Table of Contents
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) |
RICHARD M. GOLDMAN, 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, 2008
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.
Table of Contents
Item 1. | Reports to Stockholders. |
Table of Contents
Table of Contents
Security Large Cap Value Fund
Security Mid Cap Growth Fund
September 30, 2008
Annual Report
Table of Contents
Security Equity Fund | ||
2 | ||
17 | ||
27 | ||
37 | ||
45 | ||
55 | ||
63 | ||
71 | ||
81 | ||
91 | ||
101 | ||
109 | ||
118 | ||
128 | ||
129 | ||
130 |
Security Global Investors refers to the asset management arm of Security Benefit Corporation (“Security Benefit”) that consists of Security Investors, LLC, and for global investing, Security Global Investors, LLC. Security Distributors, Inc., Security Investors, LLC and Security Global Investors, LLC are subsidiaries of Security Benefit.
1 |
Table of Contents
Managers’ Commentary November 14, 2008 | Alpha Opportunity Series (unaudited) | |
To Our Shareholders:
Performance
Although returns were down the performance of the Security Equity Fund - Alpha Opportunity Series was strong on a relative basis in the 12 months ended September 30, 2008, returning –15.99%1 compared to
–21.98% for the S&P 500 Index. For the five-year period ending September 30, 2008, the Series has outperformed the benchmark by more than 400 basis points, 9.19% to 5.17% on an annualized basis.
Investment Philosophy
We are active managers as we believe that style and approach plays well to our strengths of portfolio management experience and discipline. Our fundamental philosophy rests first upon the belief that it is critical to identify the long-term investment theme governing the equity markets. These themes may persist for 15 to 20 years. Second, while we also believe that valuation adds important perspective to investment decisions, it is not an efficient means of timing purchase and sale decisions. Those decisions are best made using technical analysis, a practice that uses the movement of security prices to indicate possible future price behavior. The third tenet of our philosophy is that changes in stock prices can lead changes in fundamental corporate developments.
Sector Performance
The favorable comparisons to the S&P 500 Index can be primarily attributed to the Series’ use of cash, emphasis on the energy and materials sectors of the market in the
first nine months of the fiscal year, and the timely reduction of those same sectors beginning in the third fiscal quarter. Short positions during the period added to performance.
Our secular investment theme reflects the need for global infrastructure where energy and materials stocks provide leadership. When using the performance of the S&P 500 sectors as an indicator, both sectors performed extremely well in the first nine months of the year. Where the S&P 500 Index was down –15% in that period, energy stocks were up 13% and materials experienced a slight decline of –0.2%. With the S&P 500 Index declining –8% in the fourth fiscal quarter, our reductions of those sectors in the prior period mitigated losses as the energy and materials sectors experienced losses of –25% and –23%, respectively.
Although our secular theme could last 15 to 20 years, there will be periods where its favored sectors, such as energy and materials, will trail the S&P 500 Index and others will lead. We are in one of those periods now. It is our belief that financial and consumer-oriented stocks provide the best return opportunities during this counter-cyclical period, a period that may last through most of 2009. For that reason, we have an overweight position in both sectors versus the index.
Market Outlook
In brief, with the S&P 500 Index more than 25% off its October 2007 highs, we believe there is a lot of bad news priced in the market. Although the statistics may not have confirmed it yet, we are probably in a recession that may last well into 2009. However, we do not believe that means the financial markets cannot recover over the intermediate term.
2 |
Table of Contents
Managers’ Commentary November 14, 2008 | Security Equity Fund Alpha Opportunity Series (unaudited) | |
Numerous actions by the U.S. Congress, Treasury Department, and the Federal Reserve Bank have been an effort to stabilize securities markets and shore up the financial system. Other institutions and governments around the world have taken similar actions. While the results will not be known for some time, it is an indication of the commitment from various leaders around the globe to return normalcy to the financial system.
However, events such as the bankruptcy of Lehman Brothers, which froze credit markets, and the federal government intervention of Fannie Mae, Freddie Mac, and AIG, have resulted in extreme volatility in the equity markets. The credit market freeze has made it difficult to find counterparties with which to trade, making Series management more challenging. In addition, as a result of a previous brokerage relationship with Lehman Brothers International Europe (“LIBE”) (which was placed into administration on September 15, 2008), the Series has certain short sale positions that it is currently unable to settle and certain long positions held by its custodian that are pledged to LIBE which the Series currently cannot access. Because of the market environment, the Series is currently unable to pursue part of its investment objective because the Series is unable to invest according to a long/short strategy with an emphasis on securities of non-U.S. issuers. The Series is unable to determine when it will resume its full investment program.
We thank you for your investment and appreciate the trust and confidence you have placed in us.
Sincerely,
Bill Jenkins, Portfolio Manager
(Mainstream Investment Advisers)
John Boich, Portfolio Manager (Security Investors)
David Whittall, Portfolio Manager (Security Investors)
Scott Klimo, Portfolio Manager (Security Global Investors)
Mark Lamb, Portfolio Manager (Security Investors)
Steve Bowser, Portfolio Manager (Security Investors)
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 reduce Series expenses and in the absence of such waivers, the performance quoted would be reduced.
3 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Alpha Opportunity Series (unaudited) | |
PERFORMANCE
|
$10,000 Since Inception
This chart assumes a $10,000 investment in Class A shares of Alpha Opportunity Series on July 7, 2003 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance.
Average Annual Returns
| ||||||
Periods Ended 9-30-08
|
1 Year
|
5 Years
|
Since Inception
| |||
A Shares
| (15.99%)
| 9.19%
| 9.22%
| |||
A Shares with sales charge
| (20.82%)
| 7.92%
| 7.99%
| |||
B Shares
| (16.66%)
| 8.36%
| 8.38%
| |||
B Shares with CDSC
| (19.96%)
| 8.11%
| 8.38%
| |||
C Shares
| (16.63%)
| 8.39%
| 8.41%
| |||
C Shares with CDSC
| (17.29%)
| 8.39%
| 8.41%
| |||
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08*
| ||||||||
Consumer Discretionary
| 8.74%
| |||||||
Consumer Staples
| 6.25
| |||||||
Energy
| 1.90
| |||||||
Financials
| 15.30
| |||||||
Health Care
| 4.39
| |||||||
Industrials
| 11.83
| |||||||
Information Technology
| 4.38
| |||||||
Materials
| (0.80)
| |||||||
Telecommunication Services
| 0.22
| |||||||
Utilities
| (0.30)
| |||||||
Exchange Traded Funds
| 0.06
| |||||||
U.S. Government Sponsored Agencies
| 25.61
| |||||||
Short Term Investments
| 4.65
| |||||||
Cash & Other Assets, Less Liabilities
| 17.77
| |||||||
Total Net Assets | 100.00% | |||||||
*Securities sold short are netted with long positions in common stocks in the appropriate sectors.
4 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Alpha Opportunity Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning Account Value 4/1/2008 | Ending Account Value 9/30/2008 1 | Expenses Paid During Period 2 | ||||
Alpha Opportunity | ||||||
Series - Class A | ||||||
Actual | $1,000.00 | $914.96 | $14.65 | |||
Hypothetical
| 1,000.00
| 1,009.70
| 15.37
| |||
Alpha Opportunity | ||||||
Series - Class B | ||||||
Actual | 1,000.00 | 910.49 | 18.05 | |||
Hypothetical
| 1,000.00
| 1,006.10
| 18.96
| |||
Alpha Opportunity | ||||||
Series - Class C | ||||||
Actual | 1,000.00 | 910.59 | 18.29 | |||
Hypothetical
| 1,000.00
| 1,005.85
| 19.21
|
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (8.50%), (8.95%) and (8.94%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (3.06%, 3.78% and 3.83% for Class A, B, and C shares, respectively), including performance fees and net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
5 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
COMMON STOCKS - 57.9% | ||||
Aerospace & Defense - 1.2% | ||||
Lockheed Martin Corporation 1,2 | 3,753 | $411,592 | ||
Northrop Grumman Corporation 1,2 | 1,100 | 66,594 | ||
478,186 | ||||
Airlines - 1.8% | ||||
AMR Corporation * | 25,133 | 246,806 | ||
Southwest Airlines Company | 34,121 | 495,096 | ||
741,902 | ||||
Apparel Retail - 2.9% | ||||
Childrens Place Retail Stores, Inc. * | 669 | 22,311 | ||
Gap, Inc. 1,2 | 6,000 | 106,680 | ||
Gymboree Corporation 1,2* | 3,000 | 106,500 | ||
Ltd. Brands, Inc. 1,2 | 5,100 | 88,332 | ||
Ross Stores, Inc. 1,2 | 7,391 | 272,063 | ||
TJX Companies, Inc. 1,2 | 3,600 | 109,872 | ||
Urban Outfitters, Inc. * | 13,453 | 428,747 | ||
1,134,505 | ||||
Apparel, Accessories & Luxury Goods - 0.3% | ||||
Phillips-Van Heusen Corporation 1,2 | 800 | 30,328 | ||
Polo Ralph Lauren Corporation | 1,222 | 81,434 | ||
111,762 | ||||
Asset Management & Custody Banks - 1.8% | ||||
BlackRock, Inc. 4 | 3,151 | 612,870 | ||
T. Rowe Price Group, Inc. | 1,690 | 90,770 | ||
703,640 | ||||
Auto Parts & Equipment - 0.4% | ||||
Fuel Systems Solutions, Inc. * | 4,738 | 163,224 | ||
Biotechnology - 0.9% | ||||
Amgen, Inc. 1,2,* | 1,800 | 106,686 | ||
Biogen Idec, Inc. * | 2,500 | 125,725 | ||
OSI Pharmaceuticals, Inc. * | 2,600 | 128,154 | ||
360,565 | ||||
Coal & Consumable Fuels - 0.5% | ||||
Consol Energy, Inc. | 4,623 | 212,149 | ||
Uranium Energy Corporation * | 4,504 | 4,279 | ||
216,428 | ||||
Communications Equipment - 0.9% | ||||
Harmonic, Inc. 1,2* | 11,000 | 92,950 | ||
Research In Motion, Ltd. * | 3,889 | 265,619 | ||
358,569 | ||||
Computer & Electronics Retail - 0.6% | ||||
Best Buy Company, Inc. | 4,291 | 160,913 | ||
RadioShack Corporation 1,2 | 5,100 | 88,128 | ||
249,041 | ||||
Computer Hardware - 0.6% | ||||
Apple, Inc. * | 2,145 | 243,801 | ||
Construction & Engineering - 2.1% | ||||
Foster Wheeler, Ltd. * | 10,575 | 381,863 | ||
Pike Electric Corporation * | 6,743 | 99,324 | ||
Quanta Services, Inc. * | 14,163 | 382,543 | ||
863,730 |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Construction & Farm Machinery & Heavy Trucks - 1.6% | ||||
Joy Global, Inc. 1,2 | 9,080 | $409,871 | ||
Trinity Industries, Inc. 1,2 | 10,200 | 262,446 | ||
672,317 | ||||
Diversified Banks - 0.9% | ||||
Wachovia Corporation | 13,328 | 46,648 | ||
Wells Fargo & Company | 8,295 | 311,311 | ||
357,959 | ||||
Diversified Real Estate Activities - 0.9% | ||||
St. Joe Company | 9,458 | 369,713 | ||
Education Services - 0.1% | ||||
ITT Educational Services, Inc. * | 429 | 34,710 | ||
Electrical Components & Equipment - 0.4% | ||||
AO Smith Corporation 1,2 | 2,800 | 109,732 | ||
Thomas & Betts Corporation * | 1,597 | 62,395 | ||
172,127 | ||||
Electronic Equipment & Instruments - 0.4% | ||||
Agilent Technologies, Inc. * | 6,006 | 178,138 | ||
Electronic Manufacturing Services - 0.1% | ||||
Celestica, Inc. * | 5,700 | 36,708 | ||
Exchange Traded Funds - 1.0% | ||||
Claymore | 7,871 | 129,651 | ||
PowerShares DB US Dollar Index Bullish Fund | 4,860 | 118,778 | ||
SPDR KBW Regional Banking ETF | 4,072 | 146,511 | ||
394,940 | ||||
Food Retail - 0.2% | ||||
Safeway, Inc. 1,2 | 3,900 | 92,508 | ||
General Merchandise Stores - 0.2% | ||||
Family Dollar Stores, Inc. 1,2 | 3,700 | 87,690 | ||
Health Care Distributors - 0.3% | ||||
Owens & Minor, Inc. 1,2 | 2,700 | 130,950 | ||
Health Care Equipment - 0.3% | ||||
Baxter International, Inc. 1,2 | 1,800 | 118,134 | ||
Smith & Nephew plc ADR | 73 | 3,876 | ||
122,010 | ||||
Health Care Facilities - 0.3% | ||||
Kindred Healthcare, Inc. 1,2,* | 3,900 | 107,523 | ||
Health Care Services - 0.3% | ||||
Lincare Holdings, Inc. 1,2,* | 3,800 | 114,342 | ||
6 |
The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Home Entertainment Software - 0.9% | ||||
Shanda Interactive Entertainment, Ltd. ADR 1,2,* | 15,100 | $385,805 | ||
Home Improvement Retail - 0.1% | ||||
Lowe’s Companies, Inc. | 2,508 | 59,415 | ||
Homebuilding - 2.2% | ||||
M.D.C. Holdings, Inc. | 11,856 | 433,811 | ||
NVR, Inc. * | 822 | 470,184 | ||
903,995 | ||||
Homefurnishing Retail - 0.0% | ||||
Haverty Furniture Companies, Inc. | 959 | 10,971 | ||
Housewares & Specialties - 0.9% | ||||
Jarden Corporation * | 16,296 | 382,141 | ||
Human Resource & Employment Services - 0.3% | ||||
Watson Wyatt Worldwide, Inc. 1,2 | 2,200 | 109,406 | ||
Hypermarkets & Super Centers - 1.0% | ||||
BJ’s Wholesale Club, Inc. * | 7,108 | 276,217 | ||
Wal-Mart Stores, Inc. 1,2 | 2,200 | 131,758 | ||
407,975 | ||||
Independent Power Producers & Energy Traders - 0.2% | ||||
Constellation Energy Group, Inc. 1,2 | 2,999 | 72,876 | ||
Industrial Conglomerates - 0.3% | ||||
General Electric Company 1,2 | 4,200 | 107,100 | ||
Industrial Machinery - 0.4% | ||||
Lincoln Electric Holdings, Inc. | 847 | 54,471 | ||
Pentair, Inc. | 1,279 | 44,215 | ||
Watts Water Technologies, Inc. 1,2 | 2,800 | 76,580 | ||
175,266 | ||||
Insurance Brokers - 0.2% | ||||
Marsh & McLennan Companies, Inc. | 2,921 | 92,771 | ||
Integrated Oil & Gas - 0.3% | ||||
ConocoPhillips 1,2 | 1,500 | 109,875 | ||
Integrated Telecommunication Services - 0.7% | ||||
AT&T, Inc. 1,2 | 10,600 | 295,952 | ||
Internet Software & Services - 0.3% | ||||
Netease.com ADR * | 994 | 22,663 | ||
Sohu.com, Inc. * | 1,629 | 90,817 | ||
113,480 | ||||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Investment Banking & Brokerage - 1.6% | ||||
KBW, Inc. * | 6,885 | $226,791 | ||
Lazard, Ltd. | 2,521 | 107,798 | ||
Raymond James Financial, Inc. | 5,312 | 175,190 | ||
TD Ameritrade Holding Corporation * | 8,968 | 145,282 | ||
655,061 | ||||
IT Consulting & Other Services -0.4% | ||||
Accenture, Ltd. | 4,200 | 159,600 | ||
Leisure Products - 0.2% | ||||
Polaris Industries, Inc. | 1,554 | 70,691 | ||
Life & Health Insurance - 0.8% | ||||
Prudential Financial, Inc. | 4,550 | 327,600 | ||
Life Sciences Tools & Services - 1.6% | ||||
Charles River Laboratories International, Inc. 1,2,* | 2,000 | 111,060 | ||
Icon plc ADR * | 571 | 21,841 | ||
Illumina, Inc. * | 8,144 | 330,076 | ||
Invitrogen Corporation 1,2,* | 2,800 | 105,840 | ||
Millipore Corporation 1,2,* | 1,800 | 123,840 | ||
692,657 | ||||
Managed Health Care - 0.4% | ||||
Magellan Health Services, Inc. * | 1,800 | 73,908 | ||
WellCare Health Plans, Inc. 1,2* | 2,300 | 82,800 | ||
156,708 | ||||
Movies & Entertainment - 0.5% | ||||
Imax Corporation * | 4,280 | 25,338 | ||
Marvel Entertainment, Inc. 1,2,* | 5,400 | 184,356 | ||
209,694 | ||||
Multi-Line Insurance - 0.1% | ||||
Genworth Financial, Inc. 1,2 | 4,000 | 34,440 | ||
Multi-Utilities - 0.2% | ||||
TECO Energy, Inc. | 5,200 | 81,796 | ||
Oil & Gas Equipment & Services - 1.3% | ||||
Dresser-Rand Group, Inc. * | 8,978 | 282,538 | ||
Oil States International, Inc. * | 3,100 | 109,585 | ||
Superior Well Services, Inc. * | 4,146 | 104,935 | ||
WSP Holdings, Ltd. ADR * | 2,375 | 14,963 | ||
512,021 | ||||
Oil & Gas Exploration & Production - 0.6% | ||||
Anadarko Petroleum Corporation 1,2 | 2,755 | 133,645 | ||
Canadian Natural Resources, Ltd. | 1,747 | 119,600 | ||
253,245 | ||||
Oil & Gas Refining & Marketing - 0.2% | ||||
Clean Energy Fuels Corporation * | 6,349 | 89,838 | ||
7 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Other Diversified Financial Services - 0.3% | ||||
JPMorgan Chase & Company | 2,432 | $113,574 | ||
Packaged Foods & Meats - 0.3% | ||||
Tyson Foods, Inc. | 9,652 | 115,245 | ||
Paper Products - 0.3% | ||||
International Paper Company | 4,406 | 115,349 | ||
Personal Products - 0.2% | ||||
Herbalife, Ltd. 1,2 | 2,500 | 98,800 | ||
Pharmaceuticals - 1.4% | ||||
Forest Laboratories, Inc. 1,2,* | 3,400 | 96,152 | ||
Johnson & Johnson 1,2 | 5,000 | 346,400 | ||
Matrixx Initiatives, Inc. * | 613 | 11,028 | ||
Viropharma, Inc. 1,2,* | 9,900 | 129,888 | ||
583,468 | ||||
Property & Casualty Insurance - 1.1% | ||||
ACE, Ltd. | 6,568 | 355,525 | ||
Amtrust Financial Services, Inc. 1,2 | 6,000 | 81,540 | ||
White Mountains Insurance Group, Ltd. | 58 | 27,246 | ||
464,311 | ||||
Railroads - 1.0% | ||||
Burlington Northern Santa Fe Corporation | 2,395 | 221,370 | ||
Canadian National Railway Company | 4,056 | 193,998 | ||
415,368 | ||||
Regional Banks - 1.4% | ||||
Commerce Bancshares, Inc. | 6,364 | 295,289 | ||
National City Corporation | 38,718 | 67,757 | ||
Old National Bancorp | 809 | 16,196 | ||
PNC Financial Services Group, Inc. | 2,123 | 158,588 | ||
Synovus Financial Corporation 4 | 4,006 | 41,462 | ||
579,292 | ||||
Reinsurance - 0.5% | ||||
Endurance Specialty Holdings, Ltd. 1,2 | 3,000 | 92,760 | ||
Reinsurance Group of America, Inc. | 2,300 | 124,200 | ||
216,960 | ||||
Residential REIT’s - 0.8% | ||||
Equity Residential | 7,664 | 340,358 | ||
Restaurants - 2.4% | ||||
Bob Evans Farms, Inc. | 4,100 | 111,889 | ||
Jack in the Box, Inc. 1,2* | 4,000 | 84,400 | ||
Panera Bread Company 4,* | 13,016 | 662,515 | ||
Papa John’s International, Inc. * | 5,057 | 137,348 | ||
996,152 | ||||
Retail REIT’s - 0.1% | ||||
National Retail Properties, Inc. | 1,839 | 44,044 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Semiconductor Equipment - 0.1% | ||||
Amkor Technology, Inc. 1,2* | 9,200 | $58,604 | ||
Semiconductors - 0.0% | ||||
ARM Holdings plc ADR | 1,729 | 8,991 | ||
Soft Drinks - 0.3% | ||||
Fomento Economico Mexicano SAB de CV ADR | 2,748 | 104,809 | ||
Specialized REIT’s - 2.6% | ||||
Plum Creek Timber Company, Inc. | 9,094 | 453,428 | ||
Potlatch Corporation | 6,846 | 317,586 | ||
Rayonier, Inc. | 5,571 | 263,787 | ||
1,034,801 | ||||
Specialty Stores - 0.3% | ||||
Signet Jewelers, Ltd. | 2,172 | 50,781 | ||
Staples, Inc. | 2,950 | 66,375 | ||
117,156 | ||||
Steel - 0.4% | ||||
Schnitzer Steel Industries, Inc. | 4,617 | 181,171 | ||
Systems Software - 1.6% | ||||
CA, Inc. 1,2 | 19,362 | 386,465 | ||
Check Point Software Technologies * | 6,636 | 150,902 | ||
Symantec Corporation 1,2,* | 5,900 | 115,522 | ||
652,889 | ||||
Technology Distributors - 0.4% | ||||
Arrow Electronics, Inc. 1,2* | 2,600 | 68,172 | ||
Avnet, Inc. 1,2* | 3,100 | 76,353 | ||
144,525 | ||||
Thrifts & Mortgage Finance - 1.5% | ||||
Hudson City Bancorp, Inc. | 29,899 | 551,636 | ||
Sovereign Bancorp, Inc. | 18,868 | 74,529 | ||
626,165 | ||||
Tobacco - 2.0% | ||||
Altria Group, Inc. 1,2 | 16,700 | 331,328 | ||
Philip Morris International, Inc. 1,2 | 9,800 | 471,379 | ||
802,707 | ||||
Trading Companies & Distributors - 0.8% | ||||
Fastenal Company | 3,684 | 181,952 | ||
W.W. Grainger, Inc. | 1,609 | 139,935 | ||
321,887 | ||||
Trucking - 1.4% | ||||
Con-way, Inc. 1,2 | 3,496 | 154,209 | ||
Heartland Express, Inc. | 5,029 | 78,050 | ||
Knight Transportation, Inc. * | 8,686 | 147,401 | ||
Old Dominion Freight Line, Inc. * | 1,597 | 45,259 | ||
YRC Worldwide, Inc. * | 10,865 | 129,945 | ||
554,864 | ||||
TOTAL COMMON STOCKS (cost $26,665,292) | $23,658,857 | |||
Shares | Value | |||
FOREIGN STOCKS - 13.1% | ||||
Austria - 0.3% | ||||
Erste Group Bank AG | 2,418 | $120,291 | ||
8 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
FOREIGN STOCKS (continued) | ||||
Brazil - 0.6% | ||||
BM&F BOVESPA S.A. | 54,215 | $238,525 | ||
China - 0.5% | ||||
ZTE Corporation 3 | 58,300 | 220,823 | ||
France - 0.1% | ||||
UBISOFT Entertainment 3,* | 500 | 34,757 | ||
Germany - 1.7% | ||||
Adidas AG 3 | 2,361 | 126,031 | ||
Kloeckner & Company SE 3 | 2,400 | 55,052 | ||
Volkswagen AG 3 | 1,300 | 509,027 | ||
690,110 | ||||
Hong Kong - 1.1% | ||||
Link REIT 3,5 | 210,000 | 436,527 | ||
Indonesia - 0.4% | ||||
Bumi Resources Tbk PT 3 | 459,746 | 152,930 | ||
Ireland - 0.3% | ||||
Anglo Irish Bank Corporation plc 3 | 18,672 | 105,843 | ||
Italy - 1.0% | ||||
Maire Tecnimont SpA 3 | 29,100 | 103,173 | ||
Unione di Banche Italiane SCPA 3 | 14,706 | 321,923 | ||
425,096 | ||||
Japan - 1.5% | ||||
Astellas Pharma, Inc. 3 | 2,800 | 117,532 | ||
JGC Corporation 3 | 22,288 | 357,205 | ||
K’s Holdings Corporation 3 | 7,000 | 128,259 | ||
Mediceo Paltac Holdings Company, Ltd. 3 | 8,100 | 98,992 | ||
701,988 | ||||
Norway - 0.3% | ||||
Orkla ASA 3 | 11,900 | 109,439 | ||
Portugal - 0.7% | ||||
BRISA 3 | 15,796 | 157,000 | ||
Jeronimo Martins SGPS S.A. 3 | 14,700 | 125,277 | ||
282,277 | ||||
South Africa - 0.7% | ||||
Aveng, Ltd. 3 | 38,418 | 292,391 | ||
Switzerland - 1.2% | ||||
Actelion, Ltd. 3,* | 1,800 | 92,718 | ||
Lonza Group AG 3 | 2,916 | 365,745 | ||
458,463 | ||||
United Kingdom - 2.7% | ||||
AstraZeneca plc 3 | 2,600 | 113,766 | ||
Cadbury plc 3 | 35,200 | 355,837 | ||
GlaxoSmithKline plc 3 | 5,200 | 112,591 | ||
Imperial Tobacco Group plc 3 | 16,105 | 517,019 | ||
1,099,213 | ||||
TOTAL FOREIGN STOCKS | ||||
(cost $5,996,267) | $5,368,673 |
Principal Amount | Value | |||||
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 25.6% | ||||||
Federal Home Loan Bank | ||||||
2.35%, 10/15/20084 | $575,000 | $574,475 | ||||
2.42%, 10/28/20084 | 300,000 | 299,456 | ||||
2.03%, 10/31/20084 | 300,000 | 299,493 | ||||
2.40%, 11/3/20084 | 1,800,000 | 1,796,782 | ||||
2.12%, 11/14/20084 | 1,100,000 | 1,097,379 | ||||
2.08%, 11/21/20084 | 650,000 | 648,204 | ||||
2.44%, 11/25/20084 | 200,000 | 199,254 | ||||
2.40%, 12/10/20084 | 400,000 | 398,056 | ||||
Federal Home Loan Mortgage Corporation | ||||||
2.45%, 10/1/20081 | 775,000 | 775,000 | ||||
2.52%, 10/7/20084 | 275,000 | 274,977 | ||||
2.10%, 12/12/20084 | 600,000 | 597,000 | ||||
Federal National Mortgage Association | ||||||
2.30%, 10/10/20084 | 1,000,000 | 999,425 | ||||
2.36%, 10/15/20084 | 225,000 | 224,956 | ||||
2.25%, 10/20/20084 | 2,000,000 | 1,999,472 | ||||
2.02%, 11/7/20084 | 300,000 | 299,399 | ||||
TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (cost $10,480,670) |
| $10,483,328 | ||||
Principal Amount | | Value | ||||
SHORT TERM INVESTMENTS - 4.6% | ||||||
State Street General Acount Prime Money Market Fund | $600,000 | $600,000 | ||||
State Street Treasury Money Market Fund | 1,302,590 | 1,302,590 | ||||
TOTAL SHORT TERM INVESTMENTS (cost $1,902,590) |
| $1,902,590 | ||||
Total Investments - 101.2% |
| |||||
(cost $45,044,819) | $41,413,448 | |||||
Liabilities, Less Cash & Other Assets - (1.2)% |
| (473,279 | ) | |||
Total Net Assets - 100.0% |
| $40,940,169 | ||||
Schedule of Securities Sold Short | ||||||
Shares | Value | |||||
COMMON STOCKS - (10.1)% | ||||||
Advertising - (0.2)% | ||||||
Focus Media Holding, Ltd. ADR 6,* | (2,130 | ) | $(61,943) | |||
Alternative Carriers - (0.1)% | ||||||
Global Crossing, Ltd. 6,* | (1,800 | ) | (32,286 | ) | ||
Biotechnology - (1.4)% | ||||||
Acorda Therapeutics, Inc. 6,* | (2,800 | ) | (78,288 | ) | ||
Alnylam Pharmaceuticals, Inc. 6,* | (2,900 | ) | (81,460 | ) | ||
Cepheid, Inc. 6,* | (5,300 | ) | (92,667 | ) | ||
Regeneron Pharmaceuticals, Inc. 6,* | (3,180 | ) | (71,734 | ) | ||
Rigel Pharmaceuticals, Inc. 6,* | (3,050 | ) | (66,677 | ) | ||
Savient Pharmaceuticals, Inc. 6,* | (2,420 | ) | (55,707 | ) |
9 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Biotechnology (continued) | ||||
Vertex Pharmaceuticals, Inc. 6,* | (2,600) | $(73,539) | ||
(520,072) | ||||
Building Products - (0.3)% | ||||
USG Corporation 6,* | (4,940) | (136,112) | ||
Communications Equipment - (0.1)% | ||||
Riverbed Technology, Inc. 6,* | (3,280) | (58,202) | ||
Computer Storage & Peripherals - (0.1)% | ||||
Intermec, Inc. 6,* | (2,740) | (57,614) | ||
Diversified Banks - (0.8)% | ||||
Wachovia Corporation | (13,328) | (46,648) | ||
Wells Fargo & Company 6 | (9,730) | (305,943) | ||
(352,591) | ||||
Diversified Metals & Mining - (0.1)% | ||||
Ivanhoe Mines, Ltd. 6,* | (4,440) | (45,774) | ||
Electric Utilities - (0.7)% | ||||
Korea Electric Power Corporation ADR 6 | (18,310) | (276,071) | ||
Exchange Traded Funds - (0.9)% | ||||
SPDR Gold Trust * | (3,384) | (287,877) | ||
United States Oil Fund, LP * | (1,015) | (83,230) | ||
(371,107) | ||||
Gold - (0.3)% | ||||
Newmont Mining Corporation | (3,045) | (118,025) | ||
Yamana Gold, Inc. | (1,721) | (14,336) | ||
(132,361) | ||||
Health Care Equipment - (0.1)% | ||||
Intuitive Surgical, Inc. 6,* | (200) | (59,799) | ||
Health Care Services - (0.2)% | ||||
athenahealth, Inc. 6,* | (2,500) | (80,274) | ||
Health Care Supplies - (0.2)% | ||||
Align Technology, Inc. 6,* | (6,100) | (81,155) | ||
Home Entertainment Software - (0.1)% | ||||
Electronic Arts, Inc. 6,* | (900) | (42,957) | ||
Integrated Oil & Gas - (0.2)% | ||||
Exxon Mobil Corporation | (1,015) | (78,824) | ||
Internet Software & Services - (0.7)% | ||||
Baidu.com ADR 6,* | (200) | (62,667) | ||
Equinix, Inc. 6,* | (1,000) | (77,801) | ||
SAVVIS, Inc. 6,* | (5,700) | (79,275) | ||
VeriSign, Inc. 6,* | (1,200) | (38,030) | ||
(257,773) | ||||
Leisure Products - (0.6)% | ||||
Pool Corporation 6 | (11,639) | (276,585) | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Life Sciences Tools & Services - (0.6)% | ||||
AMAG Pharmaceuticals, Inc. 6* | (1,900) | $(79,315) | ||
Exelixis, Inc. 6,* | (4,500) | (29,463) | ||
Luminex Corporation 6,* | (2,500) | (61,285) | ||
Sequenom, Inc. 6,* | (3,810) | (79,465) | ||
(249,528) | ||||
Oil & Gas Drilling - (0.1)% | ||||
Noble Corporation | (1,015) | (44,559) | ||
Oil & Gas Exploration & Production - (0.2)% | ||||
BPZ Resources, Inc. 6* | (5,700) | (77,382) | ||
Pharmaceuticals - (0.4)% | ||||
Auxilium Pharmaceuticals, Inc. 6,* | (1,540) | (63,962) | ||
Sepracor, Inc. 6,* | (1,400) | (25,724) | ||
XenoPort, Inc. 6,* | (1,376) | (67,247) | ||
(156,933) | ||||
Regional Banks - (0.2)% | ||||
PrivateBancorp, Inc. 6 | (2,390) | (75,975) | ||
Semiconductor Equipment - (0.1)% | ||||
Varian Semiconductor Equipment Associates, Inc. 6,* | (1,260) | (43,137) | ||
Semiconductors - (0.3)% | ||||
Cree, Inc. 6,* | (4,000) | (81,002) | ||
Rambus, Inc. 6,* | (3,600) | (55,453) | ||
(136,455) | ||||
Soft Drinks - (0.2)% | ||||
Hansen Natural Corporation 6,* | (3,250) | (94,200) | ||
Specialty Chemicals - (0.1)% | ||||
Zoltek Companies, Inc. 6,* | (2,700) | (44,530) | ||
Systems Software - (0.4)% | ||||
Red Hat, Inc. 6,* | (2,610) | (58,601) | ||
VMware, Inc. 6,* | (2,400) | (88,322) | ||
(146,923) | ||||
Wireless Telecommunication Services - (0.4)% | ||||
Clearwire Corporation 6,* | (2,530) | (27,183) | ||
Leap Wireless International, Inc. 6,* | (1,500) | (63,847) | ||
SBA Communications Corporation 6,* | (2,400) | (82,713) | ||
(173,743) | ||||
TOTAL COMMON STOCKS SOLD SHORT (proceeds $4,328,575) | $(4,164,865) | |||
Shares | Value | |||
FOREIGN STOCKS - (8.8)% | ||||
Australia - (0.7)% | ||||
Aquila Resources, Ltd. 6,* | (2,500) | $(26,744) | ||
Arrow Energy, Ltd. 6,* | (8,900) | (24,300) | ||
Ausenco, Ltd. 6 | (2,100) | (21,319) | ||
Queensland Gas Company, Ltd. 6,* | (12,800) | (48,691) | ||
Riversdale Mining, Ltd. 6,* | (6,700) | (49,992) | ||
Sino Gold Mining, Ltd. 5,6* | (8,600) | (30,946) |
10 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Alpha Opportunity Series | |
Shares | Value | |||
FOREIGN STOCKS (continued) | ||||
Australia (continued) | ||||
Western Areas NL 6,* | (6,200) | $(42,462) | ||
(244,454) | ||||
Austria - (0.9)% | ||||
bwin Interactive Entertainment AG 6,* | (1,600) | (41,006) | ||
Erste Group Bank AG 6 | (5,200) | (274,278) | ||
Intercell AG 6,* | (1,900) | (83,910) | ||
(399,194) | ||||
Bermuda - 0.0% | ||||
C C Land Holdings, Ltd. 6 | (50,000) | (19,707) | ||
Canada - (0.4)% | ||||
Agnico-Eagle Mines, Ltd. 6 | (1,800) | (89,744) | ||
Silver Wheaton Corporation 6,* | (6,100) | (64,389) | ||
Trican Well Service, Ltd. 6 | (2,000) | (38,332) | ||
(192,465) | ||||
China - (0.6)% | ||||
Anhui Conch Cement Company, Ltd. 6 | (4,500) | (19,499) | ||
Beijing Capital International Airport Company, Ltd. 6 | (218,000) | (153,368) | ||
China Communications Construction Company, Ltd. 6 | (15,000) | (24,388) | ||
China National Building Material Company, Ltd. 6 | (14,700) | (19,087) | ||
China National Materials Company, Ltd. 6,* | (34,400) | (23,282) | ||
(239,624) | ||||
Germany - (1.5)% | ||||
Premiere AG 6,* | (4,000) | (69,097) | ||
Volkswagen AG 3 | (1,300) | (509,025) | ||
(578,122) | ||||
Gibraltar - (0.2)% | ||||
PartyGaming plc 6,* | (15,200) | (60,009) | ||
Hong Kong - (0.2)% | ||||
China Merchants Holdings International Company, Ltd. 6 | (3,100) | (10,738) | ||
Franshion Properties China, Ltd. 6 | (79,400) | (27,023) | ||
Fushan International Energy Group, Ltd. 6,* | (66,000) | (34,202) | ||
(71,963) | ||||
Ireland - (0.1)% | ||||
Ryanair Holdings plc 6,* | (9,600) | (39,530) | ||
Isle Of Man - (0.1)% | ||||
Genting International plc 6,* | (124,900) | (44,635) | ||
Japan - (1.4)% | ||||
Access Company, Ltd. 6,* | (17) | (26,715) | ||
Aeon Mall Company, Ltd. 6 | (1,700) | (46,256) | ||
Aozora Bank, Ltd. 6 | (16,300) | (34,871) | ||
Japan Steel Works, Ltd. 6 | (1,500) | (24,128) | ||
Marui Group Company, Ltd. 6 | (29,100) | (220,049) | ||
Mizuho Financial Group, Inc. 6 | (11) | (46,597) | ||
Mizuho Trust & Banking Company, Ltd. 6 | (17,700) | (24,821) | ||
Modec, Inc. 6 | (900) | (25,626) | ||
Monex Group, Inc. 6 | (78) | (36,852) | ||
Tokyo Broadcasting System, Inc. 6 | (1,300) | (20,263) |
Shares | Value | |||
FOREIGN STOCKS (continued) | ||||
Japan (continued) | ||||
Toyo Tanso Company, Ltd. 6 | (500) | $(26,446) | ||
(532,624) | ||||
Norway - (0.1)% | ||||
Sevan Marine ASA 6,* | (5,900) | (58,326) | ||
Portugal - (1.0)% | ||||
BRISA 6 | (44,400) | (431,595) | ||
Spain - (0.1)% | ||||
Zeltia S.A. 6 | (8,000) | (58,423) | ||
Sweden - (1.0)% | ||||
Electrolux AB 6 | (30,100) | (393,257) | ||
Switzerland - (0.3)% | ||||
Basilea Pharmaceutica 6,* | (500) | (81,308) | ||
Meyer Burger Technology AG 6,* | (200) | (54,522) | ||
(135,830) | ||||
United Kingdom - (0.2)% | ||||
Imperial Energy Corporation plc 6* | (3,900) | (84,652) | ||
TOTAL FOREIGN STOCKS SOLD SHORT (proceeds $3,495,580) | $(3,584,410) | |||
TOTAL SECURITIES SOLD SHORT - (18.9%) | ||||
(proceeds $7,824,155) | $(7,749,275) | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $45,363,271.
ADR | American Depositary Receipt | |
plc | Public Limited Company |
* Non-income producing security
1 Security is segregated as collateral for open short positions.
2 Security is deemed illiquid. The total market value of illiquid securities is $7,570,226 (cost $8,657,054), or 18.5% of total net assets.
3 Security is subject to the fair value trigger at September 30, 2008. The total market value of securities subject to the fair value trigger amounts to $4,500,832, (cost $5,132,486) or 11.0% of total net assets.
4 Security is segregated as collateral for open futures contracts.
5 Security is a PFIC (Passive Foreign Investment Company).
6 Security is fair valued by the Valuation Committee at September 30, 2008. The total market value of fair valued securities amounts to ($6,566,751) (cost $(6,574,873)), or (16.0%) of total net assets.
