINKS - 4.4% Coca-Cola Company .................... 9,500 408,120 PepsiCo, Inc. ........................ 16,200 742,446 ----------- 1,150,566 SYSTEMS SOFTWARE - 6.2% Microsoft Corporation ................ 53,000 1,472,870 Oracle Corporation* .................. 12,400 139,128 ----------- 1,611,998 THRIFTS & MORTGAGE FINANCE - 1.6% Fannie Mae ........................... 5,800 407,160 ----------- Total common stocks - 99.0% 25,901,998 REPURCHASE AGREEMENT - 1.8% - --------------------------- State Street, 0.25%, 10-01-03 (Collateralized by FHLB, 1.435%, 06-03-05 with a value of $481,825 and a repurchase amount of $469,210) ......................... $469,207 469,207 ----------- Total investments - 100.8% ............................ 26,371,205 Liabilities, less cash & other assets - (0.8%) ........ (204,050) ----------- Total net assets - 100.0% ............................. $26,167,155 =========== For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $26,147,055. * Non-income producing security ADR (American Depositary Receipt) - -------------------------------------------------------------------------------- 32 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - MID CAP VALUE SERIES NOVEMBER 15, 2003
![]() James P. Schier Senior Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: Capitalizing on selecting the right stocks and taking positions in outperforming sectors, the year ended September 30, 2003, proved to be a positive one for the Security Mid Cap Value Fund. Posting a 44.85% return for the period, the Fund outperformed the 28.23% return by its benchmark, the S&P Mid Cap Value Index, as well as the 26.44% median return of its peer group.(1) Our strategy is to seek appreciable securities of companies that are able to grow and/or reinvest in increasingly profitable ventures and hold them over three to five years to capture the best part of the improvements in profits or profitability. This strategy continues to work. We are focused on investing in securities when we find opportunities, with our individual position sizes reflecting the magnitude and the confidence in the opportunity. HEALTH CARE AND TECHNOLOGY LED RETURNS Among the health care holdings, the top performers were biotech companies. We participated in a few of these names through buying their convertible debt. Hollis Eden Pharmaceutical gained 98% for the period and Ligand Pharmaceuticals advanced 146%. Other companies such as Inamed, a company that manufactures breast implants, rose 137%. The company just launched Lap-Ban, which is a non-invasive device to treat obesity in lieu of stomach stapling. Once considered growth stocks by the market, technology stocks over the last few years have contracted to the point that many of the value indices are well represented with these names. Regardless of investing style, technology exposure and stock selection contributed significantly to the Fund's performance in this sector, returning 72% for the period. Specific names that helped the Fund include Avanex, Ixys, and Keane. We purchased Avanex, an optical components company, throughout the year when it was trading at 75% of cash value. Following Avanex's purchase of two competitors' optical component divisions, the stock price rose from less than $1 to $4 in one month, posting a 247% return for the period. Ixys, a major supplier of power semiconductors to the communications industry, rose 86% for the period. Likewise, business consulting and application development outsourcing firm, Keane, gained 86%. FINANCIAL STOCKS BOOST PERFORMANCE While underweight in financials, superior stock selection drove the Fund's performance in this sector. W. R. Berkley, a property and casualty insurance company that benefited from rate increases, returned 52% for the period. American Capital and Jefferies Group, providers of financing to small and mid capitalization companies, also contributed gains, advancing 47% and 56% respectively. UTILITIES AND ENERGY STOCKS CONTRIBUTE The Fund was underweight in utilities relative to its benchmark but stock selection benefited the Fund overall. A 266% gain by Williams Companies helped the sector return 55% for the Fund compared to 22% for the benchmark. Stock selection versus the benchmark in the energy sector also helped the Fund, as the sector generated a 24% return, double the benchmark's return. FOCUSED ON SMALLER, NIMBLE COMPANIES Small and medium sized companies continue to outperform larger companies. In 2000, the valuation gap between these categories was stretched to an extreme level as investors were willing to pay approximately more than two times the multiple for smaller companies than for larger companies. We believe this was the result of structural changes in the way people invest. The proliferation of large defined contribution plans and large mutual fund complexes produced an environment in which fund managers were willing to pay a premium for liquidity. Given this, it created an investment opportunity in smaller and mid cap stocks. Since smaller and mid cap securities have outperformed larger cap stocks since 2000, this valuation gap has returned to a more normal level recently. While historically there have been periods where the market has paid a premium for smaller and medium sized companies, it is unclear today whether we will enter one of these periods now. - -------------------------------------------------------------------------------- 33MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - MID CAP VALUE SERIES NOVEMBER 15, 2003 Nonetheless, there is still a valuation gap that does favor investing in smaller companies and our work still continues to uncover opportunities. The economic environment could possibly provide a better backdrop for continued smaller company performance. In a slower economic environment, large cap companies will find it ever more difficult to grow large revenue bases in a meaningful way. If this is the case, the market could place greater emphasis on smaller, more nimble companies. And finally, if the dollar continues to weaken and foreign investors decide to reduce their dollar denominated financial investments, large capitalization stocks could face a more challenging environment. To the extent that foreign investors hold equities, they tend to be oriented to the biggest blue chip equities. Sincerely, James P. Schier Senior Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or redemptions of shares. ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/midcap.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Mid Cap Value Series on May 1, 1997, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $27,665. By comparison, the same $10,000 investment would have grown to $20,863, based on the S&P Mid Cap Value Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Avanex Corporation 3.9% Chicago Bridge & Iron Company N.V. 3.3% W.R. Berkley Corporation 3.1% Computer Sciences Corporation 2.5% Transocean, Inc. 2.3% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR 5 YEARS SINCE INCEPTION --------------------------------------- A Shares 44.85% 18.82% 18.26% (5-1-97) A Shares with sales charge 36.53% 17.42% 17.18% (5-1-97) B Shares 43.78% 17.71% 17.14% (5-1-97) B Shares with CDSC 38.78% 17.50% 17.14% (5-1-97) C Shares 43.73% N/A 14.40% (1-29-99) C Shares with CDSC 42.73% N/A 14.40% (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. - -------------------------------------------------------------------------------- 34SCHEDULE OF INVESTMENTS September 30, 2003 SECURITY EQUITY FUND - MID CAP VALUE SERIES PRINCIPAL AMOUNT OR NUMBER MARKET CONVERTIBLE BONDS OF SHARES VALUE - -------------------------------------------------------------------------------- PHARMACEUTICALS - 1.4% Ligand Pharmaceuticals, 6.00% - 2007 ...................... $1,250,000 $2,800,000 TELECOMMUNICATIONS - 0.9% Ciena Corporation, 3.75% - 2008 ...... $2,250,000 1,904,063 --------- Total convertible bonds - 2.3% 4,704,063 PREFERRED STOCK - --------------- DIVERSIFIED METALS & MINING - 0.2% Arch Coal, Inc. ...................... 4,600 298,402 COMMON STOCKS - ------------- AGRICULTURAL PRODUCTS - 1.8% ARCHER-DANIELS-MIDLAND COMPANY ....... 280,000 3,670,800 AIR FREIGHT & LOGISTICS - 0.9% AirNet Systems, Inc.* ................ 168,000 675,360 Stonepath Group, Inc.* ............... 480,000 1,224,000 --------- 1,899,360 APPAREL RETAIL - 0.8% Wet Seal, Inc.* ...................... 154,000 1,547,700 APPLICATION SOFTWARE - 0.8% Lightspan, Inc.* ..................... 53,355 562,362 Ulticom, Inc.* ....................... 97,000 1,021,410 --------- 1,583,772 AUTO PARTS & EQUIPMENT - 0.1% Motorcar Parts & Accessories, Inc.* .. 50,000 180,500 BIOTECHNOLOGY - 0.7% Protein Design Labs, Inc.*(1) ........ 81,000 1,122,660 Serologicals Corporation* ............ 21,300 280,095 --------- 1,402,755 BROADCASTING & CABLE TV - 0.1% Cinar Corporation (Cl. B)* ........... 86,000 258,000 BUILDING PRODUCTS - 0.1% Griffon Corporation* ................. 7,500 134,700 CATALOG RETAIL - 2.1% Coldwater Creek, Inc.* ............... 438,000 4,301,160 COMMUNICATIONS EQUIPMENT - 9.0% Adaptec, Inc.* ....................... 484,000 3,659,040 Advanced Fibre Communications, Inc.* ............................. 148,000 3,103,560 Arris Group, Inc.* ................... 364,000 2,093,000 Avanex Corporation* .................. 1,600,100 7,760,485 Ciena Corporation .................... 250,000 1,477,500 --------- 18,093,585 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 7.7% Chicago Bridge & Iron Company N.V. ... 240,000 $ 6,518,400 Dycom Industries, Inc.* .............. 100,000 2,039,000 Quanta Services, Inc.* ............... 340,000 2,811,800 Shaw Group, Inc.* .................... 394,000 4,140,940 ---------- 15,510,140 DATA PROCESSING & OUTSOURCED SERVICES - 2.5% Computer Sciences Corporation* ....... 135,000 5,071,950 DIVERSIFIED COMMERCIAL SERVICES - 1.6% Angelica Corporation ................. 99,300 1,886,700 FTI Consulting, Inc.* ................ 80,000 1,388,000 ---------- 3,274,700 DIVERSIFIED METALS & MINING - 3.3% Arch Coal, Inc. ...................... 185,100 4,111,071 Phelps Dodge Corporation* ............ 50,000 2,340,000 Usec, Inc. ........................... 24,600 160,638 ---------- 6,611,709 ELECTRIC UTILITES - 5.5% Black Hills Corporation .............. 91,400 2,820,604 KFx, Inc.* ........................... 760,000 3,815,200 PNM Resources, Inc. .................. 11,500 322,460 Unisource Energy Corporation ......... 217,200 4,131,144 ---------- 11,089,408 ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.4% Maxwell Technologies, Inc.* .......... 330,000 3,012,900 Powell Industries, Inc.* ............. 105,300 1,769,040 ---------- 4,781,940 EMPLOYMENT SERVICES - 1.1% Labor Ready, Inc.* ................... 226,000 2,271,300 ENVIRONMENTAL SERVICES - 1.7% Republic Services, Inc. .............. 59,000 1,335,760 TRC Companies, Inc.* ................. 120,000 1,975,200 ---------- 3,310,960 FERTILIZERS & AGRICULTURAL CHEMICALS - 1.6% Potash Corporation of Saskatchewan, Inc. ................ 45,000 3,174,750 FOOTWEAR - 1.8% Brown Shoe Company, Inc. ............. 115,000 3,645,500 HEALTH CARE DISTRIBUTORS & SERVICES - 0.7% NDCHealth Corporation ................ 62,600 1,311,470 HOME ENTERTAINMENT SOFTWARE - 0.3% Midway Games, Inc.* .................. 173,000 512,080 - -------------------------------------------------------------------------------- 35 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 SECURITY EQUITY FUND - MID CAP VALUE SERIES (CONTINUED) NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- HOME FURNISHINGS - 3.1% Furniture Brands International, Inc.* 29,800 $ 718,180 La-Z-Boy, Inc. ....................... 100,000 2,220,000 Mohawk Industries, Inc.* ............. 18,000 1,283,760 Stanley Furniture Company, Inc. ...... 63,000 1,922,130 ---------- 6,144,070 INDUSTRIAL MACHINERY - 1.5% SPX Corporation* ..................... 62,000 2,807,360 Valmont Industries, Inc. ............. 12,900 255,291 ---------- 3,062,651 INTEGRATED OIL & GAS - 2.2% Murphy Oil Corporation ............... 74,000 4,347,500 INVESTMENT BANKING & BROKERAGE - 3.5% A.G. Edwards, Inc. ................... 66,000 2,535,060 American Capital Strategies, Ltd. .... 106,600 2,650,076 Jefferies Group, Inc. ................ 66,000 1,897,500 ---------- 7,082,636 IT CONSULTING & OTHER SERVICES - 3.0% Acxiom Corporation* .................. 274,500 4,326,120 Keane, Inc.* ......................... 125,000 1,597,500 ---------- 5,923,620 MARINE - 0.4% Frontline, Ltd. ...................... 53,000 887,750 MULTI-UTILITIES & UNREGULATED POWER - 2.0% Williams Companies, Inc. ............. 428,000 4,031,760 OIL & GAS DRILLING - 3.8% Nabors Industries, Ltd.* ............. 53,000 1,974,780 Pride International, Inc.* ........... 60,000 1,017,000 Transocean, Inc.* .................... 235,000 4,700,000 ---------- 7,691,780 OIL & GAS EQUIPMENT & SERVICES - 3.8% Key Energy Services, Inc.* ........... 330,000 3,184,500 Newpark Resources, Inc.* ............. 300,000 1,290,000 Tidewater, Inc. ...................... 108,000 3,056,400 ---------- 7,530,900 OIL & GAS EXPLORATION & PRODUCTION - 2.3% Devon Energy Corporation ............. 22,770 1,097,286 Evergreen Resources, Inc.* ........... 130,000 3,510,000 ---------- 4,607,286 OIL & GAS REFINING, MARKETING & TRANSPORTATION - 0.2% TransMontaigne, Inc.* ................ 70,000 417,200 PACKAGED FOODS - 3.3% Hain Celestial Group, Inc.* .......... 110,000 1,994,300 Hormel Foods Corporation ............. 200,000 4,596,000 ---------- 6,590,300 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PAPER PACKAGING - 1.6% Sonoco Products Company .............. 145,000 $ 3,182,750 PHARMACEUTICALS - 3.8% Hollis-Eden Pharmaceuticals, Inc.* ... 192,403 4,686,937 Ligand Pharmaceuticals, Inc. (Cl. B)* .......................... 226,800 2,923,452 ----------- 7,610,389 PROPERTY & CASUALTY INSURANCE - 3.6% MBIA, Inc. ........................... 18,750 1,030,688 W.R. Berkley Corporation ............. 180,000 6,166,800 ----------- 7,197,488 REGIONAL BANKS - 3.8% Corus Bankshares, Inc. ............... 6,800 363,800 Iberiabank Corporation ............... 20,100 1,057,662 Mercantile Bankshares Corporation .... 67,000 2,680,000 Wilmington Trust Corporation ......... 48,200 1,482,632 Zions Bankcorporation ................ 38,000 2,122,300 ----------- 7,706,394 SEMICONDUCTORS - 2.0% IXYS Corporation* .................... 282,000 2,642,340 MIPS Technologies, Inc.* ............. 6,300 25,011 Monolithic System Technology, Inc.* ............................. 170,000 1,429,700 ----------- 4,097,051 SPECIALTY CHEMICALS - 0.8% Material Sciences Corporation ........ 85,700 875,854 Minerals Technologies, Inc. .......... 15,000 763,500 ----------- 1,639,354 SPECIALTY STORES - 1.3% Linens 'n Things, Inc.* .............. 110,000 2,615,800 TRUCKING - 0.5% SCS Transportation, Inc.* ............ 11,000 166,100 Swift Transportation Company, Inc.* ............................. 36,000 816,840 ----------- 982,940 ----------- Total common stocks - 93.1% ........................... 186,987,858 WARRANTS - 0.2% - --------------- KFX, Inc. ............................ 152,000 441,669 - -------------------------------------------------------------------------------- 36 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 SECURITY EQUITY FUND - MID CAP VALUE SERIES (CONTINUED) PRINCIPAL MARKET U.S. GOVERNMENT & AGENCIES AMOUNT VALUE - -------------------------------------------------------------------------------- Federal Home Loan Bank, 1.00%, 10-10-03 ................... $2,300,000 $ 2,299,425 Federal National Mortgage Association: 1.04%, 10-01-03 ................... 2,600,000 2,600,000 1.01%, 10-03-03 ................... 2,300,000 2,299,871 1.03%, 10-06-03 ................... 1,300,000 1,299,821 1.03%, 10-08-03 ................... 1,700,000 1,699,666 ------------- 7,899,358 ------------- Total U.S. government & agencies - 5.1% 10,198,783 REPURCHASE AGREEMENT - 0.3% - --------------------------- United Missouri Bank, 0.65%, 10-01-03 (Collateralized by FNMA, 10-01-03 with a value of $525,000 and a repurchase amount of $514,009) ......................... 514,000 514,000 ------------- Total investments - 101.2% ........ ................... 203,144,775 Liabilities, less cash & other assets - (1.2%) ........ (2,377,019) ------------- Total net assets - 100.0% ............................. $200,767,756 ============= For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $166,196,085. *Non-income producing security (1)Security is segregated as collateral for futures, forward contracts or options. - -------------------------------------------------------------------------------- 37 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - SELECT 25(R) SERIES NOVEMBER 15, 2003
![]() Terry Milberger Senior Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: The combination of a cyclical stock rebound and moderate economic recovery marked the end of a far more positive 12-month period for many equity investors than we have experienced since 2000. The Security Select 25 Fund returned a positive 11.50% for the one-year period ended September 30, 2003; however, the Fund lagged its benchmark's return of 24.40%, as well as its peer group's median return of 20.00% over the same period.(1) Believing that great companies make great stocks over time, the Select 25 Fund concentrates on owning 25-30 high-quality growth stocks for the long term. To meet the Fund's criteria, a company must occupy a competitive position in its market and have a good growth outlook over the next three to five years. Other criteria include an experienced management team, financial strength, a good business model, and an ability to improve profitability over time. The concentrated nature of the Fund and its buy-hold strategy can prevent the Fund from fully participating in cyclical rebounds but should provide a cushion during market declines. SELECTED CONSUMER DISCRETIONARY STOCKS BOOST PERFORMANCE Household retail names such as Home Depot, Wal Mart and Target all performed well for the period. Target was up 25% for the year and Home Depot gained 23%. Although Kohl's Corporation was down 12% for the period, our outlook for the department store chain is positive, as we believe it is one of the few companies in its industry that can continue to grow its square footage. Advertising giant Omnicom also performed nicely, gaining 30% for the period. LOW WEIGHTING IN TECHNOLOGY As a concentrated Fund, Select 25 does not mirror the sector weightings of any particular index. Stocks are selected based upon their ability to meet the definition of great companies over the longer term. As most technology company earnings are cyclical in nature and benefit during periods when customer spending increases, many of these companies do not meet our focus of finding consistent growth. In addition, technology companies have a relatively short life cycle that averages less than three years. This makes it difficult to identify over the long term those names that will evolve into great companies. Therefore, the Select 25 Fund has generally had a sector exposure below its S&P 500 benchmark. HEALTH CARE STOCKS DISAPPOINT Because many health care stocks have the potential to be great companies over the long term, Select 25 had almost a fourth of the Fund in this sector. Expectations were that health care stocks would grow earnings between 10% and 15% during 2003. However, more cyclical areas of the market benefited from a recovering U.S. economy. One exception, Amgen, a biotech company with important new drugs to treat rheumatoid arthritis and cancer, gained 51% for the period. GREAT COMPANIES MAKE GREAT STOCKS OVER TIME Looking forward, we expect cyclical stocks to cool down and the economic recovery to moderate. Driven primarily by the mortgage refinancing boom and federal tax cuts, we anticipate that for a strong economic recovery to continue, it will require corporate capital spending to drive job growth and manufacturing orders. With this outlook and the performance of cyclical stocks during the last six months, we are holding our course by continuing to own consistent growth names. While this approach underperformed over the last six months, we believe it will outperform in the future. As always, we remain convinced that long-term investing in equities is the best way for investors to meet their financial goals. We believe that patience will be rewarded. Sincerely, Terry Milberger Senior Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or redemptions of shares. - -------------------------------------------------------------------------------- 38MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - SELECT 25(R) SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/select25series.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Select 25(R) Series on January 29, 1999, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $6,852. By comparison, the same $10,000 investment would have been $8,319, based on the S&P 500 Index performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Citigroup, Inc. 4.2% Apache Corporation 4.2% Cisco Systems, Inc. 4.2% Harley-Davidson, Inc. 3.9% American International Group, Inc. 3.7% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR SINCE INCEPTION --------------------------- A Shares 11.50% (6.60%) (1-29-99) A Shares with sales charge 5.06% (7.77%) (1-29-99) B Shares 10.69% (7.24%) (1-29-99) B Shares with CDSC 5.69% (7.64%) (1-29-99) C Shares 10.66% (7.18%) (1-29-99) C Shares with CDSC 9.66% (7.18%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 39SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SELECT 25(R) SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- ADVERTISING - 3.5% Omnicom Group, Inc. .................. 12,000 $ 862,200 APPLICATION SOFTWARE - 2.9% Intuit, Inc.* ........................ 15,000 723,600 BIOTECHNOLOGY - 3.6% Amgen, Inc.* ......................... 14,000 903,980 BREWERS - 3.6% Anheuser-Busch Companies, Inc. .............................. 18,000 888,120 BROADCASTING & CABLE TV - 3.1% Comcast Corporation* ................. 25,000 772,000 COMMUNICATIONS EQUIPMENT - 6.1% Cisco Systems, Inc.* ................. 53,000 1,035,620 Nokia OYJ ADR ........................ 30,000 468,000 --------- 1,503,620 DATA PROCESSING & OUTSOURCED SERVICE - 3.7% First Data Corporation ............... 23,000 919,080 DEPARTMENT STORES - 1.7% Kohl's Corporation* .................. 8,000 428,000 DRUG RETAIL - 3.2% Walgreen Company ..................... 26,000 796,640 GENERAL MERCHANDISE STORES - 1.8% Target Corporation ................... 12,000 451,560 HEALTH CARE DISTRIBUTORS - 3.5% Cardinal Health, Inc. ................ 15,000 875,850 HEALTH CARE EQUIPMENT - 3.4% Medtronic, Inc. ...................... 18,000 844,560 HOME IMPROVEMENT RETAIL - 1.9% Home Depot, Inc. ..................... 15,000 477,750 HYPERMARKETS & SUPERCENTERS - 2.9% Wal-Mart Stores, Inc. ................ 13,000 726,050 INDUSTRIAL CONGLOMERATES - 6.9% 3M Company ........................... 12,000 828,840 General Electric Company ............. 30,000 894,300 --------- 1,723,140 INDUSTRIAL GASSES - 2.5% Praxair, Inc. ........................ 10,000 619,500 LIFE & HEALTH INSURANCE - 3.7% Aflac, Inc. .......................... 28,000 904,400 MOTORCYCLE MANUFACTURERS - 3.9% Harley-Davidson, Inc. ................ 20,000 964,000 MOVIES & ENTERTAINMENT - 3.2% Viacom, Inc. (Cl. B) ................. 21,000 804,300 MULTI-LINE INSURANCE - 3.7% American International Group, Inc. ... 16,000 923,200 - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- OIL & GAS EQUIPMENT & SERVICES - 2.8% BJ Services Company* ................. 20,000 $ 683,400 OIL & GAS EXPLORATION & PRODUCTION - 4.2% Apache Corporation ................... 15,000 1,040,100 OTHER DIVERSIFIED FINANCIAL SERVICES - 4.2% Citigroup, Inc. ...................... 23,000 1,046,730 PHARMACEUTICALS - 6.1% Johnson & Johnson .................... 15,000 742,800 Pfizer, Inc. ......................... 25,000 759,500 ----------- 1,502,300 SEMICONDUCTORS - 2.3% Analog Devices, Inc.* ................ 15,000 570,300 SOFT DRINKS - 3.7% Pepsico, Inc. ........................ 20,000 916,600 SYSTEMS SOFTWARE - 3.6% Microsoft Corporation ................ 32,000 889,280 ----------- Total common stocks - 95.7% ....... 23,760,260 REPURCHASE AGREEMENT - 4.5% - --------------------------- United Missouri Bank, 0.65%, 10-01-03 (Collateralized by FNMA, 10-01-03 with a value of $1,150,000 and a repurchase amount of $1,127,021) .. $1,127,000 1,127,000 ----------- Total investments - 100.3% ............................ 24,887,260 Liabilities, less cash & other assets - (0.3%) ........ (63,598) ----------- Total net assets - 100.0% ............................. $24,823,662 =========== The identified cost of investments owned at September 30, 2003 was the same for federal income tax and financial statement purposes. *Non-income producing security ADR (American Depositary Receipt) - -------------------------------------------------------------------------------- 40 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES NOVEMBER 15, 2003
![]() Bill Wolfenden Portfolio Manager | ![]() |
TO OUR SHAREHOLDERS: The Small Cap Growth Series of Security Equity Fund produced a strong year of performance ended September 30, 2003. The Fund was up 47.59%, significantly outpacing the 41.72% return from the benchmark Russell 2000 Growth.(1) Volatile trading characterized the early months of the year as portfolio managers kept one eye on their Quotron and the other eye on CNN. In general, the small cap market traded on news, not on fundamentals. As U.S. forces gained the upper hand toward regime change in Iraq, investors extended their investment horizons. With interest rates at historic lows, investors favored growth equities, particularly smaller cap companies. From our view, this trend helped drive up prices of companies that we have long maintained possessed attractive and dependable growth characteristics, and are often less expensive than larger cap companies. The Fund continues to benefit from a tailwind behind small stocks. Since this market advance began in the 4th quarter of 2002, the Russell 2000 is up 36.50%, the Russell 2000 Growth is up 41.72%, while the large cap S&P 500 is up 24.30%. Back in late 2002, we suggested small cap growth stocks were historically very cheap. That valuation opportunity, combined with small caps' historical pattern of strong returns coming out of a recession, helped to fuel the rally. The recent strong performance was driven by very good stock selection across most sectors. We maintained an approximate market weight to technology throughout the year, with about an average 22% of portfolio assets invested in this sector. Approximately half of that was invested in software companies. We continued to recognize very strong performance from a number of specialty semiconductor equipment manufacturers as well. Health care represented an average 21% of portfolio assets, again in line with the benchmark weighting. Our approach in health care is to spread our positions across this broad and diverse sector. A basket of biotech stocks helped performance, as did a number of medical device companies. Weakness in a number of health care management service stocks was one of the few detractors of performance. Finally, the broad consumer sector accounted for 20%, on average, of portfolio assets. We enjoyed great success in this area as direct consumer related stocks posted strong gains, as did nearly all of our Internet related companies. The Internet group is one of the few areas where we have made a bet in excess of the benchmark this year. That bet has proven to be a good one as strong stock selection has contributed meaningful returns to date. As we discussed previously this year, we have been very diligent about harvesting gains as stocks approach their upside target price. This has increased the portfolio's turnover. Nonetheless, we want to reiterate how important it is to us to adhere to this risk control tool. Looking ahead, while many small stocks have experienced rapid price appreciation, earnings growth has been strong, supporting an attractive price to earnings ratio* (P/E) expansion. The Fund's forward P/E is 23.7x the forward 12-month earnings estimates. That 24x is not as cheap as it was a year ago when small caps were at their bottom, but it is only modestly richer than the benchmark's forward multiple of 22.8x. We are optimistic we can continue to draw on our fundamental research strength and identify the most attrac-tive small company growth stocks as we close the year. Sincerely, Bill Wolfenden Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduced Fund expenses and in the absence of such waivers the performance quoted would be reduced. Investments in small company stocks may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies. *The P/E ratio shows the weighted average of the price/earnings ratio of the stocks in a Fund's portfolio. The P/E ratio of a stock is calculated by dividing the current price of the stock by its 12 months' earnings per share. A higher "multiple" means investors have higher expectations for future growth and have bid up the stock's price. - -------------------------------------------------------------------------------- 41MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/smallcap.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Small Cap Growth Series on October 15, 1997, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $12,189. By comparison, the same $10,000 investment would have been $8,618, based on the Russell 2000 Growth Index performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Scientific Games Corporation 1.4% Infinity Property & Casualty Corporation 1.3% Embarcadero Technologies, Inc. 1.3% Scottish Re Group, Ltd. 1.3% Casual Male Retail Group, Inc. 1.3% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR 5 YEARS SINCE INCEPTION ---------------------------------------- A Shares 47.59% 8.24% 4.41% (10-15-97) A Shares with sales charge 39.11% 6.97% 3.38% (10-15-97) B Shares 46.45% 7.17% 3.40% (10-15-97) B Shares with CDSC 41.45% 6.87% 3.40% (10-15-97) C Shares 46.52% N/A 2.30% (1-29-99) C Shares with CDSC 45.52% N/A 2.30% (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses for the Fund and in the absence of such waiver, the performance quoted would be reduced. - -------------------------------------------------------------------------------- 42SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS - 1.7% Forward Air Corporation* ............. 