Security Benefit SBL Fund Annual Report dated 12/31/2006

Advised by:

Subadvisor, Mainstream

Investment Advisers

Subadvisor, Mainstream

Investment Advisers

N-CSR 1 dncsr.htm SECURITY BENEFIT SBL FUND ANNUAL REPORT DATED 12/31/2006 Security Benefit SBL Fund Annual Report dated 12/31/2006

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		811-02753

SBL FUND

(Exact name of registrant as specified in charter)


ONE SECURITY BENEFIT PLACE, TOPEKA, KANSAS		66636-0001
(Address of principal executive offices)		(Zip code)

MICHAEL G. ODLUM, PRESIDENT

SBL 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: December 31

Date of reporting period: December 31, 2006

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.

Item 1.

Reports to Stockholders.

LOGO

SBL Fund

December 31, 2006

Annual Report

Table of Contents


Series A (Equity Series)		3

Series B (Large Cap Value Series)		11

Series C (Money Market Series)		19

Series D (Global Series)		29

Series E (Diversified Income Series)		39

Series H (Enhanced Index Series)		49

Series J (Mid Cap Growth Series)		61

Series N (Managed Asset Allocation Series)		71

Series O (Equity Income Series)		97

Series P (High Yield Series)		107

Series Q (Small Cap Value Series)		120

Series V (Mid Cap Value Series)		131

Series X (Small Cap Growth Series)		141

Series Y (Select 25 Series)		149

Series Z (Alpha Opportunity Series)		157

Notes to Financial Statements		166

Report of Independent Registered Public Accounting Firm		178

Directors’ Disclosure		179

Special Stockholders’ Meeting		181

Directors and Officers		182

This page left blank intentionally.


		Series A
Manager’s Commentary		(Equity Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

Mark A. Mitchell

Portfolio Manager

To Our Shareholders:

Series A of the SBL Fund - Equity Series returned 12.89% during the year, lagging the benchmark S&P 500 Index’s return of 15.79% and the Series’ peer group median return of 13.92%. Over the last few years, higher beta, smaller capitalization companies have helped drive equity markets higher. In such environments, we tend to under perform. We still believe the market is not yet recognizing the potential in several high quality large capitalization companies. Our performance has been disappointing and we feel not indicative of our potential. We are focused on improving your Series’ returns by upgrading the talent on our equity research team and strengthening our research process. We believe that our approach will deliver good performance over a long-term investment horizon.

Our investment philosophy is centered around three key tenants: First, good investments are purchased at less than their intrinsic value; second, a long-term approach and patience are critical to successful investing; and lastly, we concentrate our investments in companies that have the greatest return potential.

Our process is a bottom-up research driven investment process that attempts to identify companies that have a competitive advantage or have the ability to become more competitive in the future. We focus on owning these companies for three to five years or longer which we believe differentiates us from a majority of our peers and ultimately allows us to make better investment decisions. We buy these companies when their current price trades below their intrinsic value. We closely monitor each company’s progress. We will sell a company if the valuation no longer makes sense, we’ve made a mistake, our investment thesis is no longer valid, or we have a more attractive investment alternative. For this Series, we apply the approach to a broad range of both growth and value names.

Financial, Technology, and Industrial Stocks Top Performers

The Series’ financial holdings were up 35% compared to 19% for the Index. This was driven almost entirely by our position in First Marblehead Corporation, up over 150%. Ill-placed short-term concerns over the company’s competitive position offered a great buying opportunity for a leading student lender with a significant competitive advantage as a result of their loan under writing capability, superior economics, and additional value-added services.

The technology sector was up over 17% versus the comparable sector Index return of 9%. The largest contributor was Unisys Corporation, up 34%. The company benefited from improving its competitive position by lowering costs and improving business execution. Not owning Intel, down 17% and Yahoo, down 34%, helped the Series as well. While both are good companies, the valuations did not meet our criteria for an attractive risk/reward profile.

General Dynamics Corporation in the industrial sector was up 32%, with the company benefiting from strong results in its defense related segment and corporate aircraft segment.

Energy and Telecom Disappointing

Energy overall negatively impacted the Series. In the Series the sector was up just over 6% versus up 24% for the energy sector return within the Index. This was driven in part by Evergreen Energy, Inc., down over 42% (previously known as KFx), and Halliburton Company, up only 1%. Evergreen Energy was hurt by concerns over the viability of the initial production results of its proprietary clean coal technology. Halliburton was impacted more generally by the recent exodus from oil services related names as a result of a weakening energy commodity market.

The telecom sector in the benchmark was up over 36%, while our sector return was down 11%. Not owning AT&T, up 53%, and Bell South, up 80%, negatively impacted the Series. It appears the market is more confident in the newly-merged telecom players. We've avoided these names because we believe it’s very difficult to determine which, if any, company will be able to create a lasting competitive advantage that allows them to generate acceptable returns on the significant capital expenditures required to build out their services offerings. Our position in Sprint Nextel Corporation, down 10%, hurt the Series’ performance. Concerns over how the integration of Nextel was progressing and lack of improvement in its core legacy Sprint operations contributed to the weakness. We still believe in management’s ability to show steady improvement as demonstrated by the spinoff of its slower growing wireline business.

2007 Market Outlook

The current low return investment environment that exists outside of equities has continued to make available ample liquidity in the U.S. equity market. Falling energy prices have helped increase consumer confidence and provide support to corporate profit margins through lower raw material input prices. Additionally, businesses have very healthy balance sheets to help drive future growth initiatives.


		Series A
Manager’s Commentary		(Equity Series)
February 15, 2007		(unaudited)

As we noted in last year’s shareholder letter, we’ve been concerned about a slowdown in U.S. consumer spending for some time. This concern has yet to materialize, but we still think it will happen. Lower energy prices will help, however, higher interest rates and a housing market slowdown provide likely headwinds. The Federal Reserve is walking a fine line between managing inflation risks while supporting economic growth. We’re unsure, like most in the market, what the Fed’s next move is. This uncertainty will weigh on the markets until it’s resolved.

We believe that investing is a long-term pursuit that requires patience and a consistent approach. Dollar cost averaging is a sound way to build long-term value¹. 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 A. Mitchell, Portfolio Manager

¹	Dollar cost averaging does not assure profits or protect against loss in a declining market.

PERFORMANCE

Series A vs. S&P 500 Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series A (Equity Series) on December 31, 1996 and reflects the fees and expenses of Series A. 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 12-31-06¹	1 Year		5 Years		10 Years
Series A	12.89	%	3.24	%	4.70	%

Performance figures do not reflect fees and expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a Series of SBL Fund are available only through the purchase of such products.

The performance data quoted above represents past performance. Past performance is not predictive of future performance. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Portfolio Composition by Sector


Consumer Discretionary	11.51	%
Consumer Staples	8.58
Energy	10.50
Financials	20.43
Health Care	17.08
Industrials	16.40
Information Technology	10.83
Materials	0.88
Telecommunication Services	2.11
Asset Backed Commercial Paper	1.53
Commercial Paper	0.29
Repurchase Agreement	0.08
Liabilities, less cash & other assets	(0.22	)
Total net assets	100.00	%

See accompanying notes.


		Series A
Manager’s Commentary		(Equity Series)
December 31, 2006		(unaudited)

PERFORMANCE

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. Performance figures and expense ratios do not reflect fees and expenses associated with an investment in variable insurance products. Shares of a Series of SBL Fund are available only through the purchase of such products. 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 1, 2006 - December 31, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line 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 fees and expenses associated with an investment in variable insurance products. Therefore, the second line 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 fees and expenses associated with an investment in variable insurance products were included, your costs would have been higher.

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²


Series A (Equity Series)
Actual	$	1,000.00	$	1,107.60	$	4.83
Hypothetical		1,000.00		1,020.62		4.63

The actual ending account value is based on the actual total return of the Series for the period July 1, 2006 to December 31, 2006 after actual expenses and will differ from the hypothetical ending account value which is based on the Series expense ratio and a hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 1, 2006 to December 31, 2006 was 10.76%.

²	Expenses are equal to the Series annualized expense ratio of 0.91%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series A (Equity Series)
December 31, 2006


	Shares		Value
COMMON STOCK - 98.3%
Aerospace & Defense - 4.0%
General Dynamics Corporation		184,100	$	13,687,835
L-3 Communications Holdings, Inc.		46,000		3,761,880

				17,449,715

Air Freight & Logistics - 2.9%
FedEx Corporation		119,500		12,980,090

Biotechnology - 3.4%
Amgen, Inc. *		220,150		15,038,447

Broadcasting & Cable TV - 2.3%
CBS Corporation (CI.B)		152,950		4,768,981
Univision Communications, Inc. *		155,500		5,507,810

				10,276,791

Coal & Consumable Fuels - 2.0%
Evergreen Energy, Inc. *		872,400		8,628,036

Communications Equipment - 1.6%
ADC Telecommunications, Inc. *		474,114		6,888,876

Construction & Engineering - 2.2%
Shaw Group, Inc. * (1)		292,200		9,788,700

Consumer Finance - 6.4%
American Express Company		222,700		13,511,209
First Marblehead Corporation		267,900		14,640,735

				28,151,944

Data Processing & Outsourced Services - 3.1%
First Data Corporation		208,700		5,326,024
Western Union Company		382,000		8,564,440

				13,890,464

Drug Retail - 2.9%
CVS Corporation		419,500		12,966,745

Health Care Equipment - 3.1%
Hospira, Inc. *		128,000		4,298,240
Zimmer Holdings, Inc. *		121,300		9,507,494