11 |
The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Alpha Opportunity Series
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $41,413,448 | |
Cash | 2,607,198 | |
Cash denominated in a foreign currency, at value*** | 106,780 | |
Restricted cash | 857,066 | |
Restricted cash denominated in a foreign currency, at value**** | 3,279,694 | |
Receivables: | ||
Fund shares sold | 123,122 | |
Securities sold | 709,814 | |
Interest | 3,636 | |
Dividends | 28,866 | |
Variation margin | 455,895 | |
Security Investors | 6,965 | |
Prepaid expenses | 14,555 | |
Total assets | 49,607,039 | |
Liabilities: | ||
Securities sold short, at value** | 7,749,275 | |
Payable for: | ||
Securities purchased | 759,299 | |
Fund shares redeemed | 57,482 | |
Dividends on short sales | 4,166 | |
Management fees | 45,313 | |
Transfer agent/maintenance fees | 8,056 | |
Administration fees | 6,788 | |
Professional fees | 17,704 | |
12b-1 distribution plan fees | 16,030 | |
Directors’ fees | 790 | |
Other | 1,967 | |
Total liabilities | 8,666,870 | |
Net assets | $40,940,169 | |
Net assets consist of: | ||
Paid in capital | $48,851,137 | |
Accumulated net investment loss | (35,571) | |
Accumulated net realized loss on sale of investments and foreign currency transactions | (3,323,597) | |
Net unrealized depreciation in value of investments and translation of assets and liabilities in foreign currencies | (4,551,800) | |
Net assets | $40,940,169 | |
Class A: | ||
Capital shares outstanding (unlimited number of shares authorized) | 3,267,374 | |
Net assets | $30,614,532 | |
Net asset value and redemption price per share | $9.37 | |
Maximum offering price per share (net asset value divided by 94.25%) | $9.94 | |
Class B: | ||
Capital shares outstanding (unlimited number of shares authorized) | 607,814 | |
Net assets | $5,390,668 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $8.87 | |
Class C: | ||
Capital shares outstanding (unlimited number of shares authorized) | 556,443 | |
Net assets | $4,934,969 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $8.87 | |
*Investments, at cost | $45,044,819 | |
**Securities sold short, proceeds | 7,824,155 | |
***Cash denominated in a foreign currency, at cost | 109,535 | |
****Restricted cash denominated in a foreign currency, at cost | 3,364,461 |
Statement of Operations | ||
For the Year Ended September 30, 2008
| ||
Investment Income: | ||
Dividends (net of foreign withholding tax of $546) | $204,413 | |
Interest | 460,629 | |
Total investment income | 665,042 | |
Expenses: | ||
Management fees | 891,663 | |
Transfer agent/maintenance fees | 84,349 | |
Administration fees | 62,487 | |
Custodian fees | 62,473 | |
Directors’ fees | 2,684 | |
Professional fees | 36,545 | |
Reports to shareholders | 3,653 | |
Registration fees | 31,171 | |
Other expenses | 3,375 | |
Dividends on short sales | 41,976 | |
12b-1 distribution fees - Class A | 71,980 | |
12b-1 distribution fees - Class B | 44,068 | |
12b-1 distribution fees - Class C | 54,221 | |
Total expenses | 1,390,645 | |
Less: | ||
Reimbursement of expenses - Class A | (26,619) | |
Reimbursement of expenses - Class B | (4,996) | |
Reimbursement of expenses - Class C | (4,134) | |
Earnings credits applied | (59,184) | |
Net expenses | 1,295,712 | |
Net investment loss | (630,670) | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | 350,161 | |
Securities sold short | 592,568 | |
Foreign currency transactions | (35,571) | |
Futures | (2,807,480) | |
Net realized loss | (1,900,322) | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (3,741,089) | |
Securities sold short | 72,495 | |
Futures | (1,446,840) | |
Translation of assets and liabilities in foreign currencies | (87,811) | |
Net unrealized depreciation | (5,203,245) | |
Net loss | (7,103,567) | |
Net decrease in net assets resulting from operations | $(7,734,237) | |
12 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets
| Security Equity Fund Alpha Opportunity Series
| |
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
Increase (decrease) in net assets from operations: | ||||||||
Net investment loss | $ | (630,670 | ) | $ | (98,282 | ) | ||
Net realized gain (loss) during the year on investments and foreign currency transactions | (1,900,322 | ) | 6,873,561 | |||||
Net unrealized appreciation (depreciation) during the year on investments and translation of assets and liabilities in foreign currencies | (5,203,245 | ) | 898,061 | |||||
Net increase (decrease) in net assets resulting from operations | (7,734,237 | ) | 7,673,340 | |||||
Distributions to shareholders from: | ||||||||
Net realized gain | ||||||||
Class A | (4,624,275 | ) | (2,136,563 | ) | ||||
Class B | (730,879 | ) | (523,991 | ) | ||||
Class C | (959,211 | ) | (617,311 | ) | ||||
Return of capital | ||||||||
Class A | (508,721 | ) | – | |||||
Class B | (80,405 | ) | – | |||||
Class C | (105,524 | ) | – | |||||
Total distributions to shareholders | (7,009,015 | ) | (3,277,865 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
Class A | 20,613,127 | 10,352,391 | ||||||
Class B | 5,409,786 | 1,279,776 | ||||||
Class C | 3,698,851 | 1,430,285 | ||||||
Distributions reinvested | ||||||||
Class A | 5,033,793 | 2,077,296 | ||||||
Class B | 802,594 | 522,694 | ||||||
Class C | 960,779 | 556,963 | ||||||
Cost of shares redeemed | ||||||||
Class A | (9,305,440 | ) | (11,078,834 | ) | ||||
Class B | (2,099,606 | ) | (4,098,624 | ) | ||||
Class C | (1,872,076 | ) | (4,012,623 | ) | ||||
Net increase (decrease) from capital share transactions | 23,241,808 | (2,970,676 | ) | |||||
Net increase in net assets | 8,498,556 | 1,424,799 | ||||||
Net assets: | ||||||||
Beginning of year | 32,441,613 | 31,016,814 | ||||||
End of year | $ | 40,940,169 | $ | 32,441,613 | ||||
Accumulated net investment loss at end of year | $ | (35,571 | ) | $ | – | |||
Capital share activity: | ||||||||
Shares sold | ||||||||
Class A | 1,869,043 | 802,495 | ||||||
Class B | 505,963 | 104,269 | ||||||
Class C | 335,936 | 114,901 | ||||||
Shares reinvested | ||||||||
Class A | 463,090 | 174,124 | ||||||
Class B | 77,545 | 45,216 | ||||||
Class C | 92,829 | 48,180 | ||||||
Shares redeemed | ||||||||
Class A | (863,491 | ) | (862,512 | ) | ||||
Class B | (210,696 | ) | (321,701 | ) | ||||
Class C | (186,349 | ) | (317,535 | ) |
13 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year
| Security Equity Fund Alpha Opportunity Series
| |
Class A | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $13.94 | $12.23 | $12.37 | $11.79 | $10.21 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | (0.16) | (0.01) | (0.06) | (0.10) | (0.16) | |||||
Net gain (loss) on securities (realized and unrealized) | (1.68) | 2.99 | 0.93 | 1.50 | 2.33 | |||||
Total from investment operations | (1.84) | 2.98 | 0.87 | 1.40 | 2.17 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (2.57) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Return of capital | (0.16) | – | – | – | – | |||||
Total distributions | (2.73) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Net asset value, end of period | $9.37 | $13.94 | $12.23 | $12.37 | $11.79 | |||||
Total Return c | (15.99%) | 26.10% | 7.39% | 12.26% | 21.68% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $30,615 | $25,072 | $20,595 | $14,622 | $6,556 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (1.44%) | (0.08%) | (0.50%) | (0.83%) | (1.48%) | |||||
Total expensesd | 2.96% | 2.88% | 3.20% | 2.94% | 3.57% | |||||
Net expensese | 2.75% | 2.68% | 3.01% | 2.86% | 2.78% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.88% | 2.88% | 3.10% | 2.86% | 2.79% | |||||
Net expenses prior to performance fee adjustmentf | 2.39% | 2.77% | 2.82% | 2.78% | 2.78% | |||||
Portfolio turnover rate | 1,248% | 1,697% | 1,302% | 1,502% | 1,175% | |||||
Class B | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $13.42 | $11.90 | $12.15 | $11.68 | $10.20 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | (0.23) | (0.09) | (0.15) | (0.18) | (0.25) | |||||
Net gain (loss) on securities (realized and unrealized) | (1.59) | 2.88 | 0.91 | 1.47 | 2.32 | |||||
Total from investment operations | (1.82) | 2.79 | 0.76 | 1.29 | 2.07 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (2.57) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Return of capital | (0.16) | – | – | – | – | |||||
Total distributions | (2.73) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Net asset value, end of period | $8.87 | $13.42 | $11.90 | $12.15 | $11.68 | |||||
Total Return c | (16.66%) | 25.14% | 6.56% | 11.39% | 20.68% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $5,391 | $3,154 | $4,846 | $4,106 | $2,324 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (2.18%) | (0.77%) | (1.24%) | (1.60%) | (2.25%) | |||||
Total expensesd | 3.13% | 3.59% | 3.95% | 3.69% | 4.29% | |||||
Net expensese | 2.93% | 3.39% | 3.76% | 3.61% | 3.53% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 3.04% | 3.59% | 3.85% | 3.61% | 3.53% | |||||
Net expenses prior to performance fee adjustmentf | 2.62% | 3.51% | 3.57% | 3.53% | 3.53% | |||||
Portfolio turnover rate | 1,248% | 1,697% | 1,302% | 1,502% | 1,175% |
14 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund | |
Selected data for each share of capital stock outstanding throughout each year | Alpha Opportunity Series |
Class C | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $13.43 | $11.90 | $12.15 | $11.68 | $10.20 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | (0.23) | (0.10) | (0.15) | (0.18) | (0.25) | |||||
Net gain (loss) on securities (realized and unrealized) | (1.60) | 2.90 | 0.91 | 1.47 | 2.32 | |||||
Total from investment operations | (1.83) | 2.80 | 0.76 | 1.29 | 2.07 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (2.57) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Return of capital | (0.16) | – | – | – | – | |||||
Total distributions | (2.73) | (1.27) | (1.01) | (0.82) | (0.59) | |||||
Net asset value, end of period | $8.87 | $13.43 | $11.90 | $12.15 | $11.68 | |||||
Total Return c | (16.63%) | 25.24% | 6.56% | 11.39% | 20.68% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $4,935 | $4,216 | $5,576 | $7,813 | $3,143 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (2.21%) | (0.77%) | (1.18%) | (1.58%) | (2.24%) | |||||
Total expensesd | 4.02% | 3.60% | 3.95% | 3.68% | 4.30% | |||||
Net expensese | 3.80% | 3.40% | 3.75% | 3.61% | 3.53% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 3.95% | 3.60% | 3.83% | 3.61% | 3.53% | |||||
Net expenses prior to performance fee adjustmentf | 3.40% | 3.51% | 3.57% | 3.53% | 3.53% | |||||
Portfolio turnover rate | 1,248% | 1,697% | 1,302% | 1,502% | 1,175% |
a Security Global Investors, LLC (SGI) became the sub-adviser of 37.5% of the assets of the Alpha Opportunity Series effective August 18, 2008. Also effective August 18, 2008, Mainstream Investment Advisers, LLC (Mainstream) sub-advises 37.5% of the assets and Security Investors, LLC (SI) manages 25% of the assets. Prior to August 18, 2008, SI paid Mainstream sub-advisory fees for 60% of the assets. SI managed the remaining 40% of the assets.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c 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 shares.
d Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
e Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
f Net expenses prior to performance fee adjustment reflect ratios after voluntary expense waivers, reimbursements, custodian earnings credits, and before performance fees adjustments, as applicable.
15 | The accompanying notes are an integral part of the financial statements |
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16 |
Table of Contents
Manager’s Commentary November 14, 2008 | Equity Series (unaudited) | |
To Our Shareholders:
Security Equity Fund Equity Series returned –26.12%1 in the period, lagging the benchmark S&P 500 Index’s return of –21.98% and the Series’ peer group median return of –22.36%. |
Our strategy is to buy companies that are trading at a significant discount to their intrinsic value. Our investment approach is a defined and disciplined process of three clear philosophical tenets focus, a long-term perspective and an opportunistic approach.
This investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a valuation target for each potential investment. We construct the portfolios based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company.
Health Care and Materials Top Performers
The health care sector of the portfolio benefited from superior stock selection relative to the S&P 500 Index allowing the Series to post a break-even return for the period compared to a –12% loss for the S&P 500 Index. The portfolio positioned the sector as a slight underweight. Leading holdings in the Series included Celgene Corporation, Gilead Sciences, Inc., and Covidien, Ltd.
Relative performance against the S&P 500 Index, in the materials sector helped performance, as the portfolio holdings lost only –4%, versus –21% for the benchmark. The portfolio was slightly overweight in the relatively small overall weighted sector. Adding positive returns for the Series were Rohm & Haas Company, Allegheny Technologies, Inc., and Vulcan Materials Company.
Over the difficult 12-month period, the consumer staples sector was able to produce a positive contribution to the return. While an even weight with the benchmark, the sector gained 9% for the portfolio, compared to 1% for the S&P 500 Index. Wal-Mart Stores, Inc. was the biggest contributor.
Financials and Industrials Disappoint
By far, the largest detractor from portfolio performance was the financials sector. The portfolio had an equal weight position with the benchmark, but stock selection fell short, even in this most battered sector. While financials in the benchmark dropped 39%, holdings in the portfolio lost –51%. Financial holdings that caused the most damage were in First Marblehead Corporation and American International Group, Inc. Both were significant holdings in the portfolio over the period and each lost more than 90% of its value.
The portfolio was significantly overweight in industrials, accounting for 18% of total assets. While the sector in the benchmark lost –25%, poor stock selection sent the portfolio down –30%. General Electric Company was the portfolio’s largest loser in the sector. Deere & Company, Textron, Inc., and McDermott International, Inc. also pulled performance down.
Stock selection in the energy sector hurt the portfolio. The largest detractors in the sector were Evergreen Energy, Inc. and Nabors Industries, Ltd.
2009 Market Outlook
Our bottom-up approach looks at market uncertainty in the context of the potential long-term impact on individual companies. Our focus is on identifying companies with the ability to be substantially better over the next three to five years or have the potential to maintain their return on capital at current levels in a difficult economic environment. During these uncertain times and volatile market conditions, we are confident in our ability to find these companies by consistently applying our disciplined process to individual stock evaluations.
We believe that investing is a long-term pursuit that requires patience and a consistent approach. We thank you for your business and the confidence you place in us.
Sincerely,
Mark Bronzo
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.
17 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Equity Series (unaudited) | |
PERFORMANCE
|
$10,000 Over Ten Years
This chart assumes a $10,000 investment in Class A shares of Equity Series on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The S&P 500 Index is a capitalization weighted index composed of 500 selected common stocks that represent the broad domestic economy and is a widely recognized unmanaged index of market performance.
Average Annual Returns
| ||||||||
Periods Ended 9-30-08 | 1 Year
| 5 Years
| 10 Years
| Since Inception | ||||
(1-29-99)
| ||||||||
A Shares |
(26.12%)
|
0.71% |
(0.95%) |
– | ||||
A Shares with sales charge
|
(30.39%)
|
(0.46%) |
(1.53%)
|
– | ||||
B Shares
|
(26.69%)
|
(0.06%)
|
(1.65%)
|
–
| ||||
B Shares with CDSC
|
(29.69%)
|
(0.32%)
|
(1.65%)
|
–
| ||||
C Shares
|
(26.79%)
|
(0.06%)
|
–
|
(3.92%)
| ||||
C Shares with CDSC
|
(27.39%)
|
(0.06%)
|
–
|
(3.92%)
| ||||
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 10.35%
| |||||
Consumer Staples
| 11.50
| |||||
Energy
| 8.93
| |||||
Financials
| 8.07
| |||||
Health Care
| 11.34
| |||||
Industrials
| 18.07
| |||||
Information Technology
| 16.64
| |||||
Materials
| 7.04
| |||||
Exchange Traded Funds
| 1.00
| |||||
Telecommunication Services
| 0.96
| |||||
Utilities
| 1.09
| |||||
U.S. Government Sponsored Agencies
| 1.82
| |||||
Repurchase Agreement
| 3.45
| |||||
Liabilities, Less Cash & Other Assets
| (0.26)
| |||||
Total Net Assets | 100.00% | |||||
18 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Equity Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning Account Value 4/1/2008 | Ending Account Value 9/30/2008 1 | Expenses Paid During Period 2 | ||||
Equity Series - | ||||||
Class A | ||||||
Actual | $1,000.00 | $860.61 | $6.28 | |||
Hypothetical
| 1,000.00
| 1,018.25
| 6.81
| |||
Equity Series - | ||||||
Class B | ||||||
Actual | 1,000.00 | 856.80 | 9.75 | |||
Hypothetical
| 1,000.00
| 1,014.50
| 10.58
| |||
Equity Series - | ||||||
Class C | ||||||
Actual | 1,000.00 | 856.18 | 9.74 | |||
Hypothetical
| 1,000.00
| 1,014.50
| 10.58
|
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (13.94%), (14.32%) and (14.38%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (1.35%, 2.10% and 2.10% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
19 |
Table of Contents
Schedule of Investments | Security Equity Fund | |
September 30, 2008 | Equity Series |
Shares | Value | |||
COMMON STOCKS - 95.0% | ||||
Aerospace & Defense - 3.4% | ||||
Honeywell International, Inc. | 77,770 | $3,231,344 | ||
United Technologies Corporation | 68,900 | 4,138,134 | ||
7,369,478 | ||||
Air Freight & Logistics - 1.8% | ||||
FedEx Corporation | 49,200 | 3,888,768 | ||
Asset Management & Custody Banks - 1.5% | ||||
Bank of New York Mellon Corporation | 102,935 | 3,353,622 | ||
Biotechnology - 3.7% | ||||
Celgene Corporation * | 53,290 | 3,372,191 | ||
Gilead Sciences, Inc. * | 101,735 | 4,637,081 | ||
8,009,272 | ||||
Broadcasting - 0.3% | ||||
CBS Corporation | 47,000 | 687,610 | ||
Building Products - 1.8% | ||||
USG Corporation * | 151,800 | 3,886,080 | ||
Cable & Satellite - 1.0% | ||||
Comcast Corporation | 117,200 | 2,300,636 | ||
Communications Equipment - 4.2% | ||||
Cisco Systems, Inc. * | 105,895 | 2,388,991 | ||
Corning, Inc. | 151,755 | 2,373,448 | ||
Qualcomm, Inc. | 63,895 | 2,745,568 | ||
Research In Motion, Ltd. * | 25,225 | 1,722,868 | ||
9,230,875 | ||||
Computer Hardware - 5.0% | ||||
Apple, Inc. * | 35,660 | 4,053,116 | ||
Hewlett-Packard Company | 150,085 | 6,939,930 | ||
10,993,046 | ||||
Construction & Farm Machinery & Heavy Trucks - 1.3% | ||||
Deere & Company | 59,420 | 2,941,290 | ||
Construction Materials - 0.8% | ||||
Vulcan Materials Company | 24,900 | 1,855,050 | ||
Consumer Finance - 1.3% | ||||
Capital One Financial Corporation | 38,800 | 1,978,800 | ||
First Marblehead Corporation | 334,900 | 833,901 | ||
2,812,701 | ||||
Data Processing & Outsourced Services - 2.9% | ||||
Visa, Inc. | 44,910 | 2,757,025 | ||
Western Union Company | 145,300 | 3,584,551 | ||
6,341,576 | ||||
Department Stores - 1.1% | ||||
JC Penney Company, Inc. | 71,700 | 2,390,478 | ||
Diversified Banks - 1.2% | ||||
Wells Fargo & Company | 68,700 | 2,578,311 | ||
Diversified Chemicals - 0.7% | ||||
Dow Chemical Company | 49,600 | 1,576,288 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Drug Retail - 3.3% | ||||
CVS Caremark Corporation | 216,885 | $7,300,349 | ||
Electric Utilities - 1.1% | ||||
Edison International | 60,000 | 2,394,000 | ||
Electrical Components & Equipment - 2.0% | ||||
Emerson Electric Company | 105,330 | 4,296,411 | ||
Electronic Manufacturing Services - 0.4% | ||||
Tyco Electronics, Ltd. | 32,800 | 907,248 | ||
Exchange Traded Funds - 1.0% | ||||
iShares Russell 1000 Value Index Fund | 17,100 | 1,092,519 | ||
iShares S&P 500 Value Index Fund | 18,300 | 1,095,255 | ||
2,187,774 | ||||
Fertilizers & Agricultural | ||||
Chemicals - 3.1% | ||||
Monsanto Company | 33,980 | 3,363,340 | ||
Mosaic Company | 50,485 | 3,435,000 | ||
6,798,340 | ||||
Footwear - 1.8% | ||||
Nike, Inc. (Cl.B) | 58,195 | 3,893,246 | ||
Health Care Equipment - 1.7% | ||||
Covidien, Ltd. | 33,800 | 1,817,088 | ||
Hospira, Inc. * | 52,700 | 2,013,140 | ||
3,830,228 | ||||
Health Care Services - 0.9% | ||||
Medco Health Solutions, Inc. * | 44,800 | 2,016,000 | ||
Home Improvement Retail - 3.3% | ||||
Home Depot, Inc. | 48,000 | 1,242,720 | ||
Lowe’s Companies, Inc. | 253,140 | 5,996,886 | ||
7,239,606 | ||||
Hypermarkets & Super Centers - 3.6% | ||||
Costco Wholesale Corporation | 42,500 | 2,759,525 | ||
Wal-Mart Stores, Inc. | 84,500 | 5,060,706 | ||
7,820,231 | ||||
Industrial Conglomerates - 2.6% | ||||
General Electric Company | 134,800 | 3,437,400 | ||
McDermott International, Inc. 1,* | 88,700 | 2,266,285 | ||
5,703,685 | ||||
Industrial Gases - 1.4% | ||||
Air Products & Chemicals, Inc. | 44,390 | 3,040,271 | ||
Integrated Oil & Gas - 3.9% | ||||
Chevron Corporation | 29,900 | 2,466,152 | ||
ConocoPhillips | 14,400 | 1,054,800 | ||
Exxon Mobil Corporation | 45,700 | 3,549,062 | ||
Sasol, Ltd. ADR | 35,900 | 1,525,391 | ||
8,595,405 | ||||
Integrated Telecommunication Services - 1.0% | ||||
Windstream Corporation | 192,200 | 2,102,668 | ||
20 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008
| Security Equity Fund Equity Series
|
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Internet Software & Services - 2.0% | ||||
Google, Inc. * | 10,870 | $4,353,652 | ||
Life Sciences Tools & Services - 2.1% | ||||
Thermo Fisher Scientific, Inc. * | 83,830 | 4,610,650 | ||
Movies & Entertainment - 1.1% | ||||
Time Warner, Inc. | 185,100 | 2,426,661 | ||
Oil & Gas Drilling - 3.2% | ||||
Nabors Industries, Ltd. * | 131,315 | 3,272,370 | ||
Transocean, Inc. | 33,500 | 3,679,640 | ||
6,952,010 | ||||
Oil & Gas Equipment & Services - 0.8% | ||||
Halliburton Company | 56,800 | 1,839,752 | ||
Oil & Gas Storage & Transportation - 1.0% | ||||
Williams Companies, Inc. | 93,900 | 2,220,735 | ||
Other Diversified Financial Services - 1.2% | ||||
JPMorgan Chase & Company | 54,900 | 2,563,830 | ||
Packaged Foods & Meats - 1.5% | ||||
General Mills, Inc. | 47,670 | 3,275,882 | ||
Pharmaceuticals - 2.9% | ||||
Johnson & Johnson | 49,760 | 3,447,373 | ||
Schering-Plough Corporation | 160,500 | 2,964,435 | ||
6,411,808 | ||||
Property & Casualty Insurance - 2.9% | ||||
Berkshire Hathaway, Inc. * | 49 | 6,399,400 | ||
Railroads - 4.4% | ||||
Burlington Northern Santa Fe Corporation | 50,250 | 4,644,608 | ||
Union Pacific Corporation | 70,400 | 5,009,663 | ||
9,654,271 | ||||
Research & Consulting Services - 0.9% | ||||
Equifax, Inc. | 55,500 | 1,911,975 | ||
Restaurants - 1.7% | ||||
McDonald’s Corporation | 61,310 | 3,782,827 | ||
Soft Drinks - 1.6% | ||||
PepsiCo, Inc. | 50,420 | 3,593,433 | ||
Specialty Chemicals - 1.0% | ||||
Rohm & Haas Company | 31,000 | 2,170,000 | ||
Systems Software - 2.1% | ||||
Oracle Corporation * | 231,050 | 4,692,626 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Tobacco - 1.5% | ||||
Altria Group, Inc. | 47,700 | $946,368 | ||
Philip Morris International, Inc. | 47,700 | 2,294,370 | ||
3,240,738 | ||||
TOTAL COMMON STOCKS | ||||
(cost $232,884,758) | $208,440,793 | |||
Principal Amount | Value | |||
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 1.8% | ||||
Federal Home Loan Bank | ||||
0.25%, 10/2/2008 | $2,000,000 | $1,999,986 | ||
0.60%, 10/9/2008 | 2,000,000 | 1,999,733 | ||
TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES | ||||
(cost $3,999,719) | $3,999,719 | |||
Principal Amount | Value | |||
REPURCHASE AGREEMENT - 3.5% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $2,991,121 (Collateralized by FHLB, 10/21/08 with a value of $3,051,301) | $2,991,000 | $2,991,000 | ||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $4,577,186 (Collateralized by FHLB, 10/3/08 with a value of $4,668,768) | 4,577,000 | 4,577,000 | ||
TOTAL REPURCHASE AGREEMENT | ||||
(cost $7,568,000) | $7,568,000 | |||
Total Investments - 100.3% | ||||
(cost $244,452,477) | $220,008,512 | |||
Liabilities, Less Cash & Other Assets - (0.3)% | (563,205) | |||
Total Net Assets - 100.0% | $219,445,307 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $245,869,035.
ADR American Depositary Receipt
* Non-income producing security
1 Portion of security is delayed in delivery due to executing broker’s bankruptcy declaration. |
21 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Equity Series
Statement of Assets & Liabilities September 30, 2008
| ||
Assets: | ||
Investments, at value* | $220,008,512 | |
Cash | 298,744 | |
Receivables: | ||
Fund shares sold | 4,265 | |
Securities sold | 1,041,650 | |
Dividends | 314,533 | |
Prepaid expenses | 16,571 | |
Total assets | 221,684,275 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 1,724,972 | |
Fund shares redeemed | 186,489 | |
Management fees | 144,810 | |
Custodian fees | 1,377 | |
Transfer agent/maintenance fees | 25,857 | |
Administration fees | 18,522 | |
Professional fees | 38,410 | |
12b-1 distribution plan fees | 57,332 | |
Directors’ fees | 5,875 | |
Other | 35,324 | |
Total liabilities | 2,238,968 | |
Net assets | $219,445,307 | |
Net assets consist of: | ||
Paid in capital | $245,023,187 | |
Undistributed net investment income | 282,642 | |
Accumulated net realized loss on sale of investments | (1,416,557) | |
Net unrealized depreciation in value of investments | (24,443,965) | |
Net assets | $219,445,307 | |
Class A: | ||
Capital shares outstanding (unlimited number of shares authorized) | 48,377,973 | |
Net assets | $205,908,490 | |
Net asset value and redemption price per share | $4.26 | |
Maximum offering price per share (net asset value divided by 94.25%) | $4.52 | |
Class B: | ||
Capital shares outstanding (unlimited number of shares authorized) | 3,007,478 | |
Net assets | $10,621,420 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $3.53 | |
Class C: | ||
Capital shares outstanding (unlimited number of shares authorized) | 764,579 | |
Net assets | $2,915,397 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $3.81 | |
*Investments, at cost | $244,452,477 |
Statement of Operations For the Year Ended September 30, 2008
| ||
Investment Income: | ||
Dividends | $4,036,789 | |
Interest | 275,675 | |
Total investment income | 4,312,464 | |
Expenses: | ||
Management fees | 2,145,823 | |
Transfer agent/maintenance fees | 577,100 | |
Administration fees | 272,408 | |
Custodian fees | 15,862 | |
Directors’ fees | 20,395 | |
Professional fees | 39,255 | |
Reports to shareholders | 30,316 | |
Registration fees | 39,238 | |
Other expenses | 27,862 | |
12b-1 distribution fees - Class A | 666,506 | |
12b-1 distribution fees - Class B | 154,382 | |
12b-1 distribution fees - Class C | 40,689 | |
Total expenses | 4,029,836 | |
Less: | ||
Earnings credits applied | (14) | |
Net expenses | 4,029,822 | |
Net investment income | 282,642 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | 2,760,490 | |
Options written | 53,515 | |
Net realized gain | 2,814,005 | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (86,550,394) | |
Net unrealized depreciation | (86,550,394) | |
Net loss | (83,736,389) | |
Net decrease in net assets resulting from operations | $(83,453,747) | |
22 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets
| Security Equity Fund Equity Series
| |
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
Increase (decrease) in net assets from operations: | ||||||||
Net investment income (loss) | $ | 282,642 | $ | (156,727 | ) | |||
Net realized gain during the year on investments | 2,814,005 | 51,607,692 | ||||||
Net unrealized depreciation during the year on investments | (86,550,394 | ) | (11,523,783 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (83,453,747 | ) | 39,927,182 | |||||
Distributions to shareholders from: | ||||||||
Net realized gain | ||||||||
Class A | (44,531,074 | ) | (36,813,817 | ) | ||||
Class B | (3,113,215 | ) | (2,833,129 | ) | ||||
Class C | (746,220 | ) | (617,995 | ) | ||||
Return of capital | ||||||||
Class A | (519,229 | ) | – | |||||
Class B | (36,300 | ) | – | |||||
Class C | (8,701 | ) | – | |||||
Total distributions to shareholders | (48,954,739 | ) | (40,264,941 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
Class A | 9,417,273 | 22,425,266 | ||||||
Class B | 3,123,443 | 4,149,590 | ||||||
Class C | 474,151 | 664,065 | ||||||
Distributions reinvested | ||||||||
Class A | 41,061,178 | 33,789,629 | ||||||
Class B | 3,104,258 | 2,766,531 | ||||||
Class C | 741,250 | 607,148 | ||||||
Cost of shares redeemed | ||||||||
Class A | (44,578,317 | ) | (104,634,399 | ) | ||||
Class B | (7,922,053 | ) | (14,318,878 | ) | ||||
Class C | (1,393,138 | ) | (1,927,297 | ) | ||||
Net increase (decrease) from capital share transactions | 4,028,045 | (56,478,345 | ) | |||||
Net decrease in net assets | (128,380,441 | ) | (56,816,104 | ) | ||||
Net assets: | ||||||||
Beginning of year | 347,825,748 | 404,641,852 | ||||||
End of year | $ | 219,445,307 | $ | 347,825,748 | ||||
Accumulated net investment income at end of year | $ | 282,642 | $ | – | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
Class A | 1,742,458 | 3,287,276 | ||||||
Class B | 703,547 | 699,825 | ||||||
Class C | 99,582 | 105,654 | ||||||
Shares reinvested | ||||||||
Class A | 7,806,369 | 5,073,518 | ||||||
Class B | 707,120 | 479,468 | ||||||
Class C | 156,382 | 98,723 | ||||||
Shares redeemed | ||||||||
Class A | (8,392,906 | ) | (15,274,912 | ) | ||||
Class B | (1,784,812 | ) | (2,408,381 | ) | ||||
Class C | (295,676 | ) | (307,016 | ) |
23 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year
| Security Equity Fund Equity Series
| |
Class A | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $6.84 | $6.85 | $6.58 | $6.50 | $5.98 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss)b | 0.01 | – | (0.01) | 0.04 | 0.01 | |||||
Net gain (loss) on securities (realized and unrealized) | (1.61) | 0.69 | 0.52 | 0.49 | 0.52 | |||||
Total from investment operations | (1.60) | 0.69 | 0.51 | 0.53 | 0.53 | |||||
Less distributions: | ||||||||||
Dividends from net investment income | – | – | (0.04) | – | (0.01) | |||||
Distributions from realized gains | (0.97) | (0.70) | (0.20) | (0.45) | – | |||||
Return of capital | (0.01) | – | – | – | – | |||||
Total distributions | (0.98) | (0.70) | (0.24) | (0.45) | (0.01) | |||||
Net asset value, end of period | $4.26 | $6.84 | $6.85 | $6.58 | $6.50 | |||||
Total Return c | (26.12%) | 10.33% | 7.88% | 8.20% | 8.87% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $205,908 | $322,850 | $371,006 | $375,280 | $391,384 | |||||
Ratios to average net assets: | ||||||||||
Net investment income (loss) | 0.15% | 0.02% | (0.08%) | 0.57% | 0.08% | |||||
Total expensesd | 1.36% | 1.34% | 1.34% | 1.30% | 1.28% | |||||
Net expensese | 1.36% | 1.34% | 1.34% | 1.30% | 1.28% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.36% | 1.34% | 1.34% | 1.30% | 1.28% | |||||
Portfolio turnover rate | 111% | 20% | 34% | 32% | 28% | |||||
Class B | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $5.89 | $6.04 | $5.83 | $5.85 | $5.41 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | (0.03) | (0.04) | (0.05) | (0.01) | (0.04) | |||||
Net gain (loss) on securities (realized and unrealized) | (1.35) | 0.59 | 0.46 | 0.44 | 0.48 | |||||
Total from investment operations | (1.38) | 0.55 | 0.41 | 0.43 | 0.44 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.97) | (0.70) | (0.20) | (0.45) | – | |||||
Return of capital | (0.01) | – | – | – | – | |||||
Total distributions | (0.98) | (0.70) | (0.20) | (0.45) | – | |||||
Net asset value, end of period | $3.53 | $5.89 | $6.04 | $5.83 | $5.85 | |||||
Total Return c | (26.69%) | 9.33% | 7.16% | 7.35% | 8.13% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $10,621 | $19,928 | $27,842 | $39,962 | $49,600 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.61%) | (0.74%) | (0.83%) | (0.16%) | (0.67%) | |||||
Total expensesd | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Net expensese | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Portfolio turnover rate | 111% | 20% | 34% | 32% | 28% |
24 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund | |
Selected data for each share of capital stock outstanding throughout each year
| Equity Series
|
Class C | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $6.28 | $6.39 | $6.16 | $6.16 | $5.69 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | (0.03) | (0.05) | (0.05) | (0.01) | (0.04) | |||||
Net gain (loss) on securities (realized and unrealized) | (1.46) | 0.64 | 0.48 | 0.46 | 0.51 | |||||
Total from investment operations | (1.49) | 0.59 | 0.43 | 0.45 | 0.47 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.97) | (0.70) | (0.20) | (0.45) | – | |||||
Return of capital | (0.01) | – | – | – | – | |||||
Total distributions | (0.98) | (0.70) | (0.20) | (0.45) | – | |||||
Net asset value, end of period | $3.81 | $6.28 | $6.39 | $6.16 | $6.16 | |||||
Total Return c | (26.79%) | 9.45% | 7.10% | 7.32% | 8.26% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $2,915 | $5,048 | $5,794 | $5,706 | $6,329 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.60%) | (0.73%) | (0.83%) | (0.18%) | (0.67%) | |||||
Total expensesd | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Net expensese | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.11% | 2.09% | 2.09% | 2.05% | 2.03% | |||||
Portfolio turnover rate | 111% | 20% | 34% | 32% | 28% |
a Significant variation in the portfolio turnover rate is due to the Investment Manager’s appointment of new portfolio managers for the series.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c 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 shares.
d Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
e Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
25 | The accompanying notes are an integral part of the financial statements |
Table of Contents
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26 |
Table of Contents
Managers’ Commentary November 14, 2008 | Global Series (unaudited) | |
To Our Shareholders:
For the fiscal year ended September 30, 2008, the Security Equity Fund Global Series Class A shares outperformed its benchmark, the MSCI World Index,
–25.16%1 to –26.05%, while the peer group was down
–27.47%. In the difficult and volatile market environment characterizing the 12-month period, all sectors posted negative returns.
At the core of the investment management team’s philosophy is the idea that excess return opportunities exist in global stock markets and can be identified and captured at the security level, regardless of country, region, or sector. Portfolio managers John Boich, Scott Klimo, and David Whittall lead the global equities team. In addition to the team’s extensive experience, other competitive advantages include the execution of in-depth fundamental research using a proprietary database that provides a unique perspective of the world, a proprietary risk management module, and a well-defined and disciplined investment process.
Consumer Discretionary and Industrials Top Performers
The best performing sector in the Series was consumer discretionary. While it had a negative return of approximately –13%, the stock selection was much better than the –30% loss for the Series’ benchmark. Marvel Entertainment, Inc. was the leading performer for the portfolio in the sector.
The industrials sector was a positive factor on the portfolio due to stock selection. While the sector was overweight relative to the benchmark, the loss of –21% was not as severe as the –29% decline for the benchmark. Wabtec Corporation and Lockheed Martin Corporation were the portfolio’s best performers in the sector.
Materials helped limit Series losses due to a large underweight position relative to the benchmark in a hard hit sector.
Financials and Energy Disappoint
While every sector detracted from performance during the period, the Series’ financials sector caused the most damage. Even though the sector was a large underweight relative to the benchmark, stock selection was the cause of the –43% decline against the –35% loss for the benchmark. National City Corporation and Anglo Irish Bank Corporation, plc were the major culprits affecting return.
The energy sector was equally dismal as the Series lost –39%, more than double the –18% loss for the benchmark. The Series had a large underweight position in the sector but stock selection pulled performance down. Bumi Resources Tbk PT, Valero Energy Corporation, and Consol Energy, Inc., led the decline for the Series.
2009 Market Outlook
The decline in the global economy has been the result of the intensification of the financial crisis, clearly now having spread to economies around the world. The process of deleveraging among financial institutions will take time. While inflation becomes less of a worry, oil prices continue to decline on a global contraction of demand, and short-term rates for overnight borrowing between business return to more normal levels, there is not an expectation of a quick turnaround.
The current market environment is a reminder for investors to assess their overall financial plan. An investor’s overall strategy should include proper diversification and be in alignment with their risk tolerance, time horizon, and goals. One of the key objectives of Security Global Investors is to provide professional, risk-managed investment portfolios that give shareholders the benefits of diversification and performance returns to help meet their goals over the long-term.
We appreciate your confidence and trust. We will continue to seek out the best individual prospects from around the globe for the Series.
Sincerely,
John Boich, Scott Klimo, David Whittall
Senior Portfolio Managers
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. Investment in international securities entail greater risks than investment in domestic securities.
27 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Global Series (unaudited) | |
PERFORMANCE
|
$10,000 Over Ten Years
This chart assumes a $10,000 investment in Class A shares of Global Series on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The MSCI World Index is an unmanaged capitalization-weighted index that is designed to measure global developed market equity performance.
Portfolio Composition by Sector as of 9-30-08
| |||||||
Consumer Discretionary
| 9.93%
| ||||||
Consumer Staples
| 13.74
| ||||||
Energy
| 4.54
| ||||||
Financials
| 16.45
| ||||||
Health Care
| 17.15
| ||||||
Industrials
| 19.09
| ||||||
Information Technology
| 11.38
| ||||||
Materials
| 1.06
| ||||||
Telecommunication Services
| 2.40
| ||||||
Utilities
| 2.88
| ||||||
Short Term Investments
| 3.25
| ||||||
Liabilities, Less Cash & Other Assets
| (1.87) |
| |||||
Total Net Assets | 100.00% | ||||||
Average Annual Returns
| ||||||||
Periods Ended 9-30-08
|
1 Year
|
5 Years
|
10 Years
|
Since
| ||||
A Shares |
(25.16%)
| 8.62%
| 8.63%
| –
| ||||
A Shares with sales charge
| (29.45%)
| 7.34%
| 7.98%
| –
| ||||
B Shares
| (24.91%)
| 8.48%
| 8.26%
| –
| ||||
B Shares with CDSC
| (27.30%)
| 8.24%
| 8.26%
| –
| ||||
C Shares
| (25.69%)
| 7.80%
| –
| 5.90%
| ||||
C Shares with CDSC
| (26.16%)
| 7.80%
| –
| 5.90%
| ||||
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
28 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Global Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning Account Value 4/1/2008 | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Global Series - Class A | ||||||
Actual | $1,000.00 | $832.66 | $7.83 | |||
Hypothetical
| 1,000.00
|
1,016.45 |
8.62 | |||
Global Series - Class B | ||||||
Actual | 1,000.00 | 834.10 | 6.69 | |||
Hypothetical | 1,000.00 | 1,017.70 | 7.36 | |||
Global Series - Class C | ||||||
Actual | 1,000.00 | 829.36 | 11.25 | |||
Hypothetical | 1,000.00 | 1,012.70 | 12.38 |
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (16.73%), (16.59%) and (17.06%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (1.71%, 1.46% and 2.46% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
29 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Global Series | |
Shares | Value | |||
COMMON STOCKS - 98.6% | ||||
Bermuda - 6.2% | ||||
Accenture, Ltd. | 64,574 | $2,453,812 | ||
Aspen Insurance Holdings, Ltd. | 34,930 | 960,575 | ||
Foster Wheeler, Ltd. * | 85,990 | 3,105,099 | ||
Max Capital Group, Ltd. | 17,300 | 401,879 | ||
6,921,365 | ||||
Brazil - 1.9% | ||||
BM&F BOVESPA S.A. | 487,517 | 2,144,902 | ||
Cayman Islands - 2.7% | ||||
Herbalife, Ltd. | 21,817 | 862,208 | ||
Shanda Interactive Entertainment, Ltd. ADR * | 84,148 | 2,149,981 | ||
3,012,189 | ||||
China - 1.9% | ||||
ZTE Corporation 1 | 574,000 | 2,174,141 | ||
France - 2.0% | ||||
France Telecom S.A. 1 | 14,394 | 403,450 | ||
UBISOFT Entertainment 1,* | 26,769 | 1,860,827 | ||
2,264,277 | ||||
Germany - 0.8% | ||||
Adidas AG 1 | 17,642 | 941,740 | ||
Hong Kong - 3.3% | ||||
Link REIT 1,2 | 1,753,144 | 3,644,263 | ||
Indonesia - 1.2% | ||||
Bumi Resources Tbk PT 1 | 4,124,730 | 1,372,049 | ||
Ireland - 1.6% | ||||
Anglo Irish Bank Corporation plc 1 | 319,945 | 1,813,614 | ||
Israel - 1.0% | ||||
Check Point Software Technologies * | 50,769 | 1,154,487 | ||
Italy - 2.3% | ||||
Unione di Banche Italiane SCPA 1 | 115,111 | 2,519,856 | ||
Japan - 8.3% | ||||
Astellas Pharma, Inc. 1 | 21,883 | 918,557 | ||
Hosiden Corporation 1 | 65,482 | 942,204 | ||
JGC Corporation 1 | 179,460 | 2,876,167 | ||
Kirin Holdings Company, Ltd. 1 | 68,384 | 897,571 | ||
Kyushu Electric Power Company, Inc. 1 | 43,602 | 907,927 | ||
Suzuken Company, Ltd. 1 | 29,798 | 904,586 | ||
Takeda Pharmaceutical Company, Ltd. 1 | 18,200 | 915,434 | ||
West Japan Railway Company 1 | 216 | 924,060 | ||
9,286,506 | ||||
Jersey - 1.1% | ||||
Randgold Resources, Ltd. ADR | 28,995 | 1,189,665 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Norway - 0.7% | ||||
Orkla ASA 1 | 84,900 | $780,786 | ||
Singapore - 2.2% | ||||
Singapore Press Holdings, Ltd. 1 | 899,521 | 2,509,727 | ||
South Africa - 2.0% | ||||
Aveng, Ltd. 1 | 291,900 | 2,221,586 | ||
Spain - 0.5% | ||||
Endesa S.A. 1 | 15,663 | 571,918 | ||
Switzerland - 6.3% | ||||
ACE, Ltd. | 42,266 | 2,287,859 | ||
Actelion, Ltd. 1,* | 17,622 | 907,712 | ||
Lonza Group AG 1 | 23,198 | 2,909,647 | ||
Novartis AG 1 | 17,002 | 894,829 | ||
7,000,047 | ||||
United Kingdom- 8.2% | ||||
Cadbury plc 1 | 277,143 | 2,801,643 | ||
GlaxoSmithKline plc 1 | 41,342 | 895,145 | ||
Imperial Tobacco Group plc 1 | 116,074 | 3,726,330 | ||
Standard Chartered plc 1 | 70,762 | 1,740,294 | ||
9,163,412 | ||||
United States - 44.4% | ||||
Altria Group, Inc. | 127,471 | 2,529,024 | ||
Amgen, Inc. * | 15,041 | 891,480 | ||
Anadarko Petroleum Corporation | 21,666 | 1,051,018 | ||
AO Smith Corporation | 21,379 | 837,843 | ||
AT&T, Inc. | 81,687 | 2,280,701 | ||
Biogen Idec, Inc. * | 18,581 | 934,438 | ||
BJ’s Wholesale Club, Inc. * | 16,481 | 640,452 | ||
Bob Evans Farms, Inc. | 33,871 | 924,340 | ||
CA, Inc. | 147,656 | 2,947,214 | ||
CKE Restaurants, Inc. | 34,900 | 369,940 | ||
Consol Energy, Inc. | 57,235 | 2,626,514 | ||
Constellation Energy Group, Inc. | 35,500 | 862,650 | ||
Family Dollar Stores, Inc. | 34,500 | 817,650 | ||
Forest Laboratories, Inc. * | 32,756 | 926,340 | ||
General Electric Company | 36,700 | 935,850 | ||
Jarden Corporation * | 125,710 | 2,947,900 | ||
Johnson & Johnson | 52,496 | 3,636,922 | ||
Joy Global, Inc. | 70,803 | 3,196,047 | ||
Kroger Company | 23,600 | 648,528 | ||
Lincare Holdings, Inc. * | 28,153 | 847,124 | ||
Lockheed Martin Corporation | 33,899 | 3,717,703 | ||
Magellan Health Services, Inc. * | 22,000 | 903,320 | ||
Millipore Corporation * | 12,674 | 871,971 | ||
National City Corporation | 743,740 | 1,301,545 | ||
Oil States International, Inc. * | 964 | 34,077 | ||
OSI Pharmaceuticals, Inc. * | 20,307 | 1,000,933 | ||
Philip Morris International, Inc. | 48,797 | 2,347,135 | ||
RadioShack Corporation | 50,365 | 870,307 | ||
Reinsurance Group of America, Inc. | 19,312 | 1,042,848 | ||
Ross Stores, Inc. | 24,168 | 889,624 | ||
Sovereign Bancorp, Inc. | 139,390 | 550,591 | ||
TECO Energy, Inc. | 55,806 | 877,828 | ||
TJX Companies, Inc. | 27,815 | 848,914 | ||
Trinity Industries, Inc. | 39,540 | 1,017,364 |
30 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Global Series | |
Shares | Value | ||||
COMMON STOCKS (continued) | |||||
United States (continued) | |||||
Varian Medical Systems, Inc. * | 14,800 | $845,524 | |||
Wal-Mart Stores, Inc. | 15,500 | 928,295 | |||
Watts Water Technologies, Inc. | 29,885 | 817,355 | |||
49,717,309 | |||||
TOTAL COMMON STOCKS | |||||
(Cost 126,453,409) | $110,403,839 | ||||
Principal Amount | Value | ||||
SHORT TERM INVESTMENTS - 3.3% | |||||
State Street Treasury Money Market Fund | $3,643,319 | $3,643,319 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost $3,643,319) | $3,643,319 | ||||
Total Investments - 101.9% |
| $114,047,158 | |||
(cost $130,096,728) | |||||
Liabilities, Less Cash & Other Assets - (1.9%) |
| (2,095,895) | |||
Total Net Assets - 100.0% |
| $111,951,263 | |||
INVESTMENT CONCENTRATION | |||||
At September 30, 2008, the investment diversification of the Series was as follows: | |||||
Industry | % of Net Assets | Value | |||
Tobacco | 7.6 | % | $8,602,489 | ||
Construction & Engineering | 7.3 | 8,202,852 | |||
Pharmaceuticals | 7.3 | 8,187,227 | |||
Diversified Banks | 5.4 | 6,073,764 | |||
Construction & Farm Machinery & Heavy Trucks | 3.8 | 4,213,411 | |||
Systems Software | 3.7 | 4,101,701 | |||
Home Entertainment Software | 3.6 | 4,010,808 | |||
Coal & Consumable Fuels | 3.6 | 3,998,563 | |||
Life Sciences Tools & Services | 3.4 | 3,781,618 | |||
Biotechnology | 3.3 | 3,734,563 | |||
Aerospace & Defense | 3.3 | 3,717,703 | |||
Retail REIT’s | 3.3 | 3,644,263 | |||
Money Markets | 3.3 | 3,643,319 | |||
Property & Casualty Insurance | 2.9 | 3,248,434 | |||
Housewares & Specialties | 2.6 | 2,947,900 | |||
Packaged Foods & Meats | 2.5 | 2,801,643 | |||
Integrated Telecommunication Services | 2.4 | 2,684,151 | |||
Publishing | 2.2 | 2,509,727 | |||
IT Consulting & Other Services | 2.2 | 2,453,812 | |||
Communications Equipment | 1.9 | 2,174,141 | |||
Specialized Finance | 1.9 | 2,144,902 | |||
Apparel Retail | 1.6 | 1,738,538 | |||
Industrial Conglomerates | 1.5 | 1,716,636 | |||
Hypermarkets & Super Centers | 1.4 | 1,568,747 | |||
Electric Utilities | 1.3 | 1,479,845 | |||
Reinsurance | 1.3 | 1,444,727 | |||
Regional Banks | 1.2 | 1,301,545 | |||
Restaurants | 1.2 | 1,294,280 | |||
Gold | 1.1 | 1,189,665 | |||
Oil & Gas Exploration & Production | 0.9 | 1,051,018 | |||
Electronic Components | 0.8 | 942,204 | |||
Apparel, Accessories & Luxury Goods | 0.8 | 941,740 | |||
Railroads | 0.8 | 924,060 |
INVESTMENT CONCENTRATION (continued) | |||||
Industry | % of Net Assets | Value | |||
Health Care Distributors | 0.8 | % | $904,586 | ||
Managed Health Care | 0.8 | 903,320 | |||
Brewers | 0.8 | 897,571 | |||
Multi-Utilities | 0.8 | 877,828 | |||
Computer & Electronics Retail | 0.8 | 870,307 | |||
Independent Power Producers & Energy Traders | 0.8 | 862,650 | |||
Personal Products | 0.8 | 862,208 | |||
Health Care Services | 0.8 | 847,124 | |||
Health Care Equipment | 0.8 | 845,524 | |||
Electrical Components & Equipment | 0.8 | 837,843 | |||
General Merchandise Stores | 0.7 | 817,650 | |||
Industrial Machinery | 0.7 | 817,355 | |||
Food Retail | 0.6 | 648,528 | |||
Thrifts & Mortgage Finance | 0.5 | 550,591 | |||
Oil & Gas Equipment & Services | 0.0 | 34,077 | |||
Total Investments | 101.9 | $114,047,158 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $132,714,847.