7,900 $ 218,435 Pacer International, Inc.* ........... 10,500 209,265 ---------- 427,700 APPAREL RETAIL - 2.6% Bebe Stores, Inc.* ................... 7,200 195,120 Casual Male Retail Group, Inc.* ...... 41,800 308,902 Hot Topic, Inc.* ..................... 6,900 155,526 ---------- 659,548 APPAREL, ACCESSORIES & LUXURY GOODS - 2.2% Ashworth, Inc.* ...................... 25,600 177,408 Guess?, Inc.* ........................ 22,400 199,360 Oxford Industries, Inc. .............. 2,550 163,710 ---------- 540,478 APPLICATION SOFTWARE - 2.0% Intervideo, Inc.* .................... 7,500 160,875 Opnet Technologies, Inc.* ............ 16,500 205,920 Ultimate Software Group, Inc.* ....... 16,900 142,805 ---------- 509,600 BIOTECHNOLOGY - 2.0% Alexion Pharmaceuticals, Inc.* ....... 8,300 136,701 Harvard Bioscience, Inc.* ............ 28,000 207,760 Telik, Inc.* ......................... 7,900 158,395 ---------- 502,856 CASINOS & GAMING - 1.4% Scientific Games Corporation* ........ 29,600 337,736 COMMUNICATIONS EQUIPMENT - 2.3% Centillium Communications, Inc.* ..... 27,100 191,597 PC-Tel, Inc* ......................... 14,900 158,983 Stratex Networks, Inc.* .............. 54,700 210,595 ---------- 561,175 COMPUTER STORAGE & PERIPHERALS - 0.8% Applied Films Corporation* ........... 6,600 196,218 DATA PROCESSING & OUTSOURCED SERVICE - 1.6% Espeed, Inc.* ........................ 8,300 187,663 Per-Se Technologies, Inc.* ........... 13,000 208,000 ---------- 395,663 DIVERSIFIED BANKS - 0.8% Net.Bank, Inc. ....................... 15,500 192,975 DIVERSIFIED COMMERCIAL SERVICES - 1.5% Bright Horizons Family Solutions, Inc.* .................. 5,200 207,740 Sylvan Learning Systems, Inc.* ....... 5,900 160,952 ---------- 368,692 ELECTRONIC EQUIPMENT MANUFACTURERS - 1.5% Eplus, Inc.* ......................... 11,000 171,600 Veeco Instruments Inc.* .............. 9,500 189,620 ---------- 361,220 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- FOOD RETAIL - 0.7% Wild Oats Market, Inc.* .............. 16,800 $ 183,624 HEALTH CARE EQUIPMENT - 8.0% Abaxis, Inc.* ........................ 14,000 194,600 Analogic Corporation ................. 5,700 273,600 Biosite, Inc.* ....................... 4,300 122,034 Conceptus, Inc.* ..................... 10,900 142,790 Dade Behring Hldgs, Inc.* ............ 5,300 148,453 Epix Medical, Inc.* .................. 11,300 192,326 I-Flow Corporation* .................. 7,300 76,650 Inamed Corporation* .................. 2,430 178,484 Intuitive Surgical, Inc.* ............ 14,700 245,196 Laserscope* .......................... 17,400 204,450 Ventana Medical Systems, Inc.* ....... 5,210 209,963 ---------- 1,988,546 HEALTH CARE FACILITIES - 1.9% Kindred Health Care, Inc.* ........... 4,600 172,270 Labone, Inc.* ........................ 12,500 291,625 ---------- 463,895 HEALTH CARE SERVICES - 3.5% Icon plc* ............................ 5,700 215,916 Inveresk Research Group, Inc.* ....... 11,700 232,245 Merge Technologies* .................. 10,700 180,188 Providence Service Corporation* ...... 14,300 225,940 ---------- 854,289 HEALTH CARE SUPPLIES - 2.0% Polymedica Corporation ............... 11,200 296,800 Tripath Imaging, Inc.* ............... 22,200 193,140 ---------- 489,940 HOME FURNISHINGS - 1.0% Kirkland's, Inc.* .................... 15,700 251,671 INSURANCE BROKERS - 0.9% Healthextras Inc.* ................... 26,800 230,748 INTERNET SOFTWARE & SERVICES - 9.5% Altiris, Inc.* ....................... 7,500 197,100 Autobytel, Inc.* ..................... 14,800 140,896 Cnet Networks, Inc.* ................. 22,400 158,592 Digitas, Inc.* ....................... 39,700 288,222 DoubleClick, Inc.* ................... 8,900 95,853 Ebookers plc ADR* .................... 8,600 157,466 Embarcadero Technologies, Inc.* ...... 31,100 312,244 Infospace, Inc.* ..................... 13,200 269,412 Kana Software, Inc.* ................. 41,000 160,720 Radware Ltd.* ........................ 11,100 201,465 Tumbleweed Communications Corporation* ...................... 30,600 169,861 ValueClick, Inc.* .................... 23,400 196,794 ---------- 2,348,625 - -------------------------------------------------------------------------------- 43 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- IT CONSULTING & OTHER SERVICES - 1.7% Forrester Research Inc.* ............. 12,200 $ 174,826 Lionbridge Technologies, Inc.* ....... 33,150 248,957 ---------- 423,783 LEISURE PRODUCTS - 0.8% K2, Inc.* ............................ 13,000 193,050 MANAGED HEALTH CARE - 1.1% American Medical Security Group* ............................ 13,600 276,216 METAL & GLASS CONTAINERS - 0.7% Jarden Corporation* .................. 4,600 173,650 OIL & GAS DRILLING - 1.4% Grey Wolf, Inc.* ..................... 57,200 199,056 Unit Corporation* .................... 8,400 158,256 ---------- 357,312 OIL & GAS EQUIPMENT & SERVICES - 3.3% Cal Dive International, Inc.* ........ 10,300 200,232 Maverick Tube Corporation* ........... 10,900 169,168 Oil States International, Inc.* ...... 17,700 224,613 Superior Energy Services, Inc.* ...... 22,100 216,580 ---------- 810,593 PACKAGED FOODS & MEATS - 0.8% Peets Coffee & Tea, Inc.* ............ 10,100 197,455 PHARMACEUTICALS - 7.0% Able Laboratories, Inc.* ............. 8,200 153,422 Angiotech Pharmaceuticals, Inc.* ..... 500 21,825 Atherogenics, Inc.* .................. 13,000 217,620 Bradley Pharmaceuticals, Inc. ........ 6,600 179,850 Collagenex Pharmaceuticals, Inc. ..... 9,800 105,154 Durect Corporation* .................. 47,100 158,256 Esperion Therapeutics, Inc.* ......... 9,900 192,951 Penwest Pharmaceuticals, Company* .......................... 8,900 189,748 Pozen, Inc.* ......................... 10,500 188,790 Salix Pharmaceuticals, Ltd.* ......... 8,370 161,206 Vicuron Pharmaceuticals, Inc.* ....... 9,900 175,230 ---------- 1,744,052 PROPERTY & CASUALTY INSURANCE - 2.2% Infinity Property & Casualty Corporation ....................... 11,750 330,292 ProAssurance Corporation* ............ 8,400 216,972 ---------- 547,264 PUBLISHING - 0.6% Information Holdings, Inc.* .......... 6,900 138,207 REGIONAL BANKS - 0.8% First Community Bancorp .............. 5,600 187,544 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- REINSURANCE - 1.3% Scottish Reinsurance Group, Ltd. ..... 12,900 $ 311,535 RESTAURANTS - 1.5% Chicago Pizza & Brewery, Inc.* ....... 13,800 162,150 Rare Hospitality International, Inc.* ............................. 8,700 216,717 ---------- 378,867 SEMICONDUCTOR EQUIPMENT - 3.7% ASE Test Limited* .................... 16,100 139,909 Genus, Inc.* ......................... 50,600 208,472 Logicvision, Inc.* ................... 56,100 184,569 Mykrolis Corporation* ................ 15,700 190,598 UltraTech Stepper, Inc.* ............. 6,600 186,252 ---------- 909,800 SEMICONDUCTORS - 8.2% Actel Corporation* ................... 7,700 184,569 DSP Group, Inc.* ..................... 7,400 184,334 Exar Corporation* .................... 15,100 213,363 IXYS Corporation* .................... 17,400 163,038 Kopin Corporation* ................... 23,700 164,241 O2Micro International Ltd.* .......... 12,800 184,960 PLX Technology, Inc.* ................ 33,900 214,790 Power Integrations, Inc.* ............ 5,300 176,172 Quicklogic Corporation* .............. 17,800 118,370 White Electronics Designs Corporation* ...................... 12,300 132,225 Xicor, Inc.* ......................... 10,700 99,403 Zoran Corporation* ................... 10,600 206,700 ---------- 2,042,165 SPECIALTY STORES - 7.2% Aaron Rents, Inc. .................... 13,200 276,540 Cost Plus, Inc.* ..................... 4,500 166,140 Friedman's, Inc. ..................... 11,200 156,240 Guitar Center, Inc.* ................. 7,100 228,336 Jo-Ann Stores, Inc.* ................. 8,000 223,200 Movie Gallery, Inc.* ................. 12,500 245,625 Regis Corporation .................... 5,700 182,970 TBC Corporation* ..................... 12,300 308,115 ---------- 1,787,166 STEEL - 0.3% GrafTech International, Ltd.* ........ 10,400 83,200 SYSTEMS SOFTWARE - 0.5% ClickSoftware Company* ............... 58,500 114,660 TRUCKING - 1.7% Marten Transport, Ltd.* .............. 6,600 172,260 Vitran Corporation, Inc.* ............ 24,000 249,840 ---------- 422,100 ---------- Total common stocks - 92.7% 22,963,818 - -------------------------------------------------------------------------------- 44 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT - 12.1% - ---------------------------- United Missouri Bank, 0.65%, 10-01-03 (Collateralized by FNMA, 10-01-03 with a value of $3,061,000 and a repurchase amount of $3,000,054) ............ $3,000,000 $ 3,000,000 ------------ Total investments - 104.8% ............................ 25,963,818 Liabilities, less cash & other assets - (4.8%) ........ (1,186,771) ------------ Total net assets - 100.0% ............................. $24,777,047 ============ For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $21,202,375. *Non-income producing security ADR (American Depositary Receipt) plc (public limited company) - -------------------------------------------------------------------------------- 45 MANAGER'S COMMENTARY SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES NOVEMBER 15, 2003
![]() Mark Mitchell Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: Fiscal 2003 marked the first positive year for most equity investors since 2000. The Security Social Awareness Fund's performance for the period was positive with the Fund returning 20.95%.(1) Although the Fund outperformed its peer group's median return of 20.72%, it lagged its benchmark, the Domini Social Index's return of 25.97%. Throughout this difficult period in the equity market, we have remained focused on our strategy. Our strategy involves identifying good companies meeting our social criteria whose growth prospects we believe the market is currently mispricing. Over the long term, we believe companies with good management teams, access to resources and strong opportunities for growth in their industries, outperform. While over the longer term this strategy has been successful, the market has favored lower-quality names over the last six months; the rationale being that lower quality names had more leverage to an economic recovery and were mispriced relative to higher quality companies with more visibility. This focus dampened the Fund's total return for the one-year period. INDUSTRIALS AND FINANCIAL STOCKS TOP PERFORMERS The Fund's industrial holdings were up 28% compared to 17% for the index. An overweighted position in Paychex, up 43% due to an improving economy and the assumption by many that it is a technology company, helped boost performance. Small positions in Southwest Airlines and Fedex also contributed positively to performance. The Fund's financial stocks also contributed gains and were up 23% vs. 21% for the benchmark. Benefiting from declining interest rates, increased stock and bond activity and strong mortgage loan demand, our overweighted positions in J.P. Morgan Chase, MBNA, American Express, Goldman Sachs and Bank of New York helped boost performance. TELECOMMUNICATIONS AND CONSUMER DISCRETIONARY DISAPPOINT The Fund's underweighting in telecommunications stocks relative to the benchmark dampened overall performance. The lower-quality, higher-risk nature of these companies does not conform to our investment discipline of buying high-quality companies with good prospects at attractive valuations. But after a prolonged period of decline, telecommunication companies such as AT&T Wireless surprised many by rising 99% while Sprint gained 72%. While we believe conceptually in the future of wireless, we have significant near-term concerns about weak balance sheets, substantial customer penetration levels, aggressive pricing, and uncertainty over the technology platform that will ultimately prevail in the telecommunications industry. Consistent with our investing strategy, the Fund held positions in larger, more stable telecommunications stocks such as SBC. While specific consumer discretionary names helped the Fund, our emphasis on paying the right price for growth kept us from outperforming in this sector as we avoided highly-valued names such as Ebay. Large active weights in the names that recovered from concerns about their future growth contributed strong performance. Examples of these include retailers Target and Home Depot. LONG-TERM INVESTING GOOD STRATEGY Patience is key to successful long-term investing. After three years of market declines, many long-term investors were rewarded in 2003 with positive returns. Although evidence of a strong economic recovery is mixed, ongoing negatives such as high unemployment and wavering consumer confidence should be offset by positives such as an improved GDP, favorable fiscal and monetary policies, and improved corporate earnings. Although there will always be uncertainties surrounding the equity markets, we believe that over time, equities present the best opportunity for investors to grow their assets. We also continue to believe in a disciplined dollar cost averaging strategy. While it does not assure profits or protect against losses in a declining market, we believe it is the best way to take advantage of the natural highs and lows in a market cycle. We look forward to helping you meet your financial goals in the future. Sincerely, Mark Mitchell Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or redemptions of shares. - -------------------------------------------------------------------------------- 46MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/socialawareness.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Social Awareness Series on November 1, 1996, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been to $11,803. By comparison, the same $10,000 investment would have grown to $16,969 based on the Domini Social Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Microsoft Corporation 6.3% American International Group, Inc. 4.3% Cisco Systems, Inc. 3.8% Johnson & Johnson 3.7% Comcast Corporation 3.4% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR 5 YEARS SINCE INCEPTION ---------------------------------------- A Shares 20.95% (0.65%) 3.31% (11-1-96) A Shares with sales charge 13.99% (1.81%) 2.43% (11-1-96) B Shares 20.07% (1.63%) 2.26% (11-1-96) B Shares with CDSC 15.07% (2.03%) 2.26% (11-1-96) C Shares 20.04% N/A (6.80%) (1-29-99) C Shares with CDSC 19.04% N/A (6.80%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 47SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- ADVERTISING - 1.5% Omnicom Group, Inc. ................... 3,500 $ 251,475 APPLICATION SOFTWARE - 1.6% Intuit, Inc.* ......................... 5,800 279,792 ASSET MANAGEMENT & CUSTODY BANKS - 0.7% Bank of New York Company, Inc. ........ 4,200 122,262 BIOTECHNOLOGY - 2.3% Amgen, Inc.* .......................... 6,000 387,420 BROADCASTING & CABLE TV - 3.4% Comcast Corporation* .................. 18,637 575,510 COMMUNICATIONS EQUIPMENT - 6.0% ADC Telecommunications, Inc.* ......... 77,500 180,575 Cisco Systems, Inc.* .................. 32,500 635,050 Nokia OYJ ADR ......................... 4,700 73,320 Qualcomm, Inc. ........................ 2,900 120,756 ---------- 1,009,701 COMPUTER HARDWARE - 2.0% Dell, Inc.* ........................... 10,100 337,239 CONSUMER FINANCE - 3.2% American Express Company .............. 6,200 279,372 MBNA Corporation ...................... 11,900 271,320 ---------- 550,692 DATA PROCESSING & OUTSOURCED SERVICE - 1.4% Paychex, Inc. ......................... 7,000 237,510 DEPARTMENT STORES - 0.5% Kohl's Corporation* ................... 1,500 80,250 DIVERSIFIED BANKS - 4.8% Bank of America Corporation ........... 5,000 390,200 Wells Fargo & Company ................. 8,200 422,300 ---------- 812,500 DIVERSIFIED CAPITAL MARKETS - 1.2% J.P. Morgan Chase & Company ........... 6,000 205,980 DRUG RETAIL - 1.1% CVS Corporation ....................... 4,600 142,876 Walgreen Company ...................... 1,200 36,768 ---------- 179,644 ELECTRONIC MANUFACTURING SERVICES - 1.5% Molex, Inc. ........................... 8,700 248,733 GENERAL MERCHANDISE STORES - 2.7% Target Corporation .................... 12,200 459,086 HEALTH CARE DISTRIBUTORS - 1.8% Cardinal Health, Inc. ................. 5,112 298,490 HEALTH CARE EQUIPMENT - 2.8% Medtronic, Inc. ....................... 10,200 478,584 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- HOME IMPROVEMENT RETAIL - 3.2% Home Depot, Inc. ...................... 12,600 $ 401,310 Lowe's Companies, Inc. ................ 2,800 145,320 ---------- 546,630 HOUSEHOLD PRODUCTS - 4.9% Colgate-Palmolive Company ............. 5,300 296,217 Procter & Gamble Company .............. 5,700 529,074 ---------- 825,291 INDUSTRIAL CONGLOMERATES - 1.5% 3M Company ............................ 3,600 248,652 INDUSTRIAL GASES - 1.3% Praxair, Inc. ......................... 3,700 229,215 INSURANCE BROKERS - 1.3% Marsh & McLennan Companies, Inc. ...... 4,600 219,006 INTEGRATED TELECOMMUNICATION SERVICES - 3.3% SBC Communications, Inc. .............. 19,348 430,493 Verizon Communications, Inc. .......... 4,200 136,248 ---------- 566,741 INVESTMENT BANKING & BROKERAGE - 1.7% Goldman Sachs Group, Inc. ............. 1,800 151,020 Merrill Lynch & Company, Inc. ......... 2,500 133,825 ---------- 284,845 LIFE & HEALTH INSURANCE - 1.2% Aflac, Inc. ........................... 6,200 200,260 MOTORCYCLE MANUFACTURERS - 2.1% Harley-Davidson, Inc. ................. 7,500 361,500 MOVIES & ENTERTAINMENT - 3.2% Time Warner, Inc.* .................... 15,500 234,205 Walt Disney Company ................... 4,300 86,731 Viacom, Inc. (Cl. B) .................. 5,900 225,970 ---------- 546,906 MULTI-LINE INSURANCE - 4.3% American International Group, Inc. .... 12,654 730,136 OIL & GAS EQUIPMENT & SERVICES - 1.2% BJ Services Company* .................. 6,100 208,437 OIL & GAS EXPLORATION & PRODUCTION - 1.0% Devon Energy Corporation .............. 3,700 178,303 PERSONAL PRODUCTS - 0.5% Avon Products, Inc. ................... 1,400 90,384 PHARMACEUTICALS - 6.6% Johnson & Johnson ..................... 12,704 629,102 Merck & Company, Inc. ................. 9,600 485,952 ---------- 1,115,054 - -------------------------------------------------------------------------------- 48 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT OR NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PROPERTY & CASUALTY INSURANCE - 1.6% Chubb Corporation ..................... 4,100 $ 266,008 PUBLISHING - 0.6% McGraw-Hill Companies, Inc. ........... 1,700 105,621 REGIONAL BANKS - 0.7% Fifth Third Bancorp ................... 2,100 116,067 SEMICONDUCTOR EQUIPMENT - 0.6% Applied Materials, Inc.* .............. 5,400 97,956 SEMICONDUCTORS - 3.9% Analog Devices, Inc.* ................. 4,900 186,298 Intel Corporation ..................... 13,600 374,136 Texas Instruments, Inc. ............... 4,200 95,760 ------------ 656,194 SOFT DRINKS - 5.5% Coca-Cola Company ..................... 10,600 455,376 PepsiCo, Inc. ......................... 10,300 472,049 ------------ 927,425 SYSTEMS SOFTWARE - 6.3% Microsoft Corporation ................. 38,200 1,061,578 THRIFTS & MORTGAGE FINANCE - 1.7% Fannie Mae ............................ 4,200 294,840 ------------ Total common stocks - 96.7% 16,391,917 REPURCHASE AGREEMENT - 4.8% - --------------------------- United Missouri Bank, 0.65%, 10-01-03 (Collateralized by FNMA, 10-01-03, amount of a value of $824,000 and a with repurchase amount of $807,015) $807,000 807,000 ------------ Total investments - 101.5% ............................ 17,198,917 Liabilities, less cash & other assets - (1.5%) ........ (253,929) ------------ Total net assets - 100.0% ............................. $16,944,988 ============ For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $18,873,277. *Non-income producing security ADR (American Depositary Receipt) - -------------------------------------------------------------------------------- 49 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY EQUITY FUND - TECHNOLOGY SERIES NOVEMBER 15, 2003
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/wellington.jpg)
Subadvisor, Wellington Management Company, LLC
TO OUR SHAREHOLDERS: REVIEW The rebound in the technology sector that began during the fourth quarter of 2002 was sustained for the twelve months ended September 30, 2003. The stellar performance of the technology sector for the twelve-month period was slightly abated in late March when the Iraqi conflict and SARS dominated the news. However, investors' optimism quickly returned as the US economy began showing signs of a rebound and the fundamentals of technology stocks began improving. The Security Technology Fund returned 67.93% for the 12-month period ended September 30, 2003, versus 65.99% for the Fund's benchmark, the Goldman Sachs Technology Index(1). The Fund slightly outperformed the Goldman Sachs Technology Composite for the same time period. In particular, the Fund's overweight in the semiconductor sub-sector was additive to performance as semiconductor stocks led the rebound in the technology sector. Global chip sales have improved thanks to increased demand from telecom companies for products like camera-enabled phones. Further, semiconductor unit sales and prices have begun rising and should continue to contribute to investors' bullish stance on this sub-sector. Strong performers for the twelve-month period for the Fund include Agere and Fairchild Semiconductor. Another strong sub-sector for the period was computer storage. The Fund's sizeable overweight in Maxtor Corp. had significant positive impact on performance. In the software sub-sector, our top holding, Microsoft, has lagged the overall technology sector, but continues to deliver steady performance. The company recently doubled its annual dividend, but the yield remains low at 16 cents per share (about 0.6%), suggesting management is waiting to see how the European Union antitrust case is resolved before making more dramatic changes to its dividend policy. Elsewhere, the recent hostile bid by Oracle for PeopleSoft probably marks the start of a period of consolidation for software. The competitive landscape for hardware is tougher, however, as it is quickly becoming a commodity. That said, companies like Dell and IBM are well positioned against these trends. In the case of the technology equipment providers like Cisco, Nokia and Samsung, stocks have been buoyed by strong sales trends. Looking into next year, the launch of new high-end phones should continue to make these stocks attractive. On the negative side, the benchmark relative performance of the Fund was affected. This ocurred by missing the speculative run up of the Internet software and services related stocks that had been beaten down dramatically in 2002, yet had a surprising rebound in 2003. OUTLOOK The technology slump is clearly behind us. The industry is giving clear signs of stabilization, with a pickup in new equipment orders, and sales of server computers on the rise. Additionally, demand for technology should strengthen aided by the substantial fiscal and monetary stimuli. However, cautious stock picking will be key to investing in this sector in the months ahead, as many technology stocks may have become stretched from a valuation standpoint. Sincerely, The Global Technology Portfolio Management Team Wellington Management Company, LLP (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduced Fund expenses and in the absence of such waivers, the performance quoted would be reduced. Investments in technology stocks may be subject to additional risks such as increased price volatility and lack of diversification. - -------------------------------------------------------------------------------- 50MANAGER'S COMMENTARY (CONTINUED) SECURITY EQUITY FUND - TECHNOLOGY SERIES NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/techseries.jpg)
$10,000 SINCE INCEPTION This chart assumes a $10,000 investment in Class A shares of Technology Series on May 1, 2000, and reflects deduction of the 5.75% sales load. On September30, 2003, the value of your investment in Class A shares of the Series (with dividends reinvested) would have been $3,751. By comparison, the same $10,000 investment would have been $7,218, based on the S&P 500 Index's performance and $3,388 based on the Goldman Sachs Technology Index. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Microsoft Corporation 9.9% Cisco Systems, Inc. 6.8% First Data Corporation 4.9% Maxtor Corporation 4.2% St Microelectronics N.V. 4.1% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 1 YEAR SINCE INCEPTION ---------------------------- A Shares 67.93% (23.62%) (5-01-00) A Shares with sales charge 58.57% (24.93%) (5-01-00) B Shares 67.11% (24.59%) (5-01-00) B Shares with CDSC 62.11% (25.26%) (5-01-00) C Shares 66.67% (24.65%) (5-01-00) C Shares with CDSC 65.67% (24.65%) (5-01-00) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Fund and in the absence of such waiver, the performance quoted would be reduced. - -------------------------------------------------------------------------------- 51SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY EQUITY FUND - TECHNOLOGY SERIES - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- APPLICATION SOFTWARE - 1.1% Cognos, Inc.* ......................... 4,100 $ 127,182 COMMUNICATIONS EQUIPMENT - 15.5% Avaya, Inc.* .......................... 13,900 151,510 Brocade Communications Systems, Inc.* .............................. 29,800 155,556 Cisco Systems, Inc.* .................. 39,700 775,738 Nokia OYJ ADR ......................... 27,600 430,560 Nortel Networks Corporation* .......... 36,100 148,010 Polycom, Inc.* ........................ 5,900 97,999 ---------- 1,759,373 COMPUTER HARDWARE - 5.6% Dell, Inc.* ........................... 13,400 447,426 International Business Machines Corporation ........................ 2,100 185,493 ---------- 632,919 COMPUTER STORAGE & PERIPHERALS - 4.1% Maxtor Corporation* ................... 38,867 473,011 DATA PROCESSING & OUTSOURCED SERVICE - 9.8% Alliance Data Systems Corporation* ....................... 2,600 68,640 Bisys Group, Inc.* .................... 13,000 170,950 Computer Sciences Corporation* ........ 4,500 169,065 First Data Corporation ................ 14,000 559,440 Sabre Holdings Corporation ............ 6,700 143,983 ---------- 1,112,078 DIVERSIFIED COMMERCIAL SERVICES - 3.3% Cendant Corporation* .................. 20,000 373,800 ELECTRICAL COMPONENTS & EQUIPMENT - 0.4% American Power Conversion Corporation ........................ 2,600 44,564 ELECTRONIC EQUIPMENT MANUFACTURERS - 1.0% Nanya Technologies* ................... 14,800 114,419 INTERNET SOFTWARE & SERVICES - 5.0% Verisign, Inc.* ....................... 13,200 177,804 Yahoo!, Inc.* ......................... 11,200 396,256 ---------- 574,060 IT CONSULTING & SERVICES - 2.0% Accenture, Ltd.* ...................... 10,300 230,102 MOVIES & ENTERTAINMENT - 1.3% Time Warner, Inc.* .................... 9,600 145,056 PRINCIPAL AMOUNT OR NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT - 7.8% Applied Materials, Inc.* .............. 7,900 $ 143,306 ASE Test Limited* ..................... 15,700 136,433 ASM Lithography Holding N.V.* ......... 14,054 184,529 Kla-Tencor Corporation* ............... 2,200 113,080 Mindspeed Technologies, Inc.* ......... 19,300 104,027 Novellus Systems, Inc.* ............... 3,000 101,250 Varian Semiconductor Equipment Associates, Inc.* .................. 2,800 104,860 ----------- 887,485 SEMICONDUCTORS - 19.2% Agere Systems, Inc.* .................. 41,300 126,791 Analog Devices, Inc.* ................. 8,800 334,576 Fairchild Semiconductor International, Inc.* ............... 16,600 275,228 Intel Corporation ..................... 8,300 228,333 Nvidia Corporation* ................... 6,500 103,422 STMicroelectronics N.V. ............... 19,252 463,011 Taiwan Semiconductor Manufacturing Company, Ltd. ........ 11,663 126,310 Texas Instruments, Inc. ............... 20,000 456,000 United Microelectronics Corporation ADR .................... 14,800 66,748 ----------- 2,180,419 SYSTEMS SOFTWARE - 12.7% Microsoft Corporation ................. 40,400 1,122,716 Network Associates, Inc.* ............. 8,100 111,456 Oracle Corporation* ................... 3,200 35,904 Red Hat, Inc.* ........................ 17,000 171,700 ----------- 1,441,776 TECHNOLOGY DISTRIBUTORS - 1.5% Ingram Micro, Inc.* ................... 12,800 167,040 ----------- Total common stocks - 90.3% 10,263,284 REPURCHASE AGREEMENT - 1.4% - --------------------------- State Street, 0.25%, 10-01-03 (Collateralized by FHLMC, 1.25%, 8-27-04, with a value of $160,305 and a repurchase amount of $154,937) $154,936 154,936 ----------- Total investments - 91.7% ............................. 10,418,220 Cash & other assets, less liabilites - 8.3% ........... 941,960 ----------- Total net assets - 100.0% ............................. $11,360,180 =========== For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $9,573,680. * Non income producing security ADR (American Depositary Receipt) - -------------------------------------------------------------------------------- 52 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY LARGE CAP VALUE FUND NOVEMBER 15, 2003
![]() Valerie Sill Senior Portfolio Manager | ![]() Advisor, The Dreyfus Corporation |