				13,805,734

Health Care Services - 2.5%
Medco Health Solutions, Inc. *		206,200		11,019,328

Home Improvement Retail - 4.0%
Home Depot, Inc.		445,200		17,879,232

Hotels, Resorts & Cruise Lines - 2.6%
Carnival Corporation		237,500		11,649,375

Hypermarkets & Super Centers - 5.7%
Costco Wholesale Corporation		231,000		12,212,970
Wal-Mart Stores, Inc.		275,800		12,736,444

				24,949,414

Industrial Conglomerates - 7.3%
General Electric Company		522,700		19,449,667
Tyco International, Ltd.		419,600		12,755,840

				32,205,507

Industrial Gases - 0.9%
Praxair, Inc.		65,800		3,903,914

Integrated Oil & Gas - 6.5%
Chevron Corporation		134,000		9,853,020
Exxon Mobil Corporation		246,900		18,919,947

				28,772,967

IT Consulting & Other Services - 2.7%
Unisys Corporation *		1,505,850		11,805,864

Managed Health Care - 5.1%
UnitedHealth Group, Inc.		172,000		9,241,560
WellPoint, Inc. *		166,600		13,109,754

				22,351,314

Movies & Entertainment - 2.5%
Time Warner, Inc.		505,000		10,998,900

Multi-Line Insurance - 5.1%
American International Group, Inc.		315,800		22,630,228

Oil & Gas Drilling - 0.7%
Transocean, Inc. * (1)		40,200		3,251,778

Oil & Gas Equipment & Services - 1.3%
BJ Services Company		70,900		2,078,788
Halliburton Company		117,700		3,654,585

				5,733,373

Other Diversified Financial Services - 5.3%
Citigroup, Inc.		278,600		15,518,020
JPMorgan Chase & Company		165,900		8,012,970

				23,530,990

Pharmaceuticals - 3.0%
Johnson & Johnson		201,400		13,296,428

Property & Casually Insurance - 3.6%
Berkshire Hathaway, Inc. *		145		15,948,550

Systems Software -3.5%
Microsoft Corporation		510,200		15,234,572

Wireless Telecommunication Services - 2.1%
Sprint Nextel Corporation		492,800		9,308,992

TOTAL COMMON STOCK (Cost $350,874,900)			$	434,336,268


	Principal Amount		Value
ASSET BACKED COMMERCIAL PAPER - 1.5%
Financial Companies - Miscellaneous Receivables - 1.0%
Fairway Finance Corporation
5.35%, 1/5/2007	$	1,200,000		1,199,291

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series A (Equity Series)
December 31, 2006 - continued


	Principal Amount		Value
ASSET BACKED COMMERCIAL PAPER (continued)
Financial Companies - Miscellaneous Receivables (continued)
Fairway Finance Corporation (continued)
5.35%, 1/9/2007	$	1,800,000	$	1,797,880
Jupiter Securitization Corporation
5.35%, 1/8/2007		1,275,000		1,273,683

				4,270,854

Financial Companies - Trade Receivables - 0.5%
Old Line Funding LLC		1,000,000		999,555
5.26%, 1/4/2007
Sheffield Receivables Corporation		1,500,000		1,499,781
5.265%, 1/2/2007

				2,499,336

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $6,770,190)			$	6,770,190

COMMERCIAL PAPER - 0.3%
Brokerage - 0.3%
ING (U.S.) Funding LLC
5.35%, 1/3/2007		1,300,000		1,299,614

TOTAL COMMERCIAL PAPER (Cost $1,299,614)			$	1,299,614

REPURCHASE AGREEMENT - 0.1%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount of $340,183 (Collateralized by FHLMC, 5.00%, 08-15-35 with a value of $346,821)	$	340,000	$	340,000

TOTAL REPURCHASE AGREEMENT (Cost $340,000)			$	340,000

Total Investments (SBL A Fund)			$	442,746,072
(Cost $359,284,704) - 100.2%
Liabilities in Excess of Other Assets - (0.2)%				(957,992	)

TOTAL NET ASSETS - 100.0%			$	441,788,080

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $359,423,041.

*	- Non-income producing security

1	- Security is segregated as collateral for open written options contracts.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series A

(Equity Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	442,746,072
Cash		9
Receivables:
Fund shares sold		70,395
Dividends		334,570
Prepaid expenses		9,800

Total assets		443,160,846

Liabilities:
Payable for:
Fund shares redeemed		780,398
Written options, at value (premiums received $121,596)		178,500
Management fees		280,197
Custodian fees		8,088
Transfer agent/maintenance fees		2,083
Administration fees		35,581
Professional fees		41,968
Directors’ fees		10,000
Other		35,951

Total liabilities		1,372,766

Net Assets	$	441,788,080

Net assets consist of:
Paid in capital	$	309,680,133
Undistributed net investment income		1,466,765
Undistributed net realized gain on sale of investments and options written		47,236,718
Net unrealized appreciation in value of investments and options written		83,404,464

Net assets	$	441,788,080

Capital shares authorized		unlimited
Capital shares outstanding		17,106,488
Net asset value per share (net assets divided by shares outstanding)	$	25.83

¹Investments, at cost	$	359,284,704

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	5,216,765
Interest		237,743

Total investment income		5,454,508

Expenses:
Management fees		3,321,940
Administration fees		421,083
Transfer agent/maintenance fees		25,229
Custodian fees		37,756
Directors’ fees		20,095
Professional fees		55,862
Reports to shareholders		84,267
Other expenses		21,517

Total expenses		3,987,749
Less: Earnings credits applied		(6	)

Net expenses		3,987,743

Net investment income		1,466,765

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		45,524,152
Options written		1,712,566

Net realized gain		47,236,718

Net unrealized appreciation (depreciation) during the year on:
Investments		4,576,552
Options written		(131,470	)

Net unrealized appreciation		4,445,082

Net realized and unrealized gain		51,681,800

Net increase in net assets resulting from operations	$	53,148,565

See accompanying notes.


Statement of Changes in Net Assets		Series A
		(Equity Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	1,466,765		$	2,686,549
Net realized gain during the year on investments and options written		47,236,718			25,155,673
Net unrealized appreciation (depreciation) during the year on investments and options written		4,445,082			(9,007,148	)

Net increase in net assets resulting from operations		53,148,565			18,835,074

Capital share transactions:
Proceeds from sale of shares		37,464,659			44,233,911
Cost of shares redeemed		(115,755,780	)		(126,234,284	)

Net decrease from capital share transactions		(78,291,121	)		(82,000,373	)

Net decrease in net assets		(25,142,556	)		(63,165,299	)

Net assets:
Beginning of year		466,930,636			530,095,935

End of year	$	441,788,080		$	466,930,636

Undistributed net investment income at end of year	$	1,466,765		$	2,686,549

Capital Share Activity:
Shares sold		1,582,979			2,025,092
Shares redeemed		(4,888,558	)		(5,789,676	)

Total capital share activity		(3,305,579	)		(3,764,584	)

See accompanying notes.


Financial Highlights		Series A
Selected data for each share of capital stock outstanding throughout each year		(Equity Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	22.88		$	21.93		$	20.37		$	16.83		$	22.36

Income (loss) from investment operations:
Net investment income		0.11			0.16			0.18			0.13			0.10
Net gain (loss) on securities (realized and unrealized)		2.84			0.79			1.40			3.53			(5.47	)

Total from investment operations		2.95			0.95			1.58			3.66			(5.37	)

Less distributions:
Dividends from net investment income		—			—			(0.02	)		(0.12	)		(0.16	)

Total distributions		—			—			(0.02	)		(0.12	)		(0.16	)

Net asset value, end of period	$	25.83		$	22.88		$	21.93		$	20.37		$	16.83

Total Return^a		12.89	%		4.33	%		7.77	%		21.74	%		(24.10	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	441,788		$	466,931		$	530,096		$	559,290		$	517,837

Ratios to average net assets:
Net investment income		0.33	%		0.55	%		0.81	%		0.66	%		0.49	%
Total expenses^b		0.90	%		0.89	%		0.87	%		0.82	%		0.82	%
Net expenses^c		0.90	%		0.89	%		0.87	%		0.82	%		0.82	%
Expenses prior to custodian earnings credits and net of expense waivers		0.90	%		0.89	%		0.87	%		0.82	%		0.82	%

Portfolio turnover rate		26	%		37	%		27	%		53	%		25	%

Total return does not take into account any of the expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products.

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.


		Series B
Manager’s Commentary		(Large Cap Value Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

Mark Mitchell

Portfolio Manager

To Our Shareholders:

Series B of the SBL Fund - Large Cap Value series returned 22.00% during the year, lagging the benchmark Russell 1000 Value Index’s return of 22.25%, but out performing the Series’ peer group median return of 18.86%. Good stock selection was offset slightly by our sector weights in 2006. While being disappointed that our results were below the benchmark, we believe that our approach delivers performance over the long-term.

Our investment philosophy is centered around three key tenants: first, good investments are purchased at less than their intrinsic value; second, a long-term approach and patience are critical to successful investing; and lastly, we concentrate our investments in companies that have the greatest return potential.