ADR | American Depositary Receipt | |
plc | Public Limited Company | |
REIT | Real Estate Investment Trust |
* Non-income producing security
1 Security was subject to the fair value trigger at September 30, 2008. The total market value of fair valued securities amounts to $43,976,063, (cost $50,365,246) or 39.3% of total net assets.
2 Security is a PFIC (Passive Foreign Investment Company)
31 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Global Series
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $114,047,158 | |
Cash | 275,774 | |
Cash denominated in a foreign currency, at value** | 162,380 | |
Receivables: | ||
Fund shares sold | 81,181 | |
Securities sold | 5,357,641 | |
Interest | 11,041 | |
Dividends | 266,341 | |
Foreign taxes recoverable | 38,160 | |
Prepaid expenses | 21,777 | |
Total assets | 120,261,453 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 7,961,774 | |
Fund shares redeemed | 145,366 | |
Management fees | 102,162 | |
Transfer agent/maintenance fees | 14,516 | |
Administration fees | 17,574 | |
Professional fees | 25,000 | |
12b-1 distribution plan fees | 27,391 | |
Directors’ fees | 2,000 | |
Other | 14,407 | |
Total liabilities | 8,310,190 | |
Net assets | $111,951,263 | |
Net assets consist of: | ||
Paid in capital | $151,750,283 | |
Accumulated net investment loss | (337,933) | |
Accumulated net realized loss on sale of investments and foreign currency transactions | (23,464,704) | |
Net unrealized depreciation in value of investments and translation of assets and liabilities in foreign currencies | (15,996,383) | |
Net assets | $111,951,263 | |
Class A: | ||
Capital shares outstanding | 8,576,201 | |
Net assets | $88,782,372 | |
Net asset value and redemption price per share | $10.35 | |
Maximum offering price per share (net asset value divided by 94.25%) | $10.98 | |
Class B: | ||
Capital shares outstanding | 1,691,159 | |
Net assets | $15,302,611 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $9.05 | |
Class C: | ||
Capital shares outstanding | 869,968 | |
Net assets | $7,866,280 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $9.04 | |
*Investments, at cost | $130,096,728 | |
**Cash denominated in a foreign currency, at cost | 157,734 |
Statement of Operations | ||
For the Year Ended September 30, 2008
| ||
Investment Income: | ||
Dividends (net of foreign withholding tax of $115,046) | $3,219,239 | |
Interest | 174,632 | |
Total investment income | 3,393,871 | |
Expenses: | ||
Management fees | 1,663,225 | |
Transfer agent/maintenance fees | 301,720 | |
Administration fees | 255,706 | |
Custodian fees | 102,900 | |
Directors’ fees | 10,819 | |
Professional fees | 39,185 | |
Reports to shareholders | 34,842 | |
Registration fees | 41,225 | |
Other expenses | 11,244 | |
12b-1 distribution fees - Class A | 326,743 | |
12b-1 distribution fees - Class C | 110,697 | |
Total expenses | 2,898,306 | |
Less: | ||
Earnings credits applied | (24,713) | |
Net expenses | 2,873,593 | |
Net investment income | 520,278 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | (16,600,661) | |
Foreign currency transactions | (473,302) | |
Net realized loss | (17,073,963) | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (24,915,052) | |
Translation of assets and liabilities in foreign currencies | 46,255 | |
Net unrealized depreciation | (24,868,797) | |
Net loss | (41,942,760) | |
Net decrease in net assets resulting from operations | $(41,422,482) | |
32 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund Global Series | ||
Statement of Changes in Net Assets |
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
Increase (decrease) in net assets from operations: | ||||||||
Net investment income | $ | 520,278 | $ | 494,177 | ||||
Net realized gain (loss) during the year on investments and foreign currency transactions | (17,073,963 | ) | 60,286,278 | |||||
Net unrealized depreciation during the year on investments and translation of assets and liabilities in foreign currencies | (24,868,797 | ) | (28,623,037 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (41,422,482 | ) | 32,157,418 | |||||
Distributions to shareholders from: | ||||||||
Net investment income | ||||||||
Class A | (256,485 | ) | – | |||||
Class B | (137,990 | ) | – | |||||
Net realized gain | ||||||||
Class A | (47,919,890 | ) | (17,339,157 | ) | ||||
Class B | (10,546,794 | ) | (3,994,738 | ) | ||||
Class C | (4,424,426 | ) | (1,528,583 | ) | ||||
Total distributions to shareholders | (63,285,585 | ) | (22,862,478 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
Class A | 29,605,642 | 48,735,358 | ||||||
Class B | 4,778,339 | 5,700,956 | ||||||
Class C | 2,736,093 | 2,621,539 | ||||||
Distributions reinvested | ||||||||
Class A | 47,766,576 | 17,194,918 | ||||||
Class B | 10,521,908 | 3,949,911 | ||||||
Class C | 4,347,344 | 1,493,247 | ||||||
Cost of shares redeemed | ||||||||
Class A | (52,959,002 | ) | (47,413,380 | ) | ||||
Class B | (13,096,148 | ) | (8,829,233 | ) | ||||
Class C | (4,307,780 | ) | (2,513,425 | ) | ||||
Net increase from capital share transactions | 29,392,972 | 20,939,891 | ||||||
Net increase (decrease) in net assets | (75,315,095 | ) | 30,234,831 | |||||
Net assets: | ||||||||
Beginning of year | 187,266,358 | 157,031,527 | ||||||
End of year | $ | 111,951,263 | $ | 187,266,358 | ||||
Accumulated net investment loss at end of year | $ | (337,933) | $ | (282,912) | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
Class A | 2,084,793 | 2,436,280 | ||||||
Class B | 352,156 | 311,989 | ||||||
Class C | 213,727 | 144,145 | �� | |||||
Shares reinvested | ||||||||
Class A | 3,504,518 | 922,474 | ||||||
Class B | 884,938 | 231,666 | ||||||
Class C | 363,187 | 86,716 | ||||||
Shares redeemed | ||||||||
Class A | (4,030,409 | ) | (2,406,454 | ) | ||||
Class B | (1,109,871 | ) | (492,573 | ) | ||||
Class C | (362,050 | ) | (139,656 | ) |
33 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year
| Security Equity Fund Global Series
| |
Year Ended September 30, | ||||||||||
Class A | 2008a | 2007a,b | 2006 | 2005 | 2004c | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $20.69 | $19.65 | $17.47 | $13.93 | $11.68 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss)d | 0.05 | 0.06 | (0.03) | (0.02) | (0.03) | |||||
Net gain (loss) on securities (realized and unrealized) | (3.63) | 3.60 | 2.21 | 3.56 | 2.28 | |||||
Total from investment operations | (3.58) | 3.66 | 2.18 | 3.54 | 2.25 | |||||
Less distributions: | ||||||||||
Dividends from net investment income | (0.04) | – | – | – | – | |||||
Distributions from realized gains | (6.72) | (2.62) | – | – | – | |||||
Total distributions | (6.76) | (2.62) | – | – | – | |||||
Net asset value, end of period | $10.35 | $20.69 | $19.65 | $17.47 | $13.93 | |||||
Total Return e | (25.16%) | 20.07% | 12.48% | 25.41% | 19.26% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $88,782 | $145,158 | $119,176 | $127,970 | $98,450 | |||||
Ratios to average net assets: | ||||||||||
Net investment income (loss) | 0.33% | 0.29% | (0.17%) | (0.14%) | (0.20%) | |||||
Total expensesf | 1.73% | 1.69% | 1.75% | 1.73% | 1.79% | |||||
Net expensesg | 1.72% | 1.69% | 1.75% | 1.73% | 1.79% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.73% | 1.69% | 1.75% | 1.73% | 1.79% | |||||
Portfolio turnover rate | 280% | 162% | 28% | 31% | 25% | |||||
Year Ended September 30, | ||||||||||
Class B | 2008a,h | 2007a,b,h | 2006h | 2005h | 2004c | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $18.96 | $18.17 | $16.12 | $12.93 | $10.93 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss)d | 0.07 | 0.09 | 0.02 | (0.12) | (0.13) | |||||
Net gain (loss) on securities (realized and unrealized) | (3.17) | 3.32 | 2.03 | 3.31 | 2.13 | |||||
Total from investment operations | (3.10) | 3.41 | 2.05 | 3.19 | 2.00 | |||||
Less distributions: | ||||||||||
Dividends from net investment income | (0.09) | – | – | – | – | |||||
Distributions from realized gains | (6.72) | (2.62) | – | – | – | |||||
Total distributions | (6.81) | (2.62) | – | – | – | |||||
Net asset value, end of period | $9.05 | $18.96 | $18.17 | $16.12 | $12.93 | |||||
Total Return e | (24.91%) | 20.36% | 12.72% | 24.67% | 18.30% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $15,303 | $29,659 | $27,494 | $28,999 | $28,360 | |||||
Ratios to average net assets: | ||||||||||
Net investment income (loss) | 0.55% | 0.50% | 0.11% | (0.80%) | (1.00%) | |||||
Total expensesf | 1.48% | 1.44% | 1.50% | 2.38% | 2.54% | |||||
Net expensesg | 1.47% | 1.44% | 1.50% | 2.38% | 2.54% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.48% | 1.44% | 1.50% | 2.38% | 2.54% | |||||
Portfolio turnover rate | 280% | 162% | 28% | 31% | 25% |
34 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund | |
Selected data for each share of capital stock outstanding throughout each year | Global Series |
Class C | 2008a | 2007b | 2006 | 2005 | Year Ended September 30, 2004c | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $19.00 | $18.37 | $16.46 | $13.22 | $11.17 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossd | (0.05) | (0.09) | (0.15) | (0.13) | (0.13) | |||||
Net gain (loss) on securities (realized and unrealized) | (3.18) | 3.34 | 2.06 | 3.37 | 2.18 | |||||
Total from investment operations | (3.23) | 3.25 | 1.91 | 3.24 | 2.05 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (6.73) | (2.62) | – | – | – | |||||
Total distributions | (6.73) | (2.62) | – | – | – | |||||
Net asset value, end of period | $9.04 | $19.00 | $18.37 | $16.46 | $13.22 | |||||
Total Return e | (25.69%) | 19.14% | 11.60% | 24.51% | 18.35% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $7,866 | $12,449 | $10,361 | $8,841 | $7,557 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.44%) | (0.48%) | (0.87%) | (0.90%) | (1.02%) | |||||
Total expensesf | 2.49% | 2.44% | 2.51% | 2.48% | 2.54% | |||||
Net expensesg | 2.47% | 2.44% | 2.50% | 2.48% | 2.54% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.49% | 2.44% | 2.51% | 2.48% | 2.54% | |||||
Portfolio turnover rate | 280% | 162% | 28% | 31% | 25% |
a Significant variation in the portfolio turnover rate is due to the re-alignment of the Series’ portfolio following the appointment of Security Global Investors, LLC (SGI) as sub-advisor.
b SGI became the sub-advisor of the Global Series effective August 1, 2007. Prior to August 1, 2007, Security Investors (SI) paid Oppenheimer Funds for sub-advisory services.
c The financial highlights for the Global Series exclude the historical financial highlights of the International Series Class A, B and C shares. The assets of the International Series were acquired by the Global Series on October 3, 2003.
d Net investment income (loss) was computed using average shares outstanding throughout the period.
e 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 shares.
f Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
g Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
h Effective August 25, 2005, Class B shares ceased charging 12b-1 fees in accordance with FINRA sales cap regulations. Per share information reflects this change. This fee will be reinstated when sales exceed the sales cap limit.
35 | The accompanying notes are an integral part of the financial statements |
Table of Contents
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36 |
Table of Contents
Managers’ Commentary November 14, 2008 | Global Institutional Series (unaudited) |
To Our Shareholders:
From inception on July 11, 2008 through September 30, 2008, the Security Equity Fund Global Institutional Series underperformed its benchmark, the MSCI World Index, –13.30%1 to –11.73%. In the difficult and volatile market environment characterizing the abbreviated period, all sectors posted negative returns.
The global equity team’s investment philosophy is that excess return opportunities exist in global stock markets and can be identified and captured at the security level, regardless of country, region, or sector. Portfolio managers John Boich, Scott Klimo, and David Whittall lead the global equities team. In addition to the team’s extensive experience, other competitive advantages include the execution of in-depth fundamental research using a proprietary database that provides a unique perspective of the world, a proprietary risk management module, and a well-defined and disciplined investment process.
Materials and Health Care Top Performers
The Series’ biggest contributor to performance was through the materials sector, simply by not being in the worst performing sector in the benchmark. While the MSCI World Index had a 7% weight in the sector, the portfolio had just a fraction of 1%. The only position in the portfolio for the sector was Schnitzer Steel Industries, Inc. While the holding did not fare well, the small allocation greatly limited the potential damage.
The health care sector benefited from a sizable overweight position and slightly better performance, on a relative basis, than the benchmark. With the portfolio’s sector declining –3%, versus –4% loss for the benchmark, the benefit to the portfolio came mostly from the overweight allocation. The strongest performers for the Series were Johnson & Johnson and Amgen, Inc.
The industrials sector added relative performance to the Series as selected stocks lost less than those in the benchmark. The return for the sector in the portfolio was a negative –11%, while the benchmark dropped –14%. Gainers for the portfolio included Lockheed Martin Corporation and AO Smith Corporation.
Financials and Consumer Staples Disappoint
While every sector detracted from performance during the period, the portfolio’s financials sector caused the most damage. A large underweight allocation relative to the benchmark (more than 50% less), combined with poor stock selection, were the causes for a –19% decline against just a –3% loss for the benchmark. National City Corporation, BM&F Bovespa, S.A., and Sovereign Bancorp, Inc. were the major culprits affecting return.
Underperforming stock selection in the consumer staples sector decreased portfolio performance with a –11% loss against a –1% decline in the benchmark. Unforeseeable issues with the products of China Mengniu Dairy Company, Ltd. led to that stock’s –65% plummet. Holdings in Cadbury, PLC and Philip Morris International, Inc. pulled down returns.
2009 Market Outlook
The decline in the global economy has been the result of the intensification of the financial crisis, clearly now having spread to economies around the world. The process of de-leveraging among financial institutions will take time. While inflation becomes less of a worry, oil prices continue to decline on a global contraction of demand, and short-term rates for overnight borrowing between business return to more normal levels, there is not an expectation of a quick turnaround.
The current market environment is a reminder for investors to assess their overall financial plan. An investor’s overall strategy should include proper diversification and be in alignment with their risk tolerance, time horizon, and goals. One of the key objectives of Security Global Investors is to provide professional, risk-managed investment portfolios that give shareholders the benefits of diversification and performance returns to help meet their goals over the long-term.
We appreciate your confidence and trust. We will continue to seek out the best individual prospects from around the globe for the Series.
Sincerely,
John Boich, Scott Klimo, David Whittall
Senior Portfolio Managers
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. Fee waivers and/or reimbursements reduce Series expenses and in the absence of such waivers, the performance quoted would be reduced. Investment in international securities entail greater risks than investment in domestic securities.
37 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Global Institutional Series (unaudited) | |
PERFORMANCE |
$10,000 Since Inception
This chart assumes a $10,000 investment in shares of Global Institutional Series on July 11, 2008 (date of inception), and reflects the fees and expenses of the Series and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The MSCI World Index is an unmanaged capitalization-weighted index that is designed to measure global developed market equity performance.
Average Annual Returns
| ||
Periods Ended 9-30-08
|
Since
| |
Global Institutional Series
| (13.30%)
| |
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 9.86%
| |||||
Consumer Staples
| 13.66
| |||||
Energy
| 4.54
| |||||
Financials
| 16.44
| |||||
Health Care
| 17.10
| |||||
Industrials
| 18.12
| |||||
Information Technology
| 12.30
| |||||
Materials
| 1.07
| |||||
Telecommunication Services
| 2.39
| |||||
Utilities
| 2.86
| |||||
Short Term Investments
| 3.25
| |||||
Liabilities, Less Cash & Other Assets
| (1.59)
| |||||
Total Net Assets | 100.00% | |||||
38 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Global Institutional Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 11, 2008 (commencement of operations) through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
Series Expenses | ||||||
Beginning Account Value 7/11/2008* | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Global Institutional Series | ||||||
Actual | $1,000.00 | $867.00 | $2.38 | |||
Hypothetical
| 1,000.00
| 1,008.52
| 2.56
|
* | Commencement of operations |
1 The actual ending account value is based on the actual total return of the Series for the period July 11, 2008 (commencement of operations) to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 11, 2008 (commencement of operations) to September 30, 2008 was (13.30%).
2 Expenses are equal to the Series annualized expense ratio of 1.15%, net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 81/366 (to reflect the period since commencement of operations).
39 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Global Institutional Series | |
Shares | Value | |||
COMMON STOCKS - 98.3% | ||||
Bermuda - 6.2% | ||||
Accenture, Ltd. | 4,268 | $162,184 | ||
Aspen Insurance Holdings, Ltd. | 2,320 | 63,800 | ||
Foster Wheeler, Ltd. * | 5,685 | 205,285 | ||
Max Capital Group, Ltd. | 1,100 | 25,553 | ||
456,822 | ||||
Brazil - 1.9% | ||||
BM&F BOVESPA S.A. | 32,317 | 142,183 | ||
Cayman Islands - 2.7% | ||||
Herbalife, Ltd. | 1,400 | 55,328 | ||
Shanda Interactive Entertainment, Ltd. ADR * | 5,562 | 142,109 | ||
197,437 | ||||
China - 2.0% | ||||
ZTE Corporation 1 | 38,000 | 143,933 | ||
France - 2.0% | ||||
France Telecom S.A. 1 | 950 | 26,628 | ||
UBISOFT Entertainment 1,* | 1,771 | 123,109 | ||
149,737 | ||||
Germany - 0.8% | ||||
Adidas AG 1 | 1,172 | 62,562 | ||
Hong Kong - 3.2% | ||||
Link REIT 1,2 | 113,900 | 236,764 | ||
Indonesia - 1.2% | ||||
Bumi Resources Tbk PT 1 | 271,551 | 90,329 | ||
Ireland - 1.6% | ||||
Anglo Irish Bank Corporation plc 1 | 21,130 | 119,776 | ||
Israel - 1.0% | ||||
Check Point Software Technologies * | 3,370 | 76,634 | ||
Italy - 2.3% | ||||
Unione di Banche Italiane SCPA 1 | 7,581 | 165,953 | ||
Japan - 8.1% | ||||
Astellas Pharma, Inc. 1 | 1,405 | 58,976 | ||
Hosiden Corporation 1 | 4,346 | 62,533 | ||
JGC Corporation 1 | 11,302 | 181,135 | ||
Kirin Holdings Company, Ltd. 1 | 4,542 | 59,616 | ||
Kyushu Electric Power Company, Inc. 1 | 2,899 | 60,366 | ||
Suzuken Company, Ltd. 1 | 1,929 | 58,559 | ||
Takeda Pharmaceutical Company, Ltd. 1 | 1,200 | 60,358 | ||
West Japan Railway Company 1 | 14 | 59,893 | ||
601,436 | ||||
Jersey - 1.1% | ||||
Randgold Resources, Ltd. ADR | 1,920 | 78,778 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Norway - 0.7% | ||||
Orkla ASA 1 | 5,600 | $51,501 | ||
Singapore - 2.2% | ||||
Singapore Press Holdings, Ltd. 1 | 56,930 | 158,839 | ||
South Africa - 2.0% | ||||
Aveng, Ltd. 1 | 19,276 | 146,705 | ||
Spain - 0.5% | ||||
Endesa S.A. 1 | 967 | 35,309 | ||
Switzerland - 6.2% | ||||
ACE, Ltd. 1 | 2,799 | 151,510 | ||
Actelion, Ltd. 1,* | 1,117 | 57,537 | ||
Lonza Group AG 1 | 1,531 | 192,028 | ||
Novartis AG 1 | 1,123 | 59,104 | ||
460,179 | ||||
United Kingdom - 8.1% | ||||
Cadbury plc 1 | 17,697 | 178,899 | ||
GlaxoSmithKline plc 1 | 2,730 | 59,110 | ||
Imperial Tobacco Group plc 1 | 7,685 | 246,713 | ||
Standard Chartered plc 1 | 4,677 | 115,024 | ||
599,746 | ||||
United States - 44.5% | ||||
Altria Group, Inc. | 8,500 | 168,639 | ||
Amgen, Inc. * | 1,000 | 59,270 | ||
Anadarko Petroleum Corporation | 1,426 | 69,175 | ||
AO Smith Corporation | 1,420 | 55,650 | ||
AT&T, Inc. | 5,370 | 149,930 | ||
Biogen Idec, Inc. * | 1,229 | 61,806 | ||
BJ’s Wholesale Club, Inc. * | 1,018 | 39,559 | ||
Bob Evans Farms, Inc. | 2,200 | 60,038 | ||
CA, Inc. | 9,886 | 197,325 | ||
CKE Restaurants, Inc. | 2,300 | 24,380 | ||
Consol Energy, Inc. | 3,783 | 173,602 | ||
Constellation Energy Group, Inc. | 2,350 | 57,105 | ||
Family Dollar Stores, Inc. | 2,300 | 54,510 | ||
Forest Laboratories, Inc. * | 2,163 | 61,170 | ||
General Electric Company | 2,400 | 61,200 | ||
Jarden Corporation * | 8,325 | 195,221 | ||
Johnson & Johnson | 3,475 | 240,748 | ||
Joy Global, Inc. | 4,685 | 211,481 | ||
Kroger Company | 1,457 | 40,038 | ||
Lincare Holdings, Inc. * | 1,842 | 55,426 | ||
Lockheed Martin Corporation | 2,230 | 244,564 | ||
Magellan Health Services, Inc. * | 1,460 | 59,948 | ||
Millipore Corporation * | 816 | 56,141 | ||
National City Corporation | 49,185 | 86,074 | ||
Oil States International, Inc. * | 64 | 2,262 | ||
OSI Pharmaceuticals, Inc. * | 1,349 | 66,493 | ||
Philip Morris International, Inc. | 3,280 | 157,768 | ||
RadioShack Corporation | 3,345 | 57,802 | ||
Reinsurance Group of America, Inc. | 1,300 | 70,200 | ||
Ross Stores, Inc. | 1,600 | 58,896 | ||
Sovereign Bancorp, Inc. | 9,230 | 36,459 | ||
TECO Energy, Inc. | 3,725 | 58,594 | ||
TJX Companies, Inc. | 1,824 | 55,668 |
40 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Global Institutional Series | |
Shares | Value | ||||
COMMON STOCKS (continued) | |||||
United States (continued) | |||||
Trinity Industries, Inc. | 2,600 | $66,898 | |||
Varian Medical Systems, Inc. * | 975 | 55,702 | |||
Wal-Mart Stores, Inc. | 1,030 | 61,687 | |||
Watts Water Technologies, Inc. | 1,946 | 53,223 | |||
3,284,652 | |||||
TOTAL COMMON STOCKS |
| ||||
(Cost $8,035,865) | $7,259,275 | ||||
Principal Amount | Value | ||||
SHORT TERM INVESTMENTS - 3.3% | |||||
State Street Treasury Money Market Fund | $239,639 | $239,639 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost $239,639) | $239,639 | ||||
Total Investments - 101.6% |
| $7,498,914 | |||
(cost $8,275,504) | |||||
Liabilities, Less Cash & Other Assets - (1.6%) |
| (116,915) | |||
Total Net Assets - 100.0% |
| $7,381,999 | |||
INVESTMENT CONCENTRATION | |||||
At September 30, 2008, the investment diversification of the Series was as follows: | |||||
Industry | % of Net Assets | Value | |||
Tobacco | 7.8 | % | $573,120 | ||
Pharmaceuticals | 7.3 | 539,466 | |||
Construction & Engineering | 7.2 | 533,125 | |||
Diversified Banks | 5.4 | 400,753 | |||
Construction & Farm Machinery & Heavy Trucks | 3.8 | 278,379 | |||
Systems Software | 3.7 | 273,959 | |||
Home Entertainment Software | 3.6 | 265,218 | |||
Coal & Consumable Fuels | 3.6 | 263,931 | |||
Life Sciences Tools & Services | 3.4 | 248,169 | |||
Biotechnology | 3.3 | 245,106 | |||
Aerospace & Defense | 3.3 | 244,564 | |||
Money Markets | 3.3 | 239,639 | |||
Retail REIT’s | 3.2 | 236,764 | |||
Property & Casualty Insurance | 2.9 | 215,310 | |||
Housewares & Specialties | 2.6 | 195,221 | |||
Packaged Foods & Meats | 2.4 | 178,899 | |||
Integrated Telecommunication Services | 2.4 | 176,558 | |||
IT Consulting & Other Services | 2.2 | 162,184 | |||
Publishing | 2.2 | 158,839 | |||
Communications Equipment | 2.0 | 143,933 | |||
Specialized Finance | 1.9 | 142,183 | |||
Apparel Retail | 1.6 | 114,564 | |||
Industrial Conglomerates | 1.5 | 112,701 | |||
Hypermarkets & Super Centers | 1.4 | 101,246 | |||
Reinsurance | 1.3 | 95,753 | |||
Electric Utilities | 1.3 | 95,675 | |||
Regional Banks | 1.2 | 86,074 | |||
Restaurants | 1.1 | 84,418 | |||
Gold | 1.1 | 78,778 | |||
Oil & Gas Exploration & Production | 0.9 | 69,175 | |||
Apparel, Accessories & Luxury Goods | 0.8 | 62,562 | |||
Electronic Components | 0.8 | 62,533 |
INVESTMENT CONCENTRATION (continued) | |||||
Industry | % of Net Assets | Value | |||
Managed Health Care | 0.8 | % | $59,948 | ||
Railroads | 0.8 | 59,893 | |||
Brewers | 0.8 | 59,616 | |||
Multi-Utilities | 0.8 | 58,594 | |||
Health Care Distributors | 0.8 | 58,559 | |||
Computer & Electronics Retail | 0.8 | 57,802 | |||
Independent Power Producers & Energy Traders | 0.8 | 57,105 | |||
Health Care Equipment | 0.8 | 55,702 | |||
Electrical Components & Equipment | 0.8 | 55,650 | |||
Health Care Services | 0.7 | 55,426 | |||
Personal Products | 0.8 | 55,328 | |||
General Merchandise Stores | 0.7 | 54,510 | |||
Industrial Machinery | 0.7 | 53,223 | |||
Food Retail | 0.5 | 40,038 | |||
Thrifts & Mortgage Finance | 0.5 | 36,459 | |||
Oil & Gas Equipment & Services | 0.0 | 2,262 | |||
Total Investments | 101.6 | $7,498,914 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $8,400,952.
ADR | American Depositary Receipt | |
plc | Public Limited Company |
* Non-income producing security
1 Security was subject to the fair value trigger at September 30, 2008. The total market value of fair valued securities amounts to $3,022,769, (cost $3,369,736) or 40.9% of total net assets.
2 Security is a PFIC (Passive Foreign Investment Company)
41 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Global Institutional Series
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $7,498,914 | |
Cash | 60,426 | |
Receivables: | ||
Securities sold | 337,986 | |
Interest | 813 | |
Dividends | 17,101 | |
Security Investors | 3,145 | |
Foreign taxes recoverable | 53 | |
Prepaid expenses | 18,166 | |
Total assets | 7,936,604 | |
Liabilities: | ||
Payable for: | ||
Fund shares redeemed | 13,612 | |
Securities purchased | 521,505 | |
Management fees | 6,770 | |
Administration fees | 2,516 | |
Transfer agent/maintenance fees | 22 | |
Custodian fees | 5,505 | |
Directors’ fees | 125 | |
Professional fees | 4,050 | |
Other fees | 500 | |
Total liabilities | 554,605 | |
Net assets | $7,381,999 | |
Net assets consist of: | ||
Paid in capital | $8,534,123 | |
Undistributed net investment income | 6,957 | |
Accumulated net realized loss on sale of investments and foreign currency transactions | (385,665) | |
Net unrealized depreciation in value of investments and translation of assets and liabilities in foreign currencies | (773,416) | |
Net assets | $7,381,999 | |
Capital shares authorized | unlimited | |
Capital shares outstanding | 851,789 | |
Net asset value per share (net assets divided by shares outstanding) | $8.67 | |
*Investments, at cost | $8,275,504 |
Statement of Operations | ||
For the Period Ended September 30, 2008*
| ||
Investment Income: | ||
Dividends (net of foreign withholding tax $1,045) | $29,756 | |
Interest | 5,817 | |
Total investment income | 35,573 | |
Expenses: | ||
Management fees | 18,152 | |
Administration fees | 4,223 | |
Transfer agent/maintenance fees | 57 | |
Custodian fees | 6,000 | |
Directors’ fees | 290 | |
Professional fees | 4,050 | |
Reports to shareholders | 1,052 | |
Registration fees | 1,577 | |
Other | 274 | |
Total expenses | 35,675 | |
Less: | ||
Reimbursement of expenses | (14,800) | |
Net expenses | 20,875 | |
Net investment income | 14,698 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the period on: | ||
Investments | (385,665) | |
Foreign currency transactions | (7,741) | |
Net realized loss | (393,406) | |
Net unrealized appreciation (depreciation) during the period on: | ||
Investments | (776,590) | |
Translation of assets and liabilities in foreign currencies | 3,174 | |
Net unrealized depreciation | (773,416) | |
Net realized and unrealized loss | (1,166,822) | |
Net decrease in net assets resulting from operations | $(1,152,124) | |
* For the period July 11, 2008 (commencement of operations) to September 30, 2008.
42 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund | ||
Statement of Changes in Net Assets
| Global Institutional Series
|
Period Ended September 30, 2008* | ||||
Increase (decrease) in net assets from operations: | ||||
Net investment income | $ | 14,698 | ||
Net realized loss during the period on investments and foreign currency transactions | (393,406 | ) | ||
Net unrealized depreciation during the period on investments and translation of assets and liabilities in foreign currencies | (773,416 | ) | ||
Net decrease in net assets resulting from operations | (1,152,124 | ) | ||
Capital share transactions: | ||||
Proceeds from sale of shares | 8,934,232 | |||
Cost of shares redeemed | (400,109 | ) | ||
Net increase from capital share transactions | 8,534,123 | |||
Net increase in net assets | 7,381,999 | |||
Net assets: | ||||
Beginning of period | – | |||
End of period | $ | 7,381,999 | ||
Undistributed net investment income at end of period | $ | 6,957 | ||
Capital share activity: | ||||
Shares sold | 893,198 | |||
Shares redeemed | (41,409 | ) | ||
Total capital share activity | 851,789 | |||
* For the period July 11, 2008 (commencement of operations) to September 30, 2008.
43 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout the period
| Security Equity Fund Global Institutional Series
| |
Period Ended September 30, 2008a | ||
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment incomeb | 0.02 | |
Net loss on securities (realized and unrealized) | (1.35) | |
Total from investment operations | (1.33) | |
Net asset value, end of period | $8.67 | |
Total Return | (13.30%) | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $7,382 | |
Ratios to average net assets: | ||
Net investment income | 0.87% | |
Total expensesc | 1.97% | |
Net expensesd | 1.15% | |
Net expenses prior to custodian earnings credits and net of expense waivers | 1.15% | |
Portfolio turnover rate | 325% |
a Security Global Institutional Series was initially capitalized on July 11, 2008 with a net asset value of $10 per share. Percentage amounts for the period, except total return, have been annualized.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c Total expense information reflects the expense ratios absent expense reductions by the Investment Manager and earnings credits, as applicable.
d Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
44 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Manager’s Commentary November 14, 2008 | Security Equity Fund | |
Mid Cap Value Series | ||
(unaudited) |
To Our Shareholders:
For the year ended September 30 2008, the Security Equity Fund Mid Cap Value Series lost –12.48%1. This exceeded the –15.79% return of the Series’ benchmark, the Russell 2500 Value Index, and the –21.47% median return of the peer group. |
Our approach with the Mid Cap Value Series is to seek companies that can increase shareholders’ return on capital. We hold such companies over three to five years to capture long–term improvements in profitability.
The investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and thus a valuation target for each idea. We construct the portfolios based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company.
Consumer Discretionary and Industrials Top Performers
Superior stock selection in the consumer discretionary, industrials, information technology, and consumer staples sectors allowed the Mid Cap Value Series to outperform its benchmark in the difficult annual period. The common theme for the portfolio over the fiscal 12 months was losing less than the benchmark as every sector recorded negative returns. Although the industrials, information technology, and consumer staples sectors were all overweight positions in the portfolio, each performed better than the benchmark sectors.
In the consumer discretionary sector, stock selection held the portfolio’s loss to –15% versus a –26% loss for the benchmark. An underweight position in the hard hit sector helped to lesson the damage. Leading the sector was Leggett & Platt, Inc., with a return of 20% over the period.
Industrials lost –9% relative to a –15% loss for the benchmark. Navigant Consulting, Inc., was the best performing holding with a return of 57% over the period. The portfolio was more than 550 basis points overweight the benchmark in information technology and its holdings performed much better, –17% to –28% for the benchmark. Maxwell Technologies, Inc. was the portfolio’s best performer. Portfolio holdings in consumer staples lost –2%, bettering the –14% loss in the benchmark.
Energy and Health Care Disappoint
Energy was the worst performing sector for the portfolio, as it had a more than double the weight against the benchmark and its holdings lost –25% over the period. The largest losses were from Evergreen Energy, Inc., Global Industries, Ltd., and USEC, Inc.
While the health care sector was a small portion of the portfolio and a large underweight, 3% against the benchmark’s 5%, stock selection lowered overall performance. Holdings for the sector in the portfolio were down –17%, as opposed to just –4% loss for the benchmark. Aspect Medical Systems, Inc. was mostly responsible for the loss.
The financials sector continued to be a large underweight, 18% to 32%, but that allocation detracted from performance as the portfolio outperformed the benchmark on a stock selection basis, –15% to –17%. MBIA, Inc. and Redwood Trust, Inc. were leaders for the sector.
Outlook for 2009
The past fiscal year was one of the most difficult in more than a generation. In challenging times our core philosophy and disciplined process becomes paramount. We continue to use a rigorous fundamental research process to identify strong companies from a risk perspective, companies that can provide earnings sustainability and generate excess cash. As the markets move downward, valuations are becoming more reasonable for long-term value investors, and volatility provides buying opportunities.
On behalf of Security Global Investors, I would like to thank you for trusting your investments and goals with us. As always, we continue to do our best to seek the potential available in small and mid-capitalization companies.
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.
45 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Mid Cap Value Series (unaudited) | |
PERFORMANCE
|
$10,000 Over 10 Years
This chart assumes a $10,000 investment in Class A shares of Mid Cap Value Series on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2500 Value Index is an unmanaged index that measures the performance of securities of small-to-mid cap U.S. companies with greater-than-average value orientation.