TO OUR SHAREHOLDERS: We are pleased to present this Annual Report for the Security Large Cap Value Fund, covering the 12-month period from October 1, 2002 through September 30, 2003. For the twelve-month period ended September 30, 2003, the Fund produced a total return of 20.24%.(1) In comparison, the Fund's benchmark, the S&P Barra Value Index, produced a total return of 26.55%. We are pleased that the Fund generated strong absolute returns. While the Fund trailed its benchmark during this time period, it performed in line versus its peer group of large cap value funds. Fundamental support for this year's stock market rally can be seen in corporate profits that are recovering very well from their lows in early 2002. For the S&P 500 Index, earnings for the first six months of 2003 increased 9.1% relative to the same period in 2002, and for the second half of this year the increase is expected to be over 14%. However, the strong profit gains are due more to corporate cost cutting than to improved sales. Productivity is improving as companies are maintaining or slowly increasing production with fewer workers, leading to what some are calling a "jobless recovery." Looking across several measures of employment, the labor plight seems to have stabilized, though it is not yet demonstrably improving. The best hint of forthcoming expansion can be found in the increase in temporary jobs, a practice used by many firms before they commit to offering permanent employment. For the large majority of workers with jobs, the recent income tax cuts have boosted take-home pay and helped retail sales. The economy should also get another boost early next year from larger income tax refunds. The Fund's pro-cyclical positioning has led to a substantial improvement in performance during this period. The Fund's holdings in capital goods, basic materials, technology, advertising, and brokerage have been significant contributors to the Fund's performance. The Fund's strongest performing sectors included financial services, capital goods, and energy. The top five performing securities during this time period were Corning, McDonald's, Koninklijke Philips Electronics, J.P.Morgan Chase, and Intel. The Fund's weakest performing sectors were utilities, consumer non-durables, and health care. The five weakest securities in the Fund were American International Group, Nokia, Schering-Plough, AT&T, and Motorola. The Fund adheres to an investment philosophy that is value-oriented, research driven, and risk averse. We attribute the Fund's relatively strong performance primarily to our stock selection strategy, which emphasizes large capitalization value stocks that possess strong business fundamentals and have a catalyst in place to generate capital appreciation. The catalyst may take many forms, including accelerating sales and earnings growth, improving balance sheet trends, new management, and restructuring. The overall risk and valuation characteristics of the Fund are carefully monitored to help ensure adequate diversification and low volatility of returns. Sincerely, Valerie J. Sill Portfolio Manager (1)Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. - -------------------------------------------------------------------------------- 53MANAGER'S COMMENTARY (CONTINUED) SECURITY LARGE CAP VALUE FUND NOVEMBER 15, 2003 ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/largecapvalue.jpg)
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Large Cap Value Fund on September 30, 1993, and reflects deduction of the 5.75% sales load. On September 30, 2003, the value of your investment in Class A shares of the fund (with dividends reinvested) would have grown to $13,057. By comparison, the same $10,000 investment would have grown to $23,910 based on the S&P Barra Value Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Citigroup, Inc. 5.0% Koninklijke (Royal) Philips Electronics N.V. ADR 3.4% Morgan Stanley 3.2% Goldman Sachs Group, Inc. 3.1% United Technologies Corporation 3.0% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ---------------------------------------- A Shares 20.24% (3.50%) 3.37% N/A A Shares with sales charge 13.30% (4.64%) 2.75% N/A B Shares 19.36% (4.43%) N/A 2.60% (10-19-93) B Shares with CDSC 14.36% (4.82%) N/A 2.60% (10-19-93) C Shares 19.23% N/A N/A (6.07%) (1-29-99) C Shares with CDSC 18.23% N/A N/A (6.07%) (1-29-99) - -------------------------------------------------------------------------------- The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 54SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY LARGE CAP VALUE FUND - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT OR NUMBER MARKET CORPORATE BONDS OF SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE - 0.0% Alderwoods Group, Inc.: 12.25% - 2009 ........................ $10,200 11,297 Multicare Companies, Inc., 0.00% - 2007*(1) ................... $200,000 -- ---------- 11,297 REFINING - 0.2% Crown Central Petroleum, 10.875% - 2005 ..................... $200,000 128,000 SERVICES - 0.0% American Eco Corporation, 9.625% - 2008* ..................... $125,000 12 ---------- Total corporate bonds - 0.2% 139,309 PREFERRED STOCK - --------------- MOVIES & ENTERTAINMENT - 2.2% News Corporation, Ltd. ADR ............ 47,600 1,299,004 COMMON STOCK - ------------ AEROSPACE & DEFENSE - 3.7% Rockwell Collins, Inc. ................ 15,600 393,900 United Technologies Corporation ....... 23,300 1,800,624 ---------- 2,194,524 ALUMINUM - 1.0% Alcoa, Inc. ........................... 23,800 622,608 APPAREL, ACCESSORIES & LUXURY GOODS - 0.5% Jones Apparel Group, Inc. ............. 10,300 308,279 APPLICATION SOFTWARE - 0.2% Cadence Design Systems, Inc.* ......... 9,700 129,980 BROADCASTING & CABLE TV - 1.8% Liberty Media Corporation* ............ 106,400 1,060,808 COMMUNICATIONS EQUIPMENT - 7.3% Comverse Technology, Inc.* ............ 18,100 270,776 Corning, Inc.* ........................ 165,100 1,555,242 Telefonaktiebolaget LM Ericsson ADR* ............................... 45,800 672,344 Nokia OYJ ADR ......................... 88,000 1,372,800 Nortel Networks Corporation* .......... 71,800 294,380 3Com Corporation* ..................... 36,800 217,120 ---------- 4,382,662 COMPUTER HARDWARE - 1.3% International Business Machines Corporation ........................ 8,600 759,638 CONSTRUCTION & FARM MACHINERY - 0.6% Deere & Company ....................... 6,500 346,515 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- CONSUMER ELECTRONICS - 4.2% Koninklijke (Royal) Philips Electronics N.V. ADR ........................... 89,600 $2,053,632 Sony Corporation ADR .................. 13,000 452,400 ---------- 2,506,032 CONSUMER FINANCE - 0.9% American Express Company .............. 12,300 554,238 DATA PROCESSING & OUTSOURCED SERVICE - 2.0% Automatic Data Processing, Inc. ....... 16,900 605,865 Sungard Data Systems, Inc.* ........... 23,000 605,130 ---------- 1,210,995 DIVERSIFIED BANKS - 4.7% Bank of America Corporation ........... 12,000 936,480 Comerica, Inc ......................... 6,600 307,560 Fleetboston Financial Corporation ..... 31,300 943,695 U.S. Bancorp .......................... 24,800 594,952 ---------- 2,782,687 DIVERSIFIED CAPITAL MARKETS - 2.2% J.P. Morgan Chase & Company ........... 37,900 1,301,107 ELECTRICAL COMPONENTS & EQUIPMENT - 1.0% Emerson Electric Company .............. 11,400 600,210 FOOD RETAIL - 1.0% Kroger Company* ....................... 17,500 312,725 Safeway, Inc* ......................... 12,700 291,338 ---------- 604,063 HEALTH CARE DISTRIBUTORS - 1.0% McKesson Corporation .................. 18,000 599,220 HEALTH CARE EQUIPMENT - 3.4% C.R. Bard, Inc. ....................... 6,200 440,200 Baxter International, Inc. ............ 33,700 979,322 Becton, Dickinson & Company ........... 16,500 595,980 ---------- 2,015,502 HEALTH CARE SERVICES - 0.0% Genesis Health Ventures, Inc.* ........ 227 5,505 HOUSEHOLD APPLIANCES - 0.5% Black & Decker Corporation ............ 7,000 283,850 INDUSTRIAL MACHINERY - 1.2% Eaton Corporation ..................... 7,900 700,098 INSURANCE BROKERS - 0.9% Marsh & McLennan Companies, Inc. ...... 11,900 566,559 INTEGRATED OIL & GAS - 4.8% BP plc ADR ............................ 19,200 808,320 Exxon Mobil Corporation ............... 31,600 1,156,560 Royal Dutch Petroleum Company ......... 20,000 884,000 ---------- 2,848,880 - -------------------------------------------------------------------------------- 55 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY LARGE CAP VALUE FUND (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- INTEGRATED TELECOMMUNICATION SERVICES - 1.5% Sprint Corporation (FON Group) ........ 24,300 $ 366,930 Verizon Communications, Inc. .......... 15,900 515,796 ---------- 882,726 INVESTMENT BANKING & BROKERAGE - 9.9% Goldman Sachs Group, Inc. ............. 22,100 1,854,190 Lehman Brothers Holdings, Inc. ........ 9,800 676,984 Merrill Lynch & Company, Inc. ......... 27,900 1,493,487 Morgan Stanley ........................ 37,400 1,887,204 ---------- 5,911,865 LIFE & HEALTH INSURANCE - 1.2% John Hancock Financial Services, Inc. ..................... 20,500 692,900 MANAGED HEALTHCARE - 1.3% Aetna, Inc. ........................... 13,100 799,493 MOVIES & ENTERTAINMENT - 1.7% Viacom, Inc. (Cl. B) .................. 27,000 1,034,100 MULTI-LINE INSURANCE - 2.7% American International Group, Inc. .... 14,500 836,650 Hartford Financial Services Group, Inc. ........................ 5,800 305,254 Loews Corporation ..................... 11,200 452,144 ---------- 1,594,048 OFFICE ELECTRONICS - 1.0% Xerox Corporation* .................... 59,900 614,574 OFFICE SERVICES & SUPPLIES - 0.7% Pitney Bowes, Inc. .................... 10,600 406,192 OIL & GAS EQUIPMENT & SERVICES - 1.4% Schlumberger, Ltd. .................... 16,900 817,960 OIL & GAS EXPLORATION & PRODUCTION - 0.9% Anadarko Petroleum Corporation ........ 13,400 559,584 OTHER DIVERSIFIED FINANACIAL SERVICES - 5.9% Citigroup, Inc. ....................... 64,966 2,956,602 Principal Financial Group, Inc. ....... 18,900 585,711 ---------- 3,542,313 PACKAGED FOODS & MEATS - 2.0% H. J. Heinz Company ................... 16,900 579,332 Nestle SA ............................. 10,600 611,015 ---------- 1,190,347 PAPER PRODUCTS - 0.5% International Paper Company ........... 7,300 284,846 PHARMACEUTICALS - 3.2% Johnson & Johnson ..................... 12,100 599,192 Pfizer, Inc. .......................... 23,260 706,639 Wyeth ................................. 12,800 590,080 ---------- 1,895,911 PRINCIPAL AMOUNT OR NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- PROPERTY & CASUALTY INSURANCE - 2.7% Allstate Corporation .................. 29,200 $ 1,066,676 Travelers Property Casualty Corporation ........................ 35,000 555,800 ---------- 1,622,476 PUBLISHING - 2.3% Gannett Company, Inc .................. 12,200 946,232 Knight-Ridder, Inc. ................... 6,000 400,200 ------------ 1,346,432 RAILROADS - 1.0% Union Pacific Corporation ............. 10,700 622,419 RESTAURANTS - 2.6% McDonald's Corporation ................ 65,700 1,546,578 SEMICONDUCTORS - 2.7% Agere Systems, Inc.* .................. 138,500 425,195 Intel Corporation ..................... 42,400 1,166,424 ------------ 1,591,619 SYSTEMS SOFTWARE - 2.9% BMC Software, Inc.* ................... 16,000 222,880 Microsoft Corporation ................. 53,700 1,492,323 ------------ 1,715,203 THRIFTS & MORTGAGE FINANCE - 1.2% Fannie Mae ............................ 10,400 730,080 WIRELESS TELECOMMUNICATION SERVICES - 0.5% Sprint Corporation (PCS Group)* ....... 50,900 291,657 ------------ Total common stocks - 94.0% 56,077,283 U.S. GOVERNMENT & AGENCIES - 2.2% Federal Farm Credit Bank, 1.00%, 10-01-03 .................... $1,318,000 1,318,000 ------------ Total investments - 98.6% ............................. 58,833,596 Cash & other assets, less liabilities - 1.4% .......... 841,170 ------------ Total net assets - 100.0% ............................. $59,674,766 ============ For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $57,832,944. * Non-income producing security ADR (American Depositary Receipt) plc (public limited company) (1) Security is fair valued - -------------------------------------------------------------------------------- 56 SEE ACCOMPANYING NOTES. MANAGER'S COMMENTARY SECURITY MID CAP GROWTH FUND NOVEMBER 15, 2003
![]() James P. Schier Senior Portfolio Manager | ![]() Advisor, Security Management Company, LLC |
TO OUR SHAREHOLDERS: Capitalizing on selecting the right stocks and taking positions in outperforming sectors, the year ended September 30, 2003, proved to be a positive one for the Security Mid Cap Growth Fund. For the period, the Fund returned 54.20% compared to its benchmark, the S&P Mid Cap Growth Index, which was up only 25.36%.(1) The Security Mid Cap Growth Fund outperformed its benchmark index by nearly 30% and its peer group's median return by approximately 27%. Our strategy, to seek appreciable securities of companies that are able to grow and/or reinvest in increasingly profitable ventures and hold them over three to five years to capture the best part of the improvements in profits or profitability, continues to work. We are focused on investing in securities when we find opportunities, with our individual position sizes reflecting the magnitude and the confidence in the opportunity. OVERWEIGHT POSITION AND STOCK SELECTION CONTRIBUTE GAINS An overweight position of 36% in the information technology sector compared to 15% for the index boosted the Fund's performance. Moreover, stock selection added value as 14 of the Fund's stocks were up 60%, with five of the 14 doubling in price. Looking back, technology was very much the place to be in the market prior to 2000. However, since the tech bubble burst in early 2000, technology stocks have done so poorly for so long that valuations got to a level where they started to look interesting. Although there is only an emerging demonstration of increasing orders, there has been much anticipation that companies would begin to increase capital expenditures. It is this anticipation that has caused technology stocks to rally. The portfolio's best technology performers included mostly niche companies. These include business intelligence software provider Hyperion, a beneficiary of the rash of national corporate scandals. Hyperion was up 58% for the year. Increased focus on the infrastructure and energy efficiency issues boosted clean-coal technology company KFX to post a 79% return. Microsemiconductor, a provider of missile defense systems and aerospace applications, benefited greatly from increased spending by the defense industry. The stock gained 172% for the period. HEALTH CARE SELECTION ALSO STRONG While the Fund was underweight in the health care sector relative to its benchmark, the sector returned 68% compared to 27% for the index. Owning the right stocks was key, evidenced by nine of the Fund's holdings being up 50% or more. The Fund was overweight the benchmark in biotech stocks which was the sector's top performer. While most of biotech company's products are in the conceptual stage and are not as yet profitable, the market revalued them as their products passed key development hurdles on the way to getting FDA approval. The portfolio's top performers in the health care sector included Esperion Therapeutic, a company focused on cholesterol-treating drugs that was founded by the developer of Lipitor. STOCK SELECTION KEY TO INDUSTRIAL RETURN The industrial sector contributed to the Fund's performance primarily due to Power-One, a leading power semiconductor supplier to the communications industry. The stock had an amazing run, advancing 246% during the period. Of the holdings in this sector, four rose 50% and three of the four doubled in price. FOCUSED ON SMALLER, NIMBLE COMPANIES Small and medium sized companies continue to outperform larger companies. In 2000, the valuation gap between these categories was stretched to an extreme level as investors were willing to pay approximately more than two times the multiple for smaller companies than for larger companies. We believe this was the result of structural changes in the way people invest. The proliferation of large defined contribution plans and large mutual fund complexes produced an environment in which fund managers were willing to pay a premium for liquidity. Given this, it created an investment opportunity in smaller and mid cap stocks. Since small and mid cap securities have outperformed larger cap stocks since 2000, this valuation gap has returned to a more normal level recently. While historically there have been periods where the market has paid a premium for smaller and medium sized companies, it is unclear today whether we will enter one of those periods now. - -------------------------------------------------------------------------------- 57MANAGER'S COMMENTARY (CONTINUED) SECURITY MID CAP GROWTH FUND NOVEMBER 15, 2003 Nonetheless, there is still a valuation gap that does favor investing in smaller companies and our work still continues to uncover opportunities. The economic environment could possibly provide a better backdrop for continued smaller company performance. In a slower economic environment, large cap companies will find it ever more difficult to grow large revenue bases in a meaningful way. If this is the case, the market could place greater emphasis on smaller, more nimble companies. Lastly, if the dollar continues to weaken and should foreign investors decide to reduce their dollar denominated financial investments, large capitalization stocks could face a more challenging environment. To the extent foreign investors hold equities, they tend to be oriented to the biggest blue chip equities. Sincerely, James P. Schier Senior Portfolio Manager (1) Performance figures are based on Class A shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. ================================= PERFORMANCE ==================================
![](https://capedge.com/proxy/N-CSR/0000897101-03-001585/growthfund2.jpg)
$10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Mid Cap Growth Fund on September 30, 1993, and reflects deduction of the 5.75% sales load. On September 30, 2003, the value of your investment in Class A shares of the fund (with dividends reinvested) would have grown to $28,108. In comparison, the same $10,000 investment would have grown to $31,808 based on the S&P Mid Cap Growth Index's performance. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. - -------------------------------------------------------------------------------- TOP 5 EQUITY HOLDINGS* % OF NET ASSETS ---------- Hollis Eden Pharmaceuticals 3.7% Axciom Corporation 3.5% @Road, Inc. 3.0% Power-One, Inc. 2.8% Ligand Pharmaceuticals, Inc. (CI. B) 2.8% *At September 30, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ----------------------------------------------------------- A Shares 54.20% 15.68% 11.55% N/A A Shares with sales charge 45.31% 14.31% 10.89% N/A B Shares 52.88% 14.60% N/A 10.56% (10-19-93) B Shares with CDSC 47.88% 14.37% N/A 10.56% (10-19-93) C Shares 52.96% N/A N/A 8.63% (1-29-99) C Shares with CDSC 51.96% N/A N/A 8.63% (1-29-99) The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of fund shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. - -------------------------------------------------------------------------------- 58SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY MID CAP GROWTH FUND - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- APPLICATION SOFTWARE - 2.4% Hyperion Solutions Corporation* ....... 50,000 $ 1,443,500 Intelidata Technologies Corporation* .. 517,500 1,221,300 Tibco Software, Inc.* ................. 289,600 1,549,360 ------------ 4,214,160 ASSET MANAGEMENT & CUSTODY BANKS - 2.2% Northern Trust Corporation ............ 49,000 2,079,560 Waddell & Reed Financial, Inc. ........ 70,000 1,649,900 ------------ 3,729,460 BIOTECHNOLOGY - 4.5% Cell Genesys, Inc.* ................... 54,000 679,320 Exact Sciences Corporation* ........... 56,800 766,800 Genvec, Inc.* ......................... 330,000 973,500 Novavax, Inc.* ........................ 126,000 924,840 Sciclone Pharmaceuticals, Inc.* ....... 339,367 2,680,999 Strategic Diagnostics, Inc.* .......... 206,300 856,145 Vical, Inc.* .......................... 156,000 907,920 ------------ 7,789,524 BROADCASTING & CABLE TV - 1.8% Cinar Corporation (Cl. B)* ............ 349,600 1,048,800 Salem Communications Corporation* ..... 103,600 2,008,804 ------------ 3,057,604 COMMUNICATIONS EQUIPMENT - 13.1% ADC Telecommunications, Inc.* ......... 1,035,000 2,411,550 Adaptec Telecommunications, Inc.* .............................. 430,000 3,250,800 Arris Group, Inc.* .................... 364,000 2,093,000 Ciena Corporation* .................... 280,000 1,654,800 Commscope, Inc.* ...................... 160,000 1,929,600 EFJ, Inc.* ............................ 255,650 997,035 Extreme Networks, Inc.* ............... 250,000 1,577,500 Finisar Corporation* .................. 1,000,000 2,250,000 Harris Corporation .................... 53,700 1,921,923 Sonus Networks, Inc.* ................. 300,000 2,079,000 Symmetricom, Inc.* .................... 44,900 284,217 Terayon Communication Systems, Inc.* .............................. 371,100 2,133,825 ------------ 22,583,250 COMPUTER STORAGE & PERIPHERALS - 1.0% Drexler Technology Corporation* ....... 117,400 1,645,948 CONSTRUCTION & ENGINEERING - 1.5% Shaw Group, Inc.* ..................... 253,700 2,666,387 DATA PROCESSING & OUTSOURCED SERVICE - 2.4% Computer Sciences Corporation* ........ 60,000 2,254,200 Fiserv, Inc.* ......................... 50,000 1,811,500 ------------ 4,065,700 DIVERSIFIED COMMERCIAL SERVICES - 0.5% Navigant Consulting, Inc.* ............ 64,800 797,688 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 2.1% KFx, Inc.* ............................ 720,000 $ 3,614,400 ELECTRICAL COMPONENTS & EQUIPMENT - 3.5% Energy Conversion Devices, Inc.* ...... 111,000 1,166,610 Power-One, Inc.* ...................... 470,000 4,836,300 ------------ 6,002,910 ELECTRONIC EQUIPMENT MANUFACTURERS - 3.7% Aeroflex, Inc.* ....................... 180,000 1,593,000 Identix, Inc.* ........................ 77,000 402,710 Maxwell Technologies, Inc.* ........... 277,000 2,529,010 Universal Display Corporation* ........ 168,800 1,753,832 ------------ 6,278,552 HEALTH CARE EQUIPMENT - 1.7% Bioject Medical Technologies, Inc.* ... 300,000 1,050,000 Closure Medical Corporation* .......... 35,000 853,650 Micro Therapeutics, Inc.* ............. 204,000 1,079,160 ------------ 2,982,810 HEALTH CARE FACILITIES - 3.2% Amsurg Corporation* ................... 55,300 1,824,347 Lifepoint Hospitals, Inc.* ............ 48,000 1,154,400 U.S. Physical Therapy, Inc.* .......... 97,000 1,186,407 United Surgical Partners International, Inc.* ............... 50,000 1,415,000 ------------ 5,580,154 HEALTH CARE SERVICES - 3.5% Hooper Holmes, Inc. ................... 568,000 3,777,200 NDCHealth Corporation ................. 59,400 1,244,430 Providence Service Corporation* ....... 62,900 993,820 ------------ 6,015,450 HEALTH CARE SUPPLIES - 0.9% Orthovita, Inc* ....................... 375,000 1,462,500 INDUSTRIAL MACHINERY - 1.7% Flowserve Corporation* ................ 72,000 1,461,600 Quixote Corporation ................... 35,700 897,855 Tennant Company ....................... 17,100 629,964 ------------ 2,989,419 INSURANCE BROKERS - 3.1% Arthur J. Gallagher & Company ......... 120,000 3,393,600 Hilb, Rogal & Hamilton Company ........ 60,000 1,862,400 ------------ 5,256,000 INTERNET SOFTWARE & SERVICES - 3.0% @Road, Inc.* .......................... 380,000 5,111,000 IT CONSULTING & OTHER SERVICES - 4.9% Acxiom Corporation* ................... 383,800 6,048,688 Keane, Inc.* .......................... 182,000 2,325,960 ------------ 8,374,648 - -------------------------------------------------------------------------------- 59 SEE ACCOMPANYING NOTES. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- SECURITY MID CAP GROWTH FUND (CONTINUED) - -------------------------------------------------------------------------------- NUMBER MARKET COMMON STOCKS OF SHARES VALUE - -------------------------------------------------------------------------------- LEISURE PRODUCTS - 2.4% Mattel, Inc. .......................... 215,000 $ 4,076,400 MOVIES & ENTERTAINMENT - 0.5% Lions Gate Entertainment Corporation* ....................... 308,300 921,817 MULTI-UTILITIES & UNREGULATED POWER - 1.0% Williams Companies, Inc. .............. 190,000 1,789,800 OIL & GAS DRILLING - 2.1% Ensco International, Inc. ............. 82,300 2,207,286 Rowan Companies, Inc.* ................ 60,000 1,474,800 ------------ 3,682,086 OIL & GAS EQUIPMENT & SERVICES - 2.8% Cooper Cameron Corporation* ........... 42,000 1,940,820 Grant Prideco, Inc.* .................. 165,000 1,681,350 Tidewater, Inc. ....................... 44,000 1,245,200 ------------ 4,867,370 OIL & GAS EXPLORATION & PRODUCTION - 4.3% Devon Energy Corporation .............. 22,770 1,097,286 EOG Resources, Inc. ................... 44,000 1,836,560 Evergreen Resources, Inc.* ............ 162,000 4,374,000 Syntroleum Corporation* ............... 35,350 142,107 ------------ 7,449,953 OIL & GAS REFINING, MARKETING & TRANSPORT - 0.9% Western Gas Resources, Inc. ........... 40,000 1,520,000 PACKAGED FOODS & MEATS - 0.3% Monterey Pasta Company* ............... 156,000 577,200 PHARMACEUTICALS - 8.8% Esperion Therapeutics, Inc.* .......... 208,000 4,053,920 Hollis Eden Pharmaceuticals* .......... 257,744 6,278,644 Ligand Pharmaceuticals, Inc. (Cl. B)*.. 368,800 4,753,832 ------------ 15,086,396 PUBLISHING - 2.1% E.W. Scripps Company .................. 43,000 3,659,300 REGIONAL BANKS - 0.9% Boston Private Financial Holdings, Inc. ..................... 65,000 1,531,400 RESTAURANTS - 0.9% Rare Hospitality International, Inc.*.. 60,000 1,494,600 SEMICONDUCTORS - 7.3% Applied Micro Circuits Corporation* ... 500,000 2,435,000 Hi/Fn, Inc.* .......................... 151,300 1,114,173 Ixys Corporation* ..................... 285,600 2,676,072 LSI Logic Corporation* ................ 173,300 1,557,967 Microsemiconductor Corporation* ....................... 160,000 2,438,400 Monolithic System Technology, Inc.* .................. 146,800 1,234,588 Xicor, Inc.* .......................... 116,950 1,086,466 ------------ 12,542,666 NUMBER MARKET COMMON STOCKS (CONTINUED) OF SHARES VALUE - -------------------------------------------------------------------------------- SPECIALTY CHEMICALS - 0.4% Rentech, Inc.* ........................ 1,139,300 $ 751,938 SPECIALTY STORES - 2.3% Cost Plus, Inc.* ...................... 62,250 2,298,270 Hibbett Sporting Goods, Inc.* ......... 69,000 1,650,480 ------------ 3,948,750 TRADING COMPANIES & DISTRIBUTORS - 1.6% MSC Industrial Direct Company, Inc. ... 130,000 2,710,500 ------------ Total common stocks - 99.3% ........................... 170,827,740 WARRANTS - 0.4% - --------------- Bioject Medical Technology, Inc. ...... 5,625 2,038 Hollis Eden Pharmaceuticals ........... 8,143 132,615 KFx, Inc. ............................. 144,000 418,424 Orthovita, Inc. ....................... 75,000 135,444 ------------ 688,521 ------------ Total investments - 99.7% ............................. 171,516,261 Cash & other assets, less liabilities - 0.3% .......... 430,903 ------------ Total net assets - 100.0% ............................. $171,947,164 ============ For federal income tax purposes, the identified cost of investments owned at September 30, 2003 was $142,618,798. * Non-income producing security - -------------------------------------------------------------------------------- 60 SEE ACCOMPANYING NOTES. STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2003 SECURITY EQUITY FUND ------------------------------------------------------------ SECURITY SOCIAL MID CAP LARGE CAP EQUITY GLOBAL AWARENESS VALUE VALUE FUND SERIES SERIES SERIES SERIES ------------ ------------ ------------ ------------ ------------ ASSETS Investments, at value(1) .......................... $ 58,833,596 $496,985,842 $ 65,329,539 $ 16,391,917 $202,630,775 Repurchase agreements, at value(1) ................ -- -- -- 807,000 514,000 Cash .............................................. 733 -- -- 1,512 9,140 Cash denominated in a foreign currency, at value(2) -- -- 160,781 -- -- Receivables: Fund shares sold ............................... 3,476 101,785 454,622 3,785 674,017 Securities sold ................................ 1,596,195 2,015,204 2,279,326 32,974 -- Interest ....................................... 3,660 -- 1,297 -- 42,111 Dividends ...................................... 50,710 426,382 97,409 11,214 134,690 Foreign taxes recoverable ......................... -- -- 12,523 -- -- Prepaid expenses .................................. 17,933 19,339 14,656 8,856 22,019 ------------ ------------ ------------ ------------ ------------ Total assets ................................. $ 60,506,303 $499,548,552 $ 68,350,153 $ 17,257,258 $204,026,752 ------------ ------------ ------------ ------------ ------------ LIABILITIES Cash overdraft .................................... $ -- $ 74,522 $ 3,017,047 $ -- $ -- Payable for: Securities purchased ........................... 728,908 -- 249,188 267,198 2,558,964 Fund shares redeemed ........................... 1,965 274,695 414,364 3,437 293,304 Written options, at value ...................... -- -- -- -- 20,250 Management fees ................................ 37,596 318,763 56,357 14,261 169,348 Custodian fees ................................. 1,626 3,732 12,013 551 2,436 Transfer and administration fees ............... 18,695 85,357 30,556 5,522 46,073 Professional fees .............................. 6,030 33,530 6,530 6,030 12,030 12b-1distribution plan fees .................... 29,301 149,467 57,004 13,333 140,521 Other .......................................... 7,416 63,536 9,691 1,938 16,070 ------------ ------------ ------------ ------------ ------------ Total liabilities ............................ 831,537 1,003,602 3,852,750 312,270 3,258,996 ------------ ------------ ------------ ------------ ------------ NET ASSETS ........................................ $ 59,674,766 $498,544,950 $ 64,497,403 $ 16,944,988 $200,767,756 ============ ============ ============ ============ ============ NET ASSETS CONSIST OF: Paid in capital ................................... $ 78,791,466 $456,279,041 $ 78,441,929 $ 20,862,241 $161,566,056 Accumulated undistributed net investment income (loss) ......................................... 154,396 607,081 (277,637) -- 146,960 Accumulated undistributed net realized gain (loss) on sale of investments, futures, options and foreign currency transactions .................. (20,555,442) (24,856,591) (19,332,287) (2,260,264) 2,149,182 Net unrealized appreciation (depreciation) in value of investments, futures, options and translation of assets and liabilities in foreign currency ............................... 1,284,346 66,515,419 5,665,398 (1,656,989) 36,905,558 ------------ ------------ ------------ ------------ ------------ Total net assets ............................. $ 59,674,766 $498,544,950 $ 64,497,403 $ 16,944,988 $200,767,756 ============ ============ ============ ============ ============ CLASS "A" SHARES Capital shares outstanding ........................ 8,981,434 71,940,041 3,656,551 518,254 4,650,488 Net assets ........................................ $ 45,857,845 $430,161,012 $ 42,711,153 $ 9,243,299 $113,821,878 Net asset value per share ......................... $ 5.11 $ 5.98 $ 11.68 $ 17.84 $ 24.48 ============ ============ ============ ============ ============ Offering price per share (net asset value divided by 94.25%) ............................. $ 5.42 $ 6.34 $ 12.39 $ 18.93 $ 25.97 ============ ============ ============ ============ ============ CLASS "B" SHARES Capital shares outstanding ........................ 2,400,720 11,408,430 1,506,317 370,029 2,346,824 Net assets ........................................ $ 11,687,089 $ 61,732,808 $ 16,460,701 $ 6,153,243 $ 53,947,123 Net asset value per share ......................... $ 4.87 $ 5.41 $ 10.93 $ 16.63 $ 22.99 ============ ============ ============ ============ ============ CLASS "C" SHARES Capital shares outstanding ........................ 429,828 1,168,145 476,822 91,028 1,411,917 Net assets ........................................ $ 2,129,832 $ 6,651,130 $ 5,325,549 $ 1,548,446 $ 32,998,755 Net asset value per share ......................... $ 4.96 $ 5.69 $ 11.17 $ 17.01 $ 23.37 ============ ============ ============ ============ ============ (1) Investments, including repurchase agreements, at cost ....................................... $ 57,549,250 $430,470,423 $ 59,670,931 $ 18,855,906 $166,343,045 (2) Cash denominated in a foreign currency, at cost -- -- 160,706 -- -- - -------------------------------------------------------------------------------- 61 SEE ACCOMPANYING NOTES. STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2003 SECURITY EQUITY FUND ----------------------------------------------------------------------- SMALL CAP ENHANCED LARGE CAP GROWTH INDEX INTERNATIONAL SELECT 25(R) GROWTH SERIES SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- ----------- ASSETS Investments, at value(1) ................................ $22,963,818 $13,935,313 $ 8,835,731 $23,760,260 $25,901,998 Repurchase agreements, at value(1) ...................... 3,000,000 518,000 -- 1,127,000 469,207 Cash .................................................... 543,950 909 315 1,241 -- Cash denominated in a foreign currency, at value(2) ..... -- -- 141,729 -- -- Receivables: Fund shares sold ..................................... 5,866 13,853 4,820 2,857 1,846 Securities sold ...................................... 288,943 -- 754,313 -- -- Dividends ............................................ 155 15,915 14,393 10,270 20,417 Security Management Company .......................... -- -- 4,434 -- -- Foreign taxes recoverable ............................... -- -- 2,865 -- -- Prepaid expenses ........................................ 8,022 10,006 10,339 10,169 12,240 ----------- ----------- ----------- ----------- ----------- Total assets ....................................... $26,810,754 $14,493,996 $ 9,768,939 $24,911,797 $26,405,708 ----------- ----------- ----------- ----------- ----------- LIABILITIES Payable for: Securities purchased ................................. $ 1,938,139 $ 5,935 $ 375,605 $ -- $ 136,408 Fund shares redeemed ................................. 25,592 30,217 135,142 41,201 419 Variation margin ..................................... -- 4,080 -- -- -- Management fees ...................................... 20,171 5,952 9,295 15,769 23,645 Custodian fees ....................................... 4,207 410 3,395 638 599 Transfer and administration fees ..................... 14,057 7,895 9,653 6,880 11,949 Professional fees .................................... 6,030 6,030 5,956 6,030 6,030 12b-1distribution plan fees .......................... 21,689 134,103 69,867 14,401 57,781 Other ................................................ 3,822 1,995 933 3,216 1,722 ----------- ----------- ----------- ----------- ----------- Total liabilities .................................. 2,033,707 196,617 609,846 88,135 238,553 ----------- ----------- ----------- ----------- ----------- NET ASSETS .............................................. $24,777,047 $14,297,379 $ 9,159,093 $24,823,662 $26,167,155 =========== =========== =========== =========== =========== NET ASSETS CONSIST OF: Paid in capital ......................................... $33,102,017 $21,129,913 $11,913,420 $37,650,495 $29,602,336 Accumulated undistributed net investment income (loss) .. -- -- 14,667 -- -- Accumulated undistributed net realized gain (loss) on sale of investments, futures and foreign currency transactions ................................ (13,109,316) (6,963,604) (3,019,816) (12,372,632) (4,020,066) Net unrealized appreciation (depreciation) in value of investments, futures and translation of assets and liabilities in foreign currency ........ 4,784,346 131,070 250,822 (454,201) 584,885 ----------- ----------- ----------- ----------- ----------- Total net assets ................................... $24,777,047 $14,297,379 $ 9,159,093 $24,823,662 $26,167,155 =========== =========== =========== =========== =========== CLASS "A" SHARES Capital shares outstanding .............................. 1,238,546 829,322 670,896 1,429,316 2,879,226 Net assets .............................................. $14,406,465 $ 6,377,355 $ 4,360,931 $10,396,185 $16,178,610 Net asset value per share ............................... $ 11.63 $ 7.69 $ 6.50 $ 7.27 $ 5.62 =========== =========== =========== =========== =========== Offering price per share (net asset value divided by 94.25%) ................................... $ 12.34 $ 8.16 $ 6.90 $ 7.71 $ 5.96 =========== =========== =========== =========== =========== CLASS "B" SHARES Capital Shares Outstanding .............................. 624,863 666,135 350,617 1,165,971 1,202,382 Net assets .............................................. $ 6,837,641 $ 4,928,764 $ 2,204,127 $ 8,202,874 $ 6,556,703 Net asset value per share ............................... $ 10.94 $ 7.40 $ 6.29 $ 7.04 $ 5.45 =========== =========== =========== =========== =========== CLASS "C" SHARES Capital shares outstanding .............................. 316,907 403,160 411,071 882,149 626,244 Net assets .............................................. $ 3,532,941 $ 2,991,260 $ 2,594,035 $ 6,224,603 $ 3,431,842 Net asset value per share ............................... $ 11.15 $ 7.42 $ 6.31 $ 7.06 $ 5.48 =========== =========== =========== =========== =========== (1) Investments, including repurchase agreements, at cost $21,179,472 $14,314,090 $ 8,588,329 $25,341,461 $25,786,320 (2) Cash denominated in a foreign currency, at cost ..... -- -- 141,685 -- -- - -------------------------------------------------------------------------------- 62 SEE ACCOMPANYING NOTES. STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2003 SECURITY EQUITY FUND ------------------------- ALPHA SECURITY TECHNOLOGY OPPORTUNITY MID CAP SERIES SERIES GROWTH FUND ----------- ----------- ----------- ASSETS Investments, at value(1) ....................................... $10,263,284 $ 5,959,294 $171,516,261 Repurchase agreements, at value(1) ............................. 154,936 219,499 -- Cash ........................................................... -- 35,454 -- Restricted cash ................................................ -- 30,000 -- Receivables: Fund shares sold ............................................ 4,597 70,724 159,033 Securities sold ............................................. 987,827 415,054 2,997,037 Deposit for short sales ..................................... -- 106,123 -- Due from broker for proceeds on securities sold short ....... -- 162,723 -- Interest .................................................... -- 415 -- Dividends ................................................... 354 2,282 31,930 Security Management Company .................................... -- 1,611 -- Prepaid expenses ............................................... 15,429 38,084 17,120 ----------- ----------- ------------ Total assets .............................................. $11,426,427 $ 7,041,263 $174,721,381 ----------- ----------- ------------ LIABILITIES Cash overdraft ................................................. $ -- $ -- $ 937,346 Securities sold short, at value(2) ............................. -- 161,200 -- Payable for: Securities purchased ........................................ -- 437,516 1,476,598 Fund shares redeemed ........................................ 6,190 -- 66,649 Variation margin ............................................ -- 30,300 -- Management fees ............................................. 9,854 10,325 114,686 Custodian fees .............................................. 1,581 2,516 1,674 Transfer and administration fees ............................ 7,572 1,979 51,390 Professional fees ........................................... 6,064 2,030 10,530 12b-1distribution plan fees ................................. 34,251 5,907 98,253 Other ....................................................... 735 279 17,091 ----------- ----------- ------------ Total liabilities ......................................... 66,247 652,052 2,774,217 ----------- ----------- ------------ NET ASSETS ..................................................... $11,360,180 $ 6,389,211 $171,947,164 =========== =========== ============ NET ASSETS CONSIST OF: Paid in capital ................................................ $17,716,499 $ 6,272,737 $136,622,561 Accumulated undistributed net investment income (loss) ......... (643) (78) -- Accumulated undistributed net realized gain (loss) on sale of investments, futures, options and foreign currency transactions ....................................... (7,449,016) 282,350 5,544,268 Net unrealized appreciation (depreciation) in value of investments, short positions, futures, options and translation of assets and liabilities in foreign currency 1,093,340 (165,798) 29,780,335 ----------- ----------- ------------ Total net assets .......................................... $11,360,180 $ 6,389,211 $171,947,164 =========== =========== ============ CLASS "A" SHARES Capital shares outstanding ..................................... 1,858,866 287,405 12,378,557 Net assets ..................................................... $ 7,397,737 $ 2,935,062 $134,208,368 Net asset value per share ...................................... $ 3.98 $ 10.21 $ 10.84 =========== =========== ============ Offering price per share (net asset value divided by 94.25%) .......................................... $ 4.22 $ 10.83 $ 11.50 =========== =========== ============ CLASS "B" SHARES Capital shares outstanding ..................................... 439,521 169,772 2,763,750 Net assets ..................................................... $ 1,676,201 $ 1,731,067 $ 26,459,428 Net asset value per share ...................................... $ 3.81 $ 10.20 $ 9.57 =========== =========== ============ CLASS "C" SHARES Capital shares outstanding ..................................... 601,280 168,989 1,090,411 Net assets ..................................................... $ 2,286,242 $ 1,723,082 $ 11,279,368 Net asset value per share ...................................... $ 3.80 $ 10.20 $ 10.34 =========== =========== ============ (1) Investments, including repurchase agreements, at cost ...... $ 9,324,649 $ 6,256,036 $141,735,926 (2) Securites sold short, at proceeds .......................... $ -- $ 162,723 $ -- - -------------------------------------------------------------------------------- 63 SEE ACCOMPANYING NOTES. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2003 SECURITY EQUITY FUND -------------------------------------------------------- SECURITY SOCIAL MID CAP LARGE CAP EQUITY GLOBAL AWARENESS VALUE VALUE FUND SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- ----------- INVESTMENT INCOME: Dividends ....................................... $ 821,430 $ 7,166,396 $ 1,180,677 $ 201,393 $ 1,544,909 Securities lending .............................. -- -- 17,349 -- -- Interest ........................................ 50,745 400,926 6,318 5,402 436,043 ----------- ----------- ----------- ----------- ----------- 872,175 7,567,322 1,204,344 206,795 1,980,952 Less: Foreign tax expense ....................... -- -- (102,210) -- -- ----------- ----------- ----------- ----------- ----------- Total investment income ....................... 872,175 7,567,322 1,102,134 206,795 1,980,952 EXPENSES: Management fees ................................. 354,074 3,835,089 629,134 160,322 1,497,711 Custodian fees .................................. 8,095 21,237 105,821 4,011 13,556 Transfer/maintenance fees ....................... 92,052 612,267 200,737 49,798 308,021 Administration fees ............................. 45,668 463,638 100,851 16,543 138,120 Directors' fees ................................. 17,956 11,425 1,426 352 2,895 Professional fees ............................... 11,888 42,141 17,330 7,452 19,422 Reports to shareholders ......................... 4,968 75,855 12,560 3,410 27,391 Registration fees ............................... 28,605 50,501 32,941 45,203 84,070 Other expenses .................................. 3,563 16,423 3,642 1,687 9,561 12b-1 distribution plan fees - Class A .......... 94,698 1,093,930 106,808 20,938 207,824 12b-1 distribution plan fees - Class B .......... 74,903 677,023 66,303 62,625 429,679 12b-1 distribution plan fees - Class C .......... 18,403 60,712 44,545 13,945 236,732 ----------- ----------- ----------- ----------- ----------- Total expenses .................................. 754,873 6,960,241 1,322,098 386,286 2,974,982 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) .................... 117,302 607,081 (219,964) (179,491) (994,030) NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments ..................................... (4,625,189) (5,174,059) (8,664,059) (902,119) 2,127,626 Futures ......................................... -- (2,897,731) -- -- -- Options written and purchased ................... -- -- -- -- 727,251 Foreign currency transactions ................... -- -- (204,772) -- -- ----------- ----------- ----------- ----------- ----------- Net realized gain (loss) ...................... (4,625,189) (8,071,790) (8,868,831) (902,119) 2,854,877 Net change in unrealized appreciation (depreciation) during the period on: Investments ..................................... 12,145,945 89,930,127 22,332,949 3,990,064 52,397,006 Options written and purchased ................... -- -- -- -- 603,941 Translation of assets and liabilities in foreign currencies ......................... -- -- 4,106 -- -- ----------- ----------- ----------- ----------- ----------- Net unrealized appreciation (depreciation) ...... 12,145,945 89,930,127 22,337,055 3,990,064 53,000,947 ----------- ----------- ----------- ----------- ----------- Net gain (loss) .............................. 7,520,756 81,858,337 13,468,224 3,087,945 55,855,824 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ................. $ 7,638,058 $82,465,418 $13,248,260 $ 2,908,454 $54,861,794 =========== =========== =========== =========== =========== - -------------------------------------------------------------------------------- 64 SEE ACCOMPANYING NOTES. STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2003 SECURITY EQUITY FUND ------------------------------------------------------------------ SMALL CAP ENHANCED LARGE CAP GROWTH INDEX INTERNATIONAL SELECT 25(R) GROWTH SERIES SERIES SERIES SERIES SERIES ---------- ---------- ---------- ---------- ---------- INVESTMENT INCOME: Dividends ....................................... $ 19,456 $ 230,672 $ 235,095 $ 214,089 $ 208,294 Securities lending .............................. -- -- 6,804 -- 1,390 Interest ........................................ 20,889 6,093 8,445 20,228 2,473 ---------- ---------- ---------- ---------- ---------- 40,345 236,765 250,344 234,317 212,157 Less: Foreign tax expense ....................... -- -- (27,197) -- -- ---------- ---------- ---------- ---------- ---------- Total investment income ....................... 40,345 236,765 223,147 234,317 212,157 EXPENSES: Management fees ................................. 176,598 102,732 86,416 190,086 189,339 Custodian fees .................................. 23,979 13,324 36,230 3,438 7,358 Transfer/maintenance fees ....................... 133,811 30,519 14,990 66,347 44,343 Administration fees ............................. 19,303 28,493 71,987 23,736 18,791 Directors' fees ................................. 303 307 145 512 365 Professional fees ............................... 7,468 7,370 7,668 7,788 7,427 Reports to shareholders ......................... 1,031 1,512 907 8,289 2,518 Registration fees ............................... 29,712 30,758 31,066 46,337 29,021 Other expenses .................................. 1,937 1,398 1,100 2,205 1,234 12b-1 distribution plan fees - Class A .......... 24,763 15,265 9,742 28,913 31,488 12b-1 distribution plan fees - Class B .......... 50,789 48,693 18,706 85,228 33,083 12b-1 distribution plan fees - Class C .......... 26,758 27,223 20,886 52,567 30,303 ---------- ---------- ---------- ---------- ---------- Total expenses .................................. 496,452 307,594 299,843 515,446 395,270 Less: Reimbursement of expenses - Class A ....... (22,997) (6,378) (35,720) -- -- Reimbursement of expenses - Class B ....... (12,489) (4,987) (18,007) -- -- Reimbursement of expenses - Class C ....... (6,507) (2,833) (19,821) -- -- ---------- ---------- ---------- ---------- ---------- Net expenses .................................... 454,459 293,396 226,295 515,446 395,270 ---------- ---------- ---------- ---------- ---------- Net investment income (loss) .................... (414,114) (56,631) (3,148) (281,129) (183,113) NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments ..................................... 2,366,986 (2,955,929) 395,092 (3,750,965) (2,266,684) Futures ......................................... -- 25,649 -- -- -- Foreign currency transactions ................... -- -- 17,815 -- -- ---------- ---------- ---------- ---------- ---------- Net realized gain (loss) ...................... 2,366,986 (2,930,280) 412,907 (3,750,965) (2,266,684) Net change in unrealized appreciation (depreciation) during the period on: Investments ..................................... 5,227,406 6,020,571 1,053,713 6,658,939 5,276,183 Futures ......................................... -- 100,000 -- -- -- Translation of assets and liabilities in foreign currencies ......................... -- -- 2,979 -- -- ---------- ---------- ---------- ---------- ---------- Net unrealized appreciation (depreciation) ...... 5,227,406 6,120,571 1,056,692 6,658,939 5,276,183 ---------- ---------- ---------- ---------- ---------- Net gain (loss) .............................. 7,594,392 3,190,291 1,469,599 2,907,974 3,009,499 ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations ................. $7,180,278 $3,133,660 $1,466,451 $2,626,845 $2,826,386 ========== ========== ========== ========== ========== - -------------------------------------------------------------------------------- 65 SEE ACCOMPANYING NOTES. STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2003 SECURITY EQUITY FUND (EXCEPT AS NOTED) -------------------------- ALPHA SECURITY TECHNOLOGY OPPORTUNITY MID CAP SERIES SERIES *GROWTH FUND ----------- ----------- ------------ INVESTMENT INCOME: Dividends ...................................... $ 16,300 $ 11,974 $ 304,968 Securities lending ............................. 1,585 -- -- Interest ....................................... 834 6,886 69,048 ----------- ----------- ----------- 18,719 18,860 374,016 Less: Foreign tax expense ...................... (248) -- -- ----------- ----------- ----------- Total investment income ...................... 18,471 18,860 374,016 EXPENSES: Management fees ................................ 73,680 27,342 1,031,797 Custodian fees ................................. 12,464 2,833 10,634 Transfer/maintenance fees ...................... 21,188 142 337,371 Administration fees ............................ 64,764 3,115 126,910 Directors' fees ................................ 115 47 16,949 Professional fees .............................. 8,783 4,483 20,645 Reports to shareholders ........................ 688 233 18,543 Registration fees .............................. 29,043 3,446 32,600 Other expenses ................................. 1,339 268 6,936 12b-1 distribution plan fees -- Class A ........ 10,971 1,449 273,976 12b-1 distribution plan fees -- Class B ........ 12,341 3,940 198,176 12b-1 distribution plan fees -- Class C ........ 17,458 3,936 81,644 ----------- ----------- ----------- Total expenses ................................. 252,834 51,234 2,156,181 Less: Reimbursement of expenses -- Class A ..... (23,623) (3,076) -- Reimbursement of expenses -- CLASS B ..... (9,092) (2,177) -- Reimbursement of expenses -- Class C ..... (13,034) (2,177) -- ----------- ----------- ----------- Net expenses ................................... 207,085 43,804 2,156,181 ----------- ----------- ----------- Net investment income (loss) ................... (188,614) (24,944) (1,782,165) NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments .................................... 566,589 250,884 7,618,758 Futures ........................................ -- 56,332 -- Options written and purchased .................. -- -- 367,114 Foreign currency transactions .................. (643) -- -- ----------- ----------- ----------- Net realized gain (loss) ..................... 565,946 307,216 7,985,872 Net change in unrealized appreciation (depreciation) during the period on: Investments .................................... 3,081,011 (77,243) 52,055,563 Securities sold short .......................... -- 1,523 -- Futures ........................................ -- (90,078) -- Options written and purchased .................. -- -- 230,934 Translation of assets and liabilities in foreign currencies ........................ (231) -- -- ----------- ----------- ----------- Net unrealized appreciation (depreciation) 3,080,780 (165,798) 52,286,497 ----------- ----------- ----------- Net gain (loss) ............................. 3,646,726 141,418 60,272,369 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ................ $ 3,458,112 $ 116,474 $58,490,204 =========== =========== =========== *For the period beginning July 7, 2003 (commencement of operations) to September 30, 2003. - -------------------------------------------------------------------------------- 66 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2003 SECURITY EQUITY FUND --------------------------------------------------------- SECURITY SOCIAL MID CAP LARGE CAP EQUITY GLOBAL AWARENESS VALUE VALUE FUND SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ..................... $ 117,302 $ 607,081 $ (219,964) $ (179,491) $ (994,030) Net realized gain (loss) during the period on investments, futures, options written and purchased and foreign currency transactions .... (4,625,189) (8,071,790) (8,868,831) (902,119) 2,854,877 Net change in unrealized appreciation (depreciation) during the period on investments, options written and purchased and translation of assets and liabilities in foreign currencies 12,145,945 89,930,127 22,337,055 3,990,064 53,000,947 ----------- ------------ ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations ............................. 7,638,058 82,465,418 13,248,260 2,908,454 54,861,794 NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ...................... 12,624,901 (67,957,739) (22,741,341) (440,061) 21,441,016 ----------- ------------ ----------- ----------- ------------ Total increase (decrease) in net assets ........ 20,262,959 14,507,679 (9,493,081) 2,468,393 76,302,810 ----------- ------------ ----------- ----------- ------------ NET ASSETS: Beginning of period .............................. 39,411,807 484,037,271 73,990,484 14,476,595 124,464,946 ----------- ------------ ----------- ----------- ------------ End of period .................................... $59,674,766 $498,544,950 $64,497,403 $16,944,988 $200,767,756 =========== ============ =========== =========== ============ Undistributed net investment income (loss) at end of period ............................... $ 154,396 $ 607,081 $ (277,637) $ -- $ 146,960 =========== ============ =========== =========== ============ - -------------------------------------------------------------------------------- 67 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2003 SECURITY EQUITY FUND ----------------------------------------------------------------------- SMALL CAP ENHANCED LARGE CAP GROWTH INDEX INTERNATIONAL SELECT 25(R) GROWTH SERIES SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ..................... $ (414,114) $ (56,631) $ (3,148) $ (281,129) $ (183,113) Net realized gain (loss) during the period on investments, futures, and foreign currency transactions ................................... 2,366,986 (2,930,280) 412,907 (3,750,965) (2,266,684) Net change in unrealized appreciation (depreciation) during the period on investments, futures, and translation of assets and liabilities in foreign currencies .............. 5,227,406 6,120,571 1,056,692 6,658,939 5,276,183 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............................. 7,180,278 3,133,660 1,466,451 2,626,845 2,826,386 NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ...................... 2,791,333 (6,261,504) 1,094,684 (2,256,498) 9,601,678 ----------- ----------- ----------- ----------- ----------- Total increase (decrease) in net assets ........ 9,971,611 (3,127,844) 2,561,135 370,347 12,428,064 ----------- ----------- ----------- ----------- ----------- NET ASSETS: Beginning of period .............................. 14,805,436 17,425,223 6,597,958 24,453,315 13,739,091 ----------- ----------- ----------- ----------- ----------- End of period .................................... $24,777,047 $14,297,379 $ 9,159,093 $24,823,662 $26,167,155 =========== =========== =========== =========== =========== Undistributed net investment income (loss) at end of period ............................... $ -- $ -- $ 14,667 $ -- $ -- =========== =========== =========== =========== =========== - -------------------------------------------------------------------------------- 68 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2003 (EXCEPT AS NOTED) SECURITY EQUITY FUND ---------------------------- ALPHA SECURITY TECHNOLOGY OPPORTUNITY MID CAP SERIES SERIES* GROWTH FUND ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) .................... $ (188,614) $ (24,944) $ (1,782,165) Net realized gain (loss) during the period on investments, futures, options written and purchased and foreign currency transactions ... 565,946 307,216 7,985,872 Net change in unrealized appreciation (depreciation) during the period on investments, securities sold short, futures, options written and purchased and translation of assets and liabilities in foreign currencies 3,080,780 (165,798) 52,286,497 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ............................ 3,458,112 116,474 58,490,204 NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ..................... 3,725,058 6,272,737 (876,048) ------------ ------------ ------------ Total increase (decrease) in net assets ....... 7,183,170 6,389,211 57,614,156 ------------ ------------ ------------ NET ASSETS: Beginning of period ............................. 4,177,010 -- 114,333,008 ------------ ------------ ------------ End of period ................................... $ 11,360,180 $ 6,389,211 $171,947,164 ============ ============ ============ Undistributed net investment income (loss) at end of period .............................. $ (643) $ (78) $ -- ============ ============ ============ *For the period beginning July 7, 2003 (commencement of operations) to September 30, 2003. - -------------------------------------------------------------------------------- 69 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2002 SECURITY EQUITY FUND ------------------------------------------------------------ SECURITY SOCIAL MID CAP LARGE CAP EQUITY GLOBAL AWARENESS VALUE VALUE FUND SERIES SERIES SERIES SERIES ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ..................... $ 32,704 $ (24,412) $ (544,758) $ (217,011) $ (819,153) Net realized gain (loss) during the period on investments, futures, options written and purchased and foreign currency transactions .... (7,301,261) 552,790 (6,024,553) (479,572) 122,959 Net change in unrealized depreciation during the period on investments, translation of assets and liabilities in foreign currencies .......... (3,019,290) (123,520,914) (4,151,411) (3,022,750) (16,612,323) ------------ ------------ ------------ ------------ ------------ Net decrease in net assets resulting from operations ............................. (10,287,847) (122,992,536) (10,720,722) (3,719,333) (17,308,517) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A ........................................ (215,293) -- -- -- -- Class B ........................................ -- -- -- -- -- Class C ........................................ -- -- -- -- -- Net realized gain: Class A ........................................ -- -- -- -- (633,247) Class B ........................................ -- -- -- -- (370,068) Class C ........................................ -- -- -- -- (166,431) Return of Capital: Class A ........................................ -- -- -- -- (325,873) Class B ........................................ -- -- -- -- (189,772) Class C ........................................ -- -- -- -- (85,729) ------------ ------------ ------------ ------------ ------------ Total distributions to shareholders ......... (215,293) -- -- -- (1,771,120) TOTAL RETURN MERGER (COMPONENTS OF NET ASSETS OF TOTAL RETURN AS OF DATE OF EXCHANGE) (NOTE 9) Capital Stock .................................... -- 4,486,653 -- -- -- Accumulated net investment loss .................. -- (56,623) -- -- -- Accumulated loss on sale of investments .......... -- (1,503,978) -- -- -- Net unrealized depreciation in value of investments .................................... -- (504,764) -- -- -- ------------ ------------ ------------ ------------ ------------ -- 2,421,288 -- -- -- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ...................... (1,693,088) (59,353,916) 9,461,531 (2,830,762) 52,685,173 ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in net assets ........ (12,196,228) (179,925,164) (1,259,191) (6,550,095) 33,605,536 ------------ ------------ ------------ ------------ ------------ NET ASSETS: Beginning of period .............................. 