Our process is a bottom-up research driven investment process that attempts to identify companies that have the ability to become more competitive in the future. We focus on owning these companies for three to five years or longer which we believe differentiates us from a majority of our peers and ultimately allows us to make better investment decisions. We buy these companies when their current price trades below their intrinsic value. We closely monitor each company’s progress. We will sell a company if the valuation no longer makes sense, we’ve made a mistake and our investment thesis is no longer valid, or we have a more attractive investment alternative. For this Series, we apply this philosophy to a broad range of value names.

Financials and Industrial Stocks Top Performers

The Series’ Financial holdings were up 37% compared to 20% for the Index. This was driven almost entirely by our position in First Marblehead Corporation, up over 150%. Ill-placed short-term concerns over the company’s competitive position offered a great buying opportunity for a leading student lender with a significant competitive advantage as a result of their loan underwriting capability, superior economics, and additional value-added services.

Holdings International, Inc., the industrial sector were up 28%. McDermott appreciated 71%, driven by strong demand for its energy infrastructure construction related services. Hughes Supply was up 27% as it agreed to be acquired by Home Depot, Inc. Hughes’ strong position in the professional contractor market fits well into Home Depot’s expansion plans in that segment.

Telecom and Energy Disappointing

The telecom sector in the benchmark was up over 39%, while our sector return was up just 1%. Not owning AT&T, up 53%, and Bell South, up 80%, negatively impacted the Series. It appears the market is more confident in the newly-merged telecom players. We’ve avoided these names because we believe it’s very difficult to determine which, if any, company will be able to create a lasting competitive advantage that allows them to generate acceptable returns on the significant capital expenditures required to build out their services offerings. Our position in Sprint Nextel Corporation, down 10%, hurt the Series’ performance. Concerns over how the integration of Nextel was progressing and lack of improvement in its core legacy Sprint operations contributed to the weakness. We still believe in management’s ability to show steady improvement as demonstrated by the spinoff of its slower growing wireline business.

Poor stock selection in the energy sector negatively impacted the Series as the sector underperformed the value index. Specifically, Halliburton Company, up just 1%, and an underweight position in Exxon Mobil Corporation, up 39%, had the largest negative impact. Halliburton was impacted more generally by the recent exodus from oil services related names as a result of a weakening energy commodity market. Exxon outperformed formed the diversified group of integrated oil companies we owned.

2007 Market Outlook

As we noted in last year’s shareholder letter, we’ve been concerned about a slowdown in U.S. consumer spending for some time. This concern has yet to materialize, but we still think it will happen. Lower energy prices will help; however, higher interest rates and a housing market slowdown provide likely headwinds. The Federal Reserve is walking a fine line between managing inflation risks while supporting economic growth. We’re unsure, like most in the market, what the Fed’s next move is. This uncertainty will weigh on the markets until it’s resolved.

Sincerely,

Mark A. Mitchell, Portfolio Manager

¹	Dollar cost averaging does not assure profits or protect against loss in a declining market.


		Series B
Manager’s Commentary		(Large Cap Value Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series B vs. Russell 1000 Value Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series B (Large Cap Value Series) on December 31, 1996 and reflects the fees and expenses of Series B. 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 12-31-06¹	1 Year		5 Years		10 Years
Series B	22.00	%	7.86	%	5.94	%

Portfolio Composition by Sector


Consumer Discretionary	11.09	%
Consumer Staples	9.67
Energy	14.20
Financials	16.89
Health Care	6.65
Industrials	16.84
Information Technology	4.92
Materials	5.86
Telecommunication Services	3.57
Utilities	1.86
Exchange Traded Funds	5.93
Asset Backed Commercial Paper	2.37
Commercial Paper	0.48
Repurchase Agreement	0.10
Liabilities, less cash & other assets	(0.43	)
Total net assets	100.00	%

See accompanying notes.


		Series B
Manager’s Commentary		(Large Cap Value Series)
December 31, 2006		(unaudited)

PERFORMANCE

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. Performance figures and expense ratios do not reflect fees and expenses associated with an investment in variable insurance products. Shares of a Series of SBL Fund are available only through the purchase of such products 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 1, 2006 - December 31, 2006.

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series B (Large Cap Value Series)
Actual	$	1,000.00	$	1,099.10	$	4.18
Hypothetical		1,000.00		1,021.22		4.02

²	Expenses are equal to the Series annualized expense ratio of 0.79%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series B (Large Cap Value Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 97.5%
Aerospace & Defense - 3.0%
United Technologies Corporation	228,400	$	14,279,568

Agricultural Products - 1.9%
Archer-Daniels-Midland Company	281,400		8,993,544

Aluminum - 0.7%
Alcoa, Inc.	119,600		3,589,196

Broadcasting & Cable TV - 2.6%
CBS Corporation (CI.B)	402,100		12,537,478

Computer Hardware - 2.8%
Hewlett-Packard Company	331,200		13,642,128

Construction & Engineering - 2.9%
Shaw Group, Inc. * (1)	423,700		14,193,950

Consumer Finance - 3.2%
First Marblehead Corporation	279,225		15,259,646

Diversified Chemicals - 3.3%
Dow Chemical Company	176,400		7,045,416
E.I. Du Pont de Nemours & Company	178,600		8,699,606

			15,745,022

Drug Retail - 3.1%
CVS Corporation	477,800		14,768,798

Electric Utilities - 1.9%
Edison International	196,300		8,927,724

Exchange Traded Funds - 5.9%
iShares Russell 1000 Value Index Fund	170,600		14,093,266
iShares S&P 500 Value Index Fund	187,600		14,424,564

			28,517,830

Health Care Equipment - 1.0%
Hospira, Inc. *	139,000		4,667,620

Health Care Services - 2.9%
Medco Health Solutions, Inc. *	258,200		13,798,208

Home Improvement Retail - 2.0%
Home Depot, Inc.	242,000		9,718,720

Hypermarkets & Super Centers - 2.8%
Costco Wholesale Corporation	254,200		13,439,554

Industrial Conglomerates - 8.6%
General Electric Company	383,900		14,284,919
McDermott International, Inc. *	286,500		14,571,390
Tyco International, Ltd.	406,600		12,360,640

			41,216,949

Integrated Oil & Gas - 9.7%
Chevron Corporation	151,000		11,103,030
ConocoPhillips	92,500		6,655,375
Exxon Mobil Corporation	204,600		15,678,498
Sasol, Ltd. ADR	360,500		13,302,450

			46,739,353

Integrated Telecommunication Services - 1.0%
Windstream Corporation	331,932		4,720,073

IT Consulting & Other Services - 2.1%
Unisys Corporation *	1,273,500		9,984,240

Managed Health Care - 2.8%
WellPoint, Inc. *	171,500		13,495,335

Movies & Entertainment - 6.5%
News Corporation	488,800		10,499,424
Time Warner, Inc.	712,600		15,520,428
Viacom, Inc. (CI.B) *	122,100		5,009,763

			31,029,615

Multi-Line Insurance - 4.1%
American International Group, Inc.	272,600		19,534,516

Oil & Gas Drilling - 0.7%
Transocean, Inc. * (1)	39,100		3,162,799

Oil & Gas Equipment & Services - 1.5%
Halliburton Company	232,600		7,222,230

Oil & Gas Storage & Transportation - 2.3%
Williams Companies, Inc.	426,800		11,148,016

Other Diversified Financial Services - 5.3%
Citigroup, Inc.	266,300		14,832,910
JPMorgan Chase & Company	221,700		10,708,110

			25,541,020

Packaged Foods & Meats - 0.3%
Tyson Foods, Inc.	83,700		1,376,865

Property & Casually Insurance - 4.3%
Berkshire Hathaway, Inc. *	190		20,898,100

Railroads - 2.3%
Union Pacific Corporation	122,800		11,300,056

Specialty Chemicals - 1.8%
Rohm & Haas Company	172,200		8,802,864

Tobacco - 1.6%
Altria Group, Inc.	91,800		7,878,276

Wireless Telecommunication Services - 2.6%
Alltel Corporation	59,900		3,622,752

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series B (Large Cap Value Series)
December 31, 2006 - continued


	Shares		Value
COMMON STOCK (continued)
Wireless Telecommunication Services (continued)
Sprint Nextel Corporation		466,600	$	8,814,074

				12,436,826

TOTAL COMMON STOCK (Cost $366,787,659)			$	468,566,119


	Principal Amount		Value
ASSET BACKED COMMERCIAL PAPER - 2.3%
Financial Companies - Diversified - 0.5%
Amsterdam Funding Corporation
5.28%, 1/4/2007	$	1,000,000		999,562
5.28%, 1/10/2007		1,600,000		1,597,888

				2,597,450

Financial Companies - Miscellaneous Receivables - 0.9%
Fairway Finance Corporation
5.35%, 1/9/2007		1,608,000		1,606,088
Falcon Asset Securitization Corporation
5.27%, 1/8/2007		1,300,000		1,298,668
5.30%, 1/11/2007		1,500,000		1,497,791

				4,402,547

Financial Companies - Trade Receivables - 0.9%
Old Line Funding LLC
5.26%, 1/12/2007		1,400,000		1,397,750
5.28%, 1/16/2007		1,500,000		1,496,700
Sheffield Receivables Corporation
5.265%, 1/2/2007		1,500,000		1,499,781

				4,394,231

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $11,394,228)			$	11,394,228

COMMERCIAL PAPER - 0.5%
Brokerage - 0.5%
Credit Suisse First Boston USA
5.28%, 1/3/2007		1,300,000		1,299,619
Goldman Sachs Group, Inc.
5.23%, 1/5/2007		1,000,000		999,419

				2,299,038

TOTAL COMMERCIAL PAPER (Cost $2,299,038)			$	2,299,038

REPURCHASE AGREEMENT - 0.1%
United Missouri Bank, 4. 85%, dated 12-29-06, matures 01-02-07; repurchase amount of $502,271 (Collateralized by FHLMC, 5.00%, 10-15-36 & FMNA, 5.00%, 06-01-18 with a combined value of $512,039)		502,000	$	502,000

TOTAL REPURCHASE AGREEMENT (Cost $502,000)			$	502,000

Total Investments (SBL B Fund) (Cost $380,982,925) - 100.4%			$	482,761,385
Liabilities in Excess of Other Assets - (0.4)%				(2,077,978	)

TOTAL NET ASSETS - 100.0%			$	480,683,407

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $381,029,891.