Average Annual Returns
| ||||||||
Periods Ended 9-30-08
|
1 Year
|
5 Years
|
10 Years
|
Since
| ||||
A Shares
| (12.48%)
| 12.07%
| 15.40%
| –
| ||||
A Shares with sales charge
| (17.52%)
| 10.75%
| 14.71%
| –
| ||||
B Shares
| (13.14%)
| 11.23%
| 14.59%
| –
| ||||
B Shares with CDSC
| (16.52%)
| 10.97%
| 14.59%
| –
| ||||
C Shares
| (13.15%)
| 11.24%
| –
| 12.76%
| ||||
C Shares with CDSC
| (13.83%)
| 11.24%
| –
| 12.76%
| ||||
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 9.12%
| |||||
Consumer Staples
| 6.89
| |||||
Energy
| 9.18
| |||||
Financials
| 14.49
| |||||
Health Care
| 4.21
| |||||
Industrials
| 13.48
| |||||
Information Technology
| 15.44
| |||||
Materials
| 5.78
| |||||
Utilities
| 10.53
| |||||
Exchange Traded Funds
| 2.82
| |||||
Convertible Bonds
| 0.91
| |||||
Commercial Paper
| 1.08
| |||||
U.S. Government Sponsored Agencies
| 6.20
| |||||
Repurchase Agreement
| 1.42
| |||||
Liabilities, Less Cash & Other Assets
| (1.55)
| |||||
Total Net Assets | 100.00% | |||||
46 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Mid Cap Value Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning Account Value 4/1/2008 | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Mid Cap Value | ||||||
Series - Class A | ||||||
Actual | $1,000.00 | $1,007.09 | $6.87 | |||
Hypothetical
| 1,000.00
| 1,018.15
| 6.91
| |||
Mid Cap Value | ||||||
Series - Class B | ||||||
Actual | 1,000.00 | 1,002.83 | 10.61 | |||
Hypothetical
| 1,000.00
| 1,014.40
| 10.68
| |||
Mid Cap Value | ||||||
Series - Class C | ||||||
Actual | 1,000.00 | 1,003.15 | 10.62 | |||
Hypothetical
| 1,000.00
| 1,014.40
| 10.68
|
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was 0.71%, 0.28% and 0.31%, for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (1.37%, 2.12% and 2.12% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
47 |
Table of Contents
Schedule of Investments | Security Equity Fund | |
September 30, 2008 | Mid Cap Value Series |
Shares | Value | |||
COMMON STOCKS - 92.0% | ||||
Aerospace & Defense - 0.4% | ||||
Argon ST, Inc. * | 153,800 | $3,612,762 | ||
Apparel Retail - 3.7% | ||||
Brown Shoe Company, Inc. | 876,500 | 14,357,070 | ||
Chico’s FAS, Inc. * | 655,360 | 3,584,819 | ||
Talbots, Inc. | 1,029,000 | 13,479,900 | ||
31,421,789 | ||||
Apparel, Accessories & Luxury Goods - 2.9% | ||||
Fossil, Inc. * | 236,700 | 6,682,041 | ||
Maidenform Brands, Inc. * | 635,900 | 9,226,909 | ||
Oxford Industries, Inc. | 318,300 | 8,221,689 | ||
24,130,639 | ||||
Application Software - 1.2% | ||||
EPIQ Systems, Inc. * | 579,250 | 7,877,800 | ||
PLATO Learning, Inc. 1,* | 845,700 | 2,401,788 | ||
10,279,588 | ||||
Auto Parts & Equipment - 0.1% | ||||
HydroGen Corporation 1,2,* | 1,260,000 | 428,400 | ||
Biotechnology - 0.3% | ||||
Combinatorx, Inc. 1,* | 866,300 | 2,798,149 | ||
Building Products - 0.8% | ||||
Trex Company, Inc. * | 357,200 | 6,468,892 | ||
Coal & Consumable Fuels - 1.5% | ||||
Evergreen Energy, Inc. * | 3,660,000 | 3,440,400 | ||
USEC, Inc. * | 1,667,100 | 9,019,011 | ||
12,459,411 | ||||
Communications Equipment - 1.2% | ||||
EF Johnson Technologies, Inc. 1,* | 870,000 | 1,087,500 | ||
Symmetricom, Inc. 1,* | 1,749,270 | 8,693,872 | ||
9,781,372 | ||||
Computer Storage & Peripherals - 0.3% | ||||
STEC, Inc. * | 307,300 | 2,366,210 | ||
Construction & Engineering - 3.4% | ||||
Insituform Technologies, Inc. * | 822,300 | 12,301,608 | ||
Quanta Services, Inc. 3,* | 345,300 | 9,326,553 | ||
URS Corporation * | 208,590 | 7,648,995 | ||
29,277,156 | ||||
Construction Materials - 0.9% | ||||
Eagle Materials, Inc. | 318,700 | 7,129,319 | ||
Consumer Finance - 0.7% | ||||
First Marblehead Corporation | 2,401,800 | 5,980,482 | ||
Data Processing & Outsourced Services - 6.8% | ||||
Affiliated Computer Services, Inc. * | 527,500 | 26,707,325 | ||
Computer Sciences Corporation * | 596,800 | 23,949,584 | ||
Gevity HR, Inc. | 809,700 | 5,894,616 | ||
56,551,525 | ||||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Electric Utilities - 5.8% | ||||
Allete, Inc. | 241,739 | $10,757,386 | ||
Empire District Electric Company | 248,170 | 5,298,430 | ||
Great Plains Energy, Inc. | 836,400 | 18,526,259 | ||
Northeast Utilities | 378,900 | 9,718,785 | ||
Westar Energy, Inc. | 200,000 | 4,608,000 | ||
48,908,860 | ||||
Electrical Components & Equipment - 1.2% | ||||
Power-One, Inc. 1,2,* | 5,626,300 | 8,158,135 | ||
UQM Technologies, Inc. * | 517,722 | 1,475,508 | ||
9,633,643 | ||||
Electronic Manufacturing Services - 2.1% | ||||
Maxwell Technologies, | 1,325,300 | 17,679,502 | ||
Exchange Traded Funds - 2.8% | ||||
iShares Russell 2000 Value Index Fund | 180,500 | 12,136,820 | ||
iShares S&P MidCap 400 | 166,300 | 11,424,810 | ||
23,561,630 | ||||
Gas Utilities - 1.4% | ||||
Atmos Energy Corporation | 441,325 | 11,748,072 | ||
Health Care Equipment - 0.3% | ||||
Aspect Medical Systems, Inc. * | 512,100 | 2,662,920 | ||
Health Care Facilities - 1.6% | ||||
Community Health Systems, Inc. * | 449,700 | 13,180,707 | ||
Health Care Services - 2.0% | ||||
Pediatrix Medical Group, | 213,100 | 11,490,352 | ||
Providence Service Corporation * | 90,000 | 882,000 | ||
RehabCare Group, Inc. * | 228,530 | 4,136,393 | ||
16,508,745 | ||||
Highways & Railtracks - 0.5% | ||||
Quixote Corporation 1,2 | 479,100 | 3,928,620 | ||
Home Furnishings - 1.7% | ||||
Leggett & Platt, Inc. | 668,800 | 14,573,152 | ||
Human Resource & Employment Services - 0.8% | ||||
Administaff, Inc. 3 | 232,000 | 6,315,040 | ||
Industrial Machinery - 1.9% | ||||
Briggs & Stratton Corporation | 372,200 | 6,022,196 | ||
Harsco Corporation | 230,800 | 8,583,452 | ||
Thermoenergy | 1,963,964 | 1,040,901 | ||
15,646,549 | ||||
Mortgage REIT’s - 0.0% | ||||
Bimini Capital Management, Inc. 1,2 | 1,474,400 | 221,160 | ||
Multi-Line Insurance - 1.8% | ||||
American Financial Group, Inc. 3 | 499,850 | 14,745,575 | ||
48 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Mid Cap Value Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Multi-Utilities - 3.3% | ||||
NorthWestern Corporation | 564,100 | $14,175,833 | ||
SCANA Corporation | 291,900 | 11,363,667 | ||
TECO Energy, Inc. | 115,700 | 1,819,961 | ||
27,359,461 | ||||
Oil & Gas Drilling - 1.5% | ||||
Helmerich & Payne, Inc. | 281,100 | 12,140,709 | ||
Oil & Gas Equipment & Services - 1.5% | ||||
Global Industries, Ltd. * | 1,759,100 | 12,208,154 | ||
Oil & Gas Exploration & Production - 3.2% | ||||
Edge Petroleum Corporation * | 89,700 | 160,563 | ||
Goodrich Petroleum Corporation * | 89,100 | 3,883,869 | ||
Gulfport Energy Corporation * | 664,000 | 6,673,200 | ||
Newfield Exploration Company 6,* | 236,400 | 7,562,436 | ||
PetroHawk Energy Corporation * | 424,800 | 9,188,424 | ||
27,468,492 | ||||
Oil & Gas Refining & Marketing - 0.0% | ||||
Nova Biosource Fuels, | 2,071,100 | 310,665 | ||
Oil & Gas Storage & Transportation - 1.5% | ||||
Southern Union Company | 590,200 | 12,187,630 | ||
Packaged Foods & Meats - 6.9% | ||||
Hormel Foods Corporation 3 | 642,300 | 23,302,644 | ||
JM Smucker Company | 345,000 | 17,488,050 | ||
Smithfield Foods, Inc. * | 740,900 | 11,765,492 | ||
TreeHouse Foods, Inc. 3,* | 169,700 | 5,040,090 | ||
57,596,276 | ||||
Paper Packaging - 4.0% | ||||
Bemis Company, Inc. | 710,600 | 18,560,872 | ||
Sonoco Products Company | 511,600 | 15,184,288 | ||
33,745,160 | ||||
Paper Products - 0.9% | ||||
Schweitzer-Mauduit International, Inc. | 392,100 | 7,445,979 | ||
Property & Casualty Insurance - 6.3% | ||||
Alleghany Corporation * | 30,785 | 11,236,525 | ||
Assured Guaranty, Ltd. | 342,800 | 5,573,928 | ||
Employers Holdings, Inc. | 271,100 | 4,711,718 | ||
Hanover Insurance Group, Inc. | 326,900 | 14,880,488 | ||
United America Indemnity, Ltd. * | 244,930 | 3,485,354 | ||
W.R. Berkley Corporation | 540,700 | 12,733,485 | ||
52,621,498 | ||||
Publishing - 0.1% | ||||
Valassis Communications, Inc. * | 112,100 | 970,786 | ||
Railroads - 0.2% | ||||
Kansas City Southern * | 42,300 | 1,876,428 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Regional Banks - 5.7% | ||||
Commerce Bancshares, Inc. | 394,800 | $18,318,720 | ||
Old National Bancorp 3 | 158,630 | 3,175,773 | ||
Whitney Holding Corporation | 134,620 | 3,264,535 | ||
Wilmington Trust Corporation | 791,900 | 22,830,477 | ||
47,589,505 | ||||
Research & Consulting Services - 2.6% | ||||
ICF International, Inc. * | 183,240 | 3,618,990 | ||
Navigant Consulting, Inc. * | 918,500 | 18,268,965 | ||
21,887,955 | ||||
Restaurants - 0.6% | ||||
Red Robin Gourmet Burgers, Inc. * | 175,500 | 4,703,400 | ||
Security & Alarm Services - 0.8% | ||||
GeoEye, Inc. * | 305,310 | 6,756,510 | ||
Semiconductor Equipment - 0.7% | ||||
Ultratech, Inc. 3,* | 476,200 | 5,762,020 | ||
Semiconductors - 3.2% | ||||
IXYS Corporation 1,2 | 2,410,360 | 21,910,172 | ||
RF Micro Devices, Inc. * | 1,614,700 | 4,714,924 | ||
26,625,096 | ||||
Trucking - 0.9% | ||||
Old Dominion Freight Line, Inc. * | 61,790 | 1,751,129 | ||
Saia, Inc. * | 413,270 | 5,488,225 | ||
7,239,354 | ||||
TOTAL COMMON STOCKS | ||||
(cost $891,796,347) | $768,494,947 | |||
Shares | Value | |||
WARRANTS - 0.0% | ||||
Lime Energy Company | ||||
$1.00, 3/19/2009 | 4,217 | 4,824 | ||
Nova Biosource Fuels, Inc. | ||||
$2.40, 7/5/2011 | 677,450 | 77,056 | ||
TOTAL WARRANTS | ||||
(cost $1,114,337) | $81,880 | |||
Principal Amount | Value | |||
CONVERTIBLE BONDS - 0.9% | ||||
Electric Utilities - 0.4% | ||||
Power-One, Inc. | ||||
8.00%, 20134,5 | $4,000,000 | $3,291,360 | ||
Metals & Minerals - 0.5% | ||||
USEC, Inc. | ||||
3.00%, 2014 | 7,600,000 | 4,313,000 | ||
TOTAL CONVERTIBLE BONDS | ||||
(cost $11,600,000) | $7,604,360 | |||
Principal Amount | Value | |||
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 6.2% | ||||
Federal Home Loan Bank | ||||
2.05%, 10/1/2008 | $13,800,000 | $13,799,999 | ||
0.25%, 10/2/2008 | 6,000,000 | 5,999,699 | ||
1.80%, 10/3/2008 | 5,000,000 | 4,999,500 | ||
2.15%, 10/7/2008 | 4,000,000 | 3,998,567 |
49 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008
| Security Equity Fund Mid Cap Value Series
|
Principal Amount | Value | |||
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 6.2% (continued) | ||||
2.15%, 10/8/2008 | $5,000,000 | $4,997,910 | ||
0.60%, 10/9/2008 | 5,000,000 | 4,997,611 | ||
0.75%, 10/10/2008 | 5,000,000 | 4,999,063 | ||
0.75%, 10/14/2008 | 4,000,000 | 3,998,917 | ||
2.35%, 10/15/2008 | 4,000,000 | 3,997,667 | ||
TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES | ||||
(cost $51,788,933) | $51,788,933 | |||
Principal Amount | Value | |||
COMMERCIAL PAPER - 1.1% | ||||
Electric - 0.6% | ||||
Florida Power & Light Company | ||||
2.70%, 10/17/2008 | $5,000,000 | $4,994,444 | ||
Financial Companies - | ||||
Captive - 0.5% | ||||
Caterpillar Financial Services Corporation | ||||
2.02%, 10/06/2008 | 4,000,000 | 3,998,878 | ||
TOTAL COMMERCIAL PAPER (cost $8,993,322) | $8,993,322 | |||
Principal Amount | Value | |||
REPURCHASE AGREEMENT - 1.4% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $11,878,482 (Collateralized by FHLB, 1/12/09 with a value of $12,115,560) | $11,878,000 | $11,878,000 | ||
TOTAL REPURCHASE AGREEMENT (cost $11,878,000) | $11,878,000 | |||
Total Investments - 101.6% | ||||
(cost $977,170,939) | $848,841,442 | |||
Liabilities, Less Cash & Other Assets - (1.6)% | (12,964,739) | |||
Total Net Assets - 100.0% | $835,876,703 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $978,436,973.
* Non-income producing security
1 Security is deemed illiquid. The total market value of illiquid securities is $68,348,199 (cost $117,277,972), or 8.2% of total net assets.
2 Investment in an affiliated issuer. See Note 8 in notes to financial statements.
3 Security is segregated as collateral for open written option contracts.
4 Security was acquired through a private placement.
5 Security is a 144A or Section 4(2) security. The total market value of 144A or Section 4(2) securities is $3,291,360 (cost $4,000,000), or 0.4% of total net assets.
6 Portion of security is delayed in delivery due to executing broker’s bankruptcy declaration.
50 |
The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Mid Cap Value Series
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments in unaffiliated issues, at value* | $796,515,453 | |
Investments in affiliated issues, at value** | 52,325,989 | |
Total investments | 848,841,442 | |
Cash | 3,467,256 | |
Receivables: | ||
Fund shares sold | 1,501,883 | |
Securities sold | 3,281,168 | |
Interest | 114,879 | |
Dividends | 2,494,335 | |
Prepaid expenses | 34,488 | |
Total assets | 859,735,451 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 17,982,472 | |
Fund shares redeemed | 1,530,767 | |
Written options, at value (premiums received, $2,492,890) | 3,183,350 | |
Management fees | 561,140 | |
Custodian fees | 7,239 | |
Transfer agent/maintenance fees | 74,290 | |
Administration fees | 66,561 | |
Professional fees | 83,167 | |
12b-1 distribution plan fees | 290,060 | |
Directors’ fees | 19,185 | |
Other | 60,517 | |
Total liabilities | 23,858,748 | |
Net assets | $835,876,703 | |
Net assets consist of: | ||
Paid in capital | $877,052,626 | |
Undistributed net investment income | 2,696,501 | |
Undistributed net realized gain on sale of investments | 85,147,533 | |
Net unrealized depreciation in value of investments | (129,019,957) | |
Net assets | $835,876,703 | |
Class A: | ||
Capital shares outstanding (unlimited number of shares authorized) | 23,092,201 | |
Net assets | $656,044,029 | |
Net asset value and redemption price per share | $28.41 | |
Maximum offering price per share (net asset value divided by 94.25%) | $30.14 | |
Class B: | ||
Capital shares outstanding (unlimited number of shares authorized) | 2,683,436 | |
Net assets | $66,641,073 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $24.83 | |
Class C: | ||
Capital shares outstanding (unlimited number of shares authorized) | 4,439,919 | |
Net assets | $113,191,601 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $25.49 | |
*Investments in unaffiliated issues, at cost | $884,703,128 | |
**Investments in affiliated issues, at cost | 92,467,811 | |
Total cost | $977,170,939 |
Statement of Operations | ||
For the Year Ended September 30, 2008
| ||
Investment Income: | ||
Dividends from securities of unaffiliated issuers | $15,850,892 | |
Dividends from securities of affiliated issuers | 191,640 | |
Interest | 1,362,319 | |
Total investment income | 17,404,851 | |
Expenses: | ||
Management fees | 6,597,936 | |
Transfer agent/maintenance fees | 1,209,563 | |
Administration fees | 774,643 | |
Custodian fees | 66,943 | |
Directors’ fees | 60,575 | |
Professional fees | 104,394 | |
Reports to shareholders | 112,248 | |
Registration fees | 78,755 | |
Other expenses | 66,784 | |
12b-1 distribution fees - Class A | 1,488,368 | |
12b-1 distribution fees - Class B | 809,874 | |
12b-1 distribution fees - Class C | 1,366,775 | |
Total expenses | 12,736,858 | |
Less: | ||
Earnings credits applied | (4) | |
Net expenses | 12,736,854 | |
Net investment income | 4,667,997 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | 106,449,144 | |
Options written | 3,826,428 | |
Net realized gain | 110,275,572 | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (242,429,996) | |
Options written | 4,160,187 | |
Net unrealized depreciation | (238,269,809) | |
Net loss | (127,994,237) | |
Net decrease in net assets resulting from operations | $(123,326,240) | |
51 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets
| Security Equity Fund Mid Cap Value Series
|
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
Increase (decrease) in net assets from operations: | ||||||||
Net investment income | $ | 4,667,997 | $ | 3,825,424 | ||||
Net realized gain during the year on investments | 110,275,572 | 154,819,641 | ||||||
Net unrealized depreciation during the year on investments | (238,269,809 | ) | (47,559,940 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (123,326,240 | ) | 111,085,125 | |||||
Distributions to shareholders from: | ||||||||
Net investment income | ||||||||
Class A | (2,202,928 | ) | (3,593,992 | ) | ||||
Net realized gain | ||||||||
Class A | (121,470,120 | ) | (32,960,688 | ) | ||||
Class B | (20,681,946 | ) | (6,506,572 | ) | ||||
Class C | (34,476,081 | ) | (9,330,424 | ) | ||||
Total distributions to shareholders | (178,831,075 | ) | (52,391,676 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
Class A | 371,736,030 | 245,384,311 | ||||||
Class B | 5,200,948 | 14,976,325 | ||||||
Class C | 15,042,995 | 39,616,310 | ||||||
Distributions reinvested | ||||||||
Class A | 112,053,902 | 32,588,871 | ||||||
Class B | 19,668,106 | 6,199,597 | ||||||
Class C | 32,802,694 | 8,812,100 | ||||||
Cost of shares redeemed | ||||||||
Class A | (301,963,588 | ) | (228,752,745 | ) | ||||
Class B | (31,210,126 | ) | (30,375,678 | ) | ||||
Class C | (55,705,793 | ) | (34,170,836 | ) | ||||
Net increase from capital share transactions | 167,625,168 | 54,278,255 | ||||||
Net increase (decrease) in net assets | (134,532,147 | ) | 112,971,704 | |||||
Net assets: | ||||||||
Beginning of year | 970,408,850 | 857,437,146 | ||||||
End of year | $ | 835,876,703 | $ | 970,408,850 | ||||
Accumulated net investment income at end of year | $ | 2,696,501 | $ | 231,432 | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
Class A | 12,267,686 | 6,118,943 | ||||||
Class B | 184,126 | 409,793 | ||||||
Class C | 518,567 | 1,071,179 | ||||||
Shares reinvested | ||||||||
Class A | 3,657,110 | 840,418 | ||||||
Class B | 730,073 | 176,275 | ||||||
Class C | 1,185,925 | 245,462 | ||||||
Shares redeemed | ||||||||
Class A | (9,688,641 | ) | (5,679,660 | ) | ||||
Class B | (1,117,874 | ) | (828,980 | ) | ||||
Class C | (1,973,041 | ) | (914,344 | ) |
52 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year | Security Equity Fund Mid Cap Value Series | |
Class A | 2008 | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | | |||||
Per Share Data | |||||||||||
Net asset value, beginning of period | $40.79 | $38.27 | $36.34 | $30.45 | $24.48 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment income (loss)a | 0.25 | 0.25 | 0.04 | 0.01 | (0.09) | ||||||
Net gain (loss) on securities (realized and unrealized) | (4.77) | 4.59 | 3.96 | 8.16 | 6.32 | ||||||
Total from investment operations | (4.52) | 4.84 | 4.00 | 8.17 | 6.23 | ||||||
Less distributions: | |||||||||||
Dividends from net investment income | (0.14) | (0.23) | – | – | – | ||||||
Distributions from realized gains | (7.72) | (2.09) | (2.07) | (2.28) | (0.26) | ||||||
Total distributions | (7.86) | (2.32) | (2.07) | (2.28) | (0.26) | ||||||
Net asset value, end of period | $28.41 | $40.79 | $38.27 | $36.34 | $30.45 | ||||||
Total Return b | (12.48%) | 12.96% | 11.44% | 27.77% | 25.59% | ||||||
Ratios/Supplemental Data | |||||||||||
Net assets, end of period (in thousands) | $656,044 | $687,484 | $596,074 | $373,031 | $215,659 | ||||||
Ratios to average net assets: | |||||||||||
Net investment income (loss) | 0.79% | 0.61% | 0.10% | 0.04% | (0.31%) | ||||||
Total expensesc | 1.37% | 1.32% | 1.36% | 1.41% | 1.48% | ||||||
Net expensesd | 1.37% | 1.32% | 1.36% | 1.41% | 1.48% | ||||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.37% | 1.32% | 1.36% | 1.41% | 1.48% | ||||||
Portfolio turnover rate | 68% | 44% | 33% | 19% | 45% | ||||||
Class B | 2008 | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | | |||||
Per Share Data | |||||||||||
Net asset value, beginning of period | $36.78 | $34.76 | $33.43 | $28.37 | $22.99 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment lossa | – | (0.04) | (0.23) | (0.22) | (0.28) | ||||||
Net gain (loss) on securities (realized and unrealized) | (4.23) | 4.15 | 3.63 | 7.56 | 5.92 | ||||||
Total from investment operations | (4.23) | 4.11 | 3.40 | 7.34 | 5.64 | ||||||
Less distributions: | |||||||||||
Distributions from realized gains | (7.72) | (2.09) | (2.07) | (2.28) | (0.26) | ||||||
Total distributions | (7.72) | (2.09) | (2.07) | (2.28) | (0.26) | ||||||
Net asset value, end of period | $24.83 | $36.78 | $34.76 | $33.43 | $28.37 | ||||||
Total Return b | (13.14%) | 12.10% | 10.60% | 26.83% | 24.67% | ||||||
Ratios/Supplemental Data | |||||||||||
Net assets, end of period (in thousands) | $66,641 | $106,179 | $108,784 | $97,664 | $74,650 | ||||||
Ratios to average net assets: | |||||||||||
Net investment loss | (0.01%) | (0.10%) | (0.68%) | (0.72%) | (1.07%) | ||||||
Total expensesc | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Net expensesd | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Portfolio turnover rate | 68% | 44% | 33% | 19% | 45% |
53 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year | Security Equity Fund Mid Cap Value Series | |
Class C | 2008 | 2007 | 2006 | 2005 | Year Ended September 30, 2004 | | |||||
Per Share Data | |||||||||||
Net asset value, beginning of period | $37.54 | $35.43 | $34.03 | $28.85 | $23.37 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment lossa | – | (0.05) | (0.22) | (0.21) | (0.29) | ||||||
Net gain (loss) on securities (realized and unrealized) | (4.33) | 4.25 | 3.69 | 7.67 | 6.03 | ||||||
Total from investment operations | (4.33) | 4.20 | 3.47 | 7.46 | 5.74 | ||||||
Less distributions: | |||||||||||
Distributions from realized gains | (7.72) | (2.09) | (2.07) | (2.28) | (0.26) | ||||||
Total distributions | (7.72) | (2.09) | (2.07) | (2.28) | (0.26) | ||||||
Net asset value, end of period | $25.49 | $37.54 | $35.43 | $34.03 | $28.85 | ||||||
Total Return b | (13.15%) | 12.13% | 10.62% | 26.80% | 24.70% | ||||||
Ratios/Supplemental Data | |||||||||||
Net assets, end of period (in thousands) | $113,192 | $176,746 | $152,579 | $93,887 | $54,133 | ||||||
Ratios to average net assets: | |||||||||||
Net investment loss | (0.01%) | (0.12%) | (0.65%) | (0.71%) | (1.06%) | ||||||
Total expensesc | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Net expensesd | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.12% | 2.07% | 2.11% | 2.16% | 2.23% | ||||||
Portfolio turnover rate | 68% | 44% | 33% | 19% | 45% |
a Net investment income (loss) was computed using average shares outstanding throughout the period.
b 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 shares.
c Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
d Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
54 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Manager’s Commentary November 14, 2008 | Mid Cap Value Institutional Series (unaudited) | |
![]() | To Our Shareholders:
From inception on July 11, 2008 through September 30, 2008, the Security Equity Fund Mid Cap Value Institutional Series gained 6.80%1. This exceeded the 2.47% return of the Series’ benchmark, the Russell 2500 Value Index. | |
Our approach with the Mid Cap Value Institutional Series is to seek companies that can increase shareholders’ return on capital. We hold such companies over three to five years to capture long-term improvements in profitability.
The investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a valuation target for each potential investment. We construct the portfolios based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company.
Materials and Industrials Top Performers
Superior stock selection in materials, industrials, consumer staples, and consumer discretionary sectors allowed the Mid Cap Value Institutional Series to outperform its benchmark.
While underweight the benchmark, stock selection in materials companies made it the leading sector in the portfolio. As the sector sank -13% for the benchmark, the Series benefited from a positive 8% gain. Holdings in Bemis Company, Inc. and Schweitzer-Mauduit International, Inc. were leaders for the portfolio.
The portfolio held an over weight position in the industrials sector and holdings gained 10% compared to just 2% in the benchmark. Trex Company, Inc., Gevity HR, Inc., and Briggs & Stratton Corporation in this sector provided the boost for the portfolio.
Contributing to returns were holdings in the consumer staples and consumer discretionary sectors. The consumer staples sector was a double weight in the portfolio and returned 16%, versus just 4% for the benchmark. The top performing positions were Long Drug Stores and J.M. Smucker Company. While the portfolio was underweight in consumer discretionary holdings, performance of 28% was nearly twice the benchmark’s 14% return. Top contributors included Leggett & Platt, Inc., and Talbots, Inc.
Information Technology and Energy Disappoint
Hurting the Series was an overweight position in the information technology sector in securities that underperformed those in the benchmark, -8% to -5%. With 16% of total assets, the sector was the second largest in the portfolio. The largest detractor in the sector was IXYS Corporation.
As the bubble in energy began to unwind at about the time of Series inception, both the portfolio and the benchmark lost approximately -31% in the sector. A significant overweight in the portfolio pulled overall performance down. Hardest hit positions in the portfolio included Global Industries, Ltd., Newfield Exploration Company, and Helmerich & Payne, Inc.
The health care sector held down overall performance. While an underweight to the benchmark, stock selection caused a –1% loss for the portfolio against a positive 3% gain for the benchmark. A position in Community Health Systems, Inc. was the determining factor of underperformance.
Outlook for 2009
Recent market conditions indicate that the coming fiscal year will be a difficult investment environment. In challenging times our core philosophy and disciplined process becomes paramount. We continue to use a rigorous fundamental research process to identify strong companies from a risk perspective, companies that can provide earnings sustainability and generate excess cash. As the markets moves downward, valuations are becoming more reasonable for long-term value investors, and volatility provides buying opportunities.
On behalf of Security Global Investors, I would like to thank you for trusting your investments and financial goals with us. We will continue to do our best to identify companies with the greatest potential returns with a focus on risk management.
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. Investment in international securities entail greater risks than investment in domestic securities. Fee waivers and/or reimbursements reduce the Series expenses and in the absence of such waivers, the performance quoted would be reduced.
55 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Mid Cap Value Institutional Series (unaudited) | |
PERFORMANCE
|
$10,000 Since Inception
This chart assumes a $10,000 investment in shares of Mid Cap Value Institutional Series on July 11, 2008 (date of Inception) and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2500 Value Index is an unmanaged index that measures the performance of securities of small-to-mid cap U.S. companies with greater-than-average value orientation.
Average Annual Returns
| ||
Periods Ended 9-30-08
|
Since Inception (7-11-08)
| |
Mid Cap Value Institutional Series
|
6.80%
| |
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 9.89%
| |||||
Consumer Staples
| 7.16
| |||||
Energy
| 9.27
| |||||
Financials
| 16.31
| |||||
Health Care
| 4.08
| |||||
Industrials
| 14.47
| |||||
Information Technology
| 17.59
| |||||
Materials
| 6.11
| |||||
Utilities
| 11.98
| |||||
Repurchase Agreement
| 3.45
| |||||
Liabilities, Less Cash & Other Assets
| (0.31)
| |||||
Total Net Assets |
100.00% | |||||
56 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Mid Cap Value Institutional Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 11, 2008 (commencement of operations) through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
Series Expenses | |||||||||
| Beginning Account Value |
| Ending Account Value 9/30/20081 |
| Expenses Paid During Period2 | ||||
Mid Cap Value Institutional Series | |||||||||
Actual | $ | 1,000.00 | $ | 1,068.00 | $ | 2.52 | |||
Hypothetical
| 1,000.00
| 1,008.63
| 2.44
|
* Commencement of operations
1 The actual ending account value is based on the actual total return of the Series for the period July 11, 2008 (commencement of operations) to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 11, 2008 (commencement of operations) to September 30, 2008 was 6.80%.
2 Expenses are equal to the Series annualized expense ratio of 1.10%, net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 81/366 (to reflect the period since commencement of operations).
57 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Mid Cap Value Institutional Series | |
Shares | Value | |||
COMMON STOCKS - 96.9% | ||||
Aerospace & Defense - 0.5% | ||||
Argon ST, Inc. * | 3,400 | $79,866 | ||
Apparel Retail - 4.4% | ||||
Brown Shoe Company, Inc. | 19,800 | 324,324 | ||
Chico’s FAS, Inc. * | 12,460 | 68,156 | ||
Talbots, Inc. | 28,500 | 373,350 | ||
765,830 | ||||
Apparel, Accessories & | ||||
Luxury Goods - 3.0% | ||||
Fossil, Inc. * | 5,500 | 155,265 | ||
Maidenform Brands, Inc. * | 13,100 | 190,081 | ||
Oxford Industries, Inc. | 6,800 | 175,644 | ||
520,990 | ||||
Application Software - 1.1% | ||||
EPIQ Systems, Inc. * | 13,800 | 187,680 | ||
Biotechnology - 0.3% | ||||
Combinatorx, Inc. 1,* | 14,800 | 47,804 | ||
Building Products - 1.0% | ||||
Trex Company, Inc. * | 9,300 | 168,423 | ||
Coal & Consumable Fuels - 2.3% | ||||
Evergreen Energy, Inc. * | 108,700 | 102,178 | ||
USEC, Inc. * | 55,300 | 299,173 | ||
401,351 | ||||
Communications Equipment - 1.4% | ||||
Symmetricom, Inc. 1,* | 50,800 | 252,476 | ||
Computer Storage & | ||||
Peripherals - 0.4% | ||||
STEC, Inc. * | 8,200 | 63,140 | ||
Construction & Engineering - 3.7% | ||||
Insituform Technologies, Inc. * | 16,900 | 252,824 | ||
Quanta Services, Inc. 2, * | 8,500 | 229,585 | ||
URS Corporation * | 4,590 | 168,315 | ||
650,724 | ||||
Construction Materials - 0.9% | ||||
Eagle Materials, Inc. | 6,900 | 154,353 | ||
Consumer Finance - 1.2% | ||||
First Marblehead Corporation | 82,600 | 205,674 | ||
Data Processing & Outsourced | ||||
Services - 7.7% | ||||
Affiliated Computer Services, Inc. * | 11,700 | 592,371 | ||
Computer Sciences Corporation * | 12,700 | 509,651 | ||
Gevity HR, Inc. | 32,800 | 238,784 | ||
1,340,806 | ||||
Electric Utilities - 7.3% | ||||
Allete, Inc. | 4,908 | 218,406 | ||
Empire District Electric Company | 8,500 | 181,475 | ||
Great Plains Energy, Inc. | 16,300 | 361,045 | ||
Northeast Utilities | 9,900 | 253,935 | ||
Westar Energy, Inc. | 11,400 | 262,656 | ||
1,277,517 | ||||
Shares | Value | ||||
COMMON STOCKS (continued) | |||||
Electrical Components & | |||||
Equipment - 1.6% | |||||
Power-One, Inc. 1,* | 164,700 | $ | 238,815 | ||
UQM Technologies, Inc. * | 12,000 | 34,200 | |||
273,015 | |||||
Electronic Manufacturing | |||||
Services - 2.4% | |||||
Maxwell Technologies, Inc. 1,* | 30,900 | 412,206 | |||
Gas Utilities - 1.4% | |||||
Atmos Energy Corporation | 9,500 | 252,890 | |||
Health Care Equipment - 0.3% | |||||
Aspect Medical Systems, Inc. * | 9,400 | 48,880 | |||
Health Care Facilities - 1.2% | |||||
Community Health Systems, Inc. * | 7,300 | 213,963 | |||
Health Care Services - 2.3% | |||||
Pediatrix Medical Group, Inc. * | 5,100 | 274,992 | |||
Providence Service Corporation * | 2,300 | 22,540 | |||
RehabCare Group, Inc. * | 5,660 | 102,446 | |||
399,978 | |||||
Home Furnishings - 1.8% | |||||
Leggett & Platt, Inc. | 14,600 | 318,134 | |||
Human Resource & Employment Services - 0.8% | |||||
Administaff, Inc. 2 | 5,200 | 141,544 | |||
Industrial Machinery - 1.8% | |||||
Briggs & Stratton Corporation | 8,800 | 142,384 | |||
Harsco Corporation | 4,500 | 167,355 | |||
309,739 | |||||
Multi-Line Insurance - 1.8% | |||||
American Financial Group, Inc. 2 | 10,800 | 318,600 | |||
Multi-Utilities - 3.2% | |||||
NorthWestern Corporation | 11,500 | 288,995 | |||
SCANA Corporation | 6,900 | 268,617 | |||
557,612 | |||||
Oil & Gas Drilling - 1.2% | |||||
Helmerich & Payne, Inc. | 5,000 | 215,950 | |||
Oil & Gas Equipment & | |||||
Services - 1.4% | |||||
Global Industries, Ltd. * | 35,300 | 244,982 | |||
Oil & Gas Exploration & | |||||
Production - 2.9% | |||||
Goodrich Petroleum Corporation * | 1,700 | 74,103 | |||
Gulfport Energy Corporation * | 9,300 | 93,465 | |||
Newfield Exploration Company 3* | 6,200 | 198,338 | |||
PetroHawk Energy Corporation * | 6,800 | 147,084 | |||
512,990 | |||||
Oil & Gas Storage & | |||||
Transportation - 1.4% | |||||
Southern Union Company | 11,700 | 241,605 | |||
58 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Mid Cap Value Institutional Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Packaged Foods & Meats - 7.2% | ||||
Hormel Foods Corporation 2 | 13,000 | $471,640 | ||
JM Smucker Company | 7,700 | 390,313 | ||
Smithfield Foods, Inc. * | 18,200 | 289,016 | ||
TreeHouse Foods, Inc. 2,* | 3,300 | 98,010 | ||
1,248,979 | ||||
Paper Packaging - 4.1% | ||||
Bemis Company, Inc. | 14,700 | 383,964 | ||
Sonoco Products Company | 10,900 | 323,512 | ||
707,476 | ||||
Paper Products - 1.2% | ||||
Schweitzer-Mauduit International, Inc. | 10,700 | 203,193 | ||
Property & Casualty Insurance - 7.3% | ||||
Alleghany Corporation * | 800 | 292,000 | ||
Assured Guaranty, Ltd. | 11,200 | 182,112 | ||
Employers Holdings, Inc. | 6,600 | 114,708 | ||
Hanover Insurance Group, Inc. | 6,800 | 309,536 | ||
United America Indemnity, Ltd. * | 6,300 | 89,649 | ||
W.R. Berkley Corporation | 11,900 | 280,245 | ||
1,268,250 | ||||
Publishing - 0.1% | ||||
Valassis Communications, Inc. * | 2,600 | 22,516 | ||
Regional Banks - 6.0% | ||||
Commerce Bancshares, Inc. | 8,600 | 399,040 | ||
Old National Bancorp 2 | 4,490 | 89,890 | ||
Whitney Holding Corporation | 3,710 | 89,968 | ||
Wilmington Trust Corporation | 16,410 | 473,100 | ||
1,051,998 | ||||
Research & Consulting Services - 2.5% | ||||
ICF International, Inc. * | 4,340 | 85,715 | ||
Navigant Consulting, Inc. * | 17,800 | 354,042 | ||
439,757 | ||||
Restaurants - 0.5% | ||||
Red Robin Gourmet Burgers, Inc. * | 3,600 | 96,480 | ||
Security & Alarm Services - 1.2% | ||||
GeoEye, Inc. * | 9,200 | 203,596 | ||
Semiconductor Equipment - 1.2% | ||||
Ultratech, Inc. 2,* | 17,300 | 209,330 | ||
Semiconductors - 3.4% | ||||
IXYS Corporation 1 | 53,930 | 490,224 | ||
RF Micro Devices, Inc. * | 38,100 | 111,252 | ||
601,476 | ||||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Trucking - 1.5% | ||||
Old Dominion Freight Line, Inc. * | 2,770 | $78,502 | ||
Saia, Inc. * | 13,400 | 177,952 | ||
256,454 | ||||
TOTAL COMMON STOCKS (cost $16,738,932) | $16,888,227 | |||
Principal Amount | Value | |||
REPURCHASE AGREEMENT - 3.4% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $602,024 (Collateralized by U.S. Treasury Note, 4.625%, 7/31/09 with a value of $602,011) | $602,000 | $602,000 | ||
TOTAL REPURCHASE AGREEMENT (cost $602,000) | $602,000 | |||
Total Investments - 100.3% | ||||
(cost $17,340,932) | $17,490,227 | |||
Liabilities, Less Cash & Other Assets - (0.3)% | (54,317) | |||
Total Net Assets - 100.0% | $17,435,910 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $17,340,932.
* Non-income producing security
1 Security is deemed illiquid. The total market value of illiquid securities is $1,441,525 (cost $1,586,825), or 8.3% of total net assets.
2 Security is segregated as collateral for open written option contracts.
3 Portion of security is delayed in delivery due to executing broker’s bankruptcy declaration.
59 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund
Mid Cap Value Institutional Series
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $17,490,227 | |
Cash | 90,881 | |
Receivables: | ||
Fund shares sold | 2,973 | |
Securities sold | 64,209 | |
Dividends | 59,732 | |
Prepaid expenses | 17,661 | |
Total assets | 17,725,683 | |
Liabilities: | ||
Payable for: | ||
Fund shares redeemed | 9,452 | |
Securities purchased | 177,447 | |
Written options, at value (premiums received $60,754) | 77,630 | |
Management fees | 11,361 | |
Administration fees | 1,889 | |
Transfer agent/maintenance fees | 26 | |
Custodian fees | 6,000 | |
Directors’ fees | 250 | |
Professional fees | 4,050 | |
Security Investors | 1,668 | |
Total liabilities | 289,773 | |
Net assets | $17,435,910 | |
Net assets consist of: | ||
Paid in capital | $16,291,678 | |
Undistributed net investment income | 70,820 | |
Undistributed net realized gain on sale of investments | 940,993 | |
Net unrealized appreciation in value of investments | 132,419 | |
Net assets | $17,435,910 | |
Capital shares authorized | unlimited | |
Capital shares outstanding | 1,632,553 | |
Net asset value per share (net assets divided by shares outstanding) | $10.68 | |
*Investments, at cost | $17,340,932 |
Statement of Operations | ||
For the Period Ended September 30, 2008*
| ||
Investment Income: | ||
Dividends | $108,480 | |
Interest | 5,287 | |
Total investment income | 113,767 | |
Expenses: | ||
Management fees | 29,282 | |
Administration fees | 4,159 | |
Transfer agent/maintenance fees | 65 | |
Custodian fees | 6,000 | |
Directors’ fees | 605 | |
Professional fees | 4,050 | |
Reports to shareholders | 500 | |
Registration fees | 1,577 | |
Other | 76 | |
Total expenses | 46,314 | |
Less: | ||
Reimbursement of expenses | (3,367) | |
Net expenses | 42,947 | |
Net investment income | 70,820 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the period on: | ||
Investments | 933,655 | |
Options written | 7,338 | |
Net realized gain | 940,993 | |
Net unrealized appreciation (depreciation) during the period on: | ||
Investments | 149,295 | |
Options written | (16,876) | |
Net unrealized appreciation | 132,419 | |
Net realized and unrealized gain | 1,073,412 | |
Net increase in net assets resulting from operations | $1,144,232 | |
* For the period July 11, 2008 (commencement of operations) to September 30, 2008. |
60 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets
| Security Equity Fund
Mid Cap Value Institutional Series
| |
Period Ended September 30, 2008* | ||||
Increase (decrease) in net assets from operations: | ||||
Net investment income | $ | 70,820 | ||
Net realized gain during the period on investments | 940,993 | |||
Net unrealized appreciation during the period on investments | 132,419 | |||
Net increase in net assets resulting from operations | 1,144,232 | |||
Capital share transactions: | ||||
Proceeds from sale of shares | 17,301,324 | |||
Cost of shares redeemed | (1,009,646 | ) | ||
Net increase from capital share transactions | 16,291,678 | |||
Net increase in net assets | 17,435,910 | |||
Net assets: | ||||
Beginning of period | – | |||
End of period | $ | 17,435,910 | ||
Undistributed net investment income at end of period | $ | 70,820 | ||
Capital share activity: | ||||
Shares sold | 1,725,544 | |||
Shares redeemed | (92,991 | ) | ||
Total capital share activity | 1,632,553 | |||
* | For the period July 11, 2008 (commencement of operations) to September 30, 2008. |
61 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout the period
|
Security Equity Fund Mid Cap Value Institutional Series | |
Period Ended September 30, 2008a | ||
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment incomeb | 0.04 | |
Net gain on securities (realized and unrealized) | 0.64 | |
Total from investment operations | 0.68 | |
Net asset value, end of period | $10.68 | |
Total Return | 6.80% | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $17,436 | |
Ratios to average net assets: | ||
Net investment income | 1.81% | |
Total expensesc | 1.19% | |
Net expensesd | 1.10% | |
Net expenses prior to custodian earnings credits and net of expense waivers | 1.10% | |
Portfolio turnover rate | 63% |
a Security Mid Cap Value Institutional Series was initially capitalized on July 11, 2008 with a net asset value of $10 per share. Percentage amounts for the period, except total return, have been annualized.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c Total expense information reflects the expense ratios absent expense reductions by the Investment Manager and earnings credits, as applicable.
d Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
62 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Manager’s Commentary November 14, 2008 | Select 25 Series (unaudited) | |
![]() | To Our Shareholders:
Security Equity Fund Select 25 Series returned –28.85%1 in the period, lagging the benchmark Russell 1000 Growth Index’s return of –20.88% and trailing the Series’ peer group median return of –23.02%. | |
Our strategy is to buy companies that are trading at a significant discount to their intrinsic value. Our investment approach is a defined and disciplined process of three clear philosophical tenets that drive our investment decisions: a valuation focus, a long-term perspective and an opportunistic approach.
This investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a valuation target for each potential investment. We construct the portfolios based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company. We structure the portfolio with 25-30 names. This philosophy is applied to a broad range of growth names.
Health Care and Consumer Discretionary Top Performers
The health care sector provided the biggest boost to returns for the portfolio. While slightly underweight relative to the benchmark, the Series returned a positive 5%, compared to the –12% loss for the benchmark. Celgene Corporation, Covance, Inc., and Gilead Sciences, Inc. were all positive contributors in the sector for the portfolio.
While the Series posted a –14% loss in the consumer discretionary sector, the magnitude of the difference with the benchmark, which lost –26%, helped the portfolio’s relative performance. The best performing holdings in the sector included McDonald’s Corporation, Walt Disney Company, and Nike, Inc.
Financials, Industrials, and Information Technology Disappoint
The financials sector meltdown over the fiscal year dramatically affected performance of the Series. Not only did the portfolio have a double-weight position in the sector, amounting to nearly 14% of total assets, stock
selection significantly underperformed the benchmark with a loss of –50% versus a –31% loss for the Russell 1000 Growth Index. The largest detractors included First Marblehead Corporation, American International Group, Inc., and Capital One Financial Corporation.
The industrials sector suffered from stock selection, as it was a slight overweight against the benchmark. The sector dropped –38% for the fiscal year, compared to a –26% loss for the benchmark. Holdings pulling down performance included Deere & Company, Textron, Inc., and FedEx Corporation.
While under weight relative to the benchmark, the information technology sector was the Series’ largest, amounting to 22% of total portfolio assets. While returns for the market as a whole suffered with a –22% loss, the portfolio holdings were down –32%. Hurting the portfolio were positions in MEMC Electronic Materials, Inc., Google, Inc., and ADC Telecommunications, Inc.
2009 Market Outlook
We understand that the markets and world financial systems are in a unique situation and that it will take time for corrections to take place. During these times, we remain committed to our disciplined approach to selecting stocks and portfolio construction.
Our bottom-up approach looks at market uncertainty in the context of the potential long-term impact on individual companies. Volatility can provide investment opportunity. We continue to focus on identifying companies with the ability to be substantially better over the next three to five years. We are confident in our ability to identify these companies.