51,608,035 663,962,435 75,249,675 21,026,690 90,859,410 ------------ ------------ ------------ ------------ ------------ End of period .................................... $ 39,411,807 $484,037,271 $ 73,990,484 $ 14,476,595 $124,464,946 ============ ============ ============ ============ ============ Undistributed net investment income (loss) at end of period ............................... $ 29,748 $ -- $ (145,355) $ -- $ -- ============ ============ ============ ============ ============ - -------------------------------------------------------------------------------- 70 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2002 SECURITY EQUITY FUND -------------------------------------------------------- SMALL CAP ENHANCED GROWTH INDEX INTERNATIONAL SELECT 25(R) SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss .............................. $ (515,568) $ (114,019) $ (87,936) $ (387,288) Net realized loss during the period on investments, futures, options written and purchased and foreign currency transactions .... (2,151,075) (2,711,134) (1,599,756) (2,630,186) Net change in unrealized appreciation (depreciation) during the period on investments, translation of assets and liabilities in foreign currencies .......................... (565,535) (1,783,160) 260,949 (1,051,332) ----------- ----------- ----------- ----------- Net decrease in net assets resulting from operations ............................. (3,232,178) (4,608,313) (1,426,743) (4,068,806) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A ........................................ -- -- -- -- Class B ........................................ -- -- -- -- Class C ........................................ -- -- -- -- Class S ........................................ -- -- -- -- Net realized gain: Class A ........................................ -- -- -- -- Class B ........................................ -- -- -- -- Class C ........................................ -- -- -- -- Class S ........................................ -- -- -- -- ----------- ----------- ----------- ----------- Total distributions to shareholders transactions .............................. -- -- -- -- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ...................... (7,765,681) 3,131,699 1,161,346 (1,886,756) ----------- ----------- ----------- ----------- Total decrease in net assets ................... (10,997,859) (1,476,614) (265,397) (5,955,562) ----------- ----------- ----------- ----------- NET ASSETS: Beginning of period .............................. 25,803,295 18,901,837 6,863,355 30,408,877 ----------- ----------- ----------- ----------- End of period .................................... $14,805,436 $17,425,223 $ 6,597,958 $24,453,315 =========== =========== =========== =========== Undistributed net investment loss at end of period ............................... $ -- $ -- $ -- $ -- =========== =========== =========== =========== - -------------------------------------------------------------------------------- 71 SEE ACCOMPANYING NOTES. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2002 SECURITY EQUITY FUND --------------------------- LARGE CAP SECURITY GROWTH TECHNOLOGY MID CAP SERIES SERIES GROWTH FUND ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss .............................. $ (134,837) $ (175,277) $ (1,908,354) Net realized loss during the period on investments, futures, options written and purchased and foreign currency transactions .... (1,399,190) (3,516,067) (1,451,172) Net change in unrealized appreciation (depreciation) during the period on investments, translation of assets and liabilities in foreign currencies .......................... (1,410,681) 1,640,321 (14,895,843) ------------ ------------ ------------ Net decrease in net assets resulting from operations ............................. (2,944,708) (2,051,023) (18,255,369) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A ........................................ -- -- -- Class B ........................................ -- -- -- Class C ........................................ -- -- -- Net realized gain: Class A ........................................ -- -- (865,421) Class B ........................................ -- -- (192,238) Class C ........................................ -- -- (41,711) ------------ ------------ ------------ Total distributions to shareholders ......... -- -- (1,099,370) NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) ...................... 9,713,609 855,932 (32,083,452) ------------ ------------ ------------ Total increase (decrease) in net assets ........ 6,768,901 (1,195,091) (51,438,191) ------------ ------------ ------------ NET ASSETS: Beginning of period .............................. 6,970,190 5,372,101 165,771,199 ------------ ------------ ------------ End of period .................................... $ 13,739,091 $ 4,177,010 $114,333,008 ============ ============ ============ Undistributed net investment loss at end of period ............................... $ -- $ -- $ -- ============ ============ ============ - -------------------------------------------------------------------------------- 72 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY LARGE CAP VALUE FUND (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------------------- 2003(C) 2002(C)(I)(N) 2001(C)(H) 2000(C) 1999(C) ---------- ------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.25 $ 5.37 $ 6.42 $ 7.17 $ 7.68 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... 0.02 0.01 0.03 0.07 0.12 Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.84 (1.10) (1.03) (0.58) 0.75 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.86 (1.09) (1.00) (0.51) 0.87 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- (0.03) (0.05) (0.13) (0.04) Distributions (from Realized Gains) ............ -- -- -- (0.11) (1.34) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.03) (0.05) (0.24) (1.38) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 5.11 $ 4.25 $ 5.37 $ 6.42 $ 7.17 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 20.24% (20.51%) (15.68%) (7.28%) 12.00% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 45,858 $ 32,997 $ 45,006 $ 60,448 $ 74,796 Ratio of Expenses to Average Net Assets ........ 1.45% 1.37% 1.32% 1.27% 1.22% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... 0.41% 0.20% 0.49% 0.99% 1.63% Portfolio Turnover Rate ........................ 76% 68% 180% 144% 98% SECURITY LARGE CAP VALUE FUND (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(I)(N) 2001(C)(H) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.08 $ 5.18 $ 6.21 $ 6.95 $ 7.54 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.02) (0.04) (0.03) -- 0.05 Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.81 (1.06) (1.00) (0.58) 0.73 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.79 (1.10) (1.03) (0.58) 0.78 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- (0.05) (0.03) Distributions (from Realized Gains) ............ -- -- -- (0.11) (1.34) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- -- (0.16) (1.37) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 4.87 $ 4.08 $ 5.18 $ 6.21 $ 6.95 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 19.36% (21.24%) (16.59%) (8.36%) 10.93% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 11,687 $ 4,905 $ 5,657 $ 7,152 $ 9,829 Ratio of Expenses to Average Net Assets ........ 2.20% 2.27% 2.32% 2.27% 2.22% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.42%) (0.71%) (0.51%) 0.01% 0.63% Portfolio Turnover Rate ........................ 76% 68% 180% 144% 98% - -------------------------------------------------------------------------------- 73 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY LARGE CAP VALUE FUND (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(I)(K)(N) 2001(C)(H) 2000(C) 1999(C)(E) ---------- ---------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.16 $ 5.28 $ 6.32 $ 7.11 $ 6.87 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.02) (0.04) (0.03) (0.01) 0.03 Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.82 (1.08) (1.01) (0.56) 0.21 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.80 (1.12) (1.04) (0.57) 0.24 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- (0.11) -- Distributions (from Realized Gains) ............ -- -- -- (0.11) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- -- (0.22) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 4.96 $ 4.16 $ 5.28 $ 6.32 $ 7.11 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 19.23% (21.21%) (16.46%) (8.10%) 3.49% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 2,130 $ 1,510 $ 904 $ 483 $ 297 Ratio of Expenses to Average Net Assets ........ 2.20% 2.25% 2.33% 2.28% 2.22% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.33%) (0.72%) (0.55%) (0.10%) 0.62% Portfolio Turnover Rate ........................ 76% 68% 180% 144% 90% - -------------------------------------------------------------------------------- 74 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - EQUITY SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------------------------- 2003(C) 2002(C)(J)(N) 2001(C) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 5.09 $ 6.36 $ 10.26 $ 9.96 $ 8.86 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... 0.01 0.01 -- -- 0.02 Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.88 (1.28) (2.49) 0.66 1.80 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.89 (1.27) (2.49) 0.66 1.82 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- (0.04) Distributions (from Realized Gains) ............ -- -- (1.40) (0.36) (0.68) Return of Capital .............................. -- -- (0.01) -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (1.41) (0.36) (0.72) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 5.98 $ 5.09 $ 6.36 $ 10.26 $ 9.96 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 17.49% (19.97%) (27.66%) 6.64% 20.66% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 430,161 $ 412,791 $ 563,553 $ 853,126 $ 917,179 Ratio of Expenses to Average Net Assets ........ 1.25% 1.11% 1.02% 1.02% 1.02% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... 0.23% 0.13% 0.03% 0.03% 0.19% Portfolio Turnover Rate ........................ 54% 30% 23% 54% 36% SECURITY EQUITY FUND - EQUITY SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(J)(N) 2001(C) 2000(C) 1999(C) ---------- ------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.64 $ 5.86 $ 9.65 $ 9.47 $ 8.52 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.03) (0.05) (0.07) (0.10) (0.08) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.80 (1.17) (2.31) 0.64 1.71 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.77 (1.22) (2.38) 0.54 1.63 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (1.40) (0.36) (0.68) Return of Capital .............................. -- -- (0.01) -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (1.41) (0.36) (0.68) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 5.41 $ 4.64 $ 5.86 $ 9.65 $ 9.47 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 16.59% (20.82%) (28.34%) 5.69% 19.23% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 61,733 $ 66,267 $ 96,067 $ 156,633 $ 159,872 Ratio of Expenses to Average Net Assets ........ 2.00% 2.02% 2.02% 2.02% 2.02% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.52%) (0.78%) (0.97%) (0.97%) (0.82%) Portfolio Turnover Rate ........................ 54% 30% 23% 54% 36% - -------------------------------------------------------------------------------- 75 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - EQUITY SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(J)(K)(N) 2001(C) 2000(C) 1999(C)(E) ---------- ---------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.88 $ 6.16 $ 10.07 $ 9.89 $ 10.13 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.03) (0.05) (0.07) (0.10) (0.05) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.84 (1.23) (2.43) 0.64 (0.19) ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.81 (1.28) (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 .................. $ 5.69 $ 4.88 $ 6.16 $ 10.07 $ 9.89 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 16.60% (20.78%) (28.35%) 5.55% (2.37%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,651 $ 4,979 $ 4,230 $ 5,426 $ 4,507 Ratio of Expenses to Average Net Assets ........ 2.00% 2.02% 2.02% 2.02% 2.02% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.52%) (0.76%) (0.97%) (0.96%) (0.89%) Portfolio Turnover Rate ........................ 54% 30% 23% 54% 45% - -------------------------------------------------------------------------------- 76 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - GLOBAL SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(I)(N) 2001(C) 2000(C) 1999(C) ---------- ------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 9.49 $ 11.04 $ 18.86 $ 13.99 $ 11.23 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.03) (0.05) (0.08) (0.11) 0.01 Net Gain (Loss) on Securities (realized and unrealized) ..................... 2.22 (1.50) (4.33) 6.47 3.71 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 2.19 (1.55) (4.41) 6.36 3.72 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- (0.01) Distributions (from Realized Gains) ............ -- -- (3.41) (1.49) (0.91) In Excess of Net Investment Income ............. -- -- -- -- (0.04) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (3.41) (1.49) (0.96) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 11.68 $ 9.49 $ 11.04 $ 18.86 $ 13.99 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 23.08% (14.04%) (27.60%) 47.04% 34.39% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 42,711 $ 50,893 $ 48,089 $ 60,909 $ 28,292 Ratio of Expenses to Average Net Assets ........ 2.00% 1.85% 1.90% 1.92% 2.00% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.26%) (0.46%) (0.57%) (0.62%) 0.11% Portfolio Turnover Rate ........................ 62% 36% 38% 92% 141% SECURITY EQUITY FUND - GLOBAL SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(I)(N) 2001(C) 2000(C) 1999(C) ---------- ------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 8.89 $ 10.38 $ 18.00 $ 13.45 $ 10.89 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.04) (0.10) (0.14) (0.17) (0.11) Net Gain (Loss) on Securities (realized and unrealized) ..................... 2.08 (1.39) (4.07) 6.21 3.58 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 2.04 (1.49) (4.21) 6.04 3.47 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (3.41) (1.49) (0.91) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (3.41) (1.49) (0.91) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 10.93 $ 8.89 $ 10.38 $ 18.00 $ 13.45 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 22.95% (14.35%) (27.86%) 46.53% 33.04% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 16,461 $ 19,021 $ 23,533 $ 30,951 $ 20,591 Ratio of Expenses to Average Net Assets ........ 2.18% 2.28% 2.39% 2.29% 3.00% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... 0.42% (0.89%) (1.07%) (0.96%) (0.87%) Portfolio Turnover Rate ........................ 62% 36% 38% 92% 141% - -------------------------------------------------------------------------------- 77 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - GLOBAL SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(I)(K)(N) 2001(C) 2000(C) 1999(C)(E) ---------- ---------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 9.14 $ 10.72 $ 18.55 $ 13.90 $ 12.68 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.09) (0.15) (0.21) (0.26) (0.03) Net Gain (Loss) on Securities (realized and unrealized) ..................... 2.12 (1.43) (4.21) 6.40 1.25 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 2.03 (1.58) (4.42) 6.14 1.22 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (3.41) (1.49) -- ---------- ---------- ---------- ---------- ---------- Total Distributions .......................... -- -- (3.41) (1.49) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 11.17 $ 9.14 $ 10.72 $ 18.55 $ 13.90 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 22.21% (14.74%) (28.20%) 45.67% 9.62% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 5,326 $ 4,076 $ 3,569 $ 2,691 $ 202 Ratio of Expenses to Average Net Assets ........ 2.77% 2.74% 2.91% 2.92% 3.00% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.96%) (1.33%) (1.57%) (1.53%) (0.49%) Portfolio Turnover Rate ........................ 62% 36% 38% 92% 90% - -------------------------------------------------------------------------------- 78 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C) 2001(C) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 14.75 $ 17.95 $ 26.04 $ 24.05 $ 19.37 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.13) (0.11) (0.07) (0.13) (0.05) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.22 (3.09) (7.55) 2.50 5.09 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 3.09 (3.20) (7.62) 2.37 5.04 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.47) (0.38) (0.36) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (0.47) (0.38) (0.36) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 17.84 $ 14.75 $ 17.95 $ 26.04 $ 24.05 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 20.95% (17.83%) (29.71%) 9.88% 26.12% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 9,243 $ 7,355 $ 10,909 $ 17,702 $ 13,403 Ratio of Expenses to Average Net Assets ........ 2.05% 1.66% 1.43% 1.42% 1.42% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.76%) (0.58%) (0.30%) (0.51%) (0.22%) Portfolio Turnover Rate ........................ 26% 3% 17% 26% 26% SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C) 2001(C) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 13.85 $ 17.01 $ 24.96 $ 23.35 $ 19.01 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.24) (0.26) (0.28) (0.38) (0.30) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.02 (2.90) (7.20) 2.37 5.00 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 2.78 (3.16) (7.48) 1.99 4.70 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.47) (0.38) (0.36) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (0.47) (0.38) (0.36) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 16.63 $ 13.85 $ 17.01 $ 24.96 $ 23.35 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 20.07% (18.58%) (30.44%) 8.53% 24.81% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,153 $ 5,999 $ 8,969 $ 12,633 $ 9,136 Ratio of Expenses to Average Net Assets ........ 2.80% 2.57% 2.43% 2.43% 2.51% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.51%) (1.49%) (1.31%) (1.52%) (1.30%) Portfolio Turnover Rate ........................ 26% 3% 17% 26% 26% - -------------------------------------------------------------------------------- 79 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------- 2003(C) 2002(C)(K) 2001(C) 2000(C) 1999(C)(E) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 14.17 $ 17.40 $ 25.50 $ 23.87 $ 24.47 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.24) (0.26) (0.28) (0.41) (0.22) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.08 (2.97) (7.35) 2.42 (0.38) ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 2.84 (3.23) (7.63) 2.01 (0.60) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.47) (0.38) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (0.47) (0.38) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 17.01 $ 14.17 $ 17.40 $ 25.50 $ 23.87 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 20.04% (18.56%) (30.39%) 8.43% (2.45%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 1,548 $ 1,123 $ 1,126 $ 918 $ 405 Ratio of Expenses to Average Net Assets ........ 2.80% 2.57% 2.45% 2.55% 2.66% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.51%) (1.48%) (1.33%) (1.64%) (1.46%) Portfolio Turnover Rate ........................ 26% 3% 17% 26% 33% - -------------------------------------------------------------------------------- 80 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - MID CAP VALUE SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C) 2001(C) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 16.90 $ 18.04 $ 20.75 $ 16.60 $ 12.07 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.07) (0.04) -- (0.04) (0.07) Net Gain (Loss) on Securities (realized and unrealized) ..................... 7.65 (0.78) (0.90) 4.89 4.65 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 7.58 (0.82) (0.90) 4.85 4.58 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.21) (1.81) (0.70) (0.05) Return of Capital .............................. -- (0.11) -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.32) (1.81) (0.70) (0.05) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 24.48 $ 16.90 $ 18.04 $ 20.75 $ 16.60 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 44.85% (4.89%) (4.54%) 30.46% 38.06% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 113,822 $ 68,544 $ 50,541 $ 34,458 $ 22,804 Ratio of Expenses to Average Net Assets ........ 1.65% 1.45% 1.30% 1.29% 1.33% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.33%) (0.20%) 0.01% (0.25%) (0.44%) Portfolio Turnover Rate ........................ 52% 51% 55% 69% 79% SECURITY EQUITY FUND - MID CAP VALUE SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C) 2001(C) 2000(C) 1999(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 15.99 $ 17.26 $ 20.11 $ 16.26 $ 11.94 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.20) (0.21) (0.19) (0.22) (0.22) Net Gain (Loss) on Securities (realized and unrealized) ..................... 7.20 (0.74) (0.85) 4.77 4.59 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 7.00 (0.95) (1.04) 4.55 4.37 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.21) (1.81) (0.70) (0.05) Return of Capital .............................. -- (0.11) -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.32) (1.81) (0.70) (0.05) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 22.99 $ 15.99 $ 17.26 $ 20.11 $ 16.26 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 43.78% (5.88%) (5.45%) 29.21% 36.71% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 53,947 $ 37,136 $ 26,967 $ 14,041 $ 9,682 Ratio of Expenses to Average Net Assets ........ 2.40% 2.34% 2.30% 2.32% 2.37% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.08%) (1.09%) (0.98%) (1.27%) (1.50%) Portfolio Turnover Rate ........................ 52% 51% 55% 69% 79% - -------------------------------------------------------------------------------- 81 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - MID CAP VALUE SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(C) 2002(C)(K) 2001(C) 2000(C) 1999(C)(E) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 16.26 $ 17.53 $ 20.39 $ 16.51 $ 14.54 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.21) (0.21) (0.19) (0.22) (0.13) Net Gain (Loss) on Securities (realized and unrealized) ..................... 7.32 (0.74) (0.86) 4.80 2.10 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 7.11 (0.95) (1.05) 4.58 1.97 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.21) (1.81) (0.70) -- Return of Capital .............................. -- (0.11) -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.32) (1.81) (0.70) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 23.37 $ 16.26 $ 17.53 $ 20.39 $ 16.51 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 43.73% (5.79%) (5.42%) 28.93% 13.55% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 32,999 $ 18,785 $ 6,976 $ 3,069 $ 1,138 Ratio of Expenses to Average Net Assets ........ 2.40% 2.35% 2.30% 2.36% 2.38% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.08%) (1.06%) (0.98%) (1.28%) (1.36%) Portfolio Turnover Rate ........................ 52% 51% 55% 69% 92% - -------------------------------------------------------------------------------- 82 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(B)(C) 2002(C)(L) 2001(C) 2000(B)(C) 1999(B)(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 7.88 $ 9.80 $ 22.08 $ 12.98 $ 8.70 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.18) (0.20) (0.18) (0.19) -- Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.93 (1.72) (10.78) 9.75 4.28 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 3.75 (1.92) (10.96) 9.56 4.28 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 11.63 $ 7.88 $ 9.80 $ 22.08 $ 12.98 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 47.59% (19.59%) (51.94%) 74.58% 49.20% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 14,406 $ 8,350 $ 17,235 $ 38,172 $ 16,877 Ratio of Expenses to Average Net Assets ........ 2.25% 2.14% 1.91% 1.55% 0.49% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (2.01%) (1.93%) (1.32%) (0.97%) 0.03% Portfolio Turnover Rate ........................ 206% 302% 394% 318% 361% SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(B)(C) 2002(C)(L) 2001(C) 2000(B)(C) 1999(B)(C) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 7.47 $ 9.37 $ 21.34 $ 12.69 $ 8.63 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.24) (0.26) (0.28) (0.31) (0.14) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.71 (1.64) (10.37) 9.42 4.20 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............ 3.47 (1.90) (10.65) 9.11 4.06 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 10.94 $ 7.47 $ 9.37 $ 21.34 $ 12.69 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 46.45% (20.28%) (52.31%) 72.70% 47.05% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,838 $ 4,292 $ 6,173 $ 11,688 $ 2,430 Ratio of Expenses to Average Net Assets ........ 3.00% 2.90% 2.67% 2.44% 1.94% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (2.76%) (2.69%) (2.07%) (1.81%) (1.41%) Portfolio Turnover Rate ........................ 206% 302% 394% 318% 361% - -------------------------------------------------------------------------------- 83 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SMALL CAP GROWTH SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------------------- 2003(B)(C) 2002(C)(K)(L) 2001(C) 2000(B)(C) 1999(B)(C)(E) ---------- ------------ ---------- ---------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 7.61 $ 9.53 $ 21.74 $ 12.86 $ 11.16 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.24) (0.26) (0.28) (0.35) (0.07) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.78 (1.66) (10.61) 9.69 1.77 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 3.54 (1.92) (10.89) 9.34 1.70 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- (1.32) (0.46) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 11.15 $ 7.61 $ 9.53 $ 21.74 $ 12.86 ========== ========== ========== ========== ========== TOTAL RETURN (a) ............................... 46.52% (20.15%) (52.46%) 73.54% 15.23% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 3,533 $ 2,164 $ 2,339 $ 3,741 $ 890 Ratio of Expenses to Average Net Assets ........ 3.00% 2.91% 2.68% 2.39% 1.47% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (2.76%) (2.69%) (2.09%) (1.81%) (0.95%) Portfolio Turnover Rate ........................ 206% 302% 394% 318% 374% - -------------------------------------------------------------------------------- 84 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------------------- 2003(b)(c)(p) 2002(c) 2001(c) 2000(c) 1999(c)(d) ------------- --------- --------- --------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.30 $ 8.03 $ 11.29 $ 10.04 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... -- (0.01) -- -- 0.03 Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.39 (1.72) (3.17) 1.37 0.01 --------- --------- --------- --------- --------- Total from Investment Operations ............... 1.39 (1.73) (3.17) 1.37 0.04 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.09) (0.12) -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- (0.09) (0.12) -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 7.69 $ 6.30 $ 8.03 $ 11.29 $ 10.04 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 22.06% (21.54%) (28.27%) 13.65% 0.40% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,377 $ 7,171 $ 6,699 $ 8,219 $ 7,589 Ratio of Expenses to Average Net Assets ........ 1.73% 1.61% 1.42% 1.44% 1.48% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... 0.00% (0.10%) 0.02% (0.05%) 0.39% Portfolio Turnover Rate ........................ 60% 62% 40% 73% 68% SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------------------- 2003(b)(c)(p) 2002(c) 2001(c) 2000(c) 1999(c)(d) ------------- --------- --------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.11 $ 7.87 $ 11.15 $ 9.99 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.05) (0.07) (0.08) (0.09) (0.02) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.34 (1.69) (3.11) 1.37 0.01 --------- --------- --------- ---------- --------- Total from Investment Operations ............... 1.29 (1.76) (3.19) 1.28 (0.01) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.09) (0.12) -- --------- --------- --------- ---------- --------- Total Distributions ......................... -- -- (0.09) (0.12) -- --------- --------- --------- ---------- --------- NET ASSET VALUE END OF PERIOD .................. $ 7.40 $ 6.11 $ 7.87 $ 11.15 $ 9.99 ========= ========= ========= ========== ========= TOTAL RETURN (A) ............................... 21.11% (22.36%) (28.81%) 12.82% (0.10%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 4,929 $ 6,125 $ 7,360 $ 10,960 $ 9,591 Ratio of Expenses to Average Net Assets ........ 2.48% 2.35% 2.17% 2.18% 2.20% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.75%) (0.84%) (0.74%) (0.79%) (0.33%) Portfolio Turnover Rate ........................ 60% 62% 40% 73% 68% - -------------------------------------------------------------------------------- 85 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - ENHANCED INDEX SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------------------------------- 2003(b)(c)(p) 2002(c)(k) 2001(c) 2000(c) 1999(c)(d) ------------- ----------- --------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.12 $ 7.88 $ 11.16 $ 10.00 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.05) (0.07) (0.08) (0.09) (0.01) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.35 (1.69) (3.11) 1.37 0.01 --------- --------- --------- --------- --------- Total from Investment Operations ............... 1.30 (1.76) (3.19) 1.28 -- LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.09) (0.12) -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- (0.09) (0.12) -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 7.42 $ 6.12 $ 7.88 $ 11.16 $ 10.00 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 21.24% (22.34%) (28.78%) 12.69% 0.00% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 2,991 $ 4,129 $ 4,840 $ 7,092 $ 5,205 Ratio of Expenses to Average Net Assets ........ 