*	- Non-income producing security

1	- Security is segregated as collateral for open written options contracts.

Glossary:

ADR - American Depositary Receipt

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series B

(Large Cap Value Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	482,761,385
Cash		471
Receivables:
Fund shares sold		940,605
Dividends		584,404
Prepaid expenses		10,064

Total assets		484,296,929

Liabilities:
Payable for:
Fund shares redeemed		442,154
Securities purchased		2,665,073
Written options, at value (premiums received $101,419)		122,210
Management fees		262,073
Directors’ fees		10,000
Custodian fees		2,625
Transfer agent/maintenance fees		2,083
Administration fees		38,453
Professional fees		35,837
Other		33,014

Total liabilities		3,613,522

Net Assets	$	480,683,407

Net assets consist of:
Paid in capital	$	602,529,743
Undistributed net investment income		3,504,848
Accumulated net realized loss on sale of investments and options written		(227,108,853	)
Net unrealized appreciation in value of investments and options written		101,757,669

Net assets	$	480,683,407

Capital shares authorized		unlimited
Capital shares outstanding		18,206,160
Net asset value per share (net assets divided by shares outstanding)	$	26.40

¹Investments, at cost	$	380,982,925

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	6,404,311
Interest		569,285

Total investment income		6,973,596

Expenses:
Management fees		2,840,902
Administration fees		415,647
Custodian fees		22,097
Transfer agent/maintenance fees		25,234
Directors’ fees		20,120
Professional fees		45,859
Reports to shareholders		79,949
Other expenses		18,972

Total expenses		3,468,780
Less: Earnings credits applied		(32	)

Net expenses		3,468,748

Net investment income		3,504,848

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		25,798,929
Options written		1,220,908

Net realized gain		27,019,837

Net unrealized appreciation (depreciation) during the year on:
Investments		57,175,374
Options written		(91,355	)

Net unrealized appreciation		57,084,019

Net realized and unrealized gain		84,103,856

Net increase in net assets resulting from operations	$	87,608,704

See accompanying notes.


		Series B
Statement of Changes in Net Assets		(Large Cap Value Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	3,504,848		$	3,971,506
Net realized gain during the year on investments and options written		27,019,837			48,032,291
Net unrealized appreciation (depreciation) during the year on investments and options written		57,084,019			(11,665,891	)

Net increase in net assets resulting from operations		87,608,704			40,337,906

Capital share transactions:
Proceeds from sale of shares		88,964,012			39,815,974
Cost of shares redeemed		(106,581,077	)		(98,954,660	)

Net decrease from capital share transactions		(17,617,065	)		(59,138,686	)

Net increase (decrease) in net assets		69,991,639			(18,800,780	)

Net assets:
Beginning of year		410,691,768			429,492,548

End of year	$	480,683,407		$	410,691,768

Undistributed net investment income at end of year	$	3,504,848		$	3,971,506

Capital Share Activity:
Shares sold		3,705,999			1,980,149
Shares redeemed		(4,475,464	)		(4,944,509	)

Total capital share activity		(769,465	)		(2,964,360	)

See accompanying notes.


Financial Highlights	Series B
Selected data for each share of capital stock outstanding throughout each year	(Large Cap Value Series	)


	2006			2005^d			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	21.64		$	19.58		$	17.68		$	13.84		$	18.59

Income (loss) from investment operations:
Net investment income		0.20			0.24			0.21			0.14			0.13
Net gain (loss) on securities (realized and unrealized)		4.56			1.82			1.70			3.84			(4.58	)

Total from investment operations		4.76			2.06			1.91			3.98			(4.45	)

Less distributions:
Dividends from net investment income		—			—			(0.01	)		(0.14	)		(0.30	)

Total distributions		—			—			(0.01	)		(0.14	)		(0.30	)

Net asset value, end of period	$	26.40		$	21.64		$	19.58		$	17.68		$	13.84

Total Return^a		22.00	%		10.52	%		10.82	%		28.81	%		(24.14	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	480,683		$	410,692		$	429,493		$	434,575		$	370,746

Ratios to average net assets:
Net investment income		0.80	%		0.98	%		1.09	%		0.93	%		0.74	%
Total expenses^b		0.79	%		0.84	%		0.92	%		0.89	%		0.91	%
Net expenses^c		0.79	%		0.84	%		0.87	%		0.83	%		0.82	%

Portfolio turnover rate		20	%		99	%		73	%		60	%		68	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	SMC became the advisor of Series B effective June 30, 2005. Prior to June 30, 2005, SMC paid Dreyfus Corporation for sub-advisory services.

See accompanying notes.


		Series C
Manager’s Commentary		(Money Market Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

Christi Fletcher

Portfolio Manager

To Our Shareholders:

The first half of 2006 proved to be comparable to 2005. The Federal Reserve Board’s campaign to increase interest rates resulted in four rate increases during the Series’ fiscal year ending at 5.25%. The yield of the Series C of the SBL Fund—Money Market Series rose accordingly, returning 4.43% for the year ended December 31, 2006, which exceeded the benchmark I-Money Net Retail Tier 1 of 4.30% for the same period.

Aside from the increases in short-term interest rates, the continued threat of higher inflation and a flat yield curve the past year proved positive for credit issuers. Companies continued to display solid balance sheet fundamentals, strong cash flows and good profit growth. In addition, the trend continues as firms utilize the excess cash flows for increasing dividends or share repurchases (shareholder friendly), rather than bolstering credit quality.

Characteristics of Portfolio Assets

At December 31, 2006, the average maturity of Series C was 51 days, which was a couple of days longer than the benchmark. This strategy positioned the Series to take advantage of longer dated securities, as the threat of decreasing rates loomed.

The yield curve for money market instruments went from upward trending during the first half of 2006 to relatively flat in the second half. This made for interesting challenges for additional yield along the maturity spectrum and among various types of money market instruments. The majority of the Series assets lie in the corporate debt sector via commercial paper, floating rate securities and Yankee CD’s, due to the strong balance sheet fundamentals of credit and because it represented good value against other sectors. At year end, approximately 52% of the Series was made up of Commercial Paper, 30% in Floating Rate securities (which includes Corporate and U.S. Government-Backed), 7% in U.S. Government/Agency obligations, 7% in Yankee CD’s, 3% in funding agreements, and 1% Mortgage-related products.

Outlook for 2007

In 2006, the economy continued to grow but with strong head winds from the long anticipated correction in the housing market, the Federal Reserve rate increases that started to take effect, and commodity prices yet again hitting all time highs. Looking forward to 2007, the economy will continue to grow but at a slower pace versus recent years. We expect short-term rates to remain at 5.25% for most of 2007. We believe the approach the Federal Reserve will take is one of a wait-and-see attitude. We are not anticipating a cut in short-term rates but have not factored in an increase either, unless we see an increase in inflation. At this point, there is limited evidence of either situation unfolding during 2007.

With a stable U.S. economy predicted in 2007, as fundamentals in the corporate sector remain solid and companies continue to generate strong cash flows and earnings growth, the Series will continue to be invested heavily in the corporate debt sectors within the money market arena.

As always, we will continue to monitor the economic and market conditions when deciding portfolio strategies and will adjust the asset mix and maturity structure in the portfolio accordingly.

Thank you for your investment in Series C. We appreciate the confidence that you have placed in us and remain focused on achieving the Series’ investment goals.

Sincerely,

Christina Fletcher

Portfolio Manager


	Series C
Manager’s Commentary	(Money Market Series	)
December 31, 2006	(unaudited	)

PERFORMANCE

Portfolio Composition by Quality Ratings (Based on Standard and Poor’s Ratings)


Tier 1 investments	106.78	%
Repurchase Agreement	0.24
Liabilities, less cash & other assets	(7.02	)
Total net assets	100.00	%

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		10 Years
Series C	4.43	%	1.91	%	3.41	%

See accompanying notes.