We believe that investing is a long-term pursuit that requires patience and a consistent approach. We recognize there are many investment fund alternatives available today and thank you for your business and the confidence you place in us.
Sincerely,
Mark Bronzo
Senior Portfolio Manager
1 Performance figures are based on Class A shares and do not reflect deductions of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce the Series expenses and in the absence of such waivers the performance quoted would be reduced.
63 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Select 25 Series (unaudited) | |
PERFORMANCE
|
$10,000 Since Inception
This chart assumes a $10,000 investment in Class A shares of Select 25 Series on January 29, 1999 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends are reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Growth Index is an unmanaged capitalization-weighted index which includes stocks incorporated in the United States and its territories and measures the performance of the Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Average Annual Returns
| ||||||
Periods Ended 9-30-08
|
1 Year
|
5 Years
|
Since (1-29-99)
| |||
A Shares
| (28.85%)
| 0.85%
| (2.82%)
| |||
A Shares with sales charge
| (32.94%)
| (0.33%)
| (3.41%)
| |||
B Shares
| (29.36%)
| 0.09%
| (3.40%)
| |||
Shares with CDSC
| (32.56%)
| (0.28%)
| (3.40%)
| |||
C Shares
| (29.37%)
| 0.09%
| (3.49%)
| |||
C Shares with CDSC
| (30.01%)
| 0.09%
| (3.49%)
|
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||||
Consumer Discretionary
| 11.04%
| |||||||
Consumer Staples
| 10.59
| |||||||
Energy
| 6.13
| |||||||
Financials
| 3.15
| |||||||
Health Care
| 14.69
| |||||||
Industrials
| 13.59
| |||||||
Information Technology
| 26.95
| |||||||
Materials
| 8.92
| |||||||
Repurchase Agreement
| 3.60
| |||||||
Cash & Other Assets, Less Liabilities
| 1.34
| |||||||
Total Net Assets | 100.00% | |||||||
64 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Select 25 Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning Account Value 4/1/2008 | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Select 25 Series - Class A | ||||||
Actual | $1,000.00 | $839.61 | $6.21 | |||
Hypothetical
| 1,000.00
| 1,018.25
| 6.81
| |||
Select 25 Series - Class B | ||||||
Actual | 1,000.00 | 836.60 | 9.64 | |||
Hypothetical
| 1,000.00
| 1,014.50
| 10.58
| |||
Select 25 Series - Class C | ||||||
Actual | 1,000.00 | 835.94 | 9.64 | |||
Hypothetical
| 1,000.00
| 1,014.50
| 10.58
|
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (16.04%), (16.34%) and (16.41%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (1.35%, 2.10% and 2.10% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
65 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Select 25 Series | |
Shares | Value | |||
COMMON STOCKS - 95.1% | ||||
Aerospace & Defense - 3.0% | ||||
Honeywell International, Inc. | 26,030 | $1,081,547 | ||
Asset Management & Custody Banks - 3.1% | ||||
Bank of New York Mellon Corporation | 35,405 | 1,153,495 | ||
Biotechnology - 7.3% | ||||
Celgene Corporation * | 17,755 | 1,123,536 | ||
Gilead Sciences, Inc. * | 34,075 | 1,553,138 | ||
2,676,674 | ||||
Cable & Satellite - 2.1% | ||||
Comcast Corporation | 39,110 | 767,729 | ||
Communications Equipment - 8.4% | ||||
Cisco Systems, Inc. * | 35,135 | 792,646 | ||
Corning, Inc. | 50,930 | 796,545 | ||
Qualcomm, Inc. | 21,220 | 911,822 | ||
Research In Motion, Ltd. * | 8,515 | 581,575 | ||
3,082,588 | ||||
Computer Hardware - 7.8% | ||||
Apple, Inc. * | 11,850 | 1,346,871 | ||
Hewlett-Packard Company | 32,660 | 1,510,198 | ||
2,857,069 | ||||
Construction & Farm Machinery & Heavy Trucks - 2.7% | ||||
Deere & Company | 19,715 | 975,893 | ||
Data Processing & Outsourced Services - 2.5% | ||||
Visa, Inc. | 14,900 | 914,711 | ||
Drug Retail - 4.3% | ||||
CVS Caremark Corporation | 46,900 | 1,578,654 | ||
Electrical Components & | ||||
Equipment - 3.9% | ||||
Emerson Electric Company | 35,095 | 1,431,525 | ||
Fertilizers & Agricultural | ||||
Chemicals - 6.2% | ||||
Monsanto Company | 11,485 | 1,136,785 | ||
Mosaic Company | 16,750 | 1,139,671 | ||
2,276,456 | ||||
Footwear - 3.3% | ||||
Nike, Inc. (Cl.B) | 18,220 | 1,218,918 | ||
Home Improvement Retail - 2.2% | ||||
Lowe’s Companies, Inc. | 33,750 | 799,538 | ||
Industrial Gases - 2.7% | ||||
Air Products & Chemicals, Inc. | 14,460 | 990,365 | ||
Internet Software & Services - 4.0% | ||||
Google, Inc. * | 3,640 | 1,457,893 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Life Sciences Tools & | ||||
Services - 4.2% | ||||
Thermo Fisher Scientific, Inc. * | 28,105 | $1,545,775 | ||
Oil & Gas Drilling - 6.1% | ||||
Nabors Industries, Ltd. * | 43,560 | 1,085,515 | ||
Transocean, Inc. | 10,540 | 1,157,714 | ||
2,243,229 | ||||
Packaged Foods & Meats - 3.0% | ||||
General Mills, Inc. | 15,925 | 1,094,366 | ||
Pharmaceuticals - 3.2% | ||||
Johnson & Johnson | 16,700 | 1,156,976 | ||
Railroads - 4.1% | ||||
Burlington Northern Santa Fe Corporation | 16,090 | 1,487,198 | ||
Restaurants - 3.4% | ||||
McDonald’s Corporation | 20,360 | 1,256,212 | ||
Soft Drinks - 3.3% | ||||
PepsiCo, Inc. | 16,900 | 1,204,463 | ||
Systems Software - 4.3% | ||||
Oracle Corporation * | 76,715 | 1,558,082 | ||
TOTAL COMMON STOCKS | ||||
(cost $40,072,628) | $34,809,356 | |||
�� | Principal Amount | Value | ||
REPURCHASE AGREEMENT - 3.6% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $1,318,053 (Collateralized by FHLB, 5.45%, 10/17/11 and GNR 2008 77-PC, 4.25%, 11/20/36 with values of $400,091 and $944,463 respectively) | $1,318,000 | $1,318,000 | ||
TOTAL REPURCHASE AGREEMENT | ||||
(cost $1,318,000) | $1,318,000 | |||
Total Investments - 98.7% | ||||
(cost $41,390,628) | $36,127,356 | |||
Cash & Other Assets, Less Liabilities - 1.3% | 490,230 | |||
Total Net Assets - 100.0% | $36,617,586 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $41,483,646.
* Non-income producing security
66 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund Select 25 Series | ||
Statement of Assets and Liabilities
September 30, 2008
Assets: | |||
Investments, at value* | $36,127,356 | ||
Cash | 858 | ||
Receivables: | |||
Fund shares sold | 2,407 | ||
Securities sold | 514,778 | ||
Dividends | 35,472 | ||
Security Investors | 11,361 | ||
Prepaid expenses | 10,550 | ||
Total assets | 36,702,782 | ||
Liabilities: | |||
Payable for: | |||
Fund shares redeemed | 13,591 | ||
Management fees | 24,641 | ||
Custodian fees | 59 | ||
Transfer agent/maintenance fees | 11,241 | ||
Administration fees | 3,181 | ||
Professional fees | 10,761 | ||
12b-1 distribution plan fees | 16,900 | ||
Directors’ fees | 930 | ||
Other | 3,892 | ||
Total liabilities | 85,196 | ||
Net assets | $36,617,586 | ||
Net assets consist of: | |||
Paid in capital | $55,663,418 | ||
Accumulated net realized loss on sale of investments | (13,782,560 | ) | |
Net unrealized depreciation in value of investments | (5,263,272 | ) | |
Net assets | $36,617,586 | ||
Class A: | |||
Capital shares outstanding (unlimited number of shares authorized) | 3,433,979 | ||
Net assets | $23,723,471 | ||
Net asset value and redemption price per share | $6.91 | ||
Maximum offering price per share (net asset value divided by 94.25%) | $7.33 | ||
Class B: | |||
Capital shares outstanding (unlimited number of shares authorized) | 1,155,807 | ||
Net assets | $7,393,583 | ||
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $6.40 | ||
Class C: | |||
Capital shares outstanding | |||
(unlimited number of shares authorized) | 856,691 | ||
Net assets | $5,500,532 | ||
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $6.42 | ||
*Investments, at cost | $41,390,628 |
Statement of Operations
For the Year Ended September 30, 2008
Investment Income: | ||
Dividends | $494,456 | |
Interest | 66,000 | |
Total investment income | 560,456 | |
Expenses: | ||
Management fees | 364,457 | |
Transfer agent/maintenance fees | 233,292 | |
Administration fees | 46,475 | |
Custodian fees | 4,167 | |
Directors’ fees | 3,106 | |
Professional fees | 16,405 | |
Reports to shareholders | 6,197 | |
Registration fees | 33,047 | |
Other expenses | 5,187 | |
12b-1 distribution fees - Class A | 75,866 | |
12b-1 distribution fees - Class B | 100,010 | |
12b-1 distribution fees - Class C | 82,468 | |
Total expenses | 970,677 | |
Less: | ||
Reimbursement of expenses - Class A | (112,265) | |
Reimbursement of expenses - Class B | (36,874) | |
Reimbursement of expenses - Class C | (29,223) | |
Net expenses | 792,315 | |
Net investment loss | (231,859) | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | (5,269,391) | |
Net realized loss | (5,269,391) | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (10,067,708) | |
Net unrealized depreciation | (10,067,708) | |
Net loss | (15,337,099) | |
Net decrease in net assets resulting from operations | $(15,568,958) | |
67 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets | Security Equity Fund
Select 25 Series |
Year Ended
| Year Ended
| |||||
Increase (decrease) in net assets from operations: | ||||||
Net investment loss | $ | (231,859) | $ | (257,870) | ||
Net realized gain (loss) during the year on investments | (5,269,391) | 7,853,362 | ||||
Net unrealized depreciation during the year on investments | (10,067,708) | (3,244,239) | ||||
Net increase (decrease) in net assets resulting from operations | (15,568,958) | 4,351,253 | ||||
Distributions to shareholders from: | ||||||
Net realized gain | ||||||
Class A | (2,418,632) | – | ||||
Class B | (850,835) | – | ||||
Class C | (907,367) | – | ||||
Total distributions to shareholders | (4,176,834) | – | ||||
Capital share transactions: | ||||||
Proceeds from sale of shares | ||||||
Class A | 14,423,069 | 10,493,477 | ||||
Class B | 4,664,269 | 1,517,578 | ||||
Class C | 1,014,911 | 1,462,460 | ||||
Distributions reinvested | ||||||
Class A | 2,377,173 | – | ||||
Class B | 845,322 | – | ||||
Class C | 902,367 | – | ||||
Cost of shares redeemed | ||||||
Class A | (11,428,342) | (12,657,596) | ||||
Class B | (4,903,980) | (7,738,929) | ||||
Class C | (4,018,565) | (3,869,582) | ||||
Net increase (decrease) from capital share transactions | 3,876,224 | (10,792,592) | ||||
Net decrease in net assets | (15,869,568) | (6,441,339) | ||||
Net assets: | ||||||
Beginning of year | 52,487,154 | 58,928,493 | ||||
End of year | $ | 36,617,586 | $ | 52,487,154 | ||
Accumulated net investment income at end of year | $ | – | $ | – | ||
Capital share activity: | ||||||
Shares sold | ||||||
Class A | 1,645,603 | 1,014,621 | ||||
Class B | 569,560 | 155,252 | ||||
Class C | 122,944 | 148,937 | ||||
Shares reinvested | ||||||
Class A | 269,520 | – | ||||
Class B | 102,963 | – | ||||
Class C | 109,511 | – | ||||
Shares redeemed | ||||||
Class A | (1,330,365) | (1,216,006) | ||||
Class B | (602,152) | (792,758) | ||||
Class C | (495,291) | (394,683) |
68 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund | |
Selected data for each share of capital stock outstanding throughout each year | Select 25 Series |
Class A | 2008a | 2007 | 2006b | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $10.66 | $9.86 | $9.36 | $7.81 | $7.27 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossc | (0.02) | (0.01) | (0.06) | (0.07) | (0.06) | |||||
Net gain (loss) on securities (realized and unrealized) | (2.87) | 0.81 | 0.56 | 1.62 | 0.60 | |||||
Total from investment operations | (2.89) | 0.80 | 0.50 | 1.55 | 0.54 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.86) | – | – | – | – | |||||
Total distributions | (0.86) | – | – | – | – | |||||
Net asset value, end of period | $6.91 | $10.66 | $9.86 | $9.36 | $7.81 | |||||
Total Return d | (28.85%) | 8.11% | 5.34% | 19.85% | 7.43% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $23,723 | $30,375 | $30,078 | $8,912 | $9,228 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.20%) | (0.10%) | (0.68%) | (0.79%) | (0.75%) | |||||
Total expensese | 1.72% | 1.57% | 1.76% | 1.67% | 1.56% | |||||
Net expensesf | 1.35% | 1.40% | 1.76% | 1.67% | 1.56% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.35% | 1.40% | 1.76% | 1.67% | 1.56% | |||||
Portfolio turnover rate | 198% | 21% | 39% | 13% | 44% | |||||
Class B | 2008a | 2007 | 2006b | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $10.01 | $9.33 | $8.92 | $7.50 | $7.04 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossc | (0.08) | (0.09) | (0.13) | (0.13) | (0.11) | |||||
Net gain (loss) on securities (realized and unrealized) | (2.67) | 0.77 | 0.54 | 1.55 | 0.57 | |||||
Total from investment operations | (2.75) | 0.68 | 0.41 | 1.42 | 0.46 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.86) | – | – | – | – | |||||
Total distributions | (0.86) | – | – | – | – | |||||
Net asset value, end of period | $6.40 | $10.01 | $9.33 | $8.92 | $7.50 | |||||
Total Return d | (29.36%) | 7.29% | 4.60% | 18.93% | 6.53% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $7,394 | $10,868 | $16,073 | $7,000 | $7,333 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.95%) | (0.88%) | (1.46%) | (1.54%) | (1.50%) | |||||
Total expensese | 2.47% | 2.32% | 2.53% | 2.42% | 2.31% | |||||
Net expensesf | 2.10% | 2.15% | 2.53% | 2.42% | 2.31% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.10% | 2.15% | 2.53% | 2.42% | 2.31% | |||||
Portfolio turnover rate | 198% | 21% | 39% | 13% | 44% |
69 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund | |
Selected data for each share of capital stock outstanding throughout each year | Select 25 Series |
Class C | 2008a | 2007 | 2006b | 2005 | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $10.04 | $9.36 | $8.94 | $7.52 | $7.06 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossc | (0.08) | (0.08) | (0.13) | (0.13) | (0.11) | |||||
Net gain (loss) on securities (realized and unrealized) | (2.68) | 0.76 | 0.55 | 1.55 | 0.57 | |||||
Total from investment operations | (2.76) | 0.68 | 0.42 | 1.42 | 0.46 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.86) | – | – | – | – | |||||
Total distributions | (0.86) | – | – | – | – | |||||
Net asset value, end of period | $6.42 | $10.04 | $9.36 | $8.94 | $7.52 | |||||
Total Return d | (29.37%) | 7.26% | 4.70% | 18.88% | 6.52% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $5,501 | $11,245 | $12,777 | $5,029 | $5,866 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.92%) | (0.86%) | (1.44%) | (1.54%) | (1.50%) | |||||
Total expensese | 2.46% | 2.32% | 2.52% | 2.42% | 2.31% | |||||
Net expensesf | 2.10% | 2.15% | 2.52% | 2.42% | 2.31% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.10% | 2.15% | 2.52% | 2.42% | 2.31% | |||||
Portfolio turnover rate | 198% | 21% | 39% | 13% | 44% |
a Significant variation in the portfolio turnover rate is due to the Investment Manager’s appointment of new portfolio managers for the series.
b The financial highlights for the Select 25 Series exclude the historical financial highlights of the Enhanced Index Series, Class A, B and C shares, the Large Cap Growth Series, Class A, B and C shares and the Social Awareness Series, Class A, B and C shares. A total of $29,412,366 was excluded from purchases in the portfolio turnover calculation. This was the cost of the securities Select 25 received as a result of the merger. The assets of the Enhanced Index, Large Cap Growth and Social Awareness Series’ were acquired by the Select 25 Series on June 16, 2006.
c Net investment income (loss) was computed using average shares outstanding throughout the period.
d 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 shares.
e Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
f Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
70 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Managers’ Commentary November 14, 2008 | Small Cap Growth Series (unaudited) | |
To Our Shareholders:
For the year ended September 30, 2008, the Security Equity Fund Small Cap Growth Series returned
–33.25%1, lagging the benchmark Russell 2000 Growth Index’s return of –17.07%. The Series also lagged its peer group median return of –22.82%.
This was a very difficult year for the portfolio. The macro environment was one of the worst since the Great Depression; the economy is not in good shape and the financial markets continue to be very unsettled.
After being the top-performing sector for the first half of the calendar year 2008, energy hit a wall and the stocks declined 40% on average during the most recent quarter, more than wiping out previous gains for the year. Based on the continued weakness in the global economy and thus oil and gas prices, we have reduced our energy holdings and are now underweight in the sector.
Although it has taken a few quarters, health care stocks finally began to show their typically defensive characteristics. While we owned several names that performed well, overall stock selection in the sector was negative, with several medical devices companies declining. In addition, our slight underweight position and negative stock selection in the pharmaceuticals and biotech areas hurt performance.
Turning to individual stocks, IPC The Hospitalist Company, Inc., the leader in hospitalist medicine and an IPO earlier this year, was a positive performer for the portfolio. Hospitalist medicine, which optimizes patient care during a hospital stay, is an emerging area in health care services. Our worst underperformer in the health care area, Spectranetics Corporation, a maker of a laser/catheter system for blocked arteries and pacemaker lead removal, was weak due to a federal investigation into the company’s marketing practices and the postponement of a clinical trial. We are watching the
situation closely, but have maintained our position in this longtime holding. Despite a weak year in our health care picks, we continue to consider health care an attractive area in which to invest, and we are looking for new ideas in this sector to build an overweighting.
Our holdings in financial services are largely defensive in nature, and we have not yet positioned the portfolio for a rebound in credit conditions. Our overweight position has helped the portfolio during the past volatile year, although our stock picks have detracted from performance. While we are cautious in adding to this area in small ways, we continue to look for new opportunities.
The technology sector also detracted significantly from returns. The majority of our companies outperformed the benchmark for the period, but two positions, NaviSite, Inc., and Website Pros, Inc., declined significantly. Both companies have a recurring-revenue business model and are showing nice revenue and earnings growth, but in this type of market environment very small-cap companies with low trading volumes do not hold up well, and these two were no exception. The long-term outlook for both companies is strong, and we have added to both positions.
The economic turmoil of the recent months has presented us with equity valuations that we have rarely seen in our 15-plus years of investing. We remain steadfast in our commitment to our time-tested principles of investing in fast-growing, high-margin companies with unique competitive advantages and strong management teams. Data suggests that small-cap stocks will outperform coming out of a period of economic weakness. We are committed to our investment process and our goal of delivering strong long-term investment results.
As fellow investors in the strategy, we thank you for your continued support in these challenging times.
Sincerely,
Bill Wolfenden, Co-Portfolio Manager
D. Scott Tracy, Co-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.
71 |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund Small Cap Growth Series (unaudited) | |
PERFORMANCE
|
$10,000 Over 10 Years
This chart assumes a $10,000 investment in Class A shares of Small Cap Growth Series on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Average Annual Returns
| ||||||||
Periods Ended 9-30-08
|
1 Year
|
5 Years
|
10 Years
|
Since
| ||||
A Shares
| (33.25%)
| 1.24%
| 4.69%
| –
| ||||
A Shares with sales charge
| (37.08%)
| 0.05%
| 4.07%
| –
| ||||
B Shares
| (33.72%)
| 0.50%
| 3.94%
| –
| ||||
B Shares with CDSC
| (36.76%)
| 0.12%
| 3.94%
| –
| ||||
C Shares
| (33.76%)
| 0.49%
| –
| 1.36%
| ||||
C Shares with CDSC
| (34.37%)
| 0.49%
| –
| 1.36%
| ||||
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 5% for Class B shares and 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 10.61%
| |||||
Consumer Staples
| 1.37
| |||||
Energy
| 6.39
| |||||
Financials
| 7.77
| |||||
Health Care
| 20.87
| |||||
Industrials
| 11.37
| |||||
Information Technology
| 26.37
| |||||
Telecommunication Services
| 4.01
| |||||
Exchange Traded Funds
| 2.81
| |||||
Repurchase Agreement
| 6.14
| |||||
Cash & Other Assets, Less Liabilities
| 2.29
| |||||
Total Net Assets | 100.00% | |||||
72 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Equity Fund
Small Cap Growth Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Series Expenses | ||||||
Beginning
|
Ending
|
Expenses
| ||||
Small Cap Growth | ||||||
Series - Class A | ||||||
Actual | $1,000.00 | $871.85 | $10.01 | |||
Hypothetical
| 1,000.00
| 1,014.30
| 10.78
| |||
Small Cap Growth | ||||||
Series - Class B | ||||||
Actual | 1,000.00 | 868.98 | 13.50 | |||
Hypothetical
| 1,000.00
| 1,010.55
| 14.53
| |||
Small Cap Growth | ||||||
Series - Class C | ||||||
Actual | 1,000.00 | 868.27 | 13.50 | |||
Hypothetical
| 1,000.00
| 1,010.55
| 14.53
|
1 The actual ending account value is based on the actual total return of the Series for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (12.81%), (13.10%) and (13.17%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (2.14%, 2.89% and 2.89% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
73 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Small Cap Growth Series | |
Shares | Value | |||
COMMON STOCKS - 91.6% | ||||
Aerospace & Defense - 2.2% | ||||
Heico Corporation | 6,230 | $204,468 | ||
Hexcel Corporation * | 13,080 | 179,065 | ||
383,533 | ||||
Airlines - 1.2% | ||||
Allegiant Travel Company * | 6,010 | 212,273 | ||
Alternative Carriers - 2.3% | ||||
Premiere Global Services, Inc. * | 28,390 | 399,164 | ||
Apparel Retail - 1.9% | ||||
Aeropostale, Inc. * | 4,790 | 153,807 | ||
Jos A. Bank Clothiers, Inc. * | 5,016 | 168,538 | ||
322,345 | ||||
Apparel, Accessories & Luxury Goods - 3.8% | ||||
FGX International Holdings, Ltd. * | 17,570 | 194,500 | ||
Fossil, Inc. * | 7,870 | 222,170 | ||
True Religion Apparel, Inc. * | 9,530 | 246,350 | ||
663,020 | ||||
Application Software - 3.5% | ||||
Advent Software, Inc. * | 3,090 | 108,861 | ||
Ebix, Inc. * | 2,240 | 210,470 | ||
Netscout Systems, Inc. * | 11,920 | 126,829 | ||
PROS Holdings, Inc. * | 17,380 | 163,198 | ||
609,358 | ||||
Biotechnology - 3.6% | ||||
BioMarin Pharmaceutical, Inc. * | 4,090 | 108,344 | ||
OSI Pharmaceuticals, Inc. * | 4,310 | 212,440 | ||
Savient Pharmaceuticals, Inc. * | 5,390 | 80,365 | ||
United Therapeutics Corporation * | 2,130 | 224,012 | ||
625,161 | ||||
Casinos & Gaming - 1.3% | ||||
Scientific Games Corporation * | 9,720 | 223,754 | ||
Commercial Printing - 1.9% | ||||
Innerworkings, Inc. * | 30,550 | 338,800 | ||
Communications Equipment - 3.2% | ||||
DG FastChannel, Inc. * | 12,790 | 280,357 | ||
Neutral Tandem, Inc. * | 15,060 | 279,212 | ||
559,569 | ||||
Computer Hardware - 0.6% | ||||
Super Micro Computer, Inc. * | 11,112 | 100,119 | ||
Computer Storage & Peripherals - 1.0% | ||||
Data Domain, Inc. * | 7,630 | 169,920 | ||
Consumer Finance - 1.5% | ||||
Cardtronics, Inc. * | 32,664 | 256,739 | ||
Data Processing & Outsourced Services - 4.0% | ||||
Cybersource Corporation * | 17,720 | 285,469 | ||
TeleTech Holdings, Inc. * | 16,790 | 208,868 | ||
TNS, Inc. * | 10,010 | 193,894 | ||
688,231 | ||||
Education Services - 1.3% | ||||
DeVry, Inc. | 4,600 | 227,884 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Electronic Equipment & Instruments - 0.9% | ||||
Digital Ally, Inc. * | 23,985 | $164,777 | ||
Environmental & Facilities Services - 1.3% | ||||
EnergySolutions, Inc. | 6,010 | 60,100 | ||
Rollins, Inc. | 8,955 | 169,966 | ||
230,066 | ||||
Exchange Traded Funds - 2.8% | ||||
iShares Russell 2000 Growth Index Fund | 6,920 | 489,382 | ||
Health Care Equipment - 7.4% | ||||
Insulet Corporation * | 12,150 | 169,128 | ||
LeMaitre Vascular, Inc. * | 61,350 | 184,050 | ||
Natus Medical, Inc. * | 10,406 | 235,800 | ||
NuVasive, Inc. * | 4,690 | 231,358 | ||
Spectranetics Corporation * | 44,597 | 206,484 | ||
Vnus Medical Technologies, Inc. * | 12,570 | 263,089 | ||
1,289,909 | ||||
Health Care Facilities - 1.6% | ||||
NovaMed, Inc. * | 28,000 | 132,720 | ||
Psychiatric Solutions, Inc. * | 4,050 | 153,698 | ||
286,418 | ||||
Health Care Services - 3.7% | ||||
Amedisys, Inc. * | 3,310 | 161,098 | ||
athenahealth, Inc. * | 4,100 | 136,407 | ||
CardioNet, Inc. * | 8,440 | 210,662 | ||
IPC The Hospitalist Company, Inc. * | 5,147 | 132,278 | ||
640,445 | ||||
Health Care Supplies - 2.1% | ||||
Haemonetics Corporation * | 1,784 | 110,108 | ||
RTI Biologics, Inc. * | 27,498 | 257,107 | ||
367,215 | ||||
Health Care Technology - 1.5% | ||||
MedAssets, Inc. * | 14,670 | 252,324 | ||
Home Improvement Retail - 1.0% | ||||
Lumber Liquidators, Inc. * | 14,520 | 182,371 | ||
Industrial Machinery - 1.4% | ||||
Flow International Corporation * | 47,849 | 243,073 | ||
Insurance Brokers - 1.2% | ||||
eHealth, Inc. * | 13,390 | 214,240 | ||
Internet Software & Services - 9.6% | ||||
Digital River, Inc. * | 3,860 | 125,064 | ||
Equinix, Inc. * | 2,985 | 207,338 | ||
Internet Brands, Inc. * | 48,730 | 339,648 | ||
j2 Global Communications, Inc. * | 12,810 | 299,114 | ||
NaviSite, Inc. * | 84,150 | 168,300 | ||
Rackspace Hosting, Inc. * | 16,058 | 156,887 | ||
Valueclick, Inc. * | 14,570 | 149,051 | ||
Website Pros, Inc. * | 41,271 | 222,863 | ||
1,668,265 | ||||
74 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Small Cap Growth Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Investment Banking & Brokerage - 0.4% | ||||
Investment Technology Group, Inc. * | 2,450 | $74,554 | ||
Leisure Products - 1.3% | ||||
Leapfrog Enterprises, Inc. * | 21,480 | 226,829 | ||
Life Sciences Tools & Services - 1.0% | ||||
Luminex Corporation * | 6,890 | 172,319 | ||
Marine - 1.0% | ||||
Genco Shipping & Trading, Ltd. | 5,090 | 169,192 | ||
Oil & Gas Equipment & Services - 4.6% | ||||
Core Laboratories N.V. | 1,740 | 176,297 | ||
Dril-Quip, Inc. * | 4,190 | 181,804 | ||
Oil States International, Inc. * | 5,770 | 203,970 | ||
Superior Energy Services, Inc. * | 6,120 | 190,577 | ||
Tesco Corporation * | 1,910 | 39,995 | ||
792,643 | ||||
Oil & Gas Exploration & Production - 1.8% | ||||
Arena Resources, Inc. * | 4,290 | 166,666 | ||
Comstock Resources, Inc. * | 3,070 | 153,654 | ||
320,320 | ||||
Personal Products - 1.4% | ||||
Bare Escentuals, Inc. * | 21,910 | 238,162 | ||
Property & Casualty Insurance - 2.5% | ||||
Amtrust Financial Services, Inc. | 31,820 | 432,433 | ||
Research & Consulting Services - 2.3% | ||||
FTI Consulting, Inc. * | 4,090 | 295,461 | ||
Hill International, Inc. * | 7,694 | 106,562 | ||
402,023 | ||||
Semiconductors - 3.6% | ||||
Cavium Networks, Inc. * | 12,360 | 174,029 | ||
Microsemi Corporation * | 9,370 | 238,748 | ||
Netlogic Microsystems, Inc. * | 7,160 | 216,518 | ||
629,295 | ||||
Specialized Finance - 2.2% | ||||
Life Partners Holdings, Inc. | 3,697 | 132,981 | ||
MSCI, Inc. * | 5,486 | 131,664 | ||
Portfolio Recovery Associates, Inc. * | 2,250 | 109,418 | ||
374,063 | ||||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Wireless Telecommunication Services - 1.7% | ||||
Syniverse Holdings, Inc. * | 18,040 | $299,644 | ||
TOTAL COMMON STOCKS | ||||
(cost $16,579,741) | $15,939,832 | |||
Principal | ||||
Amount | Value | |||
REPURCHASE AGREEMENT - 6.1% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $1,069,043 (Collateralized by GNR 2008 77-PC, 4.25%, 11/20/36 with a value of $1,091,137) | $1,069,000 | $1,069,000 | ||
TOTAL REPURCHASE AGREEMENT | ||||
(cost $1,069,000) | $1,069,000 | |||
Total Investments - 97.7% | ||||
(cost $17,648,741) | $17,008,832 | |||
Cash & Other Assets, Less Liabilities - 2.3% | 398,635 | |||
Total Net Assets - 100.0% | $17,407,467 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $18,034,048.
* Non-income producing security
75 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund Small Cap Growth Series | ||
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $17,008,832 | |
Cash | 260 | |
Receivables: | ||
Fund shares sold | 5,362 | |
Securities sold | 568,964 | |
Dividends | 1,622 | |
Prepaid expenses | 18,473 | |
Total assets | 17,603,513 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 136,811 | |
Fund shares redeemed | 13,884 | |
Management fees | 15,748 | |
Custodian fees | 1,888 | |
Transfer agent/maintenance fees | 5,984 | |
Administration fees | 2,036 | |
Professional fees | 10,400 | |
12b-1 distribution plan fees | 7,231 | |
Directors’ fees | 325 | |
Other | 1,739 | |
Total liabilities | 196,046 | |
Net assets | $17,407,467 | |
Net assets consist of: | ||
Paid in capital | $21,812,011 | |
Accumulated net realized loss on sale of investments | (3,764,635) | |
Net unrealized depreciation in value of investments | (639,909) | |
Net assets | $17,407,467 | |
Class A: | ||
Capital shares outstanding | 1,085,942 | |
Net assets | $12,413,839 | |
Net asset value and redemption price per share | $11.43 | |
Maximum offering price per share (net asset value divided by 94.25%) | $12.13 | |
Class B: | ||
Capital shares outstanding | ||
(unlimited number of shares authorized) | 260,260 | |
Net assets | $2,675,452 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $10.28 | |
Class C: | ||
Capital shares outstanding | ||
(unlimited number of shares authorized) | 221,103 | |
Net assets | $2,318,176 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $10.48 | |
*Investments, at cost | $17,648,741 |
Statement of Operations | |||
For the Year Ended September 30, 2008
| |||
Investment Income: | |||
Dividends | $ | 40,782 | |
Interest | 83,997 | ||
Total investment income | 124,779 | ||
Expenses: | |||
Management fees | 316,438 | ||
Transfer agent/maintenance fees | 128,155 | ||
Administration fees | 31,884 | ||
Custodian fees | 20,063 | ||
Directors’ fees | 1,603 | ||
Professional fees | 11,269 | ||
Reports to shareholders | 4,278 | ||
Registration fees | 34,319 | ||
Other expenses | 4,538 | ||
12b-1 distribution fees - Class A | 60,476 | ||
12b-1 distribution fees - Class B | 41,460 | ||
12b-1 distribution fees - Class C | 33,073 | ||
Total expenses | 687,556 | ||
Less: | |||
Earnings credits applied | (943) | ||
Net expenses | 686,613 | ||
Net investment loss | (561,834) | ||
Net Realized and Unrealized Gain (Loss): | |||
Net realized gain (loss) during the year on: | |||
Investments | (3,033,923) | ||
Net realized loss | (3,033,923) | ||
Net unrealized appreciation (depreciation) during the year on: | |||
Investments | (9,845,449) | ||
Net unrealized depreciation | (9,845,449) | ||
Net loss | (12,879,372) | ||
Net decrease in net assets resulting from operations | $ | (13,441,206) | |
76 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets | Security Equity Fund Small Cap Growth Series | |
|
Year Ended September 30, 2008 |
|
Year Ended September 30, 2007 | |||
Increase (decrease) in net assets from operations: | ||||||
Net investment loss | $ | (561,834) | $ | (801,855) | ||
Net realized gain (loss) during the year on investments | (3,033,923) | 6,497,308 | ||||
Net unrealized appreciation (depreciation) during the year on investments | (9,845,449) | 3,680,497 | ||||
Net increase (decrease) in net assets resulting from operations | (13,441,206) | 9,375,950 | ||||
Distributions to shareholders from: | ||||||
Net realized gain | ||||||
Class A | (3,191,745) | – | ||||
Class B | (420,821) | – | ||||
Class C | (306,607) | – | ||||
Total distributions to shareholders | (3,919,173) | – | ||||
Capital share transactions: | ||||||
Proceeds from sale of shares | ||||||
Class A | 5,720,827 | 12,762,020 | ||||
Class B | 484,765 | 823,764 | ||||
Class C | 862,243 | 685,312 | ||||
Distributions reinvested | ||||||
Class A | 3,177,232 | – | ||||
Class B | 416,649 | – | ||||
Class C | 305,485 | – | ||||
Cost of shares redeemed | ||||||
Class A | (28,269,263) | (20,550,155) | ||||
Class B | (1,955,259) | (1,886,074) | ||||
Class C | (1,160,706) | (1,699,480) | ||||
Net decrease from capital share transactions | (20,418,027) | (9,864,613) | ||||
Net decrease in net assets | (37,778,406) | (488,663) | ||||
Net assets: | ||||||
Beginning of year | 55,185,873 | 55,674,536 | ||||
End of year | $ | 17,407,467 | $ | 55,185,873 | ||
Accumulated net investment income at end of year | $ | – | $ | – | ||
Capital share activity: | ||||||
Shares sold | ||||||
Class A | 2,568,429 | 750,895 | ||||
Class B | 35,400 | 52,173 | ||||
Class C | 58,495 | 43,122 | ||||
Shares reinvested | ||||||
Class A | 199,200 | – | ||||
Class B | 28,874 | – | ||||
Class C | 20,753 | – | ||||
Shares redeemed | ||||||
Class A | (4,133,463) | (1,207,342) | ||||
Class B | (146,349) | (121,516) | ||||
Class C | (88,178) | (107,023) |
77 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year | Security Equity Fund Small Cap Growth Series | |
Year Ended September 30, | ||||||||||
Class A | 2008 | 2007 | 2006 | 2005 | 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $18.53 | $15.63 | $15.76 | $13.11 | $11.63 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossa | (0.24) | (0.23) | (0.23) | (0.24) | (0.25) | |||||
Net gain (loss) on securities (realized and unrealized) | (5.55) | 3.13 | 0.10 | 2.89 | 1.73 | |||||
Total from investment operations | (5.79) | 2.90 | (0.13) | 2.65 | 1.48 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (1.31) | – | – | – | – | |||||
Total distributions | (1.31) | – | – | – | – | |||||
Net asset value, end of period | $11.43 | $18.53 | $15.63 | $15.76 | $13.11 | |||||
Total Return b | (33.25%) | 18.55% | (0.82%) | 20.21% | 12.73% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $12,414 | $45,430 | $45,451 | $22,637 | $21,443 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (1.59%) | (1.32%) | (1.46%) | (1.67%) | (1.95%) | |||||
Total expensesc | 1.98% | 1.80% | 2.01% | 2.10% | 2.09% | |||||
Net expensesd | 1.98% | 1.80% | 2.01% | 2.10% | 2.09% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.98% | 1.80% | 2.01% | 2.10% | 2.09% | |||||
Portfolio turnover rate | 169% | 145% | 136% | 134% | 157% | |||||
Year Ended September 30, | ||||||||||
Class B | 2008 | 2007 | 2006 | 2005 | 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $16.92 | $14.38 | $14.60 | $12.24 | $10.94 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossa | (0.32) | (0.33) | (0.36) | (0.33) | (0.33) | |||||
Net gain (loss) on securities (realized and unrealized) | (5.01) | 2.87 | 0.14 | 2.69 | 1.63 | |||||
Total from investment operations | (5.33) | 2.54 | (0.22) | 2.36 | 1.30 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (1.31) | – | – | – | – | |||||
Total distributions | (1.31) | – | – | – | – | |||||
Net asset value, end of period | $10.28 | $16.92 | $14.38 | $14.60 | $12.24 | |||||
Total Return b | (33.72%) | 17.66% | (1.51%) | 19.28% | 11.88% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $2,675 | $5,792 | $5,919 | $8,283 | $9,218 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (2.42%) | (2.07%) | (2.31%) | (2.41%) | (2.69%) | |||||
Total expensesc | 2.82% | 2.56% | 2.79% | 2.85% | 2.84% | |||||
Net expensesd | 2.82% | 2.55% | 2.79% | 2.85% | 2.83% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.82% | 2.56% | 2.79% | 2.85% | 2.84% | |||||
Portfolio turnover rate | 169% | 145% | 136% | 134% | 157% |
78 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year | Security Equity Fund Small Cap Growth Series | |
Year Ended September 30, | ||||||||||
Class C | 2008 | 2007 | 2006 | 2005 | 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $17.23 | $14.64 | $14.88 | $12.47 | $11.15 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossa | (0.33) | (0.33) | (0.35) | (0.33) | (0.33) | |||||
Net gain (loss) on securities (realized and unrealized) | (5.11) | 2.92 | 0.11 | 2.74 | 1.65 | |||||
Total from investment operations | (5.44) | 2.59 | (0.24) | 2.41 | 1.32 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (1.31) | – | – | – | – | |||||
Total distributions | (1.31) | – | – | – | – | |||||
Net asset value, end of period | $10.48 | $17.23 | $14.64 | $14.88 | $12.47 | |||||
Total Return b | (33.76%) | 17.69% | (1.61%) | 19.33% | 11.84% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $2,318 | $3,964 | $4,304 | $4,420 | $4,160 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (2.43%) | (2.07%) | (2.29%) | (2.42%) | (2.69%) | |||||
Total expensesc | 2.83% | 2.56% | 2.79% | 2.85% | 2.83% | |||||
Net expensesd | 2.83% | 2.55% | 2.79% | 2.85% | 2.82% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.83% | 2.56% | 2.79% | 2.85% | 2.83% | |||||
Portfolio turnover rate | 169% | 145% | 136% | 134% | 157% |
a Net investment income (loss) was computed using average shares outstanding throughout the period.
b 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 shares.
c Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
d Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
79 | The accompanying notes are an integral part of the financial statements |
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Manager’s Commentary November 14, 2008 | Small Cap Value Series (unaudited) |
To Our Shareholders:
Since inception on July 11, 2008, the Security Equity Fund Small Cap Value Series gained 14.80%1. The Series’ benchmark, the Russell 2000 Value Index, gained 9.51% during the same period. Superior stock selection accounted for the difference in returns. |
The development of the Small Cap Value Series was a natural extension of our long-term success with the Security Equity Fund Mid Cap Value Series. The same portfolio manager and research team will manage the Series using the same approach, but focusing on small capitalization companies. We seek companies that can increase shareholders’ return on capital and then hold companies over three to five years to capture long-term improvements in profitability. We focus on investing in companies rather than securities and the size of the holding is reflective of our confidence in the opportunity.
Financials and Materials Top Performers
Even though the portfolio had a significant underweight position in the financials sector, stock selection relative to the benchmark boosted performance as the sector bounced back from an earlier meltdown. Positions in MBIA, Inc. and MGIC Investment Corporation surged by triple digits as the sector contributed 52% to the portfolio.
While the materials sector was close to an even weight to the benchmark, the portfolio benefited from superior stock selection. Holdings in the portfolio gained 16%, while the Russell 2000 Value Index holdings declined
–14%. Leading contributors for the portfolio were Schweitzer-Mauduit International, Inc. and Bemis Company, Inc.
Consumer discretionary positions added 25% to portfolio performance, compared to a 14% return for the benchmark. Positions in the sector that benefited the portfolio include Talbots, Inc., Oxford Industries, Inc., and Brown Shoe, Inc.
Health Care and Energy Disappoint
Detracting from performance were holdings in the health care sector. While an even weight to the benchmark, holdings in the portfolio lost –17%, compared to a 9% gain in the benchmark. Health Management Associates, Inc. and The Providence Service Corporation were the biggest losers for the portfolio in the sector.
An overweight position in the energy sector, coupled with underperformance of holdings relative to the benchmark, detracted from portfolio performance. Individual holdings that hurt performance include Global Industries, Ltd., Evergreen Energy, Inc., and Gulfport Energy Corporation. The fiscal year saw an enormous run-up in oil prices that blasted through the $100 per barrel level before topping out at nearly $150 in mid-July. Investor consensus recognized a market bubble for the commodity and prices tumbled with little support for any price level.
Information technology was an equal weight to the benchmark, but stock selection amounting to –6% against a break-even return for the index hurt performance. Investments in ANADIGICS, Inc. and IXYS Corporation brought down portfolio returns in the sector.
Outlook for 2009
Investors are struggling with the events of the past year from the sub-prime mortgage issue, the bankruptcies, mergers and government bailouts in the financial system, increasing unemployment, inflation, and inflated commodity prices. We recognize that these are unprecedented times and, therefore, will require the successful long-term investor to remain focused and disciplined. We intend to do just that.
As with our Large Cap Value and Mid Cap Value Series, the core investment approach and rigorous bottom-up analysis focusing on return on invested capital will continue to be our focus during these turbulent market conditions. We will continue to seek the best companies with solid financial statements that will be able to perform well over the next three-to-five-year market cycle.