2.47% 2.35% 2.17% 2.15% 2.05% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.74%) (0.85%) (0.74%) (0.77%) (0.18%) Portfolio Turnover Rate ........................ 60% 62% 40% 73% 68% - -------------------------------------------------------------------------------- 86 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - INTERNATIONAL SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------------------- 2003(b)(c) 2002(b)(c)(m) 2001(b)(c)(g) 2000(b)(c) 1999(b)(c)(d) ---------- ------------- ------------- ---------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 5.53 $ 6.87 $ 11.01 $ 9.69 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... 0.02 (0.06) (0.09) (0.13) (0.03) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.95 (1.28) (3.65) 1.45 (0.28) --------- --------- --------- --------- --------- Total from Investment Operations ............... 0.97 (1.34) (3.74) 1.32 (0.31) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.40) -- -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- (0.40) -- -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 6.50 $ 5.53 $ 6.87 $ 11.01 $ 9.69 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 17.54% (19.51%) (35.01%) 13.62% (3.10%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 4,361 $ 3,093 $ 2,934 $ 4,414 $ 2,928 Ratio of Expenses to Average Net Assets ........ 2.50% 2.50% 2.51% 2.46% 2.50% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... 0.33% (0.82%) (0.98%) (1.08%) (0.41%) Portfolio Turnover Rate ........................ 55% 252% 170% 116% 115% SECURITY EQUITY FUND - INTERNATIONAL SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------------------- 2003(b)(c) 2002(b)(c)(m) 2001(b)(c)(g) 2000(b)(c) 1999(b)(c)(d) ---------- ------------- ------------- ---------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 5.38 $ 6.74 $ 10.88 $ 9.65 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.02) (0.10) (0.15) (0.22) (0.07) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.93 (1.26) (3.59) 1.45 (0.28) --------- --------- --------- --------- --------- Total from Investment Operations ............... 0.91 (1.36) (3.74) 1.23 (0.35) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.40) -- -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- (0.40) -- -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 6.29 $ 5.38 $ 6.74 $ 10.88 $ 9.65 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 16.91% (20.18%) (35.45%) 12.75% (3.50%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 2,204 $ 1,696 $ 1,685 $ 2,520 $ 2,028 Ratio of Expenses to Average Net Assets ........ 3.25% 3.25% 3.25% 3.26% 3.19% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.39%) (1.55%) (1.73%) (1.92%) (1.09%) Portfolio Turnover Rate ........................ 55% 252% 170% 116% 115% - -------------------------------------------------------------------------------- 87 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - INTERNATIONAL SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(b)(c) 2002(b)(c)(k)(m) 2001(b)(c)(g) 2000(b)(c) 1999(b)(c)(d) ---------- ---------------- ------------- ---------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 5.40 $ 6.76 $ 10.92 $ 9.68 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.02) (0.11) (0.15) (0.21) (0.04) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.93 (1.25) (3.61) 1.45 (0.28) --------- --------- --------- --------- --------- Total from Investment Operations ............... 0.91 (1.36) (3.76) 1.24 (0.32) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- (0.40) -- -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- (0.40) -- -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 6.31 $ 5.40 $ 6.76 $ 10.92 $ 9.68 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 16.85% (20.12%) (35.50%) 12.81% (3.20%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 2,594 $ 1,809 $ 2,244 $ 3,564 $ 2,493 Ratio of Expenses to Average Net Assets ........ 3.25% 3.25% 3.25% 3.11% 2.78% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.42%) (1.57%) (1.75%) (1.76%) (0.71%) Portfolio Turnover Rate ........................ 55% 252% 170% 116% 115% - -------------------------------------------------------------------------------- 88 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SELECT 25(R) SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(c) 2002(c) 2001(c) 2000(c) 1999(c)(d) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.52 $ 7.58 $ 11.34 $ 10.53 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.05) (0.07) (0.06) (0.09) (0.05) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.80 (0.99) (3.70) 0.90 0.58 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.75 (1.06) (3.76) 0.81 0.53 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 7.27 $ 6.52 $ 7.58 $ 11.34 $ 10.53 ========== ========== ========== ========== ========== TOTAL RETURN (A) ............................... 11.50% (13.98%) (33.16%) 7.69% 5.30% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 10,396 $ 11,933 $ 14,347 $ 22,006 $ 13,975 Ratio of Expenses to Average Net Assets ........ 1.63% 1.46% 1.39% 1.35% 1.48% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.70%) (0.81%) (0.60%) (0.74%) (0.75%) Portfolio Turnover Rate ........................ 54% 33% 44% 89% 14% SECURITY EQUITY FUND - SELECT 25(R) SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(c) 2002(c) 2001(c) 2000(c) 1999(c)(d) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.36 $ 7.44 $ 11.22 $ 10.52 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.10) (0.13) (0.13) (0.17) (0.09) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.78 (0.95) (3.65) 0.87 0.61 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 0.68 (1.08) (3.78) 0.70 0.52 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 7.04 $ 6.36 $ 7.44 $ 11.22 $ 10.52 ========== ========== ========== ========== ========== TOTAL RETURN (A) ............................... 10.69% (14.52%) (33.69%) 6.65% 5.20% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 8,203 $ 8,566 $ 11,519 $ 18,199 $ 12,938 Ratio of Expenses to Average Net Assets ........ 2.38% 2.21% 2.14% 2.11% 2.19% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.45%) (1.56%) (1.35%) (1.49%) (1.47%) Portfolio Turnover Rate ........................ 54% 33% 44% 89% 14% - -------------------------------------------------------------------------------- 89 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - SELECT 25(R) SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ----------------------------------------------------------------- 2003(c) 2002(c)(k) 2001(c) 2000(c) 1999(c)(d) --------- ---------- --------- --------- --------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.38 $ 7.47 $ 11.26 $ 10.55 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.10) (0.13) (0.13) (0.17) (0.09) Net Gain (Loss) on Securities (realized and unrealized) ..................... 0.78 (0.96) (3.66) 0.88 0.64 --------- --------- --------- --------- --------- Total from Investment Operations ............... 0.68 (1.09) (3.79) 0.71 0.55 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- -- --------- --------- --------- --------- --------- Total Distributions ......................... -- -- -- -- -- --------- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 7.06 $ 6.38 $ 7.47 $ 11.26 $ 10.55 ========= ========= ========= ========= ========= TOTAL RETURN (A) ............................... 10.66% (14.59%) (33.66%) 6.73% 5.50% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,225 $ 3,954 $ 4,531 $ 7,294 $ 4,442 Ratio of Expenses to Average Net Assets ........ 2.37% 2.21% 2.14% 2.10% 2.07% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.44%) (1.56%) (1.35%) (1.49%) (1.34%) Portfolio Turnover Rate ........................ 54% 33% 44% 89% 14% - -------------------------------------------------------------------------------- 90 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------- 2003(c) 2002(c) 2001(b)(c)(g) 2000(c)(f)(g) ---------- --------- ------------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.60 $ 6.00 $ 9.71 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.04) (0.05) (0.08) (0.05) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.06 (1.35) (3.63) (0.24) ---------- --------- --------- --------- Total from Investment Operations ............... 1.02 (1.40) (3.71) (0.29) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- ---------- --------- --------- --------- Total Distributions ......................... -- -- -- -- ---------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 5.62 $ 4.60 $ 6.00 $ 9.71 ========== ========= ========= ========= TOTAL RETURN (A) ............................... 22.17% (23.33%) (38.21%) (2.90%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 16,179 $ 9,243 $ 2,436 $ 2,405 Ratio of Expenses to Average Net Assets ........ 1.83% 1.99% 2.00% 1.92% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (0.71%) (1.00%) (1.10%) (1.25%) Portfolio Turnover Rate ........................ 39% 12% 6% 5% SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------- 2003(c) 2002(c) 2001(b)(c) 2000(c)(f)(g) ---------- --------- ------------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.50 $ 5.92 $ 9.65 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.07) (0.11) (0.14) (0.08) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.02 (1.31) (3.59) (0.27) ---------- --------- --------- --------- Total from Investment Operations ............... 0.95 (1.42) (3.73) (0.35) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- ---------- --------- --------- --------- Total Distributions ......................... -- -- -- -- ---------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 5.45 $ 4.50 $ 5.92 $ 9.65 ========== ========= ========= ========= TOTAL RETURN (A) ............................... 21.11% (23.99%) (38.65%) (3.50%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 6,557 $ 1,949 $ 1,955 $ 2,039 Ratio of Expenses to Average Net Assets ........ 2.59% 2.82% 2.75% 2.68% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.49%) (1.88%) (1.85%) (2.02%) Portfolio Turnover Rate ........................ 39% 12% 6% 5% - -------------------------------------------------------------------------------- 91 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - LARGE CAP GROWTH SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------------------ 2003(c) 2002(c)(k) 2001(b)(c) 2000(c)(f)(g) --------- ---------- ---------- ------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 4.52 $ 5.93 $ 9.65 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.07) (0.11) (0.13) (0.08) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.03 (1.30) (3.59) (0.27) --------- --------- --------- --------- Total from Investment Operations ............... 0.96 (1.41) (3.72) (0.35) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- --------- --------- --------- --------- Total Distributions ......................... -- -- -- -- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 5.48 $ 4.52 $ 5.93 $ 9.65 ========= ========= ========= ========= TOTAL RETURN (A) ............................... 21.24% (23.78%) (38.55%) (3.50%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 3,432 $ 2,547 $ 2,577 $ 2,102 Ratio of Expenses to Average Net Assets ........ 2.58% 2.82% 2.75% 2.66% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.44%) (1.88%) (1.85%) (2.00%) Portfolio Turnover Rate ........................ 39% 12% 6% 5% - -------------------------------------------------------------------------------- 92 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - TECHNOLOGY SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------------- 2003(b)(c) 2002(b)(c) 2001(b)(c)(g) 2000(b)(c)(f)(g) ---------- ---------- ------------- ---------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 2.37 $ 3.41 $ 9.33 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.08) (0.09) (0.11) (0.08) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.69 (0.95) (5.81) (0.59) --------- --------- --------- --------- Total from Investment Operations ............... 1.61 (1.04) (5.92) (0.67) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- --------- --------- --------- --------- Total Distributions ......................... -- -- -- -- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 3.98 $ 2.37 $ 3.41 $ 9.33 ========= ========= ========= ========= TOTAL RETURN (A) ............................... 67.93% (30.50%) (63.45%) (6.70%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 7,398 $ 2,272 $ 3,023 $ 4,340 Ratio of Expenses to Average Net Assets ........ 2.50% 2.50% 2.26% 2.28% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (2.27%) (2.28%) (2.01%) (2.05%) Portfolio Turnover Rate ........................ 181% 166% 240% 148% SECURITY EQUITY FUND - TECHNOLOGY SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------------------------- 2003(b)(c) 2002(b)(c) 2001(b)(c)(g) 2000(b)(c)(f)(g) ---------- ---------- ------------- ---------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............... $ 2.28 $ 3.30 $ 9.21 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ...................... (0.09) (0.11) (0.16) (0.11) Net Gain (Loss) on Securities (realized and unrealized) ........................ 1.62 (0.91) (5.75) (0.68) --------- --------- --------- --------- Total from Investment Operations .................. 1.53 (1.02) (5.91) (0.79) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ............ -- -- -- -- Distributions (from Realized Gains) ............... -- -- -- -- --------- --------- --------- --------- Total Distributions ............................ -- -- -- -- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD ..................... $ 3.81 $ 2.28 $ 3.30 $ 9.21 ========= ========= ========= ========= TOTAL RETURN (A) .................................. 67.11% (30.91%) (64.17%) (7.90%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) .............. $ 1,676 $ 737 $ 870 $ 1,971 Ratio of Expenses to Average Net Assets ........... 3.25% 3.25% 3.01% 3.03% Ratio of Net Investment Income (Loss) to Average Net Assets ...................................... (2.97%) (3.02%) (2.76%) (2.79%) Portfolio Turnover Rate ........................... 181% 166% 240% 148% - -------------------------------------------------------------------------------- 93 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - TECHNOLOGY SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------- 2003(b)(c) 2002(b)(c)(k) 2001(b)(c)(g) 2000(b)(c)(f)(g) ---------- ------------- ------------- ---------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 2.28 $ 3.30 $ 9.21 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.09) (0.11) (0.16) (0.11) Net Gain (Loss) on Securities (realized and unrealized) ..................... 1.61 (0.91) (5.75) (0.68) --------- --------- --------- --------- Total from Investment Operations ............... 1.52 (1.02) (5.91) (0.79) LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- Distributions (from Realized Gains) ............ -- -- -- -- --------- --------- --------- --------- Total Distributions ......................... -- -- -- -- --------- --------- --------- --------- NET ASSET VALUE END OF PERIOD .................. $ 3.80 $ 2.28 $ 3.30 $ 9.21 ========= ========= ========= ========= TOTAL RETURN (A) ............................... 66.67% (30.91%) (64.17%) (7.90%) RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 2,286 $ 1,168 $ 1,348 $ 2,276 Ratio of Expenses to Average Net Assets ........ 3.25% 3.25% 3.01% 3.03% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (2.97%) (3.02%) (2.77%) (2.79%) Portfolio Turnover Rate ........................ 181% 166% 240% 148% - -------------------------------------------------------------------------------- 94 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 2003(b)(c)(o) -------------------------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ..................... $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ............................ (0.03) Net Gain (Loss) on Securities (realized and unrealized) .............................. 0.24 --------- Total from Investment Operations ........................ 0.21 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) .................. -- Distributions (from Realized Gains) ..................... -- --------- Total Distributions .................................. -- --------- NET ASSET VALUE END OF PERIOD ........................... $ 10.21 ========= TOTAL RETURN (A) ........................................ 2.10% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) .................... $ 2,935 Ratio of Expenses to Average Net Assets ................. 2.75% Ratio of Net Investment Income (Loss) to Average Net Assets ............................................ (1.35%) Portfolio Turnover Rate ................................. 867% SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 2003(b)(c)(o) -------------------------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD..................... $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss)............................ (0.05) Net Gain (Loss) on Securities (realized and unrealized).............................. 0.25 -------- Total from Investment Operations........................ 0.20 LESS DISTRIBUTIONS: Dividends (from Net Investment Income).................. -- Distributions (from Realized Gains)..................... -- -------- Total Distributions.................................. -- -------- NET ASSET VALUE END OF PERIOD........................... $ 10.20 ======== TOTAL RETURN (A)........................................ 2.00% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands).................... $ 1,731 Ratio of Expenses to Average Net Assets................. 3.50% Ratio of Net Investment Income (Loss) to Average Net Assets............................................ (2.11%) Portfolio Turnover Rate................................. 867% - -------------------------------------------------------------------------------- 95 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY EQUITY FUND - ALPHA OPPORTUNITY SERIES (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 2003(b)(c)(o) -------------------------------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD..................... $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss)............................ (0.05) Net Gain (Loss) on Securities (realized and unrealized).............................. 0.25 -------- Total from Investment Operations........................ 0.20 LESS DISTRIBUTIONS: Dividends (from Net Investment Income).................. -- Distributions (from Realized Gains)..................... -- -------- Total Distributions.................................. -- -------- NET ASSET VALUE END OF PERIOD........................... $ 10.20 ======== TOTAL RETURN (A)........................................ 2.00% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands).................... $ 1,723 Ratio of Expenses to Average Net Assets................. 3.50% Ratio of Net Investment Income (Loss) to Average Net Assets............................................ (2.11%) Portfolio Turnover Rate................................. 867% - -------------------------------------------------------------------------------- 96 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY MID CAP GROWTH FUND (CLASS A) FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------------------------------------- 2003(c) 2002(c)(n) 2001(c) 2000(c) 1999(c) ----------- ----------- ----------- ----------- ----------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 7.03 $ 8.48 $ 15.28 $ 9.19 $ 7.65 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.10) (0.09) (0.07) (0.08) (0.06) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.91 (1.30) (5.38) 6.60 3.51 ----------- ----------- ----------- ----------- ----------- Total from Investment Operations ............... 3.81 (1.39) (5.45) 6.52 3.45 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.06) (1.35) (0.43) (1.91) ----------- ----------- ----------- ----------- ----------- Total Distributions ......................... -- (0.06) (1.35) (0.43) (1.91) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE END OF PERIOD .................. $ 10.84 $ 7.03 $ 8.48 $ 15.28 $ 9.19 =========== =========== =========== =========== =========== TOTAL RETURN (A) ............................... 54.20% (16.64%) (38.19%) 72.82% 50.91% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 134,208 $ 90,948 $ 131,498 $ 204,787 $ 96,238 Ratio of Expenses to Average Net Assets ........ 1.41% 1.20% 1.09% 1.11% 1.21% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.14%) (0.92%) (0.64%) (0.62%) (0.77%) Portfolio Turnover Rate ........................ 57% 47% 48% 35% 54% SECURITY MID CAP GROWTH FUND (CLASS B) FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------------------------------- 2003(c) 2002(c)(n) 2001(c) 2000(c) 1999(c) ---------- ---------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.26 $ 7.62 $ 14.02 $ 8.54 $ 7.28 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.15) (0.16) (0.17) (0.19) (0.14) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.46 (1.14) (4.88) 6.10 3.31 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 3.31 (1.30) (5.05) 5.91 3.17 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.06) (1.35) (0.43) (1.91) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.06) (1.35) (0.43) (1.91) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 9.57 $ 6.26 $ 7.62 $ 14.02 $ 8.54 ========== ========== ========== ========== ========== TOTAL RETURN (A) ............................... 52.88% (17.35%) (38.83%) 71.17% 49.39% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 26,459 $ 17,502 $ 28,580 $ 38,812 $ 7,818 Ratio of Expenses to Average Net Assets ........ 2.16% 2.11% 2.09% 2.11% 2.21% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.89%) (1.84%) (1.64%) (1.61%) (1.77%) Portfolio Turnover Rate ........................ 57% 47% 48% 35% 54% - -------------------------------------------------------------------------------- 97 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD SECURITY MID CAP GROWTH FUND (CLASS C) FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------------------------------------------- 2003(c) 2002(c)(k)(n) 2001(c) 2000(c) 1999(c)(e) ---------- ------------- ---------- ---------- ---------- PER SHARE DATA NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.76 $ 8.22 $ 14.99 $ 9.11 $ 8.20 INCOME FROM INVESTMENT OPERATIONS: Net Investment Income (Loss) ................... (0.16) (0.16) (0.18) (0.20) (0.07) Net Gain (Loss) on Securities (realized and unrealized) ..................... 3.74 (1.24) (5.24) 6.51 0.98 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations ............... 3.58 (1.40) (5.42) 6.31 0.91 LESS DISTRIBUTIONS: Dividends (from Net Investment Income) ......... -- -- -- -- -- Distributions (from Realized Gains) ............ -- (0.06) (1.35) (0.43) -- ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... -- (0.06) (1.35) (0.43) -- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE END OF PERIOD .................. $ 10.34 $ 6.76 $ 8.22 $ 14.99 $ 9.11 ========== ========== ========== ========== ========== TOTAL RETURN (A) ............................... 52.96% (17.30%) (38.78%) 71.10% 11.10% RATIOS/SUPPLEMENTAL DATA Net Assets End of Period (thousands) ........... $ 11,279 $ 5,883 $ 4,194 $ 3,017 $ 95 Ratio of Expenses to Average Net Assets ........ 2.16% 2.12% 2.09% 2.11% 2.21% Ratio of Net Investment Income (Loss) to Average Net Assets ................................... (1.89%) (1.85%) (1.66%) (1.61%) (1.75%) Portfolio Turnover Rate ........................ 57% 47% 48% 35% 54% - -------------------------------------------------------------------------------- 98 SEE ACCOMPANYING NOTES. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD (a) Total return information does not reflect deduction of any sales charges imposed at the time of purchase for Class A shares or upon redemption for Class B and C. (b) Fund expenses were reduced by the Investment Manager during the period and expense ratios absent such reimbursement would have been as follows: 2003 2002 2001 2000 1999 Small Cap Growth Series Class A 2.5% N/A N/A 1.6% 1.5% Class B 3.2% N/A N/A 2.5% 2.9% Class C 3.2% N/A N/A 2.5% 2.5% International Series Class A 3.4% 4.2% 3.8% 3.5% 4.7% Class B 4.2% 5.0% 4.5% 4.3% 5.4% Class C 4.2% 5.0% 4.5% 4.1% 5.0% Large Cap Growth Series Class A N/A N/A 2.2% N/A N/A Class B N/A N/A 2.9% N/A N/A Class C N/A N/A 2.9% N/A N/A Technology Series Class A 3.0% 3.2% 2.7% 2.3% N/A Class B 4.0% 3.9% 3.4% 3.0% N/A Class C 4.0% 3.9% 3.5% 3.0% N/A Enhanced Index Series Class A 1.8% N/A N/A N/A N/A Class B 2.6% N/A N/A N/A N/A Class C 2.6% N/A N/A N/A N/A Alpha Opportunity Series Class A 3.3% N/A N/A N/A N/A Class B 4.0% N/A N/A N/A N/A Class C 4.0% N/A N/A N/A N/A (c) Net investment income (loss) was computed using average shares outstanding throughout the period. (d) Security Enhanced Index Series, Security International Series and Security Select 25(R) Series were initially capitalized on January 29, 1999, with a net asset value of $10 per share. Percentage amounts for the period, except for total return, have been annualized. (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) Security Large Cap Growth Series and Security Technology Series were initially capitalized on May 1, 2000, with a net asset value of $10 per share. Percentage amounts for the period, except total return, have been annualized. (g) Expense ratios, including reimbursements, were calculated without the reduction for custodian fees earnings credits beginning May 1, 2000 for Security Large Cap Growth Series, Security Technology Series and Security International Series. Expense ratios with such reductions would have been as follows: 2003 2002 2001 2000 International Series Class A N/A N/A 2.49% N/A Class B N/A N/A 3.23% N/A Class C N/A N/A 3.23% N/A Large Cap Growth Series Class A N/A N/A 1.99% 1.85% Class B N/A N/A N/A 2.61% Class C N/A N/A N/A 2.60% Technology Series Class A N/A N/A 2.25% 2.25% Class B N/A N/A 3.00% 3.00% Class C N/A N/A 3.00% 3.00% (h) The Dreyfus Corporation became sub-advisor of Security Large Cap Value Fund effective January 1, 2001. Prior to January 1, 2001, advisory services were provided by the Investment Manager. (i) As required, effective October 1, 2001, the Funds adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on fixed income securities. The effect of this change for the period ended September 30, 2002, was to increase net investment income per share by less than 1/2 of a cent, decrease net realized and unrealized gains and losses per share by less than 1/2 of a cent and increase the ratio of net investment income to average net assets from 0.06% to 0.07%. Per share, ratios and supplemental data for periods prior to October 1, 2001 have not been restated to reflect this change in presentation. (j) The financial highlights for the Equity Series as set forth herein exclude the historical financial highlights of the Total Return Series Class A, B and C shares. The assets of the Total Return Series were acquired by theEquity Series on August 27, 2002. (k) The financial highlights for the Class C shares exclude the historical financial highlights of the Class S shares. Class S shares were exchanged for Class C shares on June 3, 2002. (l) RS Investments, Inc., became the sub-advisor of SmallCap Growth Series effective September 3, 2002. Prior to September 3, 2002, Security Management Company, LLC (SMC) paid Strong Capital Management, Inc., for sub-advisory services. (m) Templeton/Franklin Investment Services, Inc., became the sub-advisor of International Series effective September 3, 2002. Prior to September 3, 2002, Security Management Company, LLC (SMC) paid Deutsche Asset Management, Inc., for sub-advisory services. (n) Effective May 1, 2002 the fee structure for Security Large Cap Value Fund, Equity, Global Series and Security Mid Cap Growth Fund changed. Per share information reflects this change. (o) Security Alpha Opportunity Series was initially capitalized on July 7, 2003, with a net asset value of $10 per share. Percentage amounts for the period, except for total return, have been annualized. (p) Northern Trust became the subadvisor of Enhanced Index effective May 1, 2003. Prior to May 1, 2003 Security Management Company, LLC(SMC) paid Deutsche Asset Management, Inc. for subadvisory services. - -------------------------------------------------------------------------------- 99 SEE ACCOMPANYING NOTES. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 1. SIGNIFICANT ACCOUNTING POLICIES Security Large Cap Value, Equity and Mid Cap Growth Funds (the Funds) are registered under the Investment Company Act of 1940, as amended, as open-end management investment companies. The shares of Security Equity Fund are currently issued in multiple Series, with each Series, in effect, representing a separate fund. The Fund is required to account for the assets of each Series separately and to allocate general liabilities of the Fund to each Series based on the relative net assets of each Series. Class "A" shares are generally sold with a sales charge at the time of purchase. Class "A" shares are not subject to a sales charge when they are redeemed, except that purchases of Class "A" shares of $1 million or more sold without a front-end sales charge are subject to a contingent deferred sales charge if redeemed within one year of purchase. Class "B" shares are offered without a front-end sales charge but incur additional class-specific expenses. Class B shares may be subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years. Redemptions of the shares within five years of acquisition incur a contingent deferred sales charge. Class "C" shares are offered without a front-end sales charge but incur additional class-specific expenses. Redemptions of the shares within one year of acquisition incur a contingent deferred sales charge. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. A. SECURITY VALUATION - Valuations of the Fund's securities are supplied by pricing services approved by the Board of Directors. The Fund's officers, under the general supervision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing services. Each security owned by a Fund that is listed on a securities exchange is valued at its last sale price on that exchange on the date as of which assets are valued. Where the security is listed on more than one exchange, the Fund will use the price of that exchange that it generally considers to be the principal exchange on which the stock is traded. Fund securities listed on the Nasdaq Stock Market, Inc. ("Nasdaq") will be valued at the Nasdaq Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or Nasdaq on such day, the security is valued at the closing bid price on such day. If there is no bid or if the bid price is deemed to be unsatisfactory by the Board of Directors or by the Fund's investment manager, then the securities are valued in good faith by such method as the Board of Directors determines will reflect the fair value. If events occur that will affect the value of a fund's portfolio securities before the NAV has been calculated (a "significant event"), the security will generally be priced using a fair value procedure. If the Valuation Committee determines a significant event has occurred, it will evaluate the impact of that event on an affected security or securities, to determine whether a fair value adjustment would materially affect the fund's NAV per share. The Fund generally will value short-term debt securities at prices based on market quotations for such securities or securities of similar type, yield, quality and duration, except those securities purchased with 60 days or less to maturity are valued on the basis of amortized cost which approximates market value. Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange. The values of foreign securities are determined as of the close of such foreign markets or the close of the New York Stock Exchange, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of business. The Global Series', International Series' and Technology Series' investments in foreign securities may involve risks not present in domestic investments. Since foreign securities may be denominated in a foreign currency and involve settlement and pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the these Series to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments. B. REPURCHASE AGREEMENTS - In connection with transactions in repurchase agreements, it is the Funds' policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Funds may be delayed or limited. C. FOREIGN CURRENCY TRANSACTIONS - The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from sales of portfolio securities, sales of foreign currencies, and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of portfolio securities and other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates. D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Global Series and International Series may enter into forward foreign exchange contracts in order to manage foreign currency risk from purchase or sale of securities denominated in foreign currency. These funds may also enter into such contracts to manage changes in foreign currency exchange rates on portfolio positions. These contracts are marked to market daily, by recognizing the difference between the contract exchange rate and the current market rate as unrealized gains or losses. Realized gains or losses are recognized when contracts are settled and are reflected in the statement of operations. These contracts involve market risk in excess of the amount reflected in the statement of assets and liabilities. The face or contract amount in U.S. dollars reflects the total exposure these funds have in that particular currency contract. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. - -------------------------------------------------------------------------------- 100 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 E. FUTURES - Large Cap Value Fund, Equity Series, Social Awareness Series, Small Cap Growth Series, Enhanced Index Series, International Series, Alpha Opportunity Series and Mid Cap Growth Fund utilize futures contracts to a limited extent, with the objectives of maintaining full exposure to the underlying stock market, enhancing returns, maintaining liquidity, and minimizing transaction costs. These Funds or Series, as applicable, may purchase futures contracts to immediately position incoming cash in the market, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. In the event of redemptions, the Funds or Series, as applicable, may pay departing shareholders from its cash balances and reduce their futures positions accordingly. Returns may be enhanced by purchasing futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks contained in the indexes and the prices of futures contracts, and the possibility of an illiquid market. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Funds are required to deposit and maintain as collateral either cash or securities, representing the initial margin, equal to a certain percentage of the contract value. Cash deposits are shown as restricted cash on the Statement of Assets and Liabilities; securities are noted in the Schedule of Investments. Subsequent changes in the value of the contract, or variation margin, are recorded as unrealized gains or losses. The variation margin is paid or received in cash daily by the Funds. The Funds realize a gain or loss when the contract is closed or expires. F. OPTIONS WRITTEN -The Fund may purchase put and call options and write such options on a covered basis on securities that are traded on recognized securities exchanges and over-the-counter markets. Call and put options on securities give the holder the right to purchase or sell, respectively, (and the writer the obligation to sell or purchase)a security at a specified price, until a certain date. Options may be used to hedge the Fund's portfolio, to increase returns or to maintain exposure to the equity markets. The primary risks associated with the use of options are an imperfect correlation between the change in market value of the securities held by the series and the price of the option, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. The premium received for a written option is recorded as an asset with an equal liability which is marked to market based on the option's quoted daily settlement price. Fluctuations in the value of such instruments are recorded as unrealized appreciation (depreciation) until terminated, at which time realized gains and losses are recognized. G. SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Dividend income less foreign taxes withheld (if any) plus foreign taxes recoverable (if any) are recorded on the ex-dividend date. Interest income is recognized on the accrual basis including amortization of premiums and accretion of discounts. H. EXPENSES - Expenses that are directly related to one of the Funds are charged directly to that Fund. Other operating expenses are allocated to the Funds on the basis of relative net assets. Class specific expenses, such as 12b-1 fees, are borne by that class. Income, other expenses and realized and unrealized gains and losses of a Fund are allocated to each respective class in proportion to the relative net assets of each class. I. DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders are recorded on the ex-dividend date. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. J. TAXES - The Funds complied with the requirements of the Internal Revenue Code applicable to regulated investment companies and distributed all of their taxable net income and net realized gains sufficient to relieve them from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required. K. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. L. SECURITIES LENDING - Certain of the Series may lend up to 33 1/3% of the value of total assets to broker/dealers, banks, or other institutional borrowers of securities in order to earn additional income. Each Series' policy is to maintain collateral in the form of cash, U.S. Government securities, letters of credit or such other collateral as may be permitted under its investment program equal to at least 100% of the value of securities loaned. The collateral is then "marked-to-market" daily until the securities are returned. No securities were loaned as of September 30, 2003. M. SHORT SALES - Certain Funds may make short sales "against the box," in which the Fund enters into a short sale of a security it owns. At no time will more than 15% of the value of the Funds' net assets be in deposits on short sales against the box. In a short sale that is not "against the box," a Fund sells a security which it does not own, in anticipation of a decline in the market value of the security. To complete the sale, the Fund must borrow the security generally from the broker through which the short sale is made in order to make delivery to the buyer. The Fund must replace the security borrowed by purchasing it at the market price at the time of replacement. The Fund is said to have a "short position" in securities sold until it delivers them to the broker. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of securities sold, but not yet purchased, may require purchasing the securities at prices which differ from the market value reflected on the Statement of Assets and Liabilities. The Funds are liable for any dividends or interest payable on securities while those securities are in a short position. As collateral for its short positions, the Funds are required under the Investment Company Act of 1940 to maintain segregated assets consisting of cash, cash equivalents or liquid securities. These segregated assets are valued consistent with Note 1a above. These segregated assets are required to be adjusted daily to reflect changes in the market value of the securities sold short. - -------------------------------------------------------------------------------- 101 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Management fees are payable to Security Management Company, LLC (SMC) at an annual rate of 0.75% of the average daily net assets for Security Large Cap Value Fund, Equity, Enhanced Index, Select 25 Series and Security Mid Cap Growth Fund, 1.00% for Global, Social Awareness, Mid Cap Value, Small Cap Growth, Large Cap Growth and Technology Series, and 1.10% for International Series. SMC receives a management fee from Alpha Opportunity Fund that is composed of two components. The first component is an annual base fee equal to 2.00% of Alpha Opportunity Fund's average daily net assets. The second component is a performance adjustment that either increases or decreases the base fee, depending on how Alpha Opportunity Fund performed relative to the S&P 500 Index. The illustration below demonstrates how the performance adjustment may affect the Investment Manager's fee. The Investment Manager will receive the 2.00% annual base fee for the first year of the Fund's investment operations, and thereafter if the Fund's investment performance matches the investment record of the S&P 500 Index over the prior 12 month period. If the investment performance of the Fund's Class A shares exceeds the investment record of the S&P500 Index, the performance adjustment increases the fee paid to the Investment Manager proportionately, reaching a maximum annual fee of 2.75% if the Fund outperforms the investment record of the S&P500 Index by 15 percentage points over the measuring period. If the investment performance of the Fund's Class A shares trails the investment record of the S&P500 Index, the performance adjustment decreases the fee paid to the Investment Manager proportionately, reaching a minimum annual fee of 1.25% if the Fund underperforms the investment record of the S&P 500 Index by 15 percentage points over the measuring period. The performance adjustment is calculated on the basis of a "rolling" 12 month measuring period, so that a fee rate calculated on the basis of investment performance over a 12 month period will apply only for the next succeeding month, and then will be subject to recalculation for the following month on the basis of the Fund's investment performance over the prior 12 month period. Performance adjustments will begin on August 1, 2004 based upon Alpha Opportunity Fund's performance during the 12 months ended July 1, 2004. SMC also acts as the administrative agent and transfer agent for the Funds, and as such performs administrative functions, transfer agency and dividend disbursing services, and the bookkeeping, accounting and pricing functions for each fund. For these services, the Investment Manager receives, from the Global, International, and Technology Series an administrative fee equal to .045% of the average daily net assets of the series plus the greater of .10% of the average net assets or $60,000. For administrative services provided to the Security Large Cap Value Fund, the Equity, Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index, Select 25, Large Cap Growth Series and the Security Mid Cap Growth Fund, SMC receives an administrative fee equal to .09% of the average daily net assets of each series. For Alpha Opportunity Series, SMC receives an administrative fee equal to .145% of the average daily net assets of the Alpha Opportunity Fund. For transfer agent services, SMC is paid an annual fixed charge per account as well as a transaction fee for all shareholder and dividend payments. SMC pays the Dreyfus Corporation an annual fee equal to .25% of the average daily closing value of the combined net assets of Large Cap Value Fund and another fund managed by SMC, SBL Series B, computed on a daily basis. Beginning January 1, 2002, the Dreyfus Corporation agreed to waive .10% of the average daily closing value of the combined net assets of these funds, computed on a daily basis until December 31, 2006. SMC pays OppenheimerFunds, Inc. an annual fee equal to a percentage of the average daily closing value of the combined average daily net assets of Global Series and another fund managed by SMC, SBL Series D, computed on a daily basis as follows: Combined Average Daily Net Assets Annual Fees - --------------------------------- ----------- $0 to $300 Million .................................................. .35% $300 Million to $750 Million ........................................ .30% $750 Million or more ................................................ .25% SMC pays RS Investments, an annual fee equal to a percentage of the average daily closing value of the combined net assets of SmallCap Growth Series and another fund managed by SMC, SBL Series X, computed on a daily basis as follows: Combined Average Daily Net Assets Annual Fees - --------------------------------- ----------- $0 to $100 Million .................................................. 0.55% $100 Million to $400 Million ........................................ 0.50% Over $400 Million ................................................... 0.45% Prior to May 1, 2003, SMCpaid Deutsche Asset Management, Inc. an annual fee equal to a percentage of the average daily closing value of the combined net assets of Enhanced Index Series and another fund managed by SMC, SBL Series H, computed on a daily basis as follows: Combined Average Daily Net Assets Annual Fees - --------------------------------- ----------- $0 to $100 Million .................................................. .20% $100 Million to $300 Million ........................................ .15% $300 Million or more ................................................ .13% Effective May 1, 2003, Northern Trust began providing investment advisory services to Enhanced Index and another fund managed by SMC, SBL Series H. For the services provided to Enhanced Index, SMC pays Northern Trust an annual fee equal to a percentage of the average daily closing value of the combined net assets of Security Equity Fund Enhanced Index Series and SBL Series H, computed on a daily basis as follows: - -------------------------------------------------------------------------------- 102 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 Combined Average Daily Net Assets Annual Fees - --------------------------------- ----------- $0 to $100 Million .................................................. .20% $100 Million to $300 Million ........................................ .15% $300 Million or more ................................................ .13% In addition, SMC has voluntarily agreed to waive .25% of the management fees for Enhanced Index effective 05/01/03. SMC pays Templeton Investment Counsel an annual fee equal to a percentage of the average daily closing value of the combined net assets of International Series and another fund managed by SMC, SBL Series I, computed on a daily basis as follows: Combined Average Daily Net Assets Annual Fees - --------------------------------- ----------- $0 to $50 Million ................................................... .625% $50 Million to $200 Million ......................................... .465% $200 Million to $500 Million ........................................ .375% Over $500 Million ................................................... .350% Wellington Management Company, LLP furnishes investment advisory services to the Technology Series. For such services, SMC pays Wellington an annual fee equal to .50% of the average daily closing value of the combined net assets of Technology Series and another fund managed by SMC, SBL Series T. SMC pays Mainstream Investment Advisers, LLC an annual fee equal to 2.50% of that portion of the Alpha Opportunity Fund's assets managed by Mainstream. The sub-advisory fee will be adjusted upward or downward, depending on how that portion of Alpha Opportunity Fund's assets performed relative to the S&P 500 Index. The pro rata adjustment upward or downward will be determined based upon the investment performance of that portion of Alpha Opportunity Fund's assets managed by Mainstream relative to the investment record of the S&P 500 Index. The amount of any upward adjustment in the Base Fee will be equal to 1.50% multiplied by the ratio of the number of percentage points by which the investment performance of the Alpha Opportunity Fund assets managed by Mainstream exceeds the investment record of the S&P500 Index as compared to 30 percentage points. The maximum performance adjustment upward or downward is 1.50% annually. Depending on the performance of that portion of the Fund's assets managed by Mainstream, the Investment Manager may pay Mainstream a maximum of 4.00% or a minimum of 1.00% in annual sub-advisory fees. During its first 12 months of operations, the Investment Manager will pay Mainstream the base fee of 2.50% without any adjustment for performance. Performance adjustments will being on August 1, 2004 based upon the performance during the 12 months ended July 1, 2004 of that portion of Alpha Opportunity Fund's assets managed by Mainstream. Thereafter, the Investment Manager will calculate the performance adjustment at the end of each calendar month based upon the investment performance of the assets managed by Mainstream during the twelve-month period ending on the last day of the prior month compared to the investment record of the S&P 500 Index during the same period. The Alpha Opportunity Fund's assets are reallocated between Mainstream and the Investment Manager on a monthly basis to an approximately equal allocation. This procedure ensures that the Investment Manager cannot make allocation decisions that favor the Investment Manager over Mainstream. SMC has agreed to limit the total expenses of the Enhanced Index and Select 25 Series to 1.75%, Social Awareness, Mid Cap Value, Small Cap Growth and Large Cap Growth Series to 2.00%, International and Technology Series to 2.25% in each case exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees. SMC has agreed to limit the total other expenses for Alpha Opportunity to 0.50%. The expense limits other than those for Enhanced Index, Select 25 and International Series are voluntary limits which may be terminated at any time without notice to shareholders. The Funds have adopted Distribution Plans related to the offering of Class A, Class B and Class C shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The plans provide for payments at an annual rate of 1.00% of the average daily net assets of each Fund's Class B, Class C, and 0.25% of the average daily net assets of each Fund's Class A shares. Security Distributors, Inc. (SDI), a wholly-owned subsidiary of Security Benefit Group, Inc. and the national distributor of the Funds, received net underwriting commissions on sales of shares after allowances to brokers and dealers. The net underwriting commissions received are presented in the following table: SDI UNDERWRITING COMMISSIONS ---------------------------- Large Cap Value Fund .................. $ 2,794 Security Equity Fund: Equity Series ....................... 11,113 Global Series ....................... 6,828 Social Awareness Series ............. 2,384 Mid Cap Value Series ................ 4,950 Small Cap Growth Series ............. 2,909 Enhanced Index Series ............... 2,241 International Series ................ (389) Select 25 Series .................... 3,396 Large Cap Growth Series ............. 843 Technology Series ................... 866 Alpha Opportunity Series ............ 300 Security Mid Cap Growth Fund .......... 14,544 Certain officers and directors of the Funds are also officers and/or directors of Security Benefit Life Insurance Company and its subsidiaries, which include SMC and SDI. - -------------------------------------------------------------------------------- 103 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 3. UNREALIZED APPRECIATION/DEPRECIATION FOR FEDERAL INCOME TAX PURPOSES For federal income tax purposes, the amounts of unrealized appreciation (depreciation) on investments at September 30, 2003, were as follows: GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ -------------- Large Cap Value Fund ..................................................... $ 3,390,919 $ (2,390,267) $ 1,000,652 Security Equity Fund: Equity Series .......................................................... 95,452,327 (28,936,908) 66,515,419 Global Series .......................................................... 9,655,969 (5,263,551) 4,392,418 Social Awareness Series ................................................ 1,456,036 (3,130,396) (1,674,360) Mid Cap Value Series ................................................... 45,080,344 (8,131,654) 36,948,690 Small Cap Growth Series ................................................ 5,128,859 (367,416) 4,761,443 Enhanced Index Series .................................................. 1,173,422 (2,231,529) (1,058,107) International Series ................................................... 413,926 (300,882) 113,044 Select 25 Series ....................................................... 1,637,961 (2,092,162) (454,201) Large Cap Growth Series ................................................ 1,571,222 (1,347,072) 224,150 Technology Series ...................................................... 1,259,833 (415,293) 844,540 Alpha Opportunity Series ............................................... 36,389 (120,431) (84,042) Security Mid Cap Growth Fund ............................................. 45,156,326 (16,258,863) 28,897,463 4. INVESTMENT TRANSACTIONS Investment transactions for the year ended September 30, 2003, (excluding overnight investments and short-term commercial paper) were as follows: PROCEEDS PURCHASES FROM SALES --------- ---------- Large Cap Value Fund ...................................................................... $ 47,431,658 $ 34,732,238 Security Equity Fund: Equity Series ........................................................................... 257,020,919 294,835,728 Global Series ........................................................................... 38,225,014 51,110,524 Social Awareness Series ................................................................. 4,024,372 4,902,283 Mid Cap Value Series .................................................................... 90,565,488 77,427,255 Small Cap Growth Series ................................................................. 38,565,710 32,712,180 Enhanced Index Series ................................................................... 7,875,827 13,516,218 International Series .................................................................... 3,739,060 6,709,316 Select 25 Series ........................................................................ 13,464,498 12,492,632 Large Cap Growth Series ................................................................. 17,233,805 7,183,569 Technology Series ....................................................................... 15,170,906 12,726,302 Alpha Opportunity Series ................................................................ 10,667,243 6,667,210 Security Mid Cap Growth Fund .............................................................. 78,056,223 77,459,013 5. OPEN FUTURES CONTRACTS NUMBER OF CONTRACT MARKET UNREALIZED POSITION CONTRACTS EXPIRATION DATE AMOUNT VALUE LOSS -------- --------- --------------- ------ ----- ---- ALPHA OPPORTUNITY SERIES S&P 500 Future Long 12 12/18/2003 $3,072,378 $2,982,300 $(90,078) ENHANCED INDEX SERIES S&P 500 E-Mini Future Long 8 12/19/2003 $ 405,753 $ 397,600 $ (8,153) - -------------------------------------------------------------------------------- 104 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 6. CAPITAL SHARE TRANSACTIONS The Funds are authorized to issue an unlimited number of shares in an unlimited number of classes. Transactions in the capital shares of the Funds for the years ended September 30, 2003 and 2002 (except as noted), respectively, were as follows: 2003 Total 2003 Total 2003 2003 2003 2003 Increase/ Increase/ Shares Amount Shares Amount (Decrease) (Decrease) Sold Sold Redeemed Redeemed Shares Amount ---------- ------------- ----------- ------------- ----------- ------------- Security Large Cap Value Fund: Class A shares ............ 3,275,684 $ 15,980,582 (2,059,730) $ (9,542,638) 1,215,954 $ 6,437,944 Class B shares ............ 1,770,126 8,414,192 (571,007) (2,539,716) 1,199,119 5,874,476 Class C shares ............ 207,972 955,668 (141,469) (643,187) 66,503 312,481 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 5,253,782 $ 25,350,442 (2,772,206) $ (12,725,541) 2,481,576 $ 12,624,901 ========== ============= =========== ============= =========== ============= Security Equity Fund: Equity Series Class A shares ............ 9,525,481 $ 52,599,625 (18,674,422) $(105,856,454) (9,148,941) $ (53,256,829) Class B shares ............ 3,963,505 19,942,502 (6,830,650) (35,443,343) (2,867,145) (15,500,841) Class C shares ............ 647,916 3,455,973 (499,324) (2,656,042) 148,592 799,931 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 14,136,902 $ 75,998,100 (26,004,396) $(143,955,839) (11,867,494) $ (67,957,739) ========== ============= =========== ============= =========== ============= Global Series Class A shares ............ 17,102,956 $ 170,505,008 (18,807,897) $(187,958,287) (1,704,941) $ (17,453,279) Class B shares ............ 259,359 2,446,819 (891,673) (8,037,983) (632,314) (5,591,164) Class C shares ............ 135,732 1,296,276 (104,715) (993,174) 31,017 303,102 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 17,498,047 $ 174,248,103 (19,804,285) $(196,989,444) (2,306,238) $ (22,741,341) ========== ============= =========== ============= =========== ============= Social Awareness Series Class A shares ............ 169,124 $ 2,824,966 (149,561) $ (2,475,626) 19,563 $ 349,340 Class B shares ............ 44,117 681,521 (107,048) (1,664,723) (62,931) (983,202) Class C shares ............ 30,846 489,488 (19,076) (295,687) 11,770 193,801 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 244,087 $ 3,995,975 (275,685) $ (4,436,036) (31,598) $ (440,061) ========== ============= =========== ============= =========== ============= Mid Cap Value Series Class A shares ............ 3,192,088 $ 65,771,619 (2,597,504) $ (51,319,933) 594,584 $ 14,451,686 Class B shares ............ 756,268 14,474,911 (731,230) (13,136,730) 25,038 1,338,181 Class C shares ............ 540,730 10,825,157 (284,240) (5,174,008) 256,490 5,651,149 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 4,489,086 $ 91,071,687 (3,612,974) $ (69,630,671) 876,112 $ 21,441,016 ========== ============= =========== ============= =========== ============= Small Cap Growth Series Class A shares ............ 655,128 $ 6,184,996 (476,304) $ (4,215,103) 178,824 $ 1,969,893 Class B shares ............ 304,029 2,757,770 (253,852) (2,226,918) 50,177 530,852 Class C shares ............ 130,394 1,133,518 (97,903) (842,930) 32,491 290,588 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 1,089,551 $ 10,076,284 (828,059) $ (7,284,951) 261,492 $ 2,791,333 ========== ============= =========== ============= =========== ============= Enhanced Index Series Class A shares ............ 333,447 $ 2,367,320 (642,114) $ (4,508,312) (308,667) $ (2,140,992) Class B shares ............ 177,203 1,206,524 (513,292) (3,498,690) (336,089) (2,292,166) Class C shares ............ 159,884 1,120,893 (430,959) (2,949,239) (271,075) (1,828,346) ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 670,534 $ 4,694,737 (1,586,365) $ (10,956,241) (915,831) $ (6,261,504) ========== ============= =========== ============= =========== ============= International Series Class A shares ............ 3,921,675 $ 23,481,092 (3,810,566) $ (23,039,489) 111,109 $ 441,603 Class B shares ............ 105,672 613,054 (70,072) (403,596) 35,600 209,458 Class C shares ............ 864,642 4,785,963 (788,631) (4,342,340) 76,011 443,623 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 4,891,989 $ 28,880,109 (4,669,269) $ (27,785,425) 222,720 $ 1,094,684 ========== ============= =========== ============= =========== ============= Select 25 Series Class A shares ............ 308,267 $ 2,124,128 (707,984) $ (4,949,490) (399,717) $ (2,825,362) Class B shares ............ 129,196 870,627 (310,636) (2,109,351) (181,440) (1,238,724) Class C shares ............ 368,021 2,518,754 (105,802) (711,166) 262,219 1,807,588 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 805,484 $ 5,513,509 (1,124,422) $ (7,770,007) (318,938) $ (2,256,498) ========== ============= =========== ============= =========== ============= Large Cap Growth Series Class A shares ............ 