	Series C
Manager’s Commentary	(Money Market Series	)
December 31, 2006	(unaudited	)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series C (Money Market Series)
Actual	$	1,000.00	$	1,024.10	$	3.47
Hypothetical		1,000.00		1,021.78		3.47

²	Expenses are equal to the Series annualized expense ratio of 0.68%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments	Series C
December 31, 2006	(Money Market Series	)


	Principal Amount		Value
CERTIFICATE OF DEPOSIT - 8.1%
Bank of Ireland
5.32%, 2/08/2007	$	3,000,000	$	2,999,898
Barclay’s Bank pic NY
5.31%, 4/02/2007 (1)		3,000,000		3,000,000
BNP Paribas NY Branch
5.33%, 3/16/2007		2,000,000		1,999,889

TOTAL CERTIFICATE OF DEPOSIT (Cost $8,000,000)			$	7,999,787

CORPORATE BOND - 30.8%
Automotive - 6.1%
American Honda Finance Corporation
5.476%, 2/12/2007 (2)(3)(4)(5)	$	1,550,000		1,550,970
Toyota Motor Credit Corporation
5.21%, 1/02/2007 (2)(3)		2,000,000		2,000,040
5.265%, 1/02/2007 (2)(3)		2,500,000		2,501,173

				6,052,183

Brokerage - 12.5%
Bear Stearns Companies, Inc.
5.534%, 1/16/2007 (2)(3)		1,300,000		1,300,083
Goldman Sachs Group, Inc.
5.476%, 2/12/2007 (2)(3)		1,100,000		1,100,495
5.50%, 1/02/2007 (2)(3)		2,000,000		2,001,896
Lehman Brothers Holdings, Inc.
5.35%, 1/02/2007 (2)(3)		1,000,000		1,000,599
5.494%, 1/22/2007 (2)(3)		2,000,000		2,001,306
Merrill Lynch & Company, Inc.
5.30%, 1/03/2007 (2)(3)		1,000,000		1,000,189
5.505%, 1/26/2007 (2)(3)		2,385,000		2,385,267
Morgan Stanley
5.50%, 2/15/2007 (2)(3)		1,600,000		1,600,285

				12,390,120

Financial Companies - Captive - 7.7%
Caterpillar Financial Services Corporate
5.39%, 1/29/2007 (2)(3)		2,000,000		2,000,918
General Electric Capital Corporation
5.375%, 3/15/2007		1,000,000		1,000,117
HSBC Finance Corporation
5.41%, 2/28/2007 (2)(3)		3,000,000		3,000,519
5.525%, 2/09/2007 (2)(3)		1,550,000		1,550,313

				7,551,867

Financial Companies - Noncaptive Consumer - 2.5%
SLM Corporation
5.50%, 1/25/2007 (2)(3)		2,500,000		2,500,273

Non U.S. Banking - 2.0%
Royal Bank of Scotland pic
5.364%, 3/30/2007 (2)(3)(4)		2,000,000		2,000,586

TOTAL CORPORATE BOND (Cost $30,491,715)			$	30,495,029

MISCELLANEOUS ASSET - 3.0%
Life Insurance - 3.0%
United of Omaha Life Insurance Company
5.40%, 1/01/2007 (2)		3,000,000		3,000,000

TOTAL MISCELLANEOUS ASSET (Cost $3,000,000)			$	3,000,000

MORTGAGE BACKED SECURITIES -1.5%
Other Non-Agency - 1.5%
Pass-Thru’s - 1.5%
Small Business Administration Pools
#503295, 5.75% -
1/01/2007 (2)(3)		131,048		131,769
#503303, 5.75% -
1/01/2007 (2)(3)		207,296		208,436
#503308, 5.75% -
1/01/2007 (2)(3)		148,783		148,783
#503459, 5.75% -
1/01/2007 (2)(3)		78,808		78,512
#503176, 5.87%-
1/01/2007 (2)(3)		25,335		25,462
#503343, 5.87% -
1/01/2007 (2)(3)		237,983		237,983
#503347, 5.87% -
1/01/2007 (2)(3)		416,797		416,797
#502353, 6.00% -
1/01/2007 (2)(3)		40,409		40,409
#502163,6.25% -
1/01/2007 (2)(3)		209,503		209,503

				1,497,654

TOTAL MORTGAGE BACKED SECURITIES (Cost $1,496,004)			$	1,497,654

U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 7.6%
Federal Home Loan Bank
5.35% -11/21/2007		2,000,000		1,998,944
5.40% - 9/12/2007		2,000,000		1,999,638
5.50% -10/02/2007		2,000,000		2,000,000
Federal Home Loan Mortgage Corporate
4.85% - 2/27/2007		1,500,000		1,499,386

TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (Cost $7,499,862)			$	7,497,968

ASSET BACKED COMMERCIAL PAPER - 33.0%
Financial Companies - Diversified - 8.3%
Amstel Funding Corporation
5.27%, 1/18/2007		1,900,000		1,895,272
Amsterdam Funding Corporation
5.28%, 1/4/2007		1,500,000		1,499,340
5.25%, 1/5/2007		1,700,000		1,699,248
Govco, Inc.
5.25%, 1/22/2007		2,000,000		1,994,064
5.23%, 3/7/2007		1,100,000		1,089,661

				8,177,585

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series C (Money Market Series)
December 31, 2006 - continued


	Principal Amount		Value
ASSET BACKED COMMERCIAL PAPER (continued)
Financial Companies - Miscellaneous
Receivables - 8.8%
Fairway Finance Corporation
5.28%, 1/3/2007	$	1,500,000	$	1,499,557
5.30%, 1/12/2007		1,500,000		1,497,584
Falcon Asset Securitization Corporation
5.25%, 1/30/2007		1,500,000		1,493,656
5.30%, 2/6/2007		1,000,000		994,700
5.27%, 2/12/2007		1,300,000		1,292,007
Jupiter Securitization Corporation
5.27%, 2/5/2007		2,000,000		1,989,753

				8,767,257

Financial Companies - Securities - 3.9%
Galaxy Funding, Inc.
5.275%, 1/10/2007		1,900,000		1,897,494
5.255%, 1/29/2007		2,000,000		1,992,020

				3,889,514

Financial Companies - Trade & Term Receivables - 3.5%
Eureka Securitization
5.264%, 1/8/2007		700,000		699,375
5.27%, 1/8/2007		1,500,000		1,498,463
5.26%, 1/11/2007		1,300,000		1,298,258

				3,496,096

Financial Companies - Trade Receivables - 8.5%
Old Line Funding LLC
5.27%, 1/3/2007		1,400,000		1,399,590
5.26%, 1/4/2007		1,300,000		1,299,430
5.26%, 1/19/2007		1,400,000		1,396,318
Sheffield Receivables Corporation
5.265%, 1/2/2007		2,000,000		1,999,708
5.27%, 1/5/2007		1,300,000		1,299,239
5.27%, 1/9/2007		1,000,000		998,829

				8,393,114

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $32,722,646)			$	32,723,566

COMMERCIAL PAPER - 22.8%
Banking - 1.1%
UBS Finance (DE) LLC
5.27%, 3/8/2007 (1)		1,100,000		1,089,050

Brokerage - 6.0%
Goldman Sachs Group, Inc.
5.29%, 2/1/2007		1,100,000		1,094,989
ING (US) Funding LLC
5.24%, 1/24/2007		1,600,000		1,594,858
5.28%, 2/20/2007		1,000,000		992,667
Morgan Stanley
5.20%, 5/21/2007		2,300,000		2,253,546

				5,936,060

Financial - Other - 4.0%
Bank of America
5.17%, 4/4/2007		3,000,000		2,959,750
Countrywide Financial Corporation
5.42%, 1/2/2007		1,000,000		999,849

				3,959,599

Financial Companies - Trade & Term
Receivables - 2.3%
Countrywide Financial Corporation
5.27%, 2/2/2007		2,234,000		2,223,535

Non U.S. Banking - 9.4%
Danske Corporation
5.30%, 1/30/2007		1,100,000		1,095,304
Societe Generale
5.23%, 3/5/2007		1,100,000		1,090,075
5.26%, 3/12/2007		1,600,000		1,583,949
5.22%, 3/29/2007		1,100,000		1,086,275
Westpac Banking Corporation
5.26%, 1/3/2007		1,400,000		1,399,591
5.30%, 2/5/2007		1,700,000		1,691,240
5.27%, 2/16/2007		1,400,000		1,390,573

				9,337,007

TOTAL COMMERCIAL PAPER (Cost $22,544,877)			$	22,545,251

REPURCHASE AGREEMENT - 0.2%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount $236,127 (Collateralized by FHLMC, 5.00%, 08-15-35 with a value of $241,694)	$	236,000	$	236,000

TOTAL REPURCHASE AGREEMENT (Cost $236,000)			$	236,000

Total Investments (SBL C Fund) (Cost $105,991,104) - 107.0%			$	105,995,255
Liabilities in Excess of Other Assets - (7.0)%				(6,950,983	)

TOTAL NET ASSETS - 100.0%			$	99,044,272

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $105,991,104.


1		- Security is fair valued by the Board of Directors. See Notes to financial statements.

2		- Maturity date indicated is next interest reset date.

3		- Variable rate security. Rate indicated is rate effective at December 31, 2006.

4		- Security was acquired through a private placement.

5		- Security is a 144A security, which places restrictions on resale. See Notes to financial statements.

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series C (Money Market Series)
December 31, 2006 - continued

Glossary:

plc -Public Limited Company

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series C

(Money Market Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	105,995,255
Cash		27,464
Receivables:
Fund shares sold		737,267
Securities sold		7,292
Interest		424,664
Prepaid expenses		2,513

Total assets		107,194,455

Liabilities:
Payable for:
Fund shares redeemed		3,053,248
Securities purchased		5,023,831
Management fees		41,650
Custodian fees		3,021
Transfer agent/maintenance fees		2,084
Administration fees		8,889
Professional fees		9,834
Directors’ fees		2,000
Other fees		5,626

Total liabilities		8,150,183

Net Assets	$	99,044,272

Net assets consist of:
Paid in capital	$	94,863,364
Undistributed net investment income		4,176,757
Net unrealized appreciation in value of investments		4,151

Net assets	$	99,044,272

Capital shares authorized		unlimited
Capital shares outstanding		7,778,335
Net asset value per share (net assets divided by shares outstanding)	$	12.73

¹Investments, at cost	$	105,991,104

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Interest	$	4,819,560

Total investment income		4,819,560

Expenses:
Management fees		470,472
Custodian fees		16,944
Transfer agent/maintenance fees		25,277
Administration fees		92,803
Directors’ fees		4,321
Professional fees		15,113
Reports to shareholders		14,239
Other expenses		3,644

Total expenses		642,813
Less: Earnings credits applied		(10	)

Net expenses		642,803

Net investment income		4,176,757

Net Unrealized Gain:
Net unrealized appreciation during the year on:
Investments		17,627

Net increase in net assets resulting from operations	$	4,194,384

See accompanying notes.