On behalf of Security Global Investors, I would like to thank you for trusting your investments with us. As always, we continue to do our best to seek the potential available in small capitalization companies.
Sincerely,
James P. Schier
Senior Portfolio Manager
1 Performance figures are based on Class A shares and do not reflect deductions of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Series expenses and in the absence of such waivers, the performance quoted would be reduced.
81 |
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Performance Summary September 30, 2008 | Security Equity Fund Small Cap Value Series (unaudited) |
PERFORMANCE |
$10,000 Since Inception
This chart assumes a $10,000 investment in Class A shares of Small Cap Value Series on July 11, 2008 (date of inception), reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 2000 Value Index is an unmanaged index that measures the performance of securities of small to mid cap U.S. companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Returns
| ||
Periods Ended 9-30-08
|
Since (7-11-08)
| |
Class A
|
14.80%
| |
Class C
|
14.60%
| |
Institutional Class
|
14.90%
| |
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or the contingent deferred sales charge of 1% for Class C shares, as applicable, except where noted. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced. |
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
| 13.49%
| |||||
Consumer Staples
| 3.45
| |||||
Energy
| 4.80
| |||||
Financials
| 19.35
| |||||
Health Care
| 4.35
| |||||
Industrials
| 15.79
| |||||
Information Technology
| 14.64
| |||||
Materials
| 6.57
| |||||
Utilities
| 6.60
| |||||
Cash & Other Assets, Less Liabilities
| 10.96
| |||||
Total Net Assets | 100.00% | |||||
82 | The accompanying notes are an integral part of the financial statements |
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Performance Summary September 30, 2008 | Security Equity Fund
Small Cap Value Series (unaudited) | |
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 11, 2008 (commencement of operations) through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your
Series Expenses | ||||||
Beginning Account Value 7/11/2008* | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Small Cap Value | ||||||
Series - Class A | ||||||
Actual | $1,000.00 | $1,148.00 | $3.68 | |||
Hypothetical | 1,000.00 | 1,007.64 | 3.44 | |||
Small Cap Value | ||||||
Series - Class C | ||||||
Actual | 1,000.00 | 1,146.00 | 5.46 | |||
Hypothetical | 1,000.00 | 1,005.98 | 5.11 | |||
Small Cap Value | ||||||
Series - Institutional | ||||||
Class | ||||||
Actual | 1,000.00 | 1,149.00 | 3.09 | |||
Hypothetical | 1,000.00 | 1,008.19 | 2.89 | |||
* Commencement of operations
1 The actual ending account value is based on the actual total return of the Series for the period July 11, 2008 (commencement of operations) to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 11, 2008 (commencement of operations) to September 30, 2008 was 14.80%, 14.60% and 14.90% for Class A, C, and Institutional Class shares, respectively.
2 Expenses are equal to the Series annualized expense ratio (1.55%, 2.30% and 1.30% for Class A, C, and Institutional Class shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 81/366 (to reflect the period since commencement of operations).
83 |
The accompanying notes are an integral part of the financial statements |
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Schedule of Investments September 30, 2008 | Security Equity Fund Small Cap Value Series | |
Shares | Value | |||
COMMON STOCKS - 89.0% | ||||
Apparel Retail - 4.7% | ||||
Brown Shoe Company, Inc. | 1,500 | $24,570 | ||
Chico’s FAS, Inc. * | 1,100 | 6,017 | ||
Talbots, Inc. | 1,900 | 24,890 | ||
55,477 | ||||
Apparel, Accessories & Luxury Goods - 5.7% | ||||
Fossil, Inc. * | 800 | 22,584 | ||
Maidenform Brands, Inc. * | 1,600 | 23,216 | ||
Oxford Industries, Inc. | 800 | 20,664 | ||
66,464 | ||||
Biotechnology - 0.8% | ||||
Combinatorx, Inc. 1,* | 2,900 | 9,367 | ||
Coal & Consumable Fuels - 2.3% | ||||
Evergreen Energy, Inc. * | 9,400 | 8,836 | ||
USEC, Inc. * | 3,300 | 17,853 | ||
26,689 | ||||
Communications Equipment - 2.0% | ||||
Symmetricom, Inc. 1,* | 4,800 | 23,856 | ||
Computer Storage & Peripherals - 1.0% | ||||
STEC, Inc. * | 1,500 | 11,550 | ||
Construction & Engineering - 1.8% | ||||
Insituform Technologies, Inc. * | 1,400 | 20,944 | ||
Construction Materials - 1.1% | ||||
Eagle Materials, Inc. | 600 | 13,422 | ||
Consumer Finance - 2.0% | ||||
First Marblehead Corporation | 9,200 | 22,908 | ||
Data Processing & Outsourced Services - 1.9% | ||||
Gevity HR, Inc. | 3,000 | 21,840 | ||
Diversified Commercial & Professional Services - 1.6% | ||||
School Specialty, Inc. * | 600 | 18,714 | ||
Electric Utilities - 4.9% | ||||
Allete, Inc. | 344 | 15,308 | ||
Empire District Electric Company | 1,000 | 21,350 | ||
Westar Energy, Inc. | 900 | 20,736 | ||
57,394 | ||||
Electrical Components & Equipment - 2.5% | ||||
Power-One, Inc. 1,* | 11,200 | 16,240 | ||
UQM Technologies, Inc. * | 4,700 | 13,395 | ||
29,635 | ||||
Electronic Manufacturing Services - 2.2% | ||||
Maxwell Technologies, Inc. 1,* | 1,900 | 25,346 | ||
Food Retail - 1.4% | ||||
Winn-Dixie Stores, Inc. * | 1,200 | 16,680 | ||
Health Care Equipment - 0.8% | ||||
Aspect Medical Systems, Inc. * | 1,900 | 9,880 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Health Care Facilities - 2.0% | ||||
Health Management Associates, Inc. * | 3,300 | $13,728 | ||
LCA-Vision, Inc. | 2,200 | 10,208 | ||
23,936 | ||||
Health Care Services - 0.7% | ||||
Providence Service Corporation * | 800 | 7,840 | ||
Human Resource & Employment Services - 1.4% | ||||
Administaff, Inc. 2 | 600 | 16,332 | ||
IT Consulting & Other Services - 2.1% | ||||
CACI International, Inc. * | 500 | 25,050 | ||
Multi-Utilities - 1.7% | ||||
NorthWestern Corporation | 800 | 20,104 | ||
Oil & Gas Equipment & Services - 1.3% | ||||
Global Industries, Ltd. * | 2,200 | 15,268 | ||
Oil & Gas Exploration & Production - 1.2% | ||||
Goodrich Petroleum Corporation * | 100 | 4,359 | ||
Gulfport Energy Corporation * | 1,000 | 10,050 | ||
14,409 | ||||
Packaged Foods & Meats - 2.0% | ||||
TreeHouse Foods, Inc. * | 800 | 23,760 | ||
Paper Packaging - 2.0% | ||||
Bemis Company, Inc. | 900 | 23,508 | ||
Paper Products - 2.1% | ||||
Schweitzer-Mauduit International, Inc. | 1,300 | 24,687 | ||
Property & Casualty Insurance - 5.1% | ||||
AmCOMP, Inc. * | 1,900 | 22,040 | ||
Assured Guaranty, Ltd. | 900 | 14,634 | ||
Hanover Insurance Group, Inc. | 500 | 22,760 | ||
59,434 | ||||
Regional Banks - 12.3% | ||||
Arrow Financial Corporation | 800 | 23,528 | ||
Bancfirst Corporation | 300 | 14,499 | ||
City Holding Company | 400 | 16,900 | ||
Commerce Bancshares, Inc. | 500 | 23,200 | ||
Old National Bancorp | 590 | 11,812 | ||
Tompkins Financial Corporation | 400 | 20,200 | ||
Whitney Holding Corporation | 180 | 4,365 | ||
Wilmington Trust Corporation | 1,050 | 30,271 | ||
144,775 | ||||
Research & Consulting Services - 3.5% | ||||
ICF International, Inc. * | 1,300 | 25,675 | ||
Navigant Consulting, Inc. * | 800 | 15,912 | ||
41,587 | ||||
84 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Equity Fund Small Cap Value Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Restaurants - 3.1% | ||||
BJ’s Restaurants, Inc. * | 1,700 | $20,298 | ||
Red Robin Gourmet Burgers, Inc. * | 600 | 16,080 | ||
36,378 | ||||
Security & Alarm Services - 2.3% | ||||
GeoEye, Inc. * | 1,200 | 26,556 | ||
Semiconductors - 5.5% | ||||
Anadigics, Inc. * | 3,300 | 9,273 | ||
IXYS Corporation 1 | 2,610 | 23,725 | ||
RF Micro Devices, Inc. * | 4,900 | 14,308 | ||
Supertex, Inc. * | 600 | 16,896 | ||
64,202 | ||||
Specialty Chemicals - 1.3% | ||||
Landec Corporation * | 1,900 | 15,561 | ||
Trucking - 2.7% | ||||
Old Dominion Freight Line, Inc. * | 320 | 9,069 | ||
Saia, Inc. * | 1,700 | 22,576 | ||
31,645 | ||||
TOTAL COMMON STOCKS | ||||
(cost $978,728) | $1,045,198 | |||
Total Investments - 89.0% | ||||
(cost $978,728) | $1,045,198 | |||
Cash & Other Assets, Less Liabilities - 11.0% | 128,691 | |||
Total Net Assets - 100.0% | $1,173,889 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $978,728.
* Non-income producing security
1 Security is deemed illiquid. The total market value of illiquid securities is $98,534 (cost $99,310), or 8.4% of total net assets.
2 Security is segregated as collateral for open written option contracts.
85 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Equity Fund Small Cap Value Series | ||
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $1,045,198 | |
Cash | 100,274 | |
Receivables: | ||
Securities sold | 1,520 | |
Dividends | 680 | |
Security Investors | 1,323 | |
Prepaid expenses | 38,073 | |
Total assets | 1,187,068 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 3,717 | |
Written options, at value | 145 | |
Management fees | 1,002 | |
Custodian fees | 3,000 | |
Transfer agent/maintenance fees | 52 | |
Administration fees | 470 | |
Professional fees | 4,050 | |
12b-1 distribution plan fees | 418 | |
Directors’ fees | 25 | |
Other | 300 | |
Total liabilities | 13,179 | |
Net assets | $1,173,889 | |
Net assets consist of: | ||
Paid in capital | $1,026,964 | |
Undistributed net realized gain on sale of investments | 80,302 | |
Net unrealized appreciation in value of investments | 66,623 | |
Net assets | $1,173,889 | |
Class A: | ||
Capital shares outstanding | 34,804 | |
Net assets | $399,635 | |
Net asset value and redemption price per share | $11.48 | |
Maximum offering price per share (net asset value divided by 94.25%) | $12.18 | |
Class C: | ||
Capital shares outstanding | 34,133 | |
Net assets | $391,295 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $11.46 | |
Institutional Class: | ||
Capital shares outstanding | 33,333 | |
Net assets | $382,959 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $11.49 | |
*Investments, at cost | $978,728 |
Statement of Operations | |||
For the Period Ended September 30, 2008*
| |||
Investment Income: | |||
Dividends | $ | 3,256 | |
Interest | 164 | ||
Total investment income | 3,420 | ||
Expenses: | |||
Management fees | 2,514 | ||
Transfer agent/maintenance fees | 80 | ||
Administration fees | 614 | ||
Custodian fees | 3,000 | ||
Directors’ fees | 48 | ||
Professional fees | 4,050 | ||
Reports to shareholders | 852 | ||
Registration fees | 3,392 | ||
Other expenses | 228 | ||
12b-1 distribution fees - Class A | 212 | ||
12b-1 distribution fees - Class C | 834 | ||
Total expenses | 15,824 | ||
Less: | |||
Reimbursement of expenses - Class A | (3,864) | ||
Reimbursement of expenses - Class C | (3,823) | ||
Reimbursement of expenses - Institutional Class | (3,822) | ||
Net expenses | 4,315 | ||
Net investment loss | (895) | ||
Net Realized and Unrealized Gain (Loss): | |||
Net realized gain (loss) during the period on: | |||
Investments | 81,197 | ||
Net realized gain | 81,197 | ||
Net unrealized appreciation (depreciation) during the period on: | |||
Investments | 66,470 | ||
Options written | 153 | ||
Net unrealized appreciation | 66,623 | ||
Net realized and unrealized gain | 147,820 | ||
Net increase in net assets resulting from operations | $ | 146,925 | |
*For the period from July 11, 2008 (commencement of operations) to September 30, 2008.
86 | The accompanying notes are an integral part of the financial statements |
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Statement of Changes in Net Assets
| Security Equity Fund Small Cap Value Series
| |
Period Ended September 30, 2008* | |||
Increase (decrease) in net assets from operations: | |||
Net investment loss | $ | (895) | |
Net realized gain during the period on investments | 81,197 | ||
Net unrealized appreciation during the period on investments | 66,623 | ||
Net increase in net assets resulting from operations | 146,925 | ||
Capital share transactions: | |||
Proceeds from sale of shares | |||
Class A | 350,960 | ||
Class C | 343,156 | ||
Institutional Class | 333,333 | ||
Cost of shares redeemed | |||
Class C | (485) | ||
Net increase from capital share transactions | 1,026,964 | ||
Net increase in net assets | 1,173,889 | ||
Net assets: | |||
Beginning of period | – | ||
End of period | $ | 1,173,889 | |
Accumulated net investment income at end of period | $ | – | |
Capital share activity: | |||
Shares sold | |||
Class A | 34,804 | ||
Class C | 34,174 | ||
Institutional Class | 33,333 | ||
Shares redeemed | |||
Class C | (41) |
* For the period July 11, 2008 (commencement of operations) to September 30, 2008.
87 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund |
Selected data for each share of capital stock outstanding throughout the period | Small Cap Value Series |
Class A | Period Ended September 30, 2008 a | |
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment incomeb | – | |
Net gain on securities (realized and unrealized) | 1.48 | |
Total from investment operations | 1.48 | |
Net asset value, end of period | $11.48 | |
Total Return c | 14.80% | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $400 | |
Ratios to average net assets: | ||
Net investment loss | (0.19%) | |
Total expensesd | 6.10% | |
Net expensese | 1.55% | |
Net expenses prior to custodian earning credits and net of expense waivers | 1.55% | |
Portfolio turnover rate | 86% | |
Class C | Period Ended September 30, 2008a | |
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment lossb | (0.02) | |
Net gain on securities (realized and unrealized) | 1.48 | |
Total from investment operations | 1.46 | |
Net asset value, end of period | $11.46 | |
Total Return c | 14.60% | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $391 | |
Ratios to average net assets: | ||
Net investment loss | (0.94%) | |
Total expensesd | 6.88% | |
Net expensese | 2.30% | |
Net expenses prior to custodian earning credits and net of expense waivers | 2.30% | |
Portfolio turnover rate | 86% |
88 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security Equity Fund |
Selected data for each share of capital stock outstanding throughout the period | Small Cap Value Series |
Institutional Class | Period Ended September 30, 2008a | |
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment incomeb | – | |
Net gain on securities (realized and unrealized) | 1.49 | |
Total from investment operations | 1.49 | |
Net asset value, end of period | $11.49 | |
Total Return c | 14.90% | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $383 | |
Ratios to average net assets: | ||
Net investment income | 0.06% | |
Total expensesd | 5.90% | |
Net expensese | 1.30% | |
Net expenses prior to custodian earning credits and net of expense waivers | 1.30% | |
Portfolio turnover rate | 86% |
a Security Small Cap Value Series was initially capitalized on July 11, 2008 with a net asset value of $10 per share. Percentage amounts for the period, except total return have been annualized
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c 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 C shares.
d Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
e Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
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Manager’s Commentary November 14, 2008 | Large Cap Value Fund (unaudited) | |
![]() | To Our Shareholders:
Security Large Cap Value Fund returned –23.45%1 in the period, outperforming the benchmark Russell 1000 Value Index’s return of –23.56% and nearly even with the Fund’s peer group median return of –23.24%. For the most part, good individual stock selection was the determining factor in overall performance in fiscal 2008. |
Our strategy is to buy companies that are trading at a significant discount to their intrinsic value. Our investment approach is a defined and disciplined process of three clear philosophical tenets that drive our investment decisions: a valuation focus, a long-term perspective and an opportunistic approach.
This investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and thus a valuation target for each idea. We construct the portfolios based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company.
Consumer Staples and Information Technology Top Performers
The Fund benefited from superior stock selection from the consumer staples sector, providing a positive 14% boost, compared to a loss of –2% for the benchmark. An overweight position in the sector for the portfolio relative to the benchmark added to its contribution. Wal-Mart Stores, Inc. had the largest impact with a 40% return.
The information technology sector supported Fund performance through stock selection that, while negative, was far ahead of the benchmark’s performance. The Fund’s –4% return in the sector was a marked improvement over the –35% loss for the Russell 1000 Value Index. A 16% advance in Western Union Company was the difference for the Fund.
The materials sector was another sector that benefited the portfolio due to the manager’s stock picking. While the benchmark lost –20% in the sector, the Fund was able to produce a positive return of 6%.
Financials and Energy Disappoint
The stock selection in the Large Cap Value Fund’s financials sector battered performance. While the Fund had its usual large underweight position in the sector against the benchmark, 21% versus 28%, stock selection return was –52%. The financials sector was the worst performer in the fiscal year, losing –38%. Holdings in Citigroup and Fannie Mae were the largest losses for the Fund in the sector.
The energy sector for the Fund pulled performance down due to stock selection in an underperforming sector of the market. The Fund’s performance in the energy sector lagged the benchmark, –13% to –10%. Securities in particular that hurt the Fund were Williams Companies, Inc., Exxon Mobil Corporation, and Halliburton Company.
The utilities sector, while a heavy underweight for the Fund at 2% compared to 7% for the benchmark, hurt performance as holdings lost –13%, nearly 3% more than holdings in the benchmark. The Fund’s only holding in the sector, Edison International, lost –26% during the fiscal year.
2009 Market Outlook
In the difficult market environment experienced over the past 12 months, the collective experience of our team and our dedication to our investing principles provides a framework of how to navigate these challenging times. Our bottom-up approach looks at market uncertainty in the context of the potential long-term impact on individual companies. Our focus is on applying a bottom-up approach to identifying individual companies with the ability to be substantially better and have a positive impact on the portfolio over the next three to five years. We remain confident in our ability to uncover these companies.
Current markets reinforce that investing is a long-term pursuit that requires patience and a consistent approach. We recognize there are many investment fund alternatives available today and thank you for your business and the confidence you place in us.
Sincerely,
Mark Mitchell
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. Fee waivers and/or reimbursements reduce Fund expenses and in the absence of such waivers, the performance quoted would be reduced.
91 |
Table of Contents
Performance Summary September 30, 2008 | Security Large Cap Value Fund (unaudited) | |
PERFORMANCE
|
$10,000 Over Ten Years
This chart assumes a $10,000 investment in Class A shares of Large Cap Value Fund on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Value Index is an unmanaged index representing the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Returns
| ||||||||
Periods Ended 9-30-08 |
Since Inception (1-29-99)
| |||||||
1 Year
| 5 Years
| 10 Years
| ||||||
A Shares
| (23.45%)
| 6.75%
| 1.47%
| –
| ||||
A Shares with sales charge
| (27.85%)
| 5.50%
| 0.87%
| –
| ||||
B Shares
| (23.39%)
| 6.18%
| 0.76%
| –
| ||||
B Shares with CDSC
| (27.05%)
| 5.87%
| 0.76%
| –
| ||||
C Shares
| (24.09%)
| 5.94%
| –
| (0.04%)
| ||||
C Shares with CDSC
| (24.81%)
| 5.94%
| –
| (0.04%)
| ||||
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 and/or reimbursements reduced expenses of the Fund and in the absence of such waiver, the performance would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary |
10.55%
| |||||
Consumer Staples
|
12.88
| |||||
Energy
|
11.25
| |||||
Financials
|
13.12
| |||||
Health Care
|
7.94
| |||||
Industrials
|
22.57
| |||||
Information Technology
|
6.19
| |||||
Materials
|
5.04
| |||||
Telecommunication Services
|
0.95
| |||||
Utilities
|
2.44
| |||||
Exchange Traded Funds |
0.53
| |||||
U.S. Government Sponsored Agencies
|
5.04
| |||||
Repurchase Agreement
|
2.64
| |||||
Liabilities, Less Cash & Other Assets |
(1.14)
| |||||
Total Net Assets |
100.00%
| |||||
92 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Large Cap Value Fund (unaudited) | |
Information About Your Fund’s Expenses
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Fund Expenses | ||||||
Beginning Account Value 4/1/2008
|
Ending Account Value 9/30/20081
|
Expenses Paid During Period2
| ||||
Large Cap Value | ||||||
Fund - Class A | ||||||
Actual | $1,000.00 | $872.73 | $5.85 | |||
Hypothetical | 1,000.00 | 1,018.75 | 6.31 | |||
Large Cap Value | ||||||
Fund - Class B | ||||||
Actual | 1,000.00 | 873.61 | 4.68 | |||
Hypothetical | 1,000.00 | 1,020.00 | 5.05 | |||
Large Cap Value | ||||||
Fund - Class C | ||||||
Actual | 1,000.00 | 869.86 | 9.35 | |||
Hypothetical | 1,000.00 | 1,015.00 | 10.08 |
1 The actual ending account value is based on the actual total return of the Fund for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Fund expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (12.73%), (12.64%) and (13.01%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Fund annualized expense ratio (1.25%, 1.00% and 2.00% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
93 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Large Cap Value Fund | |
Shares | Value | |||
COMMON STOCKS - 93.5% | ||||
Aerospace & Defense - 3.6% | ||||
United Technologies Corporation | 47,400 | $2,846,844 | ||
Air Freight & Logistics - 3.5% | ||||
FedEx Corporation | 35,300 | 2,790,112 | ||
Broadcasting - 1.4% | ||||
CBS Corporation (Cl.B) | 77,100 | 1,124,118 | ||
Building Products - 3.8% | ||||
USG Corporation * | 117,300 | 3,002,880 | ||
Computer Hardware - 2.2% | ||||
Hewlett-Packard Company | 37,400 | 1,729,376 | ||
Construction Materials - 1.7% | ||||
Vulcan Materials Company | 18,200 | 1,355,900 | ||
Consumer Finance - 2.6% | ||||
Capital One Financial Corporation | 28,300 | 1,443,300 | ||
First Marblehead Corporation | 254,950 | 634,826 | ||
2,078,126 | ||||
Data Processing & Outsourced Services - 3.3% | ||||
Western Union Company | 106,200 | 2,619,954 | ||
Department Stores - 2.2% | ||||
JC Penney Company, Inc. | 52,200 | 1,740,348 | ||
Diversified Banks - 2.1% | ||||
Wells Fargo & Company | 43,800 | 1,643,814 | ||
Diversified Chemicals - 1.3% | ||||
Dow Chemical Company | 33,600 | 1,067,808 | ||
Drug Retail - 2.6% | ||||
CVS Caremark Corporation | 60,400 | 2,033,064 | ||
Electric Utilities - 2.4% | ||||
Edison International | 48,500 | 1,935,150 | ||
Electronic Manufacturing Services - 0.7% | ||||
Tyco Electronics, Ltd. | 20,450 | 565,647 | ||
Exchange Traded Funds - 0.5% | ||||
iShares Russell 1000 Value Index Fund | 3,300 | 210,837 | ||
iShares S&P 500 Value Index Fund | 3,500 | 209,475 | ||
420,312 | ||||
Health Care Equipment - 3.3% | ||||
Covidien, Ltd. | 20,350 | 1,094,016 | ||
Hospira, Inc. * | 40,800 | 1,558,560 | ||
2,652,576 | ||||
Health Care Services - 1.8% | ||||
Medco Health Solutions, Inc. * | 31,400 | 1,413,000 | ||
Home Improvement Retail - 4.5% | ||||
Home Depot, Inc. | 34,800 | 900,972 | ||
Lowe’s Companies, Inc. | 111,300 | 2,636,697 | ||
3,537,669 | ||||
Shares | Value | ||||
COMMON STOCKS (continued) | |||||
Hypermarkets & Super Centers - 7.3% | |||||
Costco Wholesale Corporation | 33,200 | $ | 2,155,676 | ||
Wal-Mart Stores, Inc. | 61,400 | 3,677,246 | |||
5,832,922 | |||||
Industrial Conglomerates - 5.3% | |||||
General Electric Company | 101,700 | 2,593,350 | |||
McDermott International, Inc. 1,* | 64,500 | 1,647,975 | |||
4,241,325 | |||||
Integrated Oil & Gas - 7.6% | |||||
Chevron Corporation | 21,000 | 1,732,080 | |||
ConocoPhillips | 8,900 | 651,925 | |||
Exxon Mobil Corporation | 33,000 | 2,562,780 | |||
Sasol, Ltd. ADR | 26,000 | 1,104,740 | |||
6,051,525 | |||||
Integrated Telecommunication Services - 1.0% | |||||
Windstream Corporation | 69,176 | 756,785 | |||
Movies & Entertainment - 2.5% | |||||
News Corporation | 27,500 | 329,725 | |||
Time Warner, Inc. | 125,600 | 1,646,616 | |||
1,976,341 | |||||
Oil & Gas Equipment & Services - 1.7% | |||||
Halliburton Company | 41,100 | 1,331,229 | |||
Oil & Gas Storage & Transportation - 1.9% | |||||
Williams Companies, Inc. | 65,500 | 1,549,075 | |||
Other Diversified Financial Services - 2.4% | |||||
JPMorgan Chase & Company | 40,000 | 1,868,000 | |||
Pharmaceuticals - 2.8% | |||||
Schering-Plough Corporation | 121,200 | 2,238,564 | |||
Property & Casualty Insurance - 6.1% | |||||
Berkshire Hathaway, Inc. * | 37 | 4,832,200 | |||
Railroads - 4.6% | |||||
Union Pacific Corporation | 51,000 | 3,629,160 | |||
Research & Consulting Services - 1.8% | |||||
Equifax, Inc. | 40,900 | 1,409,005 | |||
Specialty Chemicals - 2.0% | |||||
Rohm & Haas Company | 22,600 | 1,582,000 | |||
94 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Large Cap Value Fund | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Tobacco - 3.0% | ||||
Altria Group, Inc. | 34,800 | $690,432 | ||
Philip Morris International, Inc. | 34,800 | 1,673,880 | ||
2,364,312 | ||||
TOTAL COMMON STOCKS | ||||
(cost $74,556,866) | $74,219,141 | |||
Principal Amount | Value | |||
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 5.0% | ||||
Federal Home Loan Bank | ||||
0.25%, 10/2/2008 | $2,000,000 | $1,999,986 | ||
0.60%, 10/9/2008 | 2,000,000 | 1,999,733 | ||
TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES | ||||
(cost $3,999,719) | $3,999,719 | |||
Principal Amount | Value | |||
REPURCHASE AGREEMENT - 2.6% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $2,094,085 (Collateralized by FHLB, 5.40%, 10/27/11 with a value of $2,136,569) | ||||
$2,094,000 | $2,094,000 | |||
TOTAL REPURCHASE AGREEMENT | ||||
(cost $2,094,000) | $2,094,000 | |||
Total Investments - 101.1% | ||||
(cost $80,650,585) | $80,312,860 | |||
Liabilities, Less Cash & Other Assets - (1.1)% | (903,472) | |||
Total Net Assets - 100.0% | $79,409,388 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $81,784,445.
ADR | American Depositary Receipt |
* | Non-income producing security |
1 Portion of security is delayed in delivery due to executing broker’s bankruptcy declaration.
95 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Large Cap Value Fund | ||
Statement of Assets and Liabilities | ||
September 30, 2008 | ||
Assets: | ||
Investments, at value* | $80,312,860 | |
Cash | 217,961 | |
Receivables: | ||
Fund shares sold | 43,637 | |
Dividends | 148,692 | |
Security Investors | 10,278 | |
Prepaid expenses | 25,030 | |
Total assets | 80,758,458 | |
Liabilities: | ||
Payable for: | ||
Securities purchased | 1,223,504 | |
Fund shares redeemed | 23,066 | |
Management fees | 44,733 | |
Custodian fees | 1,200 | |
Transfer agent/maintenance fees | 10,693 | |
Administration fees | 6,688 | |
Professional fees | 14,405 | |
12b-1 distribution plan fees | 18,279 | |
Directors’ fees | 1,650 | |
Other | 4,852 | |
Total liabilities | 1,349,070 | |
Net assets | $79,409,388 | |
Net assets consist of: | ||
Paid in capital | $86,316,777 | |
Undistributed net investment income | 583,228 | |
Accumulated net realized loss on sale of investments | (7,152,892) | |
Net unrealized depreciation in value of investments | (337,725) | |
Net assets | $79,409,388 | |
Class A: | ||
Capital shares outstanding | 9,957,291 | |
Net assets | $66,902,141 | |
Net asset value and redemption price per share | $6.72 | |
Maximum offering price per share (net asset value divided by 94.25%) | $7.13 | |
Class B: | ||
Capital shares outstanding | 1,286,238 | |
Net assets | $8,096,776 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $6.29 | |
Class C: | ||
Capital shares outstanding | 694,459 | |
Net assets | $4,410,471 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $6.35 | |
*Investments, at cost | $80,650,585 |
Statement of Operations | ||
For the Year Ended September 30, 2008 | ||
Investment Income: | ||
Dividends | $1,704,097 | |
Interest | 146,307 | |
Total investment income | 1,850,404 | |
Expenses: | ||
Management fees | 622,836 | |
Transfer agent/maintenance fees | 230,729 | |
Administration fees | 91,561 | |
Custodian fees | 9,536 | |
Directors’ fees | 5,020 | |
Professional fees | 19,369 | |
Reports to shareholders | 16,552 | |
Registration fees | 43,822 | |
Other expenses | 25,143 | |
12b-1 distribution fees - Class A | 200,218 | |
12b-1 distribution fees - Class C | 53,216 | |
Total expenses | 1,318,002 | |
Less: | ||
Reimbursement of expenses - Class A | (89,886) | |
Reimbursement of expenses - Class B | (11,337) | |
Reimbursement of expenses - Class C | (5,980) | |
Net expenses | 1,210,799 | |
Net investment income | 639,605 | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | (4,599,205) | |
Options written | 59,355 | |
Net realized loss | (4,539,850) | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (19,617,311) | |
Options written | (15,979) | |
Net unrealized depreciation | (19,633,290) | |
Net loss | (24,173,140) | |
Net decrease in net assets resulting from operations | $(23,533,535) | |
96 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security | ||
Statement of Changes in Net Assets | Large Cap Value Fund |
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||
Increase (decrease) in net assets from operations: | ||||||
Net investment income | $ | 639,605 | $ | 347,813 | ||
Net realized gain (loss) during the year on investments | (4,539,850) | 6,463,825 | ||||
Net unrealized appreciation (depreciation) during the year on investments | (19,633,290) | 9,449,894 | ||||
Net increase (decrease) in net assets resulting from operations | (23,533,535) | 16,261,532 | ||||
Distributions to shareholders from: | ||||||
Net investment income | ||||||
Class A | (378,053) | (25,136) | ||||
Class B | (22,222) | – | ||||
Net realized gain | ||||||
Class A | (2,835,403) | – | ||||
Class B | (523,802) | – | ||||
Class C | (232,292) | – | ||||
Total distributions to shareholders | (3,991,772) | (25,136) | ||||
Capital share transactions: | ||||||
Proceeds from sale of shares | ||||||
Class A | 42,964,106 | 30,239,174 | ||||
Class B | 3,386,023 | 5,176,235 | ||||
Class C | 2,180,812 | 2,465,830 | ||||
Distributions reinvested | ||||||
Class A | 3,086,622 | 23,953 | ||||
Class B | 540,480 | – | ||||
Class C | 228,558 | – | ||||
Cost of shares redeemed | ||||||
Class A | (36,583,296) | (28,048,187) | ||||
Class B | (6,331,496) | (6,549,458) | ||||
Class C | (2,035,897) | (1,128,054) | ||||
Net increase from capital share transactions | 7,435,912 | 2,179,493 | ||||
Net increase (decrease) in net assets | (20,089,395) | 18,415,889 | ||||
Net assets: | ||||||
Beginning of year | 99,498,783 | 81,082,894 | ||||
End of year | $ | 79,409,388 | $ | 99,498,783 | ||
Accumulated net investment income at end of year | $ | 583,228 | $ | 343,898 | ||
Capital share activity: | ||||||
Shares sold | ||||||
Class A | 5,509,142 | 3,513,517 | ||||
Class B | 457,814 | 644,129 | ||||
Class C | 284,364 | 309,682 | ||||
Shares reinvested | ||||||
Class A | 377,800 | 2,882 | ||||
Class B | 70,743 | – | ||||
Class C | 29,416 | – | ||||
Shares redeemed | ||||||
Class A | (4,639,628) | (3,278,710) | ||||
Class B | (849,539) | (814,025) | ||||
Class C | (274,934) | (137,551) |
97 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security | |
Selected data for each share of capital stock outstanding throughout each year | Large Cap Value Fund |
Class A | 2008 | 2007 | 2006 | 2005a | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $9.18 | $7.65 | $6.78 | $5.71 | $5.11 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment incomeb | 0.05 | 0.04 | 0.01 | 0.03 | 0.01 | |||||
Net gain (loss) on securities (realized and unrealized) | (2.14) | 1.49 | 0.90 | 1.04 | 0.60 | |||||
Total from investment operations | (2.09) | 1.53 | 0.91 | 1.07 | 0.61 | |||||
Less distributions: | ||||||||||
Dividends from net investment income | (0.04) | – | (0.04) | – | (0.01) | |||||
Distributions from realized gains | (0.33) | – | – | – | – | |||||
Total distributions | (0.37) | – | (0.04) | – | (0.01) | |||||
Net asset value, end of period | $6.72 | $9.18 | $7.65 | $6.78 | $5.71 | |||||
Total Return c | (23.45%) | 20.04% | 13.45% | 18.74% | 11.98% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $66,902 | $79,998 | $64,786 | $45,295 | $43,071 | |||||
Ratios to average net assets: | ||||||||||
Net investment income | 0.68% | 0.51% | 0.17% | 0.56% | 0.19% | |||||
Total expensesd | 1.36% | 1.35% | 1.49% | 1.61% | 1.52% | |||||
Net expensese | 1.25% | 1.27% | 1.49% | 1.61% | 1.52% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.25% | 1.27% | 1.49% | 1.61% | 1.52% | |||||
Portfolio turnover rate | 48% | 25% | 54% | 110% | 75% | |||||
Class B | 2008f | 2007f | 2006 | 2005a | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $8.58 | $7.18 | $6.38 | $5.42 | $4.87 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss)b | 0.07 | (0.01) | (0.04) | (0.01) | (0.03) | |||||
Net gain (loss) on securities (realized and unrealized) | (2.02) | 1.41 | 0.84 | 0.97 | 0.58 | |||||
Total from investment operations | (1.95) | 1.40 | 0.80 | 0.96 | 0.55 | |||||
Less distributions: | ||||||||||
Dividends from net investment income | (0.01) | – | – | – | – | |||||
Distributions from realized gains | (0.33) | – | – | – | – | |||||
Total distributions | (0.34) | – | – | – | – | |||||
Net asset value, end of period | $6.29 | $8.58 | $7.18 | $6.38 | $5.42 | |||||
Total Return c | (23.39%) | 19.50% | 12.54% | 17.71% | 11.29% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | �� | $8,097 | $13,784 | $12,761 | $8,500 | $10,164 | ||||
Ratios to average net assets: | ||||||||||
Net investment income (loss) | 0.93% | (0.08%) | (0.58%) | (0.16%) | (0.57%) | |||||
Total expensesd | 1.11% | 1.92% | 2.26% | 2.36% | 2.27% | |||||
Net expensese | 1.00% | 1.85% | 2.26% | 2.36% | 2.27% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.00% | 1.85% | 2.26% | 2.36% | 2.27% | |||||
Portfolio turnover rate | 48% | 25% | 54% | 110% | 75% |
98 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security | |
Selected data for each share of capital stock outstanding throughout each year | Large Cap Value Fund |
Class C | 2008 | 2007 | 2006 | 2005a | Year Ended September 30, 2004 | |||||
Per Share Data | ||||||||||
Net asset value, beginning of period | $8.72 | $7.31 | $6.49 | $5.52 | $4.96 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment lossb | – | (0.02) | (0.04) | (0.01) | (0.03) | |||||
Net gain (loss) on securities (realized and unrealized) | (2.04) | 1.43 | 0.86 | 0.98 | 0.59 | |||||
Total from investment operations | (2.04) | 1.41 | 0.82 | 0.97 | 0.56 | |||||
Less distributions: | ||||||||||
Distributions from realized gains | (0.33) | – | – | – | – | |||||
Total distributions | (0.33) | – | – | – | – | |||||
Net asset value, end of period | $6.35 | $8.72 | $7.31 | $6.49 | $5.52 | |||||
Total Return c | (24.09%) | 19.29% | 12.63% | 17.57% | 11.29% | |||||
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in thousands) | $4,410 | $5,717 | $3,536 | $2,899 | $2,561 | |||||
Ratios to average net assets: | ||||||||||
Net investment loss | (0.07%) | (0.23%) | (0.60%) | (0.18%) | (0.57%) | |||||
Total expensesd | 2.11% | 2.10% | 2.25% | 2.36% | 2.28% | |||||
Net expensese | 2.00% | 2.02% | 2.25% | 2.36% | 2.28% | |||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.00% | 2.02% | 2.25% | 2.36% | 2.28% | |||||
Portfolio turnover rate | 48% | 25% | 54% | 110% | 75% |
a Security Investors (SI) became the advisor of Security Large Cap Value Fund effective June 30, 2005. Prior to June 30, 2005, SI paid Dreyfus Corporation for sub-advisory services.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c 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 shares.
d Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
e Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
f Effective August 1, 2007, Class B shares ceased charging 12b-1 fees in accordance with FINRA (formerly NASD) sales cap regulations. Per share information reflects this change. This fee will be reinstated when sales exceed the sales cap limit.
99 | The accompanying notes are an integral part of the financial statements |
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100 |
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Manager’s Commentary | Security Large Cap Value Fund | |
Large Cap Value Institutional Series | ||
November 14, 2008
| (unaudited)
|
![]() | To Our Shareholders:
From inception on July 11, 2008 through September 30, 2008, the Security Large Cap Value Fund Large Cap Value Institutional Series declined –3.90%1 falling more than the –2.37% return of its benchmark, the Russell 1000 Value Index. |
Our strategy is to buy companies that are trading at a significant discount to their intrinsic value. Our investment approach is a defined and disciplined process of three clear philosophical tenets that drive our investment decisions: a valuation focus, a long-term perspective and an opportunistic approach.
This investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a valuation target for each potential investment. We construct the portfolio based on the level of conviction generated by this bottom-up analysis and the upside/downside profile associated with each company.
Materials and Telecommunication Services Top Performers
The materials sector led performance results for the portfolio. While an even weight to the benchmark, selecting superior performing stocks gained a positive 19% for the portfolio against a loss of –13% for the benchmark for a total difference greater than 30%. A position in Vulcan Materials Company, LC, which surged 47% during the 2-month period, accounted for the performance.
Not being in the wrong place was a benefit to the portfolio relative to the benchmark. The Series only had a 1% weighting in the telecommunications services sector, compared to more than a 5% weight for the benchmark. The sector in the benchmark was hit hard with a –13% loss while the Series was down just –6%. The only position in the sector for the portfolio was Windstream Corporation.
The information technology sector was slightly overweight the benchmark and benefited from a 1% gain, compared to a –8% loss in the Russell 1000 Value Index. The largest weightings for the portfolio were Western Union Company and Hewlett-Packard Company.
Financials and Consumer Staples Disappoint
The Large Cap Value Institutional Series financials sector suffered from poor stock selection and an underweight allocation. The Series had its usual large underweight in the sector against the benchmark, 15% versus 26%. During the short period, the financials sector bounced back, making it the biggest gainer in the benchmark, with a return of 17%. Unfortunately, the Series did not fully participate in the gains as it returned a mere 3%. While holdings in Capital One Financial Corporation and JPMorgan Chase & Company earned impressive returns, the implosion of American International Group, Inc. took back nearly all returns for the group.
The consumer staples sector dragged down performance as its overweight position lost –3% compared to a gain of 2% for the benchmark. Detracting from overall performance were positions in CVS Caremark Corporation, Philip Morris International, Inc., and Costco Wholesale Corporation.
Poor stock selection in health care hurt the portfolio as it was down –5% while the benchmark was even for the period. Most of the loss in the sector was the result of a position in Schering-Plough Corporation.
2009 Market Outlook
Current markets reinforce that investing is a long-term pursuit that requires patience and a consistent approach. The collective experience of our team and our dedication to our investing principles provides a framework of how to navigate the challenging times we expect over the foreseeable future. Our focus is on applying a bottom-up approach to identifying individual companies with the ability to be substantially better and have a positive impact on the portfolio over the next three to five years. We remain confident in our ability to identify these companies.
We recognize there are many investment fund alternatives available today and thank you for your business and the confidence you place in us.
Sincerely,
Mark Mitchell
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. Fee waivers and/or reimbursements reduce Series expenses and in the absence of such waivers, the performance quoted would be reduced. |
101 |
Table of Contents
Performance Summary | Security Large Cap Value Fund | |
Large Cap Value Institutional Series | ||
September 30, 2008
| (unaudited)
|
PERFORMANCE |
$10,000 Since Inception
This chart assumes a $10,000 investment in shares of Large Cap Value Institutional Series on July 11, 2008 (date of inception), and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. The Russell 1000 Value Index is an unmanaged index representing the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Returns
| ||
Periods Ended 9-30-08 |
Since Inception
| |
Large Cap Value Institutional Series
|
(3.90%)
|
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 Series will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The figures do not reflect the deduction of taxes that a shareholder would pay on distributions or redemption of shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted. Fee waivers and/or reimbursements reduced expenses of the Series and in the absence of such waiver, the performance quoted would be reduced.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||||
Consumer Discretionary | 11.16% | |||||||
Consumer Staples | 12.40 | |||||||
Energy | 10.68 | |||||||
Financials | 11.58 | |||||||
Health Care | 7.83 | |||||||
Industrials | 22.41 | |||||||
Information Technology | 5.87 | |||||||
Materials | 4.89 | |||||||
Telecommunication Services | 1.00 | |||||||
Utilities | 2.40 | |||||||
Exchange Traded Funds | 4.85 | |||||||
Cash & Other Assets, Less Liabilities | 4.93 | |||||||
Total Net Assets | 100.00% | |||||||
102 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary | Security Large Cap Value Fund | |
Large Cap Value Institutional Series | ||
September 30, 2008
| (unaudited)
|
Information About Your Series Expenses
Calculating your ongoing Series expenses
Example
As a shareholder of the Series, you incur ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 11, 2008 (commencement of operations) through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds
Series | ||||||
Expenses | ||||||
Beginning Account Value 7/11/2008* | Ending Account Value 9/30/20081 | Expenses Paid During Period2 | ||||
Large Cap Value Institutional Series | ||||||
Actual | $1,000.00 | $961.00 | $2.13 | |||
Hypothetical | 1,000.00 | 1,008.90 | 2.18 | |||
* Commencement of operations
1 The actual ending account value is based on the actual total return of the Series for the period July 11, 2008 (commencement of operations) to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 11, 2008 (commencement of operations) to September 30, 2008 was (3.90%).