1,662,989 $ 9,276,514 (793,945) $ (4,326,342) 869,044 $ 4,950,172 Class B shares ............ 1,088,511 5,959,453 (319,346) (1,646,003) 769,165 4,313,450 Class C shares ............ 152,477 790,028 (89,726) (451,972) 62,751 338,056 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 2,903,977 $ 16,025,995 (1,203,017) (6,424,317) 1,700,960 $ 9,601,678 ========== ============= =========== ============= =========== ============= Technology Series Class A shares ............ 1,700,337 $ 5,685,197 (799,732) $ (2,642,434) 900,605 $ 3,042,763 Class B shares ............ 270,397 872,164 (153,878) (486,253) 116,519 385,911 Class C shares ............ 148,413 480,116 (59,020) (183,732) 89,393 296,384 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 2,119,147 $ 7,037,477 (1,012,630) $ (3,312,419) 1,106,517 $ 3,725,058 ========== ============= =========== ============= =========== ============= Alpha Opportunity Series* Class A shares ............ 318,546 $ 3,210,618 (31,141) $ (327,957) 287,405 $ 2,882,661 Class B shares ............ 169,772 1,699,668 -- -- 169,772 1,699,668 Class C shares ............ 168,989 1,690,408 -- -- 168,989 1,690,408 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 657,307 $ 6,600,694 (31,141) $ (327,957) 626,166 $ 6,272,737 ========== ============= =========== ============= =========== ============= Security Mid Cap Growth Fund Class A shares ............ 4,578,400 $ 40,656,683 (5,138,315) $ (44,459,945) (559,915) $ (3,803,262) Class B shares ............ 1,135,067 9,427,357 (1,168,642) (8,552,708) (33,575) 874,649 Class C shares ............ 497,073 4,322,997 (277,157) (2,270,432) 219,916 2,052,565 ---------- ------------- ----------- ------------- ----------- ------------- Total .................... 6,210,540 $ 54,407,037 (6,584,114) $ (55,283,085) (373,574) $ (876,048) ========== ============= =========== ============= =========== ============= *For the period beginning July 7, 2003 (commencement of operations) to September 30, 2003. - -------------------------------------------------------------------------------- 105 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 6. CAPITAL SHARE TRANSACTIONS (CONTINUED) 2002 Total 2002 Total 2002 2002 2002 2002 2002 2002 Increase/ Increase/ Shares Amount Shares Amount Shares Amount (Decrease) (Decrease) Sold Sold Reinvested Reinvested Redeemed Redeemed Shares Amount --------- ------------ ----------- ---------- ----------- ------------- ----------- ------------ Large Cap Value Fund Class A shares ............. 1,193,136 $ 6,466,262 33,045 $ 197,941 (1,840,565) $ (10,034,941) (614,384) $ (3,370,738) Class B shares ............. 547,656 2,868,781 -- -- (437,132) (2,202,677) 110,524 666,104 Class C shares ............. 322,760 1,700,069 -- -- (130,743) (646,451) 192,017 1,053,618 Class S shares ............. 3,996 22,400 -- -- (11,632) (64,472) (7,636) (42,072) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 2,067,548 $ 11,057,512 33,045 $ 197,941 (2,420,072) $ (12,948,541) (319,479) $ (1,693,088) ========== ============ ======= ========== =========== ============= ========== ============ Security Equity Fund: Equity Series Class A shares ............. 12,042,285 $ 76,351,535 -- $ -- (19,759,506) $(125,366,721) (7,717,221) $(49,015,186) Class B shares ............. 3,848,604 24,139,027 -- -- (6,134,349) (36,063,969) (2,285,745) (11,924,942) Class C shares ............. 557,043 3,487,971 -- -- (297,814) (1,792,974) 259,229 1,694,997 Class S shares ............. 5,465 36,817 -- -- (23,193) (145,602) (17,728) (108,785) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 16,453,397 $104,015,350 -- $ -- (26,214,862) $(163,369,266) (9,761,465) $(59,353,916) ========== ============ ======= ========== =========== ============= ========== ============ Global Series Class A shares ............. 17,098,344 $193,880,867 -- $ -- (16,093,291) $(184,491,678) 1,005,053 $ 9,389,189 Class B shares ............. 527,452 5,999,231 -- -- (657,013) (7,220,612) (129,561) (1,221,381) Class C shares ............. 345,302 3,864,735 -- -- (232,364) (2,506,573) 112,938 1,358,162 Class S shares ............. 1,324 16,796 -- -- (6,659) (81,235) (5,335) (64,439) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 17,972,422 $203,761,629 -- $ -- (16,989,327) $(194,300,098) 983,095 $ 9,461,531 ========== ============ ======= ========== =========== ============= ========== ============ Social Awareness Series Class A shares ............. 193,611 $ 3,565,917 -- $ -- (302,641) $ (5,161,031) (109,030) $ (1,595,114) Class B shares ............. 83,304 1,442,914 -- -- (177,436) (2,916,322) (94,132) (1,473,408) Class C shares ............. 31,525 558,479 -- -- (16,985) (296,994) 14,540 261,485 Class S shares ............. --- -- -- -- (1,307) (23,725) (1,307) (23,725) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 308,440 $ 5,567,310 -- $ -- (498,369) $ (8,398,072) (189,929) $ (2,830,762) ========== ============ ======= ========== =========== ============= ========== ============ Mid Cap Value Series Class A shares ............. 2,681,687 $ 57,296,305 43,856 $ 908,701 (1,470,203) $ (30,981,343) 1,255,340 $ 27,223,663 Class B shares ............. 1,538,369 31,715,651 27,649 546,059 (807,313) (15,601,038) 758,705 16,660,672 Class C shares ............. 1,079,682 22,853,396 6,475 130,026 (328,860) (6,235,819) 757,297 16,747,603 Class S shares ............. 24,373 546,845 5,427 111,634 (385,002) (8,605,244) (355,202) (7,946,765) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 5,324,111 $112,412,197 83,407 $1,696,420 (2,991,378) $ (61,423,444) 2,416,140 $ 52,685,173 ========== ============ ======= ========== =========== ============= ========== ============ Small Cap Growth Series Class A shares ............. 532,394 $5,349,414 -- $ -- (1,230,400) $ (12,729,785) (698,006) $ (7,380,371) Class B shares ............. 356,036 3,562,949 -- -- (440,539) (4,272,369) (84,503) (709,420) Class C shares ............. 171,086 1,682,678 -- -- (131,917) (1,304,989) 39,169 377,689 Class S shares ............. 2,828 32,238 -- -- (8,608) (85,817) (5,780) (53,579) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 1,062,344 $ 10,627,279 -- $ -- (1,811,464) $ (18,392,960) (749,120) $ (7,765,681) ========== ============ ======= ========== =========== ============= ========== ============ Enhanced Index Series Class A shares ............. 636,383 $ 4,828,573 -- $ -- (332,010) $ (2,584,386) 304,373 $ 2,244,187 Class B shares ............. 285,356 2,127,224 -- -- (218,166) (1,721,386) 67,190 405,838 Class C shares ............. 161,948 1,271,028 -- -- (101,409) (786,653) 60,539 484,375 Class S shares ............. -- -- -- -- (339) (2,701) (339) (2,701) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 1,083,687 $ 8,226,825 -- $ -- (651,924) $ (5,095,126) 431,763 $ 3,131,699 ========== ============ ======= ========== =========== ============= ========== ============ International Series Class A shares ............. 826,825 $ 5,286,550 -- $ -- (694,269) $ (4,477,761) 132,556 $ 808,789 Class B shares ............. 85,295 542,278 -- -- (20,331) (135,521) 64,964 406,757 Class C shares ............. 1,031,609 6,362,667 -- -- (1,028,566) (6,416,855) 3,043 (54,188) Class S shares ............. 29 200 -- -- (29) (212) -- (12) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 1,943,758 $ 12,191,695 -- $ -- (1,743,195) $ (11,030,349) 200,563 $ 1,161,346 ========== ============ ======= ========== =========== ============= ========== ============ Select 25 Series Class A shares ............. 449,230 $ 3,730,554 -- $ -- (513,090) $ (4,190,883) (63,860) $ (460,329) Class B shares ............. 286,019 2,292,073 -- -- (486,519) (3,816,980) (200,500) (1,524,907) Class C shares ............. 129,055 1,038,746 -- -- (115,709) (927,139) 13,346 111,607 Class S shares ............. 553 4,800 -- -- (2,221) (17,927) (1,668) (13,127) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 864,857 $ 7,066,173 -- $ -- (1,117,539) $ (8,952,929) (252,682) $ (1,886,756) ========== ============ ======= ========== =========== ============= ========== ============ Large Cap Growth Series Class A shares ............. 1,949,955 $ 10,239,483 -- $ -- (345,765) $ (1,849,654) 1,604,190 $ 8,389,829 Class B shares ............. 273,903 1,520,855 -- -- (171,225) (939,344) 102,678 581,511 Class C shares ............. 226,975 1,307,126 -- -- (98,345) (563,377) 128,630 743,749 Class S shares ............. 390 2,480 -- -- (707) (3,960) (317) (1,480) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 2,451,223 $ 13,069,944 -- $ -- (616,042) $ (3,356,335) 1,835,181 $ 9,713,609 ========== ============ ======= ========== =========== ============= ========== ============ Technology Series Class A shares ............. 452,192 $ 1,871,160 -- $ -- (381,209) $ (1,484,392) 70,983 $ 386,768 Class B shares ............. 77,250 287,638 -- -- (17,657) (60,216) 59,593 227,422 Class C shares ............. 188,074 685,197 -- -- (84,120) (303,103) 103,954 382,094 Class S shares ............. 64 280 -- -- (38,526) (140,632) (38,462) (140,352) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 717,580 $ 2,844,275 -- $ -- (521,512) $ (1,988,343) 196,068 $ 855,932 ========== ============ ======= ========== =========== ============= ========== ============ Security Mid Cap Growth Fund Class A shares ............. 5,544,892 $ 54,000,517 79,784 $ 829,746 (8,196,903) $ (80,140,831) (2,572,227) $(25,310,568) Class B shares ............. 910,549 7,745,638 20,366 189,811 (1,886,546) (16,408,348) (955,631) (8,472,899) Class C shares ............. 589,690 5,405,335 3,053 30,713 (232,494) (2,003,670) 360,249 3,432,378 Class S shares ............. 22,162 227,995 982 10,135 (200,953) (1,970,493) (177,809) (1,732,363) ---------- ------------ ------- ---------- ----------- ------------- ---------- ------------ Total ..................... 7,067,293 $ 67,379,485 104,185 $1,060,405 (10,516,896) $(100,523,342) (3,345,418) $(32,083,452) ========== ============ ======= ========== =========== ============= ========== ============ - -------------------------------------------------------------------------------- 106 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 7. OPTIONS WRITTEN The following call options written were outstanding for Mid Cap Value Series as of September 30, 2003: CALL OPTIONS WRITTEN EXPIRATION EXERCISE NUMBER OF MARKET COMMON STOCK DATE PRICE CONTRACTS VALUE --------- -------- --------- --------- Protein Design Labs, Inc. ................................................. 11/21/03 $17.50 810 $20,250 ------ --------- Total call options outstanding (premiums received, $124,078) 810 $20,250 ====== ========= Transactions in options written for Mid Cap Value Series for the period ended September 30, 2003 were as follows: PUT OPTIONS WRITTEN NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2002 ......................................................................... 1,814 $ 301,480 Opened ................................................................................................ 3,872 515,559 Bought Back ........................................................................................... (74) (46,137) Expired ............................................................................................... (3,506) (461,927) Exercised ............................................................................................. (2,106) (308,975) --------- --------- Balance at September 30, 2003 ......................................................................... -- $ -- ========= ========= CALL OPTIONS WRITTEN NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2002 ......................................................................... 420 $ 68,337 Opened ................................................................................................ 4,529 489,859 Bought Back ........................................................................................... -- -- Expired ............................................................................................... (2,410) (265,324) Exercised ............................................................................................. (1,729) (168,794) --------- --------- Balance at September 30, 2003 ......................................................................... 810 $ 124,078 ========= ========= Transactions in options written for Security Mid Cap Growth Fund for the period ended September 30, 2003 were as follows: PUT OPTIONS WRITTEN NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2002 ......................................................................... 1,304 $ 198,586 Opened ................................................................................................ 2,343 325,550 Bought Back ........................................................................................... (314) (63,296) Expired ............................................................................................... (1,737) (210,327) Exercised ............................................................................................. (1,596) (250,513) --------- --------- Balance at September 30, 2003 ......................................................................... -- $ -- ========= ========= CALL OPTIONS WRITTEN NUMBER OF PREMIUM CONTRACTS AMOUNT --------- --------- Balance at September 30, 2002 ......................................................................... 889 $ 221,450 Opened ................................................................................................ 430 90,399 Bought Back ........................................................................................... -- -- Expired ............................................................................................... (800) (156,786) Exercised ............................................................................................. (519) (155,063) --------- --------- Balance at September 30, 2003 ......................................................................... -- $ -- ========= ========= - -------------------------------------------------------------------------------- 107 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 8. FEDERAL TAX MATTERS The tax character of distributions paid during the fiscal years ended September 30, 2002 and 2003, was the same as that reported in the Statement of Changes in Net Assets, except as follows: ORDINARY CAPITAL RETURN OF INCOME GAIN CAPITAL TOTAL -------- ---------- --------- ---------- 2002 - ---- Security Large Cap Value Fund $209,686 $ -- $ 5,607 $ 215,293 Security Mid Cap Growth Fund -- 1,079,682 19,688 1,099,370 As of September 30, 2003 the components of accumulated earnings/(deficit) on a tax basis were the same as those reported in the Statement of Assets and Liabilities, except as follows: UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED TOTAL ORDINARY LONG-TERM ACCUMULATED CAPITAL AND APPRECIATION ACCUMULATED INCOME GAIN EARNINGS OTHER LOSSES* (DEPRECIATION)** EARNINGS/(DEFICIT) ------------- ------------- ----------- ------------- ---------------- ------------------ Security Large Cap Value Fund $108,075 $ -- $ 108,075 $(20,225,427) $ 1,000,652 $(19,116,700) Security Equity Fund: Global Series --- -- -- (18,343,725) 4,392,418 (13,951,307) Social Awareness Series -- -- -- (2,242,893) (1,674,360) (3,917,253) Mid Cap Value Series -- 2,149,183 2,149,183 -- 37,052,517 39,201,700 SmallCap Growth Series -- -- -- (13,086,413) 4,761,443 (8,324,970) Enhanced Index Series -- -- -- (5,774,426) (1,058,107) (6,832,533) International Series 14,667 -- 14,667 (2,885,458) 113,044 (2,757,747) Large Cap Growth Series -- -- -- (3,659,331) 224,150 (3,435,181) Technology Series -- -- -- (7,199,986) 844,540 (6,355,446) Alpha Opportunity Series 219,240 -- 219,240 (20,248) (84,042) 114,950 Security Mid Cap Growth Fund -- 6,427,140 6,427,140 -- 28,897,463 35,324,603 * Certain Funds had net capital loss carryovers and deferred post October losses as identified elsewhere in the Notes. ** The differences between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of wash sale losses and the differences between book and tax basis passive foreign investment companies and bond discount accretion. In accordance with the provisions of the Internal Revenue Code, the percentage of ordinary dividends (including short-term capital gains) attributable to the fiscal year ended September 30, 2003, which qualify for the dividends received deduction for corporate shareholders is 100% for the Security Large Cap Value Fund, 96% for the International Series and 5% for the Alpha Opportunity Series. - -------------------------------------------------------------------------------- 108 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 As of September 30, 2003, the accumulated net realized loss on sales of investments for federal income tax purposes which are available to offset future taxable gains and post-October capital losses that are deferred to the first day of the next fiscal year are as follows: DEFERRED CAPITAL LOSS POST-OCTOBER CARRYOVERS EXPIRES IN LOSSES ------------ ---------- ------------ Security Large Cap Value Fund $ 727,563 2008 $3,023,584 7,265,289 2009 56,003 2010 9,152,988 2011 ----------- 17,201,843 Security Equity Fund: Equity Series 1,653,201 2009 8,324,394 14,878,996 2010 ----------- 16,532,197 Global Series 28,793 2009 6,638,758 4,986,902 2010 6,689,272 2011 ----------- 11,704,967 Social Awareness Series 817,736 2009 274,407 132,011 2010 1,018,739 2011 ----------- 1,968,486 SmallCap Growth Series 13,086,413 2010 -- Enhanced Index Series 138,713 2009 3,067,270 976,489 2010 1,591,954 2011 ----------- 2,707,156 International Series 286,251 2009 -- 1,690,567 2010 908,640 2011 ----------- 2,885,458 Select 25 Series 368,467 2008 3,420,733 2,259,072 2009 3,363,943 2010 2,960,418 2011 ----------- 8,951,900 Large Cap Growth Series 58,405 2009 1,568,317 296,393 2010 1,736,216 2011 ----------- 2,091,014 Technology Series 78,037 2009 24,110 4,005,352 2010 3,092,993 2011 ----------- 7,176,382 Alpha Opportunity Series -- N/A 20,248 The Security Equity Fund - Equity Series inherited approximately $1,504,000 of capital losses (included above) from its merger with Security Equity Fund - Total Return Series (see Note 9), which may be applied against any realized net taxable capital gains in future years or until September 30, 2009, the respective date, whichever occurs first, subject to certain limitations imposed by Section 382 of - -------------------------------------------------------------------------------- 109 NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2003 the Internal Revenue Code. Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to post-October losses, losses deferred due to wash sales, proceeds from securities litigation, foreign currency gains and losses, investments in limited partnerships and REITs, and the "mark-to-market" of certain Passive Foreign Investment Companies (PFIC's) for tax purposes. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the difference arises. On the Statements of Assets and Liabilities, the following adjustments were made for permanent tax adjustments: ACCUMULATED UNDISTRIBUTED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME PAID-IN-CAPITAL ------------ -------------- --------------- Security Large Cap Value Fund $ (7,346) $ 7,346 $ -- Security EquityFund: Global Series 204,857 87,682 (292,539) Social Awareness Series (776,651) 179,491 597,160 Mid Cap Value Series -- 1,140,990 (1,140,990) SmallCap Growth Series -- 414,114 (414,114) Enhanced Index Series -- 56,631 (56,631) International Series (17,815) 17,815 -- Select 25 -- 281,129 (281,129) Large Cap Growth Series -- 183,113 (183,113) Technology Series -- 188,614 (188,614) Alpha Opportunity Series (24,865) 24,865 -- Security Mid Cap Growth Fund -- 1,782,165 (1,782,165) 9. ACQUISITION OF SECURITY EQUITY FUND - TOTAL RETURN SERIES Pursuant to a plan of reorganization approved by Security Equity Fund Total Return Series shareholders, Security Equity Fund Equity Series acquired all the net assets of Total Return Series, which totalled $2,421,288 on the closing date of the reorganization, August 27, 2002. A total of 208,971 Class A shares, 153,617 Class B shares and 73,895 Class C shares were issued in exchange for Total Return Series' Class A, B and C shares. In exchange for the assets of Total Return Series 436,483 shares of Equity Series were distributed to Total Return shareholders of record as of immediately after the closing date. A total of $1,203,652 in assets for Class A shares, $808,176 in assets for Class B shares and $409,460 in assets for Class C shares were received in exchange for Total Return Series' assets. This exchange qualified as a tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue Code. Total Return's net assets included $504,764 of unrealized depreciation, $56,623 of accumulated net investment loss and $1,503,978 of accumulated realized loss on sale of investments. The aggregate net assets of Equity Series immediately before the acquisition totalled $552,921,881. Following the acquisition, the combined net assets of Equity Series totalled $555,343,169. 10. SUBSEQUENT EVENT The shareholders of the Security Equity Fund, International and Technology Series approved a plan of reorganization on September 30, 2003. The reorganization took place on October 3, 2003. The assets and liabilities of the International Series were merged into the Security Equity Fund - Global Series. The assets and liabilities of the Technology Series were merged into the Security Mid Cap Growth Fund. - -------------------------------------------------------------------------------- 110 REPORT OF INDEPENDENT AUDITORS THE SHAREHOLDERS AND BOARD OF DIRECTORS SECURITY LARGE CAP VALUE FUND, SECURITY EQUITY FUND AND SECURITY MID CAP GROWTH FUND We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Security Large Cap Value Fund, Security Equity Fund (comprised of the Equity, Global, Social Awareness, MidCap Value,SmallCap Growth, Enhanced Index, International, Select 25(R), Large Cap Growth, Technology and Alpha Opportunity Series) and Security Mid Cap Growth Fund (the Funds) as of September 30, 2003, and the related statements of operations, changes in net assets and financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procdures included confirmation of securities owned as of September 30, 2003, by correspondence with the custodians and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective entities/series constituting the Funds at September 30, 2003, and the results of their operations, the changes in their net assets and their financial highlights for the periods indicated above in conformity with accounting principles generally accepted in the United States.
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Kansas City Missouri November 7, 2003 - -------------------------------------------------------------------------------- 111SPECIAL SHAREHOLDER MEETING (UNAUDITED) A special meeting of the Security Equity Fund-International Series and Technology Series was held on September 30, 2003. Each matter voted upon at the meeting, as well as the number of votes cast for, against or withheld, and the number of abstentions with respect to such matters are set forth below: (1) The approval of a plan of reorganization providing for the acquisition of all of the assets and liabilities of Security Equity Fund, International Series ("International Fund") by Security Equity Fund, Global Series ("Global Fund") solely in exchange for shares of the Global Fund, followed by the complete liquidation of the International Fund. The following votes were cast regarding this matter: VOTES FOR VOTES AGAINST/ABSTENTIONS Security Equity Fund, International Series 889,209 15,742 (2) The approval of a plan of reorganization providing for the acquisition of all of the assets and liabilities of Security Equity Fund, Technology Series ("Technology Fund") by Security Mid Cap Growth Fund, solely in exchange for shares of the Mid Cap Growth Fund, followed by the complete liquidation of the Technology Fund. VOTES FOR VOTES AGAINST/ABSTENTIONS Security Equity Fund, Technology Series 1,627,616 44,010 - -------------------------------------------------------------------------------- 112 DIRECTOR DISCLOSURE SEPTEMBER 30, 2003 NUMBER OF PRINCIPAL PORTFOLIOS IN NAME, POSITION(S) OCCUPATION(S) FUND COMPLEX ADDRESS AND HELD WITH TERM OF OFFICE AND DURING THE PAST OVERSEEN BY DATE OF BIRTH THE FUND LENGTH OF TIME SERVED 5 YEARS THE DIRECTOR - -------------------------------------------------------------------------------------------------------------------------------------------------------- Donald A. Chubb, Jr. Director** 1994 to present*** Business broker, 38 One Security Benefit Place Griffith & Blair Realtors Topeka, KS 66636-0001 Manager, Star Sign,Inc. 12/14/46 Penny A. Lumpkin Director** 1993 to present*** President, Vivian's Gift Shop 38 One Security Benefit Place Vice President, Palmer Companies, Inc. Topeka, KS 66636-0001 Vice President, Bellairre Shopping Center 08/20/39 Partner, Goodwin Ent. Partner, PLB Partner, Town Crier Vice President and Treasurer, Palmer News, Inc. Vice President, M/S News, Inc. Secretary, Kansas City Periodicals Mark L. Morris, Jr., D.V.M. Director** 1991 to present*** Independent Investor, Morris Co. 38 One Security Benefit Place Partner, Mark Morris Associates Topeka, KS 66636-0001 02/03/34 Maynard F. Oliverius Director** 1998 to present*** President & CEO, Stormont Vail HealthCare 38 One Security Benefit Place Topeka, KS 66636-0001 12/18/43 John D. Cleland Chairman of the Board February 2000 to present Sr. Vice President and Managing Member 38 One Security Benefit Place Director* 1991 to present*** Representative, Security Management Company, LLC Topeka, KS 66636-0001 Sr. Vice President, Security Benefit Group, Inc. 05/01/36 Sr. Vice President, Security Benefit Life Insurance Co. Director & Vice President, Security Distributors, Inc. James R. Schmank President February 2000 to present President and Managing Member Representative, 38 One Security Benefit Place Director* 1997 to present*** Security Management Company, LLC Topeka, KS 66636-0001 Sr. Vice President, Security Benefit Group, Inc. 02/21/53 Sr. Vice President, Security Benefit Life Insurance Co. Director, Security Distributors, Inc. * These directors are deemed to be "interested persons" of the Funds under the Investment Company Act of 1940, as amended, by reason of their positions with the Funds' Investment Manager and/or the parent of the Investment Manager. ** These directors serve on the Funds' joint audit committee, the purpose of which is to meet with the independent auditors, to review the work of the auditors, and to oversee the handling by Security Management Company, LLC of the accounting function for the Funds. *** Term is until the next annual meeting, or until their successors shall have been duly elected and qualified. The statement of additional information ("SAI") includes additional information about the Fund Directors and is available upon request without charge by calling 1-800-888-2461. - -------------------------------------------------------------------------------- 113 THE SECURITY GROUP OF MUTUAL FUNDS - --------------------------------------- Security Large Cap Value Fund Security Equity Fund o Equity Series o Global Series o Social Awareness Series o Mid Cap Value Series o Small Cap Growth Series o Enhanced Index Series o International Series o Select 25 Series o Large Cap Growth Series o Technology Series o Alpha Opportunity Series Security Mid Cap Growth Fund Security Income Fund o Diversified Income Series o High Yield Series o Capital Preservation Series Security Municipal Bond Fund Security Cash Fund This report is submitted for the general information of the shareholders of the Funds. The report is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective prospectus which contains details concerning the sales charges and other pertinent information.
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One Security Benefit Place Topeka, KS 66636-0001 SECURITY FUNDS OFFICERS AND DIRECTORS - --------------------------------------- DIRECTORS - --------- Donald A. Chubb, Jr. John D. Cleland Penny A. Lumpkin Mark L. Morris, Jr., D.V.M. Maynard F. Oliverius James R. Schmank OFFICERS - -------- John D. Cleland, CHAIRMAN OF THE BOARD James R. Schmank, PRESIDENT Steve M. Bowser, VICE PRESIDENT, EQUITY FUND Mark Lamb,VICE PRESIDENT, EQUITY FUND Terry A. Milberger, VICE PRESIDENT, EQUITY FUND Mark Mitchell, VICE PRESIDENT, EQUITY FUND James P. Schier, VICE PRESIDENT, EQUITY AND MID CAP GROWTH FUND Cindy L. Shields, VICE PRESIDENT, EQUITY FUND Amy J. Lee, SECRETARY Christopher D. Swickard, ASSISTANT SECRETARY Brenda M. Harwood, TREASURER SDI 604 (R9-03) 46-06045-00ITEM 2. CODE OF ETHICS. The Registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. A copy of the Registrant's code of ethics is filed herewith as Exhibit 10(a)(1). No amendments were made to the provisions of the code of ethics during the period covered by this report. No implicit or explicit waivers to the provisions of the code of ethics were granted during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Registrant's Board of Directors has determined that Maynard Oliverius, a member of the Audit Committee of the Board, is an audit committee financial expert. Mr. Oliverius is "independent" for purposes of this item. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. RESERVED. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. RESERVED. ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's President and Treasurer have concluded that the registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR. (b) There were no significant changes in the registrant's internal controls, or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) (1) Code of Ethics pursuant to Item 2 above. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SECURITY EQUITY FUND By: /s/ JAMES R. SCHMANK -------------------------------------- James R. Schmank, President Date: December 1, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ JAMES R. SCHMANK -------------------------------------- James R. Schmank, President Date: December 1, 2003 By: /s/ BRENDA M. HARWOOD -------------------------------------- Brenda M. Harwood, Treasurer Date: December 1, 2003