		Series C
Statement of Changes in Net Assets		(Money Market Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	4,176,757		$	2,001,810
Net unrealized appreciation (depreciation) during the year on investments		17,627			(2,778	)

Net increase in net assets resulting from operations		4,194,384			1,999,032

Capital share transactions:
Proceeds from sale of shares		290,303,698			201,348,365
Cost of shares redeemed		(267,108,743	)		(197,776,333	)

Net increase from capital share transactions		23,194,955			3,572,032

Net increase in net assets		27,389,339			5,571,064

Net assets:
Beginning of year		71,654,933			66,083,869

End of year	$	99,044,272		$	71,654,933

Undistributed net investment income at end of year	$	4,176,757		$	2,001,810

Capital Share Activity:
Shares sold		23,327,782			16,766,162
Shares redeemed		(21,430,027	)		(16,450,894	)

Total capital share activity		1,897,755			315,268

See accompanying notes.


Financial Highlights		Series C
Selected data for each share of capital stock outstanding throughout each year		(Money Market Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	12.19		$	11.87		$	11.79		$	11.82		$	12.20

Income (loss) from investment operations:
Net investment income		0.45			0.33			0.11			0.09			0.16
Net gain (loss) on securities (realized and unrealized)		0.09			(0.01	)		(0.02	)		(0.02	)		(0.02	)

Total from investment operations		0.54			0.32			0.09			0.07			0.14

Less distributions:
Dividends from net investment income		—			—			(0.01	)		(0.10	)		(0.52	)

Total distributions		—			—			(0.01	)		(0.10	)		(0.52	)

Net asset value, end of period	$	12.73		$	12.19		$	11.87		$	11.79		$	11.82

Total Return^a		4.43	%		2.70	%		0.72	%		0.55	%		1.20	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	99,044		$	71,655		$	66,084		$	86,458		$	117,297

Ratios to average net assets:
Net investment income		4.43	%		2.63	%		0.70	%		0.63	%		1.26	%
Total expenses^b		0.68	%		0.69	%		0.65	%		0.59	%		0.58	%
Net expenses^c		0.68	%		0.69	%		0.65	%		0.59	%		0.58	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.

This page left blank intentionally.


		Series D
Manager’s Commentary		(Global Series)
February 15, 2007		(unaudited)

LOGO

Subadvisor, OppenheimerFunds, Inc.

LOGO

Rajeev Bhaman

Portfolio Manager

To Our Shareholders

Series D of the SBL Fund - Global Series returned 17.34% under-performing the benchmark, Morgan Stanley Capital International, Inc. (MSCI) World Index return of 20.07% for the year ended December 31, 2006. Our investment philosophy is based on the idea that earnings growth drives stock prices and that we are most likely to identify long-term earnings growth opportunities by examining trends that provide tailwinds for growth in the coming decade. We are very interested in attributes of industries and companies within those industries that are likely to be beneficiaries of these long-term trends. Ideally, we like to buy these businesses at a bargain price, that is, a price where we have the opportunity to double our investment in three to five years. This rarely happens except when there is a perception that something has gone wrong with an excellent business. If we can determine that the difficulty is temporary rather than permanent, then we consider it to be a good investment.

We had notable successes with a number of our larger holdings, such as Infosys Technologies Ltd., Reckitt Benckiser plc and H&M Hennes & Mauritz AB. However, there were significant underperformers, most notably eBay, Inc., Advanced Micro Devices, Inc. and Boston Scientific Corporation.

Additionally there were other disappointments, including a significant market slowdown in the demand for implantable cardiac defibrillators as well as a deceleration in the growth rate of knee and hip replacements, both of which impacted our holdings. We remain confident that the long-term opportunity for all of the segments that faced setbacks in the past year remains excellent and that our original thesis will come to pass.

Our investments in software companies, Intuit, Inc. and Adobe Systems, Inc., continue to remain positive, as the companies remain innovative with new products that not only impress their existing customer bases but achieve broader appeal. Our investments in Inditex S.A., the owner of Zara stores, and Tesco plc, the UK’s leading grocery chain, have been worthwhile as they continue to grow rapidly worldwide, leveraging their scale and supply chain to achieve high economic returns. Our investments in television companies, Zee Telefilms Ltd. in India, and Grupo Televisa SA in Mexico, contributed positively to the Series’ performance as they continue to retain high market shares in their respective markets and as the appeal of their programming grows worldwide.

We are finding excellent opportunities across a variety of areas particularly in technology. It should be noted that our investment philosophy is based on returns over a three to five year period rather than the next quarter or two. We continue to favor a number of our existing holdings, such as L.M. Ericsson and Juniper Networks, Inc. Additional investments may be made as the opportunity for communication network build-outs remains robust. Additionally, we are finding quality investment opportunities in the areas of analog and mixed signal semiconductors.

Companies such as Maxim Integrated Products, Inc. and Linear Technology Corporation. continue to see high margin profitable growth and are now available at a fraction of their valuations of only a few years ago. Leading companies in the Programmable Logic Devices arena such as Altera Corporation. and Xilinx, Inc., we believe, also provide significant investment upside. We have also invested significantly in companies such as Carnival Corporation. which operates the Carnival Cruise Lines, and the car manufacturer Bayerische Motoren Werke AG (BMW), which we feel has solid franchises. Both are available at bargain prices. Automatic Data Processing, Inc., the leading payroll processor in the world, is another investment we highly favor. Its business opportunities expand as more companies look to outsource more of their non-core activities to high-quality, lower cost providers. As global growth continues to be positive and interest rates remain relatively low, we remain optimistic about markets generally. As such, we expect to continue to see productive opportunities for investment. We remain focused on our long-term investment philosophy that looks for “good companies in good businesses at good prices.”

In closing, please remember that investing in foreign markets entails additional risks, including the risks associated with currency fluctuations and political uncertainties, as described in the prospectus.

Sincerely,

Rajeev Bhaman

Portfolio Manager


		Series D
Manager’s Commentary		(Global Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series D vs. MSCI World Index

LOGO

$10,000 Over Ten Years

The chart above assumes a hypothetical $10,000 investment in Series D (Global Series) on December 31, 1996 and reflects the fees and expenses of Series D. The MSCI World Index is an unmanaged capitalization-weighted index that is designed to measure global developed market equity performance.

Portfolio Composition by Sector


Consumer Discretionary	20.77	%
Consumer Staples	8.25
Energy	6.16
Financials	15.43
Health Care	10.99
Industrials	9.37
Information Technology	23.62
Materials	0.42
Telecommunication Services	3.86
Utilities	0.62
Cash & other assets, less liabilities	0.51
Total net assets	100.00	%

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		10 Years
Series D	17.34	%	11.90	%	12.09	%

See accompanying notes.


		Series D
Manager’s Commentary		(Global Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series D (Global Series)
Actual	$	1,000.00	$	1,132.40	$	6.72
Hypothetical		1,000.00		1,018.90		6.36

²	Expenses are equal to the Series annualized expense ratio of 1.25%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series D (Global Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 98.8%
Bermuda - 0.3%
Everest Re Group, Ltd.	16,400	$	1,609,004

Brazil - 1.5%
Companhia de Bebidas das Americas ADR	72,756		3,550,493
Empresa Brasileira de Aeronautica S.A. ADR	124,326		5,148,340

			8,698,833

Canada - 1.6%
Husky Energy, Inc.	94,000		6,290,311
Manulife Financial Corporation	86,766		2,927,664

			9,217,975

Cayman Islands - 3.1%
ACE, Ltd.	59,999		3,634,139
GlobalSantaFe Corporation	84,700		4,978,666
Transocean, Inc. *	78,600		6,357,954
XL Capital, Ltd.	39,800		2,866,396

			17,837,155

Denmark - 0.3%
Novo-Nordisk A/S (CI.B)	21,600		1,799,203

Finland - 0.7%
Fortum Oyj	125,300		3,566,059
Neste Oil Oyj	15,975		485,650

			4,051,709

France - 5.5%
Arkema *	20,137		1,034,827
LVMH Moet Hennessy Louis Vuitton S.A.	68,300		7,208,217
NicOx S.A. *	25,810		778,167
Sanofi-Aventis	95,340		8,803,423
Societe Generale	30,275		5,139,417
Technip S.A.	90,310		6,199,089
Total S.A.	34,432		2,483,940

			31,647,080

Germany - 4.9%
Allianz AG	35,357		7,223,087
Bayerische Motoren Werke (BMW) AG *	94,810		5,445,427
SAP AG	118,648		6,305,549
Siemens AG	92,992		9,223,706