2 Expenses are equal to the Series annualized expense ratio of 0.98%, net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 81/366 (to reflect the period since commencement of operations).
103 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Large Cap Value Fund Large Cap Value Institutional Series | |
Shares | Value | |||
COMMON STOCKS - 95.1% | ||||
Aerospace & Defense - 3.3% | ||||
United Technologies Corporation | 1,570 | $94,294 | ||
Air Freight & Logistics - 3.8% | ||||
FedEx Corporation | 1,400 | 110,656 | ||
Broadcasting - 1.4% | ||||
CBS Corporation (Cl.B) | 2,770 | 40,387 | ||
Building Products - 4.3% | ||||
USG Corporation * | 4,890 | 125,183 | ||
Computer Hardware - 1.8% | ||||
Hewlett-Packard Company | 1,150 | 53,176 | ||
Construction Materials - 2.5% | ||||
Vulcan Materials Company | 950 | 70,775 | ||
Consumer Finance - 2.9% | ||||
Capital One Financial Corporation | 1,070 | 54,570 | ||
First Marblehead Corporation | 11,690 | 29,108 | ||
83,678 | ||||
Data Processing & Outsourced Services - 3.2% | ||||
Western Union Company | 3,670 | 90,539 | ||
Department Stores - 2.4% | ||||
JC Penney Company, Inc. | 2,070 | 69,014 | ||
Diversified Banks - 1.8% | ||||
Wells Fargo & Company | 1,380 | 51,791 | ||
Diversified Chemicals - 1.4% | ||||
Dow Chemical Company | 1,250 | 39,725 | ||
Drug Retail - 2.4% | ||||
CVS Caremark Corporation | 2,060 | 69,340 | ||
Electric Utilities - 2.4% | ||||
Edison International | 1,730 | 69,027 | ||
Electronic Manufacturing Services - 0.9% | ||||
Tyco Electronics, Ltd. | 910 | 25,171 | ||
Exchange Traded Funds - 4.9% | ||||
iShares Russell 1000 Value Index Fund | 1,090 | 69,640 | ||
iShares S&P 500 Value Index Fund | 1,170 | 70,025 | ||
139,665 | ||||
Health Care Equipment - 3.1% | ||||
Covidien, Ltd. | 650 | 34,944 | ||
Hospira, Inc. * | 1,430 | 54,626 | ||
89,570 | ||||
Health Care Services - 1.8% | ||||
Medco Health Solutions, Inc. * | 1,180 | 53,100 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Home Improvement Retail - 4.8% | ||||
Home Depot, Inc. | 1,470 | $38,058 | ||
Lowe’s Companies, Inc. | 4,210 | 99,735 | ||
137,793 | ||||
Hypermarkets & Super Centers - 7.2% | ||||
Costco Wholesale Corporation | 1,140 | 74,020 | ||
Wal-Mart Stores, Inc. | 2,240 | 134,153 | ||
208,173 | ||||
Industrial Conglomerates - 5.2% | ||||
General Electric Company | 3,740 | 95,369 | ||
McDermott International, Inc. * | 2,120 | 54,166 | ||
149,535 | ||||
Integrated Oil & Gas - 7.1% | ||||
Chevron Corporation | 690 | 56,911 | ||
ConocoPhillips | 360 | 26,370 | ||
Exxon Mobil Corporation | 1,120 | 86,979 | ||
Sasol, Ltd. ADR | 820 | 34,842 | ||
205,102 | ||||
Integrated Telecommunication Services - 1.0% | ||||
Windstream Corporation | 2,630 | 28,772 | ||
Movies & Entertainment - 2.6% | ||||
News Corporation | 1,110 | 13,309 | ||
Time Warner, Inc. | 4,620 | 60,568 | ||
73,877 | ||||
Oil & Gas Equipment & Services - 1.8% | ||||
Halliburton Company | 1,560 | 50,528 | ||
Oil & Gas Storage & Transportation - 1.8% | ||||
Williams Companies, Inc. | 2,190 | 51,794 | ||
Other Diversified Financial Services - 2.3% | ||||
JPMorgan Chase & Company | 1,440 | 67,248 | ||
Pharmaceuticals - 2.9% | ||||
Schering-Plough Corporation | 4,480 | 82,746 | ||
Property & Casualty Insurance - 4.6% | ||||
Berkshire Hathaway, Inc. * | 1 | 130,601 | ||
Railroads - 4.1% | ||||
Union Pacific Corporation | 1,660 | 118,126 | ||
Research & Consulting Services - 1.6% | ||||
Equifax, Inc. | 1,370 | 47,197 | ||
Specialty Chemicals - 1.0% | ||||
Rohm & Haas Company | 430 | 30,100 | ||
104 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Large Cap Value Fund Large Cap Value Institutional Series | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Tobacco - 2.8% | ||||
Altria Group, Inc. | 1,120 | $22,221 | ||
Philip Morris International, Inc. | 1,190 | 57,239 | ||
79,460 | ||||
TOTAL COMMON STOCKS | ||||
(cost $2,818,415) | $2,736,143 | |||
Total Investments - 95.1% | ||||
(cost $2,818,415) | $2,736,143 | |||
Cash & Other Assets, Less Liabilities - 4.9% | 142,054 | |||
Total Net Assets - 100.0% | $2,878,196 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $2,818,414.
ADR | American Depositary Receipt |
* Non-income producing security
105 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Large Cap Value Fund Large Cap Value Institutional Series | ||
Statement of Assets and Liabilities | ||
September 30, 2008
| ||
Assets: | ||
Investments, at value* | $2,736,143 | |
Cash | 174,747 | |
Receivables: | ||
Dividends | 5,227 | |
Security Investors | 2,193 | |
Prepaid expenses | 19,512 | |
Total assets | 2,937,822 | |
Liabilities: | ||
Payable for: | ||
Fund shares redeemed | 23,360 | |
Securities purchased | 26,300 | |
Management fees | 1,655 | |
Administration fees | 692 | |
Transfer agent/maintenance fees | 19 | |
Custodian fees | 3,000 | |
Directors’ fees | 50 | |
Professional fees | 4,050 | |
Other fees | 500 | |
Total liabilities | 59,626 | |
Net assets | $2,878,196 | |
Net assets consist of: | ||
Paid in capital | $2,995,345 | |
Undistributed net investment income | 8,072 | |
Accumulated net realized loss on sale of investments | (42,949) | |
Net unrealized depreciation in value of investments | (82,272) | |
Net assets | $2,878,196 | |
Capital shares authorized | unlimited | |
Capital shares outstanding | 299,530 | |
Net asset value per share | ||
(net assets divided by shares outstanding) | $9.61 | |
*Investments, at cost | $2,818,415 |
Statement of Operations | |||
For the Period Ended September 30, 2008*
| |||
Investment Income: | |||
Dividends | $ | 13,756 | |
Interest | 1,064 | ||
Total investment income | 14,820 | ||
Expenses: | |||
Management fees | 4,476 | ||
Administration fees | 1,104 | ||
Transfer agent/maintenance fees | 51 | ||
Custodian fees | 3,000 | ||
Directors’ fees | 113 | ||
Professional fees | 4,050 | ||
Reports to shareholders | 1,449 | ||
Registration fees | 1,748 | ||
Other | 76 | ||
Total expenses | 16,067 | ||
Less: | |||
Reimbursement of expenses | (9,319) | ||
Net expenses | 6,748 | ||
Net investment income | 8,072 | ||
Net Realized and Unrealized Gain (Loss): | |||
Net realized gain (loss) during the period on: | |||
Investments | (42,949) | ||
Net realized loss | (42,949) | ||
Net unrealized appreciation (depreciation) during the period on: | |||
Investments | (82,272) | ||
Net unrealized depreciation | (82,272) | ||
Net realized and unrealized loss | (125,221) | ||
Net decrease in net assets resulting from operations | $ | (117,149) | |
* For the period July 11, 2008 (commencement of operations) to September 30, 2008.
106 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets | Security Large Cap Value Fund Large Cap Value Institutional Series | |
Period Ended 2008* | ||||
Increase (decrease) in net assets from operations: | ||||
Net investment income | $ | 8,072 | ||
Net realized loss during the period on investments | (42,949 | ) | ||
Net unrealized depreciation during the period on investments | (82,272 | ) | ||
Net decrease in net assets resulting from operations | (117,149 | ) | ||
Capital share transactions: | ||||
Proceeds from sale of shares | 3,308,936 | |||
Cost of shares redeemed | (313,591 | ) | ||
Net increase from capital share transactions | 2,995,345 | |||
Net increase in net assets | 2,878,196 | |||
Net assets: | ||||
Beginning of period | – | |||
End of period | $ | 2,878,196 | ||
Undistributed net investment income at end of period | $ | 8,072 | ||
Capital share activity: | ||||
Shares sold | 330,636 | |||
Shares redeemed | (31,106 | ) | ||
Total capital share activity | 299,530 | |||
* For the period July 11, 2008 (commencement of operations) to September 30, 2008.
107 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout the period | Security Large Cap Value Fund Large Cap Value Institutional Series | |
Period Ended September 30, 2008 a | ||
Per Share Data | ||
Net asset value, beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment incomeb | 0.03 | |
Net loss on securities (realized and unrealized) | (0.42) | |
Total from investment operations | (0.39) | |
Net asset value, end of period | $9.61 | |
Total Return | (3.90%) | |
Ratios/Supplemental Data | ||
Net assets, end of period (in thousands) | $2,878 | |
Ratios to average net assets: | ||
Net investment income | 1.17% | |
Total expensesc | 2.33% | |
Net expensesd | 0.98% | |
Net expenses prior to custodian earnings credits and net of expense waivers | 0.98% | |
Portfolio turnover rate | 35% |
a Security Large Cap Value Institutional Series was initially capitalized on July 11, 2008 with a net asset value of $10 per share. Percentage amounts for the period, except total return, have been annualized.
b Net investment income (loss) was computed using average shares outstanding throughout the period.
c Total expense information reflects the expense ratios absent expense reductions by the Investment Manager and earnings credits, as applicable.
d Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
108 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Mid Cap Growth Fund (unaudited) | ||
Manager’s Commentary | ||
November 14, 2008 |
| To Our Shareholders:
For the year ended September 30, 2008, the Security Mid Cap Growth Fund returned –26.24%1, lagging the benchmark Russell Mid Cap Growth Index’s return of –24.65%. The Fund also lagged its peer group median return of –24.77%. |
Our approach with the Mid Cap Growth Fund is to seek 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. For this Fund, we target securities of companies that appear likely to generate above average profitability at prices that do not reflect that potential.
Consumer Discretionary, Utilities, and Health Care Top Performers
Even though the consumer discretionary sector declined approximately –30% during the period, it was able to provide a boost to the portfolio on a relative basis to the benchmark. Leading the sector were holdings in TJX Companies, Inc., Activision Blizzard, Inc., and Darden Restaurants, Inc.
The health care sector, slightly over weight the benchmark, performed much better than the benchmark, declining only –4% against a –12% drop, due to stock selection. Incyte Corporation was the best performing security, while Genzyme Corporation added positive returns.
The small allocation to the utilities sector helped the portfolio. At only 1%, it was nearly three-fourths less than the benchmark. The sector was the hardest hit in the benchmark losing –37% compared to just a –5% decline for the portfolio. Our only holdings were Questar Corporation and Alliant Energy Corporation.
Information Technology and Energy Disappoint
The information technology, energy, and financials sectors accounted for approximately 40% of total portfolio assets. Each sector suffered during the fiscal year due to poor stock selection.
The information technology sector was an even weight; however, holdings declined by approximately –47% compared to the 29% decline in the benchmark. The largest drags on performance were positions in Mindspeed Technologies, Inc., MEMC Electronic Materials, Inc., and Applied Micro Circuits Corporation.
Holdings in the energy sector declined approximately
–40% against a loss of –17% for the benchmark. The sector was an underweight position in the portfolio. Positions that caused the most damage to the Fund include Evergreen Energy, Inc. and National Oilwell Varco, Inc.
Poor stock selection also hurt the portfolio’s financials sector as it declined approximately –38% compared to the –24% loss in the benchmark. The portfolio had an overweight position in the sector. First Marblehead Corporation and SLM Corporation were the largest detractors to performance.
Outlook for 2009
It became apparent through stock market performance during the fiscal year that there was a growing consensus of a worldwide economic slowdown. We continue to have a neutral stance towards risk and we expect a long period of sub-par growth for the U.S. economy.
Toward the end of the period, we raised our weighting in defensive positions such as health care and consumer staples, while raising our cash level. During this same time, the Federal Reserve, U.S. Treasury, and other central bankers around the globe were providing massive monetary and fiscal stimulus to stabilize the financial system and markets.
We believe that it is more important than ever that we maintain discipline in our investment approach based on our core philosophy and rigorous fundamental process to identify the securities that can provide the best long-term performance for shareholders.
On behalf of Security Global Investors, I would like to thank you for trusting your investments with us. As always, we continue to do our best to seek the potential available in mid-capitalization companies.
Sincerely,
Joseph O’Connor, 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.
109 |
Table of Contents
Security Mid Cap Growth Fund (unaudited) | ||
Performance Summary | ||
September 30, 2008 |
PERFORMANCE
|
$10,000 Over Ten Years
This chart assumes a $10,000 investment in Class A shares of Security Mid Cap Growth Fund on September 30, 1998, reflects deduction of the 5.75% sales load and assumes all dividends reinvested. The chart does not reflect the deduction of taxes that a shareholder would pay on distributions of the redemption of fund shares. The Russell 2500 Growth Index is an unmanaged index that measures this performance of securities of small-to-mid U.S. companies with greater-than-average growth orientation. The Russell MidCap Growth Index is an unmanaged capitalization-weighted Index that is designed to measure the performance of the 800 smallest companies in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell MidCap Growth Index replaced the Russell 2500 Growth Index as the Fund’s primary benchmark effective February 1, 2008, to provide a more meaningful comparison of the Fund’s performance in light of the investment strategies that it employs.
Average Annual Returns
| ||||||||
Periods Ended 9-30-08 |
1 Year
|
5 Years
|
10 Years
|
Since
| ||||
A Shares
|
(26.24%)
|
(0.16%)
|
7.37%
|
–
| ||||
A Shares with sales charge
|
(30.49%)
|
(1.33%)
|
6.73%
|
–
| ||||
B Shares
|
(26.92%)
|
(0.91%)
|
6.63%
|
–
| ||||
B Shares with CDSC
|
(29.63%)
|
(1.13%)
|
6.63%
|
–
| ||||
C Shares
|
(26.87%)
|
(0.88%)
|
–
|
3.61%
| ||||
C Shares with CDSC
|
(27.43%)
|
(0.88%)
|
–
|
3.61%
| ||||
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 shares. Such figures would be lower if the maximum sales charge and any applicable taxes were deducted.
|
Portfolio Composition by Sector as of 9-30-08
| ||||||
Consumer Discretionary
|
16.83%
| |||||
Energy
|
7.97
| |||||
Financials
|
6.94
| |||||
Health Care
|
15.92
| |||||
Industrials
|
10.03
| |||||
Information Technology
|
23.38
| |||||
Materials
|
12.00
| |||||
Warrants
|
0.03
| |||||
Repurchase Agreement
|
6.68
| |||||
Cash & Other Assets, Less Liabilities
|
0.22 | |||||
Total Net Assets
| 100.00% | |||||
110 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Performance Summary September 30, 2008 | Security Mid Cap Growth Fund (unaudited) | |
Information About Your Fund’s Expenses
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2008 through September 30, 2008.
Actual Expenses
The first line for each class of shares in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class of shares in the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the second line for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Fund Expenses | ||||||
Beginning
| Ending Account Value 9/30/20081
| Expenses Paid During Period2
| ||||
Mid Cap Growth | ||||||
Fund - Class A | ||||||
Actual | $1,000.00 | $878.91 | $7.23 | |||
Hypothetical
| 1,000.00
| 1,017.30
| 7.77
| |||
Mid Cap Growth | ||||||
Fund - Class B | ||||||
Actual | 1,000.00 | 875.44 | 10.74 | |||
Hypothetical
| 1,000.00
| 1,013.55
| 11.53
| |||
Mid Cap Growth | ||||||
Fund - Class C | ||||||
Actual | 1,000.00 | 875.00 | 10.73 | |||
Hypothetical
| 1,000.00
| 1,013.55
| 11.53
|
1 The actual ending account value is based on the actual total return of the Fund for the period April 1, 2008 to September 30, 2008 after actual expenses and will differ from the hypothetical ending account value which is based on the Fund expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period April 1, 2008 to September 30, 2008 was (12.11%), (12.46%) and (12.50%), for Class A, B, and C shares, respectively.
2 Expenses are equal to the Fund annualized expense ratio (1.54%, 2.29% and 2.29% for Class A, B, and C shares, respectively), net of any applicable fee waivers or earnings credits, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
111 |
Table of Contents
Schedule of Investments September 30, 2008 | Security Mid Cap Growth Fund | |
Shares | Value | |||
COMMON STOCKS - 93.1% | ||||
Aerospace & Defense - 3.1% | ||||
Goodrich Corporation | 63,270 | $2,632,032 | ||
Apparel, Accessories & Luxury Goods - 2.7% | ||||
Phillips-Van Heusen Corporation | 61,010 | 2,312,889 | ||
Asset Management & Custody Banks - 1.9% | ||||
T. Rowe Price Group, Inc. | 29,710 | 1,595,724 | ||
Auto Parts & Equipment - 1.2% | ||||
BorgWarner, Inc. | 32,660 | 1,070,268 | ||
Biotechnology - 8.3% | ||||
Genzyme Corporation * | 53,230 | 4,305,775 | ||
Gilead Sciences, Inc. * | 62,090 | 2,830,062 | ||
7,135,837 | ||||
Casinos & Gaming - 4.5% | ||||
Penn National Gaming, Inc. * | 61,600 | 1,636,712 | ||
WMS Industries, Inc. * | 71,535 | 2,186,825 | ||
3,823,537 | ||||
Coal & Consumable Fuels - 1.6% | ||||
Peabody Energy Corporation | 31,050 | 1,397,250 | ||
Commodity Chemicals - 2.2% | ||||
Celanese Corporation | 66,670 | 1,860,760 | ||
Communications Equipment - 1.8% | ||||
Foundry Networks, Inc. * | 84,920 | 1,546,393 | ||
Data Processing & Outsourced Services - 2.2% | ||||
Alliance Data Systems Corporation * | 29,155 | 1,847,844 | ||
Department Stores - 2.4% | ||||
JC Penney Company, Inc. | 61,760 | 2,059,078 | ||
Electrical Components & Equipment - 2.7% | ||||
Ametek, Inc. | 56,080 | 2,286,382 | ||
Electronic Manufacturing Services - 1.9% | ||||
Tyco Electronics, Ltd. | 60,081 | 1,661,840 | ||
Fertilizers & Agricultural Chemicals - 5.1% | ||||
Agrium, Inc. | 51,545 | 2,890,643 | ||
Mosaic Company | 21,985 | 1,495,859 | ||
4,386,502 | ||||
Home Entertainment Software - 4.6% | ||||
Activision Blizzard, Inc. * | 256,720 | 3,961,191 | ||
Hotels, Resorts & Cruise Lines - 1.7% | ||||
Marriott International, Inc. | 55,850 | 1,457,127 | ||
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Industrial Gases - 3.9% | ||||
AirGas, Inc. | 34,735 | $1,724,593 | ||
Praxair, Inc. | 22,735 | 1,631,009 | ||
3,355,602 | ||||
Industrial Machinery - 0.4% | ||||
Thermoenergy Corporation 1,* | 613,387 | 325,095 | ||
IT Consulting & Other Services - 2.9% | ||||
Cognizant Technology Solutions Corporation * | 107,675 | 2,458,220 | ||
Leisure Facilities - 1.7% | ||||
Life Time Fitness, Inc. * | 46,910 | 1,466,876 | ||
Life Sciences Tools & Services - 3.9% | ||||
Thermo Fisher Scientific, Inc. * | 60,660 | 3,336,300 | ||
Multi-Line Insurance - 5.1% | ||||
Assurant, Inc. | 49,565 | 2,726,075 | ||
HCC Insurance Holdings, Inc. | 60,630 | 1,637,010 | ||
4,363,085 | ||||
Oil & Gas Equipment & Services - 4.4% | ||||
National Oilwell Varco, Inc. * | 43,860 | 2,203,087 | ||
Weatherford International, Ltd. * | 62,600 | 1,573,764 | ||
3,776,851 | ||||
Oil & Gas Storage & Transportation - 1.9% | ||||
Williams Companies, Inc. | 70,310 | 1,662,832 | ||
Pharmaceuticals - 3.7% | ||||
Teva Pharmaceutical Industries, Ltd. ADR | 69,665 | 3,189,960 | ||
Railroads - 3.9% | ||||
Union Pacific Corporation | 47,250 | 3,362,310 | ||
Restaurants - 2.6% | ||||
Darden Restaurants, Inc. | 78,630 | 2,251,177 | ||
Semiconductor Equipment - 1.9% | ||||
MEMC Electronic Materials, Inc. * | 59,305 | 1,675,959 | ||
Semiconductors - 5.4% | ||||
Fairchild Semiconductor International, Inc. * | 113,600 | 1,009,904 | ||
National Semiconductor Corporation | 81,965 | 1,410,618 | ||
ON Semiconductor Corporation * | 325,080 | 2,197,541 | ||
4,618,063 | ||||
Steel - 0.8% | ||||
Nucor Corporation | 17,725 | 700,138 | ||
112 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Schedule of Investments September 30, 2008 | Security Mid Cap Growth Fund | |
Shares | Value | |||
COMMON STOCKS (continued) | ||||
Systems Software - 2.7% | ||||
Symantec Corporation * | 117,100 | $2,292,818 | ||
TOTAL COMMON STOCKS | ||||
(cost $90,240,622) | $79,869,940 | |||
Shares | Value | |||
WARRANTS - 0.0% | ||||
Lime Energy Company | ||||
$1.00, 3/19/2009 | 2,967 | 3,394 | ||
Nova Biosource Fuels, Inc. | ||||
$2.40, 7/5/2011 | 208,050 | 23,664 | ||
TOTAL WARRANTS | ||||
(cost $506,575) | $27,058 | |||
Principal Amount | Value | |||
REPURCHASE AGREEMENT - 6.7% | ||||
UMB Financial Corp, 1.46%, dated 9/30/08, matures 10/1/08; repurchase amount $5,731,232 (Collateralized by FHLB, 10/28/08 with a value of $5,846,103) | $5,731,000 | $5,731,000 | ||
TOTAL REPURCHASE AGREEMENT | ||||
(cost $5,731,000) | $5,731,000 | |||
Total Investments - 99.8% | ||||
(cost $96,478,197) | $85,627,998 | |||
Cash & Other Assets, Less Liabilities - 0.2% | 189,154 | |||
Total Net Assets - 100.0% | $85,817,152 | |||
For federal income tax purposes the identified cost of investments owned at September 30, 2008 was $97,071,289.
ADR | American Depositary Receipt |
* Non-income producing security
1 Security is deemed illiquid. The total market value of illiquid securities is $325,095 (cost $654,000), or 0.4% of total net assets.
113 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Security Mid Cap Growth Fund | ||
Statement of Assets and Liabilities | ||
September 30, 2008 | ||
Assets: | ||
Investments, at value* | $85,627,998 | |
Receivables: | ||
Fund shares sold | 17,615 | |
Securities sold | 1,127,675 | |
Dividends | 51,186 | |
Prepaid expenses | 24,500 | |
Total assets | 86,848,974 | |
Liabilities: | ||
Cash overdraft | 94 | |
Payable for: | ||
Securities purchased | 840,328 | |
Fund shares redeemed | 39,188 | |
Management fees | 58,009 | |
Custodian fees | 2,512 | |
Transfer agent/maintenance fees | 18,415 | |
Administration fees | 7,798 | |
Professional fees | 20,050 | |
12b-1 distribution plan fees | 29,002 | |
Directors’ fees | 1,600 | |
Other | 14,826 | |
Total liabilities | 1,031,822 | |
Net assets | $85,817,152 | |
Net assets consist of: | ||
Paid in capital | $120,835,643 | |
Accumulated net realized loss on sale of investments | (24,168,292) | |
Net unrealized depreciation in value of investments | (10,850,199) | |
Net assets | $85,817,152 | |
Class A: | ||
Capital shares outstanding (unlimited number of shares authorized) | 11,099,341 | |
Net assets | $71,654,507 | |
Net asset value and redemption price per share | $6.46 | |
Maximum offering price per share (net asset value divided by 94.25%) | $6.85 | |
Class B: | ||
Capital shares outstanding (unlimited number of shares authorized) | 1,566,429 | |
Net assets | $7,710,608 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $4.92 | |
Class C: | ||
Capital shares outstanding (unlimited number of shares authorized) | 1,137,727 | |
Net assets | $6,452,037 | |
Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) | $5.67 | |
*Investments, at cost | $96,478,197 |
Statement of Operations | ||
For the Year Ended September 30, 2008 | ||
Investment Income: | ||
Dividends | $724,733 | |
Interest | 431,597 | |
Total investment income | 1,156,330 | |
Expenses: | ||
Management fees | 996,558 | |
Transfer agent/maintenance fees | 358,308 | |
Administration fees | 127,555 | |
Custodian fees | 15,144 | |
Directors’ fees | 7,455 | |
Professional fees | 53,804 | |
Reports to shareholders | 22,562 | |
Registration fees | 51,420 | |
Other expenses | 28,327 | |
12b-1 distribution fees - Class A | 281,757 | |
12b-1 distribution fees - Class B | 117,200 | |
12b-1 distribution fees - Class C | 84,515 | |
Total expenses | 2,144,605 | |
Less: | ||
Earnings credits applied | (57) | |
Net expenses | 2,144,548 | |
Net investment loss | (988,218) | |
Net Realized and Unrealized Gain (Loss): | ||
Net realized gain (loss) during the year on: | ||
Investments | (22,363,569) | |
Net realized loss | (22,363,569) | |
Net unrealized appreciation (depreciation) during the year on: | ||
Investments | (13,666,899) | |
Net unrealized depreciation | (13,666,899) | |
Net loss | (36,030,468) | |
Net decrease in net assets resulting from operations | $(37,018,686) | |
114 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Statement of Changes in Net Assets | Security | |
Mid Cap Growth Fund |
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||
Increase (decrease) in net assets from operations: | ||||||||
Net investment loss | $ | (988,218 | ) | $ | (1,710,600 | ) | ||
Net realized gain (loss) during the year on investments | (22,363,569 | ) | 36,643,823 | |||||
Net unrealized depreciation during the year on investments | (13,666,899 | ) | (29,521,012 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (37,018,686 | ) | 5,412,211 | |||||
Distributions to shareholders from: | ||||||||
Net realized gain | ||||||||
Class A | (28,305,723 | ) | (19,776,158 | ) | ||||
Class B | (3,379,810 | ) | (2,496,080 | ) | ||||
Class C | (2,111,785 | ) | (1,608,868 | ) | ||||
Total distributions to shareholders | (33,797,318 | ) | (23,881,106 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
Class A | 13,994,661 | 48,235,738 | ||||||
Class B | 1,239,490 | 1,357,847 | ||||||
Class C | 1,676,082 | 1,704,430 | ||||||
Distributions reinvested | ||||||||
Class A | 27,267,564 | 19,133,742 | ||||||
Class B | 3,319,686 | 2,453,633 | ||||||
Class C | 1,945,651 | 1,496,764 | ||||||
Cost of shares redeemed | ||||||||
Class A | (70,720,345 | ) | (83,873,354 | ) | ||||
Class B | (4,954,737 | ) | (8,893,103 | ) | ||||
Class C | (3,272,723 | ) | (6,683,210 | ) | ||||
Net decrease from capital share transactions | (29,504,671 | ) | (25,067,513 | ) | ||||
Net decrease in net assets | (100,320,675 | ) | (43,536,408 | ) | ||||
Net assets: | ||||||||
Beginning of year | 186,137,827 | 229,674,235 | ||||||
End of year | $ | 85,817,152 | $ | 186,137,827 | ||||
Accumulated net investment income at end of year | $ | – | $ | – | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
Class A | 1,697,528 | 4,072,151 | ||||||
Class B | 186,925 | 142,975 | ||||||
Class C | 236,049 | 160,950 | ||||||
Shares reinvested | ||||||||
Class A | 3,416,988 | 1,702,290 | ||||||
Class B | 542,432 | 265,258 | ||||||
Class C | 275,979 | 145,458 | ||||||
Shares redeemed | ||||||||
Class A | (8,463,584 | ) | (7,294,430 | ) | ||||
Class B | (800,385 | ) | (946,339 | ) | ||||
Class C | (434,505 | ) | (639,771 | ) |
115 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights | Security | |
Selected data for each share of capital stock outstanding throughout each year | Mid Cap Growth Fund |
Class A | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004b | ||||||
Per Share Data | |||||||||||
Net asset value, beginning of period | $11.11 | $12.03 | $12.65 | $11.02 | $10.84 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment lossc | (0.05) | (0.08) | (0.12) | (0.10) | (0.13) | ||||||
Net gain (loss) on securities (realized and unrealized) | (2.46) | 0.35 | 0.47 | 2.46 | 0.71 | ||||||
Total from investment operations | (2.51) | 0.27 | 0.35 | 2.36 | 0.58 | ||||||
Less distributions: | |||||||||||
Distributions from realized gains | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | ||||||
Total distributions | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | ||||||
Net asset value, end of period | $6.46 | $11.11 | $12.03 | $12.65 | $11.02 | ||||||
Total Return d | (26.24%) | 2.10% | 2.81% | 21.76% | 5.23% | ||||||
Ratios/Supplemental Data | |||||||||||
Net assets, end of period (in thousands) | $71,655 | $160,544 | $192,159 | $183,676 | $149,715 | ||||||
Ratios to average net assets: | |||||||||||
Net investment loss | (0.63%) | (0.67%) | (0.93%) | (0.85%) | (1.11%) | ||||||
Total expensese | 1.50% | 1.41% | 1.40% | 1.42% | 1.41% | ||||||
Net expensesf | 1.50% | 1.41% | 1.40% | 1.42% | 1.41% | ||||||
Net expenses prior to custodian earning credits and net of expense waivers | 1.50% | 1.41% | 1.40% | 1.42% | 1.41% | ||||||
Portfolio turnover rate | 191% | 34% | 41% | 31% | 50% | ||||||
Class B | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004b | ||||||
Per Share Data | |||||||||||
Net asset value, beginning of period | $9.09 | $10.12 | $10.86 | $9.61 | $9.57 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment lossc | (0.09) | (0.14) | (0.18) | (0.16) | (0.19) | ||||||
Net gain (loss) on securities (realized and unrealized) | (1.94) | 0.30 | 0.41 | 2.14 | 0.63 | ||||||
Total from investment operations | (2.03) | 0.16 | 0.23 | 1.98 | 0.44 | ||||||
Less distributions: | |||||||||||
Distributions from realized gains | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | ||||||
Total distributions | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | ||||||
Net asset value, end of period | $4.92 | $9.09 | $10.12 | $10.86 | $9.61 | ||||||
Total Return d | (26.92%) | 1.34% | 2.12% | 20.95% | 4.44% | ||||||
Ratios/Supplemental Data | |||||||||||
Net assets, end of period (in thousands) | $7,711 | $14,877 | $22,010 | $27,115 | $26,578 | ||||||
Ratios to average net assets: | |||||||||||
Net investment loss | (1.40%) | (1.43%) | (1.68%) | (1.61%) | (1.86%) | ||||||
Total expensese | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | ||||||
Net expensesf | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | ||||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | ||||||
Portfolio turnover rate | 191% | 34% | 41% | 31% | 50% |
116 | The accompanying notes are an integral part of the financial statements |
Table of Contents
Financial Highlights Selected data for each share of capital stock outstanding throughout each year | Security Mid Cap Growth Fund | |
Class C | 2008a | 2007 | 2006 | 2005 | Year Ended September 30, 2004b | |||||||
Per Share Data | ||||||||||||
Net asset value, beginning of period | $10.11 | $11.13 | $11.84 | $10.43 | $10.34 | |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment lossc | (0.10) | (0.15) | (0.19) | (0.18) | (0.21) | |||||||
Net gain (loss) on securities (realized and unrealized) | (2.20) | 0.32 | 0.45 | 2.32 | 0.70 | |||||||
Total from investment operations | (2.30) | 0.17 | 0.26 | 2.14 | 0.49 | |||||||
Less distributions: | ||||||||||||
Distributions from realized gains | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | |||||||
Total distributions | (2.14) | (1.19) | (0.97) | (0.73) | (0.40) | |||||||
Net asset value, end of period | $5.67 | $10.11 | $11.13 | $11.84 | $10.43 | |||||||
Total Return d | (26.87%) | 1.31% | 2.20% | 20.83% | 4.59% | |||||||
Ratios/Supplemental Data | ||||||||||||
Net assets, end of period (in thousands) | $6,452 | $10,717 | $15,505 | $16,330 | $14,759 | |||||||
Ratios to average net assets: | ||||||||||||
Net investment loss | (1.40%) | (1.43%) | (1.68%) | (1.60%) | (1.86%) | |||||||
Total expensese | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | |||||||
Net expensesf | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | |||||||
Net expenses prior to custodian earning credits and net of expense waivers | 2.26% | 2.16% | 2.15% | 2.17% | 2.16% | |||||||
Portfolio turnover rate | 191% | 34% | 41% | 31% | 50% |
a Significant variation in the portfolio turnover rate is due to the Investment Manager’s appointment of new portfolio managers for the fund.
b The financial highlights for the Security Mid Cap Growth Fund exclude the historical financial highlights of the Technology Series Class, A, B and C shares. The assets of the Technology Series were acquired by the Security Mid Cap Growth Fund on October 3, 2003.
c Net investment income (loss) was computed using average shares outstanding throughout the period.
d 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 shares.
e Total expense information reflects expense ratios absent expense reductions by the Investment Manager and custodian earnings credits, as applicable.
f Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.
117 | The accompanying notes are an integral part of the financial statements |
Table of Contents
September 30, 2008
1.Significant Accounting Policies
Security Large Cap Value, Equity and Mid Cap Growth Funds (collectively referred to herein as 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 and Large Cap Value Fund are currently issued in multiple series, with each series, in effect, representing a separate fund. The Security Equity Fund accounts for the assets of each series separately. Class “A” shares are generally sold with a sales charge at the time of purchase. Class “A” shares are not subject to a sales charge when they are redeemed, except for purchases of $1 million or more 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 may be subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years. Redemptions of Class “B” shares within five years of acquisition incur a contingent deferred sales charge. Class “C” shares are offered without a front-end sales charge but incur additional class-specific expenses. Redemptions of Class “C” shares within one year of acquisition incur a contingent deferred sales charge. “Institutional” Class shares are offered primarily for direct investment by institutions, such as pension and profit sharing plans, endowments, foundations and corporations. Institutional class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a contingent deferred sales charge. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements.
A. Security Valuation - Valuations of the Funds’ or Series’ securities are supplied by pricing services approved by the Board of Directors. The Funds’ officers, under the general super vision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing services. Each security owned by the Funds or Series 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 or Series will use the price of that exchange that it generally considers to be the principal exchange on which the stock is traded. Securities listed on the Nasdaq Stock Market, Inc. (“Nasdaq”) will be valued at the Nasdaq Official Closing Price, 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. Securities for which market quotations are not readily available are valued taking into consideration securities with similar yields, quality, type of issue, coupon, duration and rating. If there is no bid price or if the bid price is deemed to be unsatisfactory by the Board of Directors or by the Funds’ or Series’ 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 after the close of a foreign exchange that will affect the value of a Fund or Series portfolio securities before the time as of which the NAV is 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 or Series net asset value per share. Some of the factors which may be considered by the Board of Directors in determining fair value are fundamental analytical data relating to the investment, the nature and duration of any restrictions on disposition, trading in similar securities of the same issuer or comparable companies, information from broker-dealers, and an evaluation of the forces that influence the market in which the securities are purchased and sold.
Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange. The values of foreign securities are determined as of the close of such foreign markets or the close of the New York Stock Exchange, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of business. Investments in foreign securities may involve risks not present in domestic investments. The Valuation Committee will determine the current value of such foreign securities by taking into consideration certain factors which may include those discussed above, as well as the following factors, among others: the value of the securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign securities such as WEBS®. In addition, the Board of Directors has authorized the Valuation Committee and Administrator to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.
The Funds or Series 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.
B. Repurchase Agreements - In connection with transactions in repurchase agreements, it is the Funds’ or Series’ policy that their custodian take possession of the underlying collateral and that the fair value of the collateral exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Fund or Series may be delayed or limited.
C. Foreign Currency Transactions - The accounting records of the Funds or Series 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. 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 or Series. Foreign investments may also subject the Fund or 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.
The Funds or Series do not isolate that portion of the results of operations resulting from changes in the foreign exchange
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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 - Certain Funds or Series may enter into forward foreign exchange contracts in order to manage foreign currency risk from purchase or sale of securities denominated in foreign currency. The Fund or Series may also enter into such contracts to manage the effect of 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 or Series have in that particular currency contract. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract.
E. Futures - The Funds or Series may utilize futures contracts to a limited extent, with the objectives of maintaining full exposure to the underlying stock market, enhancing returns, maintaining liquidity, minimizing transaction costs and hedging possible variations in foreign exchange values. The Funds or Series, as applicable, may purchase or sell financial and foreign currency 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 Fund or Series, as applicable, may pay from its cash balances and reduce its future 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 or Series are required to deposit and maintain as collateral either cash or securities, representing the initial margin, equal to a certain percentage of the contract value. Cash deposits are shown as restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted in the Schedule of Investments. Subsequent changes in the value of the contract are recorded as unrealized gains or losses. The variation margin is paid or received in cash daily by the Funds or Series. The Funds or Series realize a gain or loss when the contract is closed or expires.
F. Options Purchased and Written - The Funds or Series may purchase and write put and call options on a covered basis on securities that are traded on recognized securities exchanges and over-the-counter markets. Call and put options on securities give the holder the right to purchase or sell (and the writer the obligation to sell or purchase), respectively, a security at a specified price, until a certain date. Options may be used to hedge the Funds’ or Series’ 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 Fund or 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. Securities Sold Short - Certain Funds or Series may make short sales “against the box,” in which the Fund or Series enters into a short sale of a security it owns. At no time will more than 15% of the value of the Funds’ or Series’ net assets be in deposits on short sales against the box. If a Fund or Series makes a short sale, the Fund or Series does not immediately deliver from its own account the securities sold and does not receive the proceeds from the sale. To complete the sale, the Fund or Series must borrow the security (generally from the broker through which the short sale is made) in order to make delivery to the buyer. The Fund or Series must replace the security borrowed by purchasing it at the market price at the time of replacement or delivering the security from its own portfolio. The Fund or Series is said to have a “short position” in securities sold until it delivers them to the broker, at which time it receives the proceeds of the sale. Certain Funds or Series may make short sales that are not “against the box,” which create opportunities to increase the Fund’s or Series’ return but, at the same time, involve specific risk considerations and may be considered a speculative technique. Such short sales theoretically involve unlimited loss potential, as the market price of securities sold short may continually increase, although a Fund or Series may mitigate such losses by replacing the securities sold short before the market price has increased significantly. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of securities sold, but not yet purchased, may require purchasing the securities at prices which differ from the market value reflected on the Statement of Assets and Liabilities. The Fund or Series are liable for any dividends or interest payable on securities while those securities are in a short position and are recorded as dividend expense in the Statement of Operations. As collateral for its short positions, the Fund or Series are required under the Investment Company Act of 1940 to maintain segregated assets consisting of cash, cash
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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.
H. Security Transactions and Investment Income - Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Dividend income is accrued as of the ex-dividend date, except that certain dividends for foreign securities where the ex-dividend date may have passed are recorded as soon as the Fund or Series is informed of the dividend in the exercise of reasonable diligence. Interest income is recognized on the accrual basis, including the amortization of premiums and accretion of discounts on debt securities.
I. Expenses - Expenses that are directly related to one of the Funds or Series are charged directly to that Fund or Series. Other operating expenses are allocated to the Funds or Series 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 or Series are allocated to each respective class in proportion to the relative net assets of each class.
J. 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.
K. Taxes - The Funds or Series intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute 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.
On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ or Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. If applicable, the Funds or Series would recognize interest and penalties accrued related to unrecognized tax benefits in “other expenses” on the Statement of Operations. For all open tax years (September 30, 2004—September 30, 2007) and all major taxing jurisdictions through the end of the reporting period, the Funds’ or Series’ management has completed a review and evaluation in connection with the adoption of FIN 48 and has determined that no tax liability is required and no additional disclosures are needed as of September 30, 2008.
L. Earnings Credits - Under the fee agreement with the custodian, the Funds or Series may earn credits based on overnight custody cash balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statement of Operations are before the reduction in expense from the related earnings credits.
M. Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.
N. Indemnifications - - Under the Funds’ or Series’ organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds or Series. In addition, in the normal course of business, the Funds or Series enter into contracts that provide general indemnification to other parties. The Funds’ or Series’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds or Series that have not yet occurred, and may not occur. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
O. Recent Accounting Pronouncements - In September 2006, FASB issued Statement on Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosure about the use of fair value requirements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of September 30, 2008, the Funds or Series do not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.
In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS “161”), “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133,” which requires enhanced disclosures about an entity’s derivative and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position and financial performance, SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Funds or Series do not expect SFAS 161 to have a material impact on their financial statements.
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2. Management Fees and Other Transactions with Affiliates
Management fees are paid monthly to Security Investors (SI), (formerly known as Security Management Company) based on the following annual rates for the year ended September 30, 2008:
Management Fees (as a % of net assets) | ||||
Security Equity Fund: | ||||
Alpha Opportunity Series | 2.31%1 | |||
Equity Series | 0.75% | |||
Global Series | 1.00% | |||
Global Institutional Series | 1.00% | |||
Mid Cap Value Series | 0.81%2 | |||
Mid Cap Value Institutional Series | 0.75% | |||
Select 25 Series | 0.75% | |||
Small Cap Growth Series | 1.00% | |||
Small Cap Value Series | 1.00% | |||
Security Large Cap Value Fund: | ||||
Large Cap Value Fund | 0.65% | |||
Large Cap Value Institutional Series | 0.65% | |||
Security Mid Cap Growth Fund
| 0.75%
|
1Effective August 18, 2008, SI receives a management fee from the Alpha Opportunity Series at an annual rate of 1.25% of the average daily net assets. Prior to August 18, 2008, SI received a management fee from the Alpha Opportunity Series that consisted of two components. The first component was an annual base fee equal to 2.00% of Alpha Opportunity Series’ average daily net assets. The second component was a base fee adjustment that either increased or decreased the base fee, depending on how Alpha Opportunity Series (calculated by reference to its Class A shares) performed relative to the S&P 500 Index over the prior 12-month period (the “Measuring Period”). SI received the base fee of 2.00% without adjustment if the performance of Alpha Opportunity Series (calculated by reference to its Class A shares) matched the performance of the S&P 500 Index. The maximum base fee adjustment at each calculation period was 0.75% up or down in the event that Alpha Opportunity Series outperformed or underperformed the S&P 500 Index by 15% or more. SI calculated the base fee adjustment each month based upon Alpha Opportunity Series’ performance relative to the S&P 500 Index during the Measuring Period ending on the last day of the month. If Alpha Opportunity Series outperformed the S&P 500 Index over the Measuring Period, the base fee was adjusted upward. The upward adjustment was equal to the amount by which Alpha Opportunity Series’ performance exceeded that of the S&P 500 Index divided by 15 and multiplied by the average daily net assets of Alpha Opportunity Series during the Measuring Period to determine the base fee adjustment for the month. If Alpha Opportunity Series underperformed the Index, the base fee was adjusted downward on the same basis. SI determined the dollar amount of any performance adjustment each month by multiplying the adjustment percentage by the average daily net assets of the Alpha Opportunity Series during the Measuring Period and dividing that number by the number of days in the Measuring Period and then multiplying that amount by the number of days in the current month. 2Management fees are payable at an annual rate of 1.00% of the average daily net assets of $200 million or less, and 0.75% of the average daily net assets of the Mid Cap Value Series in excess of $200 million.
SI also acts as the administrative agent and transfer agent for the Funds, and as such performs administrative functions, transfer agency and dividend disbursing services, and the bookkeeping, accounting and pricing functions for each Fund or Series. For these services, the Investment Manager receives the following:
Administrative Fees (as a % of net assets)
| ||
Security Equity Fund: | ||
Alpha Opportunity Series | 0.15% | |
Equity Series | 0.095% | |
Global Series | 0.05% + greater of 0.10% or $60,000 | |
Global Institutional Series | 0.15% | |
Mid Cap Value Series | 0.095% | |
Mid Cap Value Institutional Series | 0.095% | |
Select 25 Series | 0.095% | |
Small Cap Growth Series | 0.095% | |
Small Cap Value Series | 0.095% | |
Security Large Cap Value Fund: | ||
Large Cap Value Fund | 0.095% | |
Large Cap Value Institutional Series | 0.095% | |
Security Mid Cap Growth Fund | 0.095% | |
Minimum charge per Series or Fund | $25,0001 | |
Certain out-of-pocket charges
| Varies
| |
1 SI has agreed not to charge the $25,000 minimum fee for the Global Institutional Series, Mid Cap Value Institutional Series, Small Cap Value Series and Large Cap Value Institutional Series through December 31, 2009.
|
SI is paid the following for providing transfer agent services to the Funds or Series:
Annual per account charge | $5.00 - $8.00 | |
Transaction fee | $0.60 - $1.10 | |
Annual minimum charge | $25,0001 | |
Certain out-of-pocket charges | Varies | |
1 SI has agreed not to charge the $25,000 minimum fee for the Global Institutional Series, Mid Cap Value Institutional Series, Small Cap Value Series and Large Cap Value Institutional Series through December 31, 2009.
|
Effective January 1, 2007, the investment advisory contract for Security Large Cap Value Fund provides that the total expenses be limited to 1.25% of average net assets for Class A shares and 2.00% of average net assets for both Class B and Class C shares, exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). Effective January 1, 2007, the investment advisory contract for the Select 25 Series provides that the total expenses be limited to 1.35% of average net assets for Class A shares and 2.10% of average net assets for both Class B and C shares, exclusive of brokerage costs, dividends on securities sold
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short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). These contracts are in effect through January 31, 2010. Effective January 1, 2007, the investment advisory contract for the Alpha Opportunity Series provides that the total other expenses be limited to 0.50% of average net assets for each class of shares, exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). Effective August 18, 2008, the investment advisory contract for the Alpha Opportunity Series, provides that the total expenses be limited to 1.95% of average net assets for Class A shares and 2.70% for both Class B and Class C shares, exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). This contract is in effect until February 1, 2011. Effective July 11, 2008, the investment advisory contract for the Global Institutional Series, Mid Cap Value Institutional Series and the Large Cap Value Institutional Series, provides that the total expenses be limited to 1.15%, 1.10% and 0.98%, respectively, of average net assets exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). Also effective July 11, 2008, the investment advisory contract for the Small Cap Value Series, provides that the total expenses be limited to 1.55% of average net assets for Class A shares, 2.30% for Class B shares and 1.30% for the Institutional Class shares, exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund or Series invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under generally accepted accounting principles). These contracts are in effect through January 31, 2010. The Investment Manager is entitled to reimbursement by the Alpha Opportunity Series, Global Institutional Series, Mid Cap Value Institutional Series, Select 25 Series, Small Cap Value Series, Large Cap Value Fund and the Large Cap Value Institutional Series of fees waived or expenses reimbursed during any of the previous 36 months, beginning on the date of the expense limitation agreement, if on any day the estimated operating expenses are less than the indicated percentages. As of September 30, 2008, the amount of fees waived or expenses reimbursed in the Alpha Opportunity Series, Global Institutional Series, Mid Cap Value Institutional Series, Select 25 Series, Small Cap Value Series, Large Cap Value Fund and the Large Cap Value Institutional Series were $35,749, $14,800, $3,367, $178,362, $11,509, $107,203 and $9,319, respectively. As of September 30, 2008, no amounts were recouped by the Investment Manager.
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 or Series’ Class B and Class C shares, and 0.25% of the average daily net assets of
each Fund’s or Series’ Class A shares. Effective August 25, 2005, the Global Series ceased charging 12b-1 fees on Class B shares in accordance with the FINRA sales cap regulations. Effective August 1, 2007, the Security Large Cap Value Fund ceased charging 12b-1 fees on Class B shares in accordance with the FINRA sales cap regulations. These fees may be reinstated at any time.
Security Distributors, Inc. (SDI), an affiliate of the Funds and distributor of the Funds, retained underwriting commissions during the year ended September 30, 2008, on sales of shares after allowances to brokers an dealers in the following amounts:
SDI Underwriting Commissions | |||||
Security Equity Fund: | |||||
Alpha Opportunity Series | $ | 20,241 | |||
Equity Series | 18,752 | ||||
Global Series | 128,700 | ||||
Mid Cap Value Series | 295,409 | ||||
Select 25 Series | 14,253 | ||||
Small Cap Growth | 11,748 | ||||
Security Large Cap Value Fund | 29,950 | ||||
Security Mid Cap Growth Fund | 34,713 |
Certain officers and directors of the Funds are also officers and/or directors of Security Benefit Life Insurance Company, a subsidiary of Security Benefit Corporation, and its affiliates, which include Security Global Investors (SGI) and SDI.
At September 30, 2008, Security Benefit Corporation and its subsidiaries owned over five percent of the outstanding shares of the Funds or Series, as follows:
Fund or Series | Percent of outstanding shares owned | |||||
Security Equity Fund: | ||||||
Alpha Opportunity Series | 14.77% | |||||
Equity Series | 15.98% | |||||
Global Institutional Series | 100% | |||||
Mid Cap Value Institutional Series | 100% | |||||
Select 25 Series | 15.74% | |||||
Small Cap Growth Series | 29.66% | |||||
Small Cap Value Series | 97.78% | |||||
Security Large Cap Value Fund: | ||||||
Large Cap Value Fund | 13.09% | |||||
Large Cap Value Institutional Series | 100% | |||||
Security Mid Cap Growth Fund | 9.42% |
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3. Investment Transactions
Investment transactions for the year ended September 30, 2008, (excluding overnight investments and short-term commercial paper) were as follows:
Purchases | Proceeds from Sales | |||
Security Equity Fund: | ||||
Alpha Opportunity Series | $258,256,305 | $244,345,293 | ||
Equity Series | 307,129,289 | 355,145,692 | ||
Global Series | 442,348,900 | 467,326,586 | ||
Global Institutional Series | 13,591,952 | 5,169,178 | ||
Mid Cap Value Series | 539,621,821 | 562,861,142 | ||
Mid Cap Value Institutional Series | 18,152,266 | 2,336,882 | ||
Select 25 Series | 92,511,418 | 92,399,229 | ||
Small Cap Growth Series | 49,865,321 | 72,044,199 | ||
Small Cap Value Series | 1,099,046 | 201,515 | ||
Security Large Cap Value Fund: | ||||
Large Cap Value Fund | 47,086,995 | 44,015,012 | ||
Large Cap Value Institutional Series | 3,128,429 | 222,586 | ||
Security Mid Cap Growth Fund
| 233,300,296
| 286,887,938
|
4. Open Futures Contracts
Open futures contracts for Alpha Opportunity Series as of September 30, 2008, were as follows:
Alpha Opportunity Series S&P 500 Index Futures | ||||
Position | Long | |||
Number of Contracts | 36 | |||
Expiration Date | 12-19-08 | |||
Contract Amount | $11,428,498 | |||
Market Value | $10,521,000 | |||
Unrealized Loss | ($907,498) |
5. Options Written
Information as to options written by the Funds or Series during the period ended September 30, 2008, and options outstanding at September 30, 2008 is provided below:
Equity Series Written Call Options
Number of Contracts | Premium Amount | ||||||
Balance at September 30, 2007 | – | $ | – | ||||
Opened | 242 | 40,765 | |||||
Expired | (242 | ) | (40,765 | ) | |||
Balance at September 30, 2008 | – | $ | – | ||||
Equity Series Written Put Options
Number of Contracts | Premium Amount | ||||||
Balance at September 30, 2007 | – | $ | – | ||||
Opened | 774 | 73,905 | |||||
Exercised | (250 | ) | (12,750 | ) | |||
Expired | (524 | ) | (61,155 | ) | |||
Balance at September 30, 2008 | – | $ | – | ||||
Mid Cap Value Series Written Call Options Outstanding
Common Stock | Expiration Date | Exercise Price | Number of Contracts | Market Value | ||||||||
Administaff, Inc. | 01-16-08 | $ | 30.00 | 903 | $ | 130,935 | ||||||
Old National Bankcorp | 12-19-08 | 17.50 | 842 | 101,040 | ||||||||
Quanta Services, Inc. | 11-21-08 | 35.00 | 1,153 | 69,180 | ||||||||
TreeHouse Foods, Inc. | 11-21-08 | 30.00 | 1,697 | 246,065 | ||||||||
Ultratech, Inc. | 11-21-08 | 17.50 | 402 | 10,050 | ||||||||
Total call options outstanding (premiums received, $985,532) | 4,997 | $ | 557,270 | |||||||||
Mid Cap Value Series Written Put Options Outstanding | ||||||||||||
Common Stock | Expiration Date | Exercise Price | Number of Contracts | Market Value | ||||||||
First Horizon National Corporation | 11-21-08 | $ | 10.00 | 4,000 | $ | 940,000 | ||||||
Helmerich & Payne, Inc. | 10-17-08 | 50.00 | 547 | 377,430 | ||||||||
McDermott International, Inc. | 11-21-08 | 35.00 | 1,115 | 1,159,600 | ||||||||
W.R. Berkley Corporation | 10-17-08 | 22.50 | 1,540 | 53,900 | ||||||||
Wilmington Trust Corporation | 11-21-08 | 22.50 | 1,730 | 95,150 | ||||||||
Total put options outstanding (premiums received, $1,507,358) | 8,932 | $ | 2,626,080 | |||||||||
Mid Cap Value Series Written Call Options | ||||||||||||
Number of Contracts | Premium Amount | |||||||||||
Balance at September 30, 2007 | 13,062 | $ | 2,685,538 | |||||||||
Opened | 22,646 | 5,633,130 | ||||||||||
Bought Back | (2,145 | ) | (629,437 | ) | ||||||||
Expired | (17,103 | ) | (3,691,666 | ) | ||||||||
Exercised | (11,463 | ) | (3,012,033 | ) | ||||||||
Balance at September 30, 2008 | 4,997 | $ | 985,532 | |||||||||
Mid Cap Value Series Written Put Options | ||||||||||||
Number of Contracts | Premium Amount | |||||||||||
Balance at September 30, 2007 | – | $ | – | |||||||||
Opened | 20,304 | 3,272,408 | ||||||||||
Expired | (3,255 | ) | (595,327 | ) | ||||||||
Exercised | (8,117 | ) | (1,169,723 | ) | ||||||||
Balance at September 30, 2008 | 8,932 | $ | 1,507,358 | |||||||||
Mid Cap Value Institutional Series Written Call Options Outstanding |
| |||||||||||
Common Stock | Expiration Date | Exercise Price | Number of Contracts | Market Value | ||||||||
Administaff, Inc, | 01-16-08 | $ | 30.00 | 21 | $ | 3,045 | ||||||
Old National Bankcorp | 12-19-08 | 17.50 | 24 | 2,880 | ||||||||
Quanta Services, Inc. | 11-21-08 | 35.00 | 30 | 1,800 | ||||||||
TreeHouse Foods, Inc. | 11-21-08 | 30.00 | 33 | 4,785 | ||||||||
Ultratech, Inc. | 11-21-08 | 17.50 | 9 | 225 | ||||||||
Total call options outstanding (premiums received, $23,422) | 117 | $ | 12,735 | |||||||||
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Mid Cap Value Institutional Series Written
Put Options Outstanding
Common Stock | Expiration Date | Exercise Price | Number of Contracts | Market Value | ||||||
First Horizon National Corporation | 11-21-08 | $ | 10.00 | 100 | $ | 23,500 | ||||
Helmerich & Payne, Inc. | 10-17-08 | 50.00 | 14 | 9,660 | ||||||
McDermott International, Inc. | 11-21-08 | 35.00 | 27 | 28,080 | ||||||
W.R. Berkley Corporation | 10-17-08 | 22.50 | 40 | 1,400 | ||||||
Wilmington Trust Corporation | 11-21-08 | 22.50 | 41 | 2,255 | ||||||
Total put options outstanding (premiums received, $37,332) | 222 | $ | 64,895 | |||||||
Mid Cap Value Institutional Series Written Call Options
Number of Contracts | Premium Amount | ||||||
Balance at July 11, 2008 | – | $ | – | ||||
Opened | 135 | 29,294 | |||||
Exercised | (18 | ) | (5,872 | ) | |||
Balance at September 30, 2008 | 117 | $ | 23,422 | ||||
Mid Cap Value Institutional Series Written Put Options
Number of Contracts | Premium Amount | ||||||
Balance at July 11, 2008 | – | $ | – | ||||
Opened | 304 | 48,906 | |||||
Expired | (62 | ) | (7,339 | ) | |||
Exercised | (20 | ) | (4,235 | ) | |||
Balance at September 30, 2008 | 222 | $ | 37,332 | ||||
Small Cap Value Series Written Call Options Outstanding
Common Stock | Expiration Date | Exercise Price | Number of Contracts | Market Value | ||||||
Administaff, Inc. | 01-16-08 | $ | 30.00 | 1 | $ | 145 | ||||
Total call options outstanding (premiums received, $298) | 1 | $ | 145 | |||||||
Small Cap Value Series Written Call Options
Number of Contracts | Premium Amount | ||||
Balance at July 11, 2008 | – | $ | – | ||
Opened | 1 | 298 | |||
Balance at September 30, 2008 | 1 | $ | 298 | ||
Security Large Cap Value Fund Written Call Options
Number of Contracts | Premium Amount | ||||||
Balance at September 30, 2007 | – | $ | – | ||||
Opened | 182 | 30,670 | |||||
Expired | (182 | ) | (30,670 | ) | |||
Balance at September 30, 2008 | – | $ | – | ||||
Security Large Cap Value Fund Written Put Options
Number of Contracts | Premium Amount | ||||||
Balance at September 30, 2007 | 235 | $ | 19,505 | ||||
Opened | 571 | 54,674 | |||||
Exercised | (391 | ) | (45,494 | ) | |||
Expired | (415 | ) | (28,685 | ) | |||
Balance at September 30, 2008 | – | $ | – | ||||
Security Mid Cap Growth Fund Written Call Options
Number of Contracts | Premium Amount | ||||||
Balance at September 30, 2007 | – | $ | – | ||||
Opened | 327 | 13,006 | |||||
Expired | (327 | ) | (13,006 | ) | |||
Balance at September 30, 2008 | – | $ | – | ||||
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7. Federal Tax Matters
For federal income tax purposes, the amounts of unrealized appreciation (depreciation) on investments at September 30, 2008, were as follows:
Gross unrealized
| Gross unrealized
| Net unrealized
| ||||
Security Equity Fund: | ||||||
Alpha Opportunity Series | $ – | $ (3,949,823) | $ (3,949,823) | |||
Equity Series | 14,882,630 | (40,743,153) | (25,860,523) | |||
Global Series | – | (18,667,689) | (18,667,689) | |||
Global Institutional Series | – | (902,038) | (902,038) | |||
Mid Cap Value Series | 45,964,558 | (175,560,089) | (129,595,531) | |||
Mid Cap Value Institutional Series | 1,476,944 | (1,327,649) | 149,295 | |||
Select 25 Series | 685,823 | (6,042,113) | (5,356,290) | |||
Small Cap Growth Series | 1,493,440 | (2,518,656) | (1,025,216) | |||
Small Cap Value Series | 133,096 | (66,626) | 66,470 | |||
Security Large Cap Value Fund: | ||||||
Large Cap Value Fund | 9,785,669 | (11,257,254) | (1,471,585) | |||
Large Cap Value Institutional Series | 150,553 | (232,824) | (82,271) | |||
Securty Mid Cap Growth Fund | 1,801,643 | (13,244,934) | (11,443,291) |
The tax character of distributions paid during the fiscal years ended September 30, 2008 and 2007 are as follows:
2008 | Ordinary Income | Capital Gain | Return of Capital | Total | ||||||||||
Security Equity Fund: | ||||||||||||||
Alpha Opportunity Series | $ 5,776,326 | $ 538,039 | $ 694,650 | $ 7,009,015 | ||||||||||
Equity Series | 4,553,170 | 43,837,339 | 564,230 | 48,954,739 | ||||||||||
Global Series | 6,004,745 | 57,280,840 | – | 63,285,585 | ||||||||||
Mid Cap Value Series | 9,452,756 | 169,378,319 | – | 178,831,075 | ||||||||||
Select 25 Series | – | 4,176,834 | – | 4,176,834 | ||||||||||
Small Cap Growth Series | 841,392 | 3,077,781 | – | 3,919,173 | ||||||||||
Security Large Cap Value Fund: | ||||||||||||||
Large Cap Value Fund | 400,275 | 3,591,497 | – | 3,991,772 | ||||||||||
Security Mid Cap Growth Fund
| 6,035,045
| 27,762,273
| –
| 33,797,318
| ||||||||||
2007 | ||||||||||||||
Security Equity Fund: | ||||||||||||||
Alpha Opportunity Series | $ 2,569,557 | $ 708,308 | $ 3,277,865 | |||||||||||
Equity Series | 9,735,014 | 30,529,927 | 40,264,941 | |||||||||||
Global Series | 68,515 | 22,793,963 | 22,862,478 | |||||||||||
Mid Cap Value Series | 15,495,867 | 36,895,809 | 52,391,676 | |||||||||||
Security Large Cap Value Fund: | ||||||||||||||
Large Cap Value Fund | 25,136 | – | 25,136 | |||||||||||
Security MidCap Growth Fund | 1,583,425 | 22,297,681 | 23,881,106 | |||||||||||
Note: For federal income tax purposes, short term capital gain distributions are treated as ordinary income distributions. As of September 30, 2008, the components of distributable earnings on a tax basis were: |
| |||||||||||||
Undistributed Ordinary Income | Undistributed Long-Term Gain | Accumulated Capital and Other Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings/(Deficit) | ||||||||||
Security Equity Fund: | ||||||||||||||
Alpha Opportunity Series | $ – | $ – | $(3,948,213) | $ (3,962,755) | $ | (7,910,968 | ) | |||||||
Equity Series | 282,643 | – | – | (25,860,523) | (25,577,880 | ) | ||||||||
Global Series | – | 225,469 | (21,409,987) | (18,614,503) | (39,799,021 | ) | ||||||||
Global Institutional Series | 14,698 | – | (267,958) | (898,864) | (1,152,124 | ) | ||||||||
Mid Cap Value Series | 2,696,500 | 86,413,567 | – | (130,285,990) | (41,175,923 | ) | ||||||||
Mid Cap Value Institutional Series | 1,011,813 | – | – | 132,419 | 1,144,232 | |||||||||
Select 25 Series | – | 7,623 | (13,697,165) | (5,356,290) | (19,045,832 | ) | ||||||||
Small Cap Growth Series | – | 96,487 | (3,475,815) | (1,025,216) | (4,404,544 | ) | ||||||||
Small Cap Value Series | 80,302 | – | – | 66,623 | 146,925 | |||||||||
Security Large Cap Value Fund: | ||||||||||||||
Large Cap Value Fund | 602,734 | 427,733 | (6,466,272) | (1,471,584) | (6,907,389 | ) | ||||||||
Large Cap Value Institutional Series | 8,072 | – | (42,949) | (82,272) | (117,149 | ) | ||||||||
Security Mid Cap Growth Fund | – | 651,342 | (24,226,541) | (11,443,292) | (35,018,491 | ) |
* Certain Funds had net capital loss carryovers and deferred post October losses as identified elsewhere in the Notes to the Financial Statements. | ||
** The differences between book-basis and tax-basis unrealized appreciation (depreciation) are attributable primarily to the tax deferral of wash sale losses, the differences between book and tax basis passive foreign investment companies and bond discount accretion. |
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Notes to Financial Statements
September 30, 2008
As of September 30, 2008, the capital loss carryovers utilized and expired in 2008 and the accumulated net realized loss on sales of investments for federal income tax purposes which are available to offset future taxable gains and post-October losses that are deferred to the first day of the next fiscal year are as follows:
Capital Loss in 2008 | Capital Loss In 2008 | Capital Loss at 9/30/08 | Expires In | Deferred Post- October Losses | |||||||||||||||||
Security Equity Fund: | |||||||||||||||||||||
Alpha Opportunity Series | $ | – | $ | – | $ | – | $ | 3,948,213 | |||||||||||||
Global Series | 208,547 | – | – | 2009 | $ | 20,735,778 | |||||||||||||||
234,431 | – | 674,209 | 2010 | ||||||||||||||||||
$ | 442,978 | $ | – | $ | 674,209 | ||||||||||||||||
Global Institutional Series | $ | – | $ | – | $ | – | $ | 267,958 | |||||||||||||
Select 25 Series* | $ | 1,740 | $ | 158,259 | $ | – | 2008 | $ | 5,272,638 | ||||||||||||
– | – | 2,412,936 | 2009 | ||||||||||||||||||
– | – | 2,582,076 | 2010 | ||||||||||||||||||
– | – | 3,390,876 | 2011 | ||||||||||||||||||
– | – | 38,639 | 2012 | ||||||||||||||||||
$ | 1,740 | $ | 158,259 | $ | 8,424,527 | ||||||||||||||||
Small Cap Growth Series | $ | – | $ | – | $ | – | $ | 3,475,814 | |||||||||||||
Security Large Cap Value Fund: | |||||||||||||||||||||
Large Cap Value Fund | $ | – | $ | – | $ | – | $ | 6,466,270 | |||||||||||||
Large Cap Value Institutional Series | $ | – | $ | – | $ | – | $ | 42,949 | |||||||||||||
Security Mid Cap Growth Fund | $ | 567,035 | $ | – | $ | 567,035 | 2009 | $ | 23,075,528 | ||||||||||||
– | – | 567,035 | 2010 | ||||||||||||||||||
– | – | 16,944 | 2011 | ||||||||||||||||||
$ | 567,035 | $ | – | $ | 1,151,014 | ||||||||||||||||
* The Security Equity Fund - Select 25 Series obtained approximately $1,236,753, $3,140,789 and $1,728,838 of capital losses (included above) from its merger with Security Equity Fund - Social Awareness Series, Enhanced Index Series and Large Cap Growth Series, respectively, on June 16, 2006. Certain of these capital losses expired (as shown above) due to limitations imposed by Section 382 of the Internal Revenue Code. The remaining capital losses may be applied against future realized capital gains subject to annual limitations.
|
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Notes to Financial Statements
September 30, 2008
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to post-October losses, losses deferred due to wash sales, foreign currency gains and losses, and the “mark-to-market” of certain passive foreign investment companies (PFICs) for tax purposes. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise.
On the Statement of Assets and Liabilities the following adjustments were made for permanent book tax differences:
Accumulated Net Realized Gain (Loss) | Undistributed Net Investment Income | Paid-in- Capital | ||||||||||
Security Equity Fund: | ||||||||||||
Alpha Opportunity Series | $ 99,551 | $ | 595,099 | $ | (694,650) | |||||||
Equity Series | 564,229 | – | (564,229) | |||||||||
Global Series | 526,425 | (180,824) | (345,601) | |||||||||
Global Institutional Series | 7,741 | (7,741) | – | |||||||||
Select 25 Series | 158,260 | 231,859 | (390,119) | |||||||||
Small Cap Growth Series | (215,270) | 561,834 | (346,564) | |||||||||
Small Cap Value Series | (895) | 895 | – | |||||||||
Security Mid Cap | ||||||||||||
Growth Fund | (72,662) | 988,218 | (915,556) | |||||||||
8. Affiliated Transactions*
Investments representing 5% or more of the outstanding voting securities of a portfolio company of a Fund or Series result in that portfolio company being considered an affiliated company of such Fund or Series, as defined in the 1940 Act. The aggregate market value of all securities of affiliated companies held in the Mid Cap Value Series of the Security Equity Fund as of September 30, 2008 amounted to $52,325,989, which represents 6.3% of net assets. There were no affiliated companies held in any other Fund or Series. Transactions in the Mid Cap Value Series during the year ended September 30, 2008, in which the portfolio company is an “affiliated person” are as follows:
Balance 9-30-07
|
Gross Additions
|
Gross Reductions
|
Balance 9-30-08
|
Realized Gain/(Loss)
|
Investment Income
| |||||||||||||
Bimini Capital Management, Inc. (Shares) | 1,474,400 | – | 1,474,400 | – | – | |||||||||||||
Bimini Capital Management, Inc. (Cost) | $ | 16,310,457 | $ | – | $ | – | $ | 16,310,457 | $ | – | $ | – | ||||||
Hydrogen Corporation (Shares) | 840,300 | 419,700 | – | 1,260,000 | – | – | ||||||||||||
Hydrogen Corporation (Cost) | $ | 4,054,365 | $ | 1,170,963 | $ | – | $ | 5,225,328 | $ | – | $ | – | ||||||
IXYS Corporation (Shares) | 1,335,400 | 1,074,960 | – | 2,410,360 | – | – | ||||||||||||
IXYS Corporation (Cost) | $ | 11,770,248 | $ | 8,572,545 | $ | – | $ | 20,342,793 | $ | – | $ | – | ||||||
Maxwell Technologies, Inc,. (Shares) | 789,400 | 535,900 | – | 1,325,300 | – | – | ||||||||||||
Maxwell Technologies, Inc. (Cost) | $ | 10,502,509 | $ | 4,104,994 | $ | – | $ | 14,607,503 | $ | – | $ | – | ||||||
Power-One, Inc. (Shares) | 2,648,800 | 2,977,500 | – | 5,626,300 | – | – | ||||||||||||
Power-One, Inc. (Cost) | $ | 16,493,326 | $ | 10,170,376 | $ | – | $ | 26,663,702 | $ | – | $ | – | ||||||
Quixote Corporation (Shares) | 479,100 | – | – | 479,100 | – | – | ||||||||||||
Quixote Corporation (Cost) | $ | 9,318,028 | $ | – | $ | – | $ | 9,318,028 | $ | – | $ | 191,640 | ||||||
* As a result of the Security Mid Cap Values Series’ beneficial ownership of the common stock of these portfolio companies, applicable regulations require that the Series state that it may be deemed an affiliate of the respective portfolio company. The Series disclaims that the “affiliated persons” are affiliates of the Distributor, Advisor, Series or any other client of the Advisor.
9. Alpha Opportunity Series
Alpha Opportunity Series (“Alpha”) contracted with Lehman Brothers International Europe (“LBIE”) to provide prime brokerage services related to the Alpha’s short selling. On September 15, 2008, LBIE was placed into administration and a third party administrator has been named (the “Administrator”). Alpha’s exposure to LBIE consists of short sale proceeds held by LBIE, and restricted long positions held at Alpha’s custodian, as collateral for said short sales. Alpha has delivered a Notice of Termination of Loans to LBIE and the Administrator. Alpha is working to resolve these issues with LBIE and the Administrator. As of September 30, 2008, included in the Statement of Assets and Liabilities are the value of restricted long positions of $7,570,226, restricted cash, including foreign cash, representing the value of short sale proceeds of $4,136,760 and liabilities for short sales of $7,122,424 representing the value of securities sold short at the time of termination. Until such time as the liability for short sales is settled and all restrictions are removed, Alpha cannot sell such restricted long positions and/or utilize the restricted cash balances to achieve the Alpha’s investment objectives and/or meet Alpha redemptions or other obligations. As of the close of business on October 3, 2008, and until further notice, Alpha is not accepting subscriptions for shares from either new or existing shareholders.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Security Equity Fund (comprised of Alpha Opportunity, Equity, Global, Global Institutional, Mid Cap Value, Mid Cap Value Institutional, Select 25, Small Cap Growth and Small Cap Value Series), Security Large Cap Value Fund (comprised of Large Cap Value Fund and Large Cap Value Institutional Series) and Security Mid Cap Growth Fund (the Funds) as of September 30, 2008, and the related statements of operations for the periods then ended, the statements of changes in net assets and the financial highlights for each of 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2008, by correspondence with the custodians and brokers, or by other appropriate auditing procedures where replies from brokers were not received. 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 series constituting the Funds at September 30, 2008, and the results of their operations for the periods then ended, changes in their net assets and financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Kansas City, Missouri
November 25, 2008
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(unaudited)
A special meeting of the shareholders of the Security Equity Fund - Alpha Opportunity Series was held on August 5, 2008. Each matter voted upon at the meeting, as well as the number of votes cast for, against or withheld or abstentions with respect to such matters are set forth below:
(1) | The approval of an amended investment advisory agreement between Security Equity Fund - Alpha Opportunity Series and Security Investors LLC: |
Votes For | Votes Against/Abstentions | |
2,166,761 | 93,534 |
(2) | The approval of a new investment sub-advisory agreement between Security Investors, LLC and Security Global Investors, LLC pursuant to which Security Global Investors, LLC will be appointed as an investment sub-adviser to Security Equity Fund - Alpha Opportunity Series: |
Votes For | Votes Against/Abstentions | |
2,195,031 | 65,085 |
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The business address of each director is One Security Benefit Place, Topeka, KS 66636-0001
Name | ||
(Date of Birth) | ||
Year Elected*** | Principal Occupation(s) During Past 5 Years | |
Donald A. Chubb, Jr.** | Business Broker - Griffith & Blair Realtors | |
(12-14-46) | Director - Jayhawk Area Boy Scouts Council | |
1994 | ||
Harry W. Craig, Jr.** | Chairman, CEO, Secretary & Director - The Martin Tractor Company, Inc. | |
(05-11-39) | Director - Stormont-Vail Corporation | |
2004 | Director - Concerned Citizens for Topeka | |
Director - Oscar S. Stauffer Executive in Residence | ||
Jerry B. Farley** | President - Washburn University | |
(09-20-46) | President - J&J Bonanza | |
2005 | ||
Penny A. Lumpkin** | Partner - Vivian’s Gift Shop (Corporate Retail) | |
(08-20-39) | Vice President - Palmer Companies, Inc.(Small Business and Shopping | |
1993 | Center Development) | |
Vice President - PLB (Real Estate Equipment Leasing) | ||
Vice President - Town Crier (Retail) | ||
Prior to 2002: | ||
Vice President - Bellaire Shopping Center (Managing and Leasing) | ||
Partner - Goodwin Enterprises (Retail)
| ||
Maynard F. Oliverius** | President & Chief Executive Officer - Stormont-Vail HealthCare | |
(12-18-43) | Director - VHA Mid-America | |
1998 | Director - Go Topeka
| |
Richard M. Goldman* | Senior Vice President - Security Benefit Corporation | |
(03-04-61) | President - Security Investors, LLC | |
2008 (President, Director & | Director - Security Distributors, Inc. | |
Chairman of the Board) | Director - First Security Benefit Life Insurance and Annuity Company of New York | |
President & Manager - Security Global Investors, LLC | ||
President - Security Investments Corporation | ||
Managing Member - RM Goldman Partners, LLC | ||
President & CEO - ForstmannLeff | ||
Managing Director - Head of the Americas Institutional Business, Deutsche | ||
Asset Management
|
*This director is deemed to be an “interested person” of the Funds under the Investment Company Act of 1940, as amended, by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager. This director is also an officer of the funds.
**These directors serve on the Fund’s joint audit committee, the purpose of which is to meet with the independent registered public accounting firm, to review the work of the independent registered public accounting firm, and to oversee the handling by Security Investors of the accounting and financial reporting functions for the Funds.
***Each director oversees 31 Security Funds portfolios and serves until the next annual meeting, or until a successor has been duly elected and qualified.
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Officers (unaudited)
The business address of each officer is One Security Benefit Place, Topeka, KS 66636-0001
Name | ||
(Date of Birth) | ||
Title - Year Elected | Principal Occupation(s) During Past 5 Years | |
Steven M. Bowser | Vice President & Senior Portfolio Manager - Security Investors, LLC; | |
(02-11-60) | Vice President & Senior Portfolio Manager - Security Benefit Life Insurance | |
Vice President - 2003
| Company
| |
Mark P. Bronzo | Portfolio Manager, Security Investors, LLC | |
(11-01-60) | Managing Director & Chief Compliance Officer, Nationwide Separate | |
Vice President - 2008 | Accounts LLC | |
Christina Fletcher | Vice President & Portfolio Manager - Security Investors, LLC | |
(07-25-72) | Credit Analyst/Portfolio Manager - Horizon Cash Management | |
Vice President - 2005 | Senior Money Market Trader - Scudder Investments | |
Brenda M. Harwood | Vice President, Chief Compliance Officer & Treasurer - Security Global | |
(11-03-63) | Investors, LLC | |
Chief Compliance Officer - 2004 | Assistant Vice President - Security Benefit Life Insurance Company | |
Treasurer - 1988 | Vice President, Assistant Treasurer & Director - Security Distributors, Inc. | |
Mark Lamb | Vice President - Security Investors, LLC, | |
(02-03-60) | Vice President - Security Benefit Life Insurance Company | |
Vice President - 2003 | ||
Amy J. Lee | Secretary - Security Investors, LLC | |
(06-05-61) | Secretary & Chief Compliance Officer - Security Distributors, Inc. | |
Secretary - 1987 | Vice President, Associate General Counsel & Assistant Secretary -Security Benefit | |
Corporation & Security Benefit Life Insurance Company | ||
Director - Brecek & Young Advisors, Inc. | ||
Mark Mitchell | Vice President & Portfolio Manager - Security Investors, LLC | |
(08-24-64) | Vice President & Portfolio Manager - Security Benefit Life Insurance Company | |
Vice President - 2003 | ||
Joseph C. O’Connor | Portfolio Manager, Security Investors, LLC | |
(07-15-60) | Managing Director, Nationwide Separate Accounts LLC | |
Vice President - 2008 | ||
Christopher Phalen | Vice President & Head of Fixed Income - Security Global Investors, LLC; | |
(11-9-70) | Assistant Vice President & Head of Fixed Income - Security Benefit Life Insurance | |
Vice President - 2002 | Company | |
Vice President & Portfolio Manager - Security Investors, LLC | ||
Vice President & Portfolio Manager - Security Benefit Life Insurance Company
| ||
Daniel W. Portanova | Portfolio Manager, Security Investors, LLC | |
(10-02-60) | Managing Director, Nationwide Separate Accounts LLC | |
Vice President - 2008
| ||
James P. Schier | Vice President & Senior Portfolio Manager - Security Investors, LLC; | |
(12-28-57) | Vice President & Senior Portfolio Manager - Security Benefit Life Insurance | |
Vice President - 1998 | Company | |
Cindy L. Shields | Vice President & Head of Operations - Security Global Investors | |
(06-05-67) | Vice President & Head of Equity Asset Management - Security Investors, LLC | |
Vice President - 1988 | Vice President & Head of Equity Asset Management - Security Benefit Life | |
Insurance Company | ||
Christopher D. Swickard | Assistant Secretary - Security Investors, LLC | |
(10-09-65) | Second Vice President & Assistant General Counsel - Security Benefit | |
Assistant Secretary - 1996 | Corporation and Security Benefit Life Insurance Company | |
Assistant Secretary - Security Distributors, Inc. | ||
David G. Toussaint | Vice President & Portfolio Manager - Security Investors, LLC | |
(10-10-66) | Assistant Vice President & Portfolio Manager - Security Benefit Life Insurance | |
Vice President - 2001
| Company
|
* Officers serve until the next annual meeting or until a successor has been duly elected and qualified.
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Tax Information (unaudited)
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, 2008, which qualify for the dividends received deduction for corporate shareholders is as follows:
Security Equity Fund: | |||||||
Alpha Opportunity Series | 11 | % | |||||
Equity Series | 57 | % | |||||
Global Series | 26 | % | |||||
Mid Cap Value Series | 79 | % | |||||
Small Cap Growth Series | 13 | % | |||||
Security Large Cap Value Fund: | |||||||
Large Cap Value Fund | 100 | % | |||||
Security Mid Cap Growth Fund | 14 | % |
Certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of ordinary income distributions for the fiscal year ended September 30, 2008, taxed at the maximum rate of 15% is as follows:
Security Equity Fund: | |||||||
Alpha Opportunity Series | 12 | % | |||||
Equity Series | 57 | % | |||||
Global Series | 28 | % | |||||
Mid Cap Value Series | 79 | % | |||||
Security Large Cap Value Fund: | |||||||
Large Cap Value Fund | 100 | % | |||||
Mid Cap Growth Fund | 14 | % |
For federal income tax purposes, the Funds designate capital gain dividends for the fiscal year ended September 30, 2008 as follows:
Security Equity Fund: | |||||||
Alpha Opportunity Series | $ | 667,525 | |||||
Equity Series | 44,458,896 | ||||||
Global Series | 57,280,840 | ||||||
Mid Cap Value Series | 169,306,776 | ||||||
Select 25 Series | 4,176,834 | ||||||
Small Cap Growth Series | 2,798,128 | ||||||
Security Large Cap Value Fund: | |||||||
Large Cap Value Fund | 3,591,497 | ||||||
Security Mid Cap Growth Fund | 27,762,273 |
Additional information for foreign shareholders only:
For the year ended September 30, 2008, the following ordinary distributions paid qualified as interest related dividends under the Internal Revenue Code Section 871(k)(1)(c):
Security Equity Fund: | |||||||
Alpha Opportunity Series | 13 | % | |||||
Global Series | 2 | % | |||||
Mid Cap Value Series | 13 | % | |||||
Small Cap Growth Series | 8 | % | |||||
Security Large Cap Value Fund: | |||||||
Large Cap Value Fund | 14 | % | |||||
Security Mid Cap Growth Fund | 8 | % |
For the year ended September 30, 2008, the following ordinary distributions paid qualified as short term capital gain dividends under the Internal Revenue Code Section 871(k)(2)(c):
Security Equity Fund: | |||||||
Alpha Opportunity Series | 91 | % | |||||
Equity Series | 100 | % | |||||
Mid Cap Value Series | 53 | % | |||||
Small Cap Growth Series | 100 | % | |||||
Security Mid Cap Growth Fund | 100 | % |
Other Information
Each of the Security Funds files a complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Forms N-Q of each such Fund are available on the Commission’s website at www.sec.gov. The Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The portfolio holdings of each of the Security Funds are available on their website, www.securitybenefit.com or by calling 1-800-888-2461.
A description of the policies and procedures that the Security Funds use to determine how to vote proxies relating to portfolio securities is available upon request, free of charge by calling 1-800-888-2461, or accessing the U.S. Securities and Exchange Commission website at www.sec.gov. Information regarding how the Security Funds voted proxies relating to portfolio securities during the 12 month period ended June 30, 2008 is available upon request, free of charge by calling 1-800-888-2461, or accessing the U.S. Securities and Exchange Commission website at www.sec.gov.
The statement of additional information (“SAI”) includes additional information about the Funds’ Directors and is available upon request without charge by calling 1-800-888-2461.
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Item 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. The Registrant hereby undertakes to provide any person without charge, upon request, a copy of its Code by calling the Registrant at 1-800-888-2461.
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. |
(a) | Audit Fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $146,500 in 2007 and $172,800 in 2008. |
(b) | Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item 4 were $3,600 in 2007 and $5,100 in 2008. These services consisted of a review of the Registrant’s semi-annual financial statements. |
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (“Service Affiliates”) which required pre-approval by the Audit Committee were $20,000 in 2007 and $9,250 in 2008, which related to the review of the transfer agent function.
(c) | Tax Fees. The aggregate fees billed to the Registrant in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $20,000 in 2007 and $28,600 in 2008. These services consisted of (i) preparation of U.S. federal, state and excise tax returns; (ii) U.S. federal and state tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired and (iv) review of U.S. federal excise distribution calculations. |
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The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee were $0 in 2007 and $0 in 2008.
(d) | All Other Fees. The aggregate fees billed to the Registrant in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $0 in 2007 and $0 in 2008. |
The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (d) of this Item, which required pre-approval by the Audit Committee were $0 in 2007 and $0 in 2008.
(e) | (1) | Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of the auditor’s engagements for audit and non-audit services to the Registrant. Pre-approval considerations include whether the proposed services are compatible with maintaining the auditor’s independence as specified in applicable rules. | ||
(e) | (2) | Percentage of Non-Audit Services Approved under (c)(7)(i)(C). The percentage of the services described in each of (b) through (d) of this Item 4 (only those that relate to the Registrant) that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X was 0%, 0% and 0%, respectively. |
(f) | Not applicable. |
(g) | Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $43,200 in 2007 and $42,950 in 2008. |
(h) | Auditor Independence. The Registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young, LLP to the Registrant (and its affiliates) that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young, LLP’s independence. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Schedule of Investments. |
The Schedule of Investments is included under Item 1 of this form.
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Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
The registrant does not currently have in place procedures by which shareholders may recommend nominees to the registrant’s board.
There have been no changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
Item 11. | 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 12. | 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. |
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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/ RICHARD M. GOLDMAN | |
Richard M. Goldman, President | ||
Date: | December 5, 2008 |
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/ RICHARD M. GOLDMAN | |
Richard M. Goldman, President | ||
Date: | December 5, 2008 | |
By: | /s/ BRENDA M. HARWOOD | |
Brenda M. Harwood, Treasurer | ||
Date: | December 5, 2008 |