			28,197,769

Hong Kong - 0.4%
Hutchison Whampoa, Ltd.	212,918		2,163,862

India - 3.1%
Hindustan Lever, Ltd.	608,300		2,979,507
ICICI Bank, Ltd. ADR	35,950		1,500,553
Infosys Technologies, Ltd.	145,765		7,396,385
Zee Entertainment Enterprises, Ltd. (1)	642,400		5,591,492

			17,467,937

Italy - 0.5%
Bulgari SpA	199,500		2,831,001

Japan - 10.6%
Canon, Inc.	41,100		2,313,937
Chugai Pharmaceutical Company, Ltd.	98,800		2,038,183
Credit Saison Company, Ltd.	104,600		3,603,714
Fanuc, Ltd.	16,200		1,595,429
Hoya Corporation	94,600		3,688,450
KDDI Corporation	817		5,540,263
Keyence Corporation	12,600		3,122,340
Kyocera Corporation	31,000		2,922,734
Murata Manufacturing Company, Ltd.	77,400		5,235,662
Nidec Corporation	21,400		1,654,384
Nintendo Company, Ltd.	12,800		3,323,558
Resona Holdings, Inc.	795		2,171,127
Secom Company, Ltd.	45,000		2,333,095
Sega Sammy Holdings, Inc.	34,700		935,986
Seven & I Holdings Company, Ltd.	45,375		1,410,760
Shionogi & Company, Ltd.	149,000		2,929,793
Sony Corporation	154,100		6,604,008
Square Enix Company, Ltd.	83,400		2,186,530
Sumitomo Mitsui Financial Group, Inc.	116		1,189,194
Toyota Motor Corporation	86,800		5,805,874

			60,605,021

Mexico - 2.5%
Fomento Economico Mexicano, S.A. de C.V. *	372,300		4,319,693
Grupo Modelo, S.A. de C.V. (CI.C)	514,300		2,846,776
Grupo Televisa S.A. ADR	251,432		6,791,178

			13,957,647

Netherlands - 2.3%
European Aeronautic Defence and Space Company N.V.	186,080		6,411,046
Koninklijke (Royal) Philips Electronics N.V.	177,900		6,709,264

			13,120,310

Norway - 0.4%
Tandberg ASA	165,500		2,495,188

Panama - 1.3%
Carnival Corporation	149,000		7,308,450

Republic of Korea - 2.0%
Hyundai Heavy Industries Company, Ltd. *	13,810		1,873,046

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series D (Global Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Republic of Korea (continued)
Samsung Electronics Company, Ltd.*	5,821	$	3,840,983
SK Telecom Company, Ltd. ADR	203,980		5,401,391

			11,115,420

Singapore - 0.2%
Singapore Press Holdings, Ltd.	467,466		1,304,613

Spain - 1.0%
Industria de Diseno Textil S.A.	100,100		5,392,490

Sweden - 6.4%
Hennes & Mauritz AB (CI.B)	221,900		11,213,946
lnvestor AB (CI.B) (2)	143,293		3,516,084
Telefonaktiebolaget LM Ericsson (CI.B)	5,441,000		21,973,483

			36,703,513

Switzerland - 3.4%
Credit Suisse Group	111,974		7,834,045
Novartis AG	52,111		3,004,348
Roche Holding AG	40,237		7,215,252
Syngenta AG	7,282		1,354,804

			19,408,449

Taiwan - 1.5%
Benq Corporation	1,782,000		954,228
MediaTek, Inc.	394,200		4,076,575
Taiwan Semiconductor Manufacturing Company, Ltd. ADR	332,047		3,629,274

			8,660,077

United Kingdom - 12.7%
3i Group plc (2)	74,126		1,464,665
BP plc ADR	66,075		4,433,633
Burberry Group plc	201,264		2,548,070
CadburySchweppes plc	558,965		5,982,069
Diageo plc	164,364		3,226,768
Experian Group, Ltd. *	100,232		1,175,736
Home Retail Group	89,232		714,695
HSBC Holdings plc	309,619		5,676,262
Pearson plc	162,540		2,454,095
Prudential plc	392,576		5,377,595
Reckitt Benckiser plc	182,633		8,351,083
Royal Bank of Scotland Group plc	240,400		9,387,205
Smith & Nephew plc	289,023		3,016,729
Tesco plc	592,005		4,692,334
Vodafone Group plc	4,000,277		11,084,680
WPP Group plc	208,300		2,818,668

			72,404,287

United States - 32.6%
3M Company	69,700		5,431,721
Adobe Systems, Inc. *	177,300		7,290,576
Advanced Micro Devices, Inc. *	309,700		6,302,395
Affymetrix, Inc. *	50,100		1,155,306
Altera Corporation *	179,600		3,534,528
Amgen, Inc. *	38,900		2,657,259
Atherogenics, Inc. *	118,200		1,171,362
Automatic Data Processing, Inc.	134,600		6,629,050
Avis Budget Group, Inc.	20,500		444,645
Avon Products, Inc.	77,500		2,560,600
Berkshire Hathaway, Inc. (CI.B) *	940		3,446,040
Biomet, Inc.	85,900		3,545,093
Boeing Company	43,300		3,846,772
Boston Scientific Corporation *	221,247		3,801,023
Chevron Corporation	53,454		3,930,473
Cisco Systems, Inc. *	95,400		2,607,282
Coach, Inc. *	76,400		3,282,144
Colgate-Palmolive Company	52,800		3,444,672
Corning, Inc. *	263,100		4,922,601
Cree, Inc. *	88,800		1,538,016
eBay, Inc. *	275,800		8,293,306
Emerson Electric Company	129,300		5,698,251
Express Scripts, Inc. *	28,000		2,004,800
Genentech, Inc. *	28,800		2,336,544
Getty Images, Inc. *	35,500		1,520,110
Gilead Sciences, Inc. *	65,900		4,278,887
International Game Technology	79,300		3,663,660
International Rectifier Corporation *	54,600		2,103,738
Intuit, Inc. *	145,100		4,427,001
Johnson & Johnson	21,800		1,439,236
JPMorgan Chase & Company	58,792		2,839,654
Juniper Networks, Inc. *	276,100		5,229,334
Linear Technology Corporation	55,100		1,670,632
Lockheed Martin Corporation	34,700		3,194,829
Maxim Integrated Products, Inc.	127,000		3,888,740
McDonald’s Corporation	83,500		3,701,555
Medtronic, Inc.	39,700		2,124,347
Microsoft Corporation	346,200		10,337,532
Morgan Stanley	76,900		6,261,967
Nektar Therapeutics *	42,668		648,980
Northern Trust Corporation	90,200		5,474,238
Northrop Grumman Corporation	38,600		2,613,220
Nuvelo, Inc. *	29,800		119,200
Qualcomm, Inc.	7,640		288,716
Quest Diagnostics, Inc.	44,500		2,358,500
Raytheon Company	63,800		3,368,640
Realogy Corporation *	54,550		1,653,956
Regeneron Pharmaceuticals, Inc. *	27,100		543,897
Sirius Satellite Radio, Inc. *	1,083,900		3,837,006
Theravance, Inc. *	42,000		1,297,380
Tiffany & Company	116,800		4,583,232
Wal-Mart Stores, Inc.	112,300		5,186,014

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series D (Global Series)
December 31, 2006 – continued


	Shares	Value
COMMON STOCK (continued)
United States (continued)
Walt Disney Company	115,800	$	3,968,466
Xilinx, Inc.	120,000		2,857,200
Yahoo!, Inc. *	38,600		985,844

			186,340,170

TOTAL COMMON STOCK (Cost $390,132,725)		$	564,337,163

PREFERRED STOCK - 0.7%
Germany - 0.7%
Porsche AG	2,971		3,780,902

TOTAL PREFERRED STOCK (Cost $823,264)		$	3,780,902

Total Investments (SBL D Fund) (Cost $390,955,989) - 99.5%		$	568,118,065
Other Assets in Excess of Liabilities - 0.5%			2,887,537

TOTAL NET ASSETS - 100.0%		$	571,005,602

INVESTMENT CONCENTRATION

At December 31, 2006, the investment diversification of the fund was as follows:


Industry	%of Net Assets		Value
Communications Equipment	6.4	%	$	37,516,604
Semiconductors	5.9			33,442,081
Pharmaceuticals	5.1			28,400,801
Aerospace & Defense	4.3			24,582,846
Diversified Banks	4.0			22,892,631
Wireless Telecommunication Services	3.9			22,026,333
Application Software	3.2			18,023,126
Integrated Oil & Gas	3.0			17,138,357
Industrial Conglomerates	2.9			16,819,289
Electronic Equipment Manufacturers	2.9			16,623,570
Apparel Retail	3.0			16,606,436
Broadcasting & Cable TV	2.9			16,219,676
Apparel, Accessories & Luxury Goods	2.9			15,869,432
Automobile Manufacturers	2.6			15,032,203
Household Products	2.6			14,775,262
Consumer Electronics	2.3			13,313,272
Health Care Equipment	2.2			12,487,193
Biotechnology	2.0			12,011,334
Oil & Gas Drilling	2.0			11,336,620
Systems Software	1.8			10,337,532
Property & Casualty Insurance	1.7			9,946,575
Internet Software & Services	1.6			9,279,150
Life & Health Insurance	1.4			8,305,260
Diversified Capital Markets	1.4			7,834,045
IT Consulting & Other Services	1.3			7,396,385
Hotels, Resorts & Cruise Lines	1.3			7,308,450
Multi-Line Insurance	1.3			7,223,087
Asset Management & Custody Banks	1.2			6,938,903
Data Processing & Outsourced Services	1.2			6,629,050
Brewers	1.1			6,397,269
Investment Banking & Brokerage	1.1			6,261,967
Oil & Gas Equipment & Services	1.1			6,199,089
Food Retail	1.0			6,103,094
Packaged Foods & Meats	1.0			5,982,069
Electrical Components & Equipment	1.0			5,698,251
Home Entertainment Software	1.0			5,510,088
Publishing	0.9			5,278,817
Hypermarkets & Super Centers	0.9			5,186,014
Specialty Stores	0.8			4,583,232
Health Care Services	0.8			4,363,300
Soft Drinks	0.8			4,319,693
Movies & Entertainment	0.7			3,968,466
Diversified Commercial & Professional Services	0.7			3,953,476
Restaurants	0.6			3,701,555
Casinos & Gaming	0.6			3,663,660
Consumer Finance	0.6			3,603,714
Electric Utilities	0.6			3,566,059
Multi-Sector Holdings	0.6			3,516,084
Distillers & Vintners	0.6			3,226,768
Other Diversified Financial Services	0.5			2,839,654
Advertising	0.5			2,818,668
Personal Products	0.4			2,560,600
Office Electronics	0.4			2,313,937
Regional Banks	0.4			2,171,127
Construction & Farm Machinery & Heavy Trucks	0.3			1,873,046
Life Sciences Tools & Services	0.3			1,804,286
Real Estate Management & Development	0.3			1,653,956
Reinsurance	0.3			1,609,004
Industrial Machinery	0.3			1,595,429
Fertilizers & Agricultural Chemicals	0.2			1,354,804
Commodity Chemicals	0.2			1,034,827
Computer Storage & Peripherals	0.2			954,228
Leisure Products	0.2			935,986
Catalog Retail	0.1			714,695
Oil & Gas Refining & Marketing	0.1			485,650

Total Investments	99.5			568,118,065
Other Assets and Liabilities, Net	0.5			2,887,537

Net Assets	100	%	$	571,005,602

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $394,187,632.

*	- Non-income producing security

1	- Security is fair valued by the Board of Directors. See Notes to financial statements.

2	- Security is a PFIC (Passive Foreign Investment Company)

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series D (Global Series)
December 31, 2006 - continued

Glossary:

ADR

- American Depositary Receipt

plc

- Public Limited Company

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series D

(Global Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	568,118,065
Cash denominated in a foreign currency, at value²		4,163,115
Receivables:
Fund shares sold		344,104
Securities sold		1,855,583
Dividends		528,500
Foreign taxes recoverable		115,212
Prepaid expenses		12,838

Total assets		575,137,417

Liabilities:
Cash Overdraft		2,912,530
Payable for:
Fund shares redeemed		556,197
Management fees		487,094
Custodian fees		3,209
Transfer agent/maintenance fees		2,083
Administration fees		76,664
Professional fees		57,896
Directors’ fees		9,250
Other fees		26,892

Total liabilities		4,131,815

Net Assets	$	571,005,602

Net assets consist of:
Paid in capital	$	348,318,376
Undistributed net investment income		709,006
Undistributed net realized gain on sale of investments, options purchased and foreign currency transactions		44,780,149
Net unrealized appreciation in value of investments and translation of assets and liabilities in foreign currency		177,198,071

Net assets	$	571,005,602

Capital shares authorized		unlimited
Capital shares outstanding		51,752,419
Net asset value per share (net assets divided by shares outstanding)	$	11.03

¹Investments, at cost	$	390,955,989
²Cash denominated in a foreign currency,at cost		4,137,401

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends (net of foreign withholding tax of $689,997)	$	8,369,156
Interest		123,121

Total investment income		8,492,277

Expenses:
Management fees		5,452,108
Custodian fees		231,402
Transfer agent/maintenance fees		25,252
Administration fees		830,629
Directors’ fees		24,231
Professional fees		87,133
Reports to shareholders		83,785
Other expenses		32,245

Total expenses		6,766,785

Less: Earnings credits applied		(5,053	)

Net expenses		6,761,732

Net investment income		1,730,545

Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		45,732,544
Options purchased		10,370
Foreign currency transactions		(74,126	)

Net realized gain		45,668,788

Net unrealized appreciation during the year on:
Investments		39,176,497
Translation of assets and liabilities in foreign currencies		42,248

Net unrealized appreciation		39,218,745

Net realized and unrealized gain		84,887,533

Net increase in net assets resulting from operations	$	86,618,078

See accompanying notes.


Statement of Changes in Net Assets		Series D
		(Global Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase in net assets from operations:
Net investment income	$	1,730,545		$	1,399,179
Net realized gain during the year on investments, options purchased and foreign currency transactions		45,668,788			47,319,645
Net unrealized appreciation during the year on investments and translation of assets and liabilities in foreign currencies		39,218,745			12,433,781

Net increase in net assets resulting from operations		86,618,078			61,152,605

Capital share transactions:
Proceeds from sale of shares		160,312,177			116,417,418
Cost of shares redeemed		(192,137,583	)		(127,933,968	)

Net decrease from capital share transactions		(31,825,406	)		(11,516,550	)

Net increase (decrease) in net assets		54,792,672			49,636,055

Net assets:
Beginning of year		516,212,930			466,576,875

End of year	$	571,005,602		$	516,212,930

Undistributed net investment income at end of year	$	709,006		$	269,487

Capital Share Activity:
Shares sold		16,063,388			13,632,840
Shares redeemed		(19,215,494	)		(15,082,993	)

Total capital share activity		(3,152,106	)		(1,450,153	)

See accompanying notes.


Financial Highlights		Series D
Selected data for each share of capital stock outstanding throughout each year		(Global Series)


	2006			2005			2004			2003^c			Year Ended, December 31, 2002^b
Per Share Data
Net asset value, beginning of period	$	9.40		$	8.28		$	6.97		$	4.87		$	6.31

Income (loss) from investment operations:
Net investment income		0.03			0.03			0.03			0.03			0.02
Net gain (loss) on securities (realized and unrealized)		1.60			1.09			1.28			2.09			(1.45	)

Total from investment operations		1.63			1.12			1.31			2.12			(1.43	)

Less distributions:
Dividends from net investment income		—			—			—			(0.02	)		(0.01	)

Total distributions		—			—			—			(0.02	)		(0.01	)

Net asset value, end of period	$	11.03		$	9.40		$	8.28		$	6.97		$	4.87

Total Return^a		17.34	%		13.53	%		18.79	%		43.45	%		(22.71	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	571,006		$	516,213		$	466,577		$	427,609		$	305,053

Ratios to average net assets:
Net investment income		0.32	%		0.30	%		0.37	%		0.44	%		0.27	%
Total expenses^d		1.24	%		1.24	%		1.23	%		1.25	%		1.23	%
Net expenses^e		1.24	%		1.24	%		1.23	%		1.25	%		1.23	%

Portfolio turnover rate		23	%		33	%		28	%		44	%		48	%

^b	The financial highlights for Series D exclude the historical financial highlights of Series M. The assets of Series M were acquired by Series D on August 27, 2002.

^c	The financial highlights for Series D exclude the historical financial highlights of Series I. The assets of Series I were acquired by Series D on October 3, 2003.

^d	Total expense information reflects expense ratios absent fund expense reductions, by the Investment Manager, and earnings credits, as applicable.

^e	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.


		Series E
Manager’s Commentary		(Diversified Income Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

Steven M. Bowser

Portfolio Manager

Christopher L. Phalen

Portfolio Manager

To Our Shareholders:

2006 proved to be an interesting year for the fixed income markets. Interest rates across the yield curve increased, with long-term rates increasing less than short-term rates resulting in a more inverted yield curve. The Federal Reserve held the Fed funds’ rate unchanged at the August meeting after 17 consecutive increases, citing moderating economic growth, a slow down in the housing market, and the lagged effects of previous interest rate increases. Inflation still remained above levels preferred by the Fed so for the remainder of the year the market debated whether economic growth would slow down causing an interest rate cut, or inflation would continue to be high and cause another increase. The market also debated the impact of the inverted yield curve, which historically is a good indicator of future economic weakness, as equities and credit spreads continued to generate good performance signaling strong economic growth. Series E of the SBL Fund - Diversified Income Series earned a return of 3.80% for the year ended December 31, 2006, which lagged the benchmark Lehman Brothers Aggregate Index return of 4.33% for the same period.

Factors Affecting Performance in 2006

The returns for the bond market were again impacted by the Federal Reserve Bank’s four interest rate increases in the first half of 2006. As bond interest rates moved up across the yield curve, prices of bonds fell. The yield curve also inverted, with short-term rates higher than long term rates, which historically increases the risk of recession. Treasury securities underperformed the other fixed income sectors due to their lower yield.

During 2006, the Series was positioned shorter than the average maturity of its benchmark to mitigate the impact of rising rates. This strategy was correct and protected the Series from loss due to declining bond prices. The Series was slightly overweighted corporate bonds to take advantage of the strong credit fundamentals and low volatility of corporate spreads. While the corporate overweight was correct, it should have been larger given the strong performance of the sector. We kept the corporate weighting lower due to concerns about valuations and event risk in the sector. Mortgage-backed securities were slightly overweighted to take advantage of the additional yield and low volatility levels. This over weight proved successful as mortgage-backed securities were the top performing sector in the Lehman Aggregate Index. Again, to maximize performance the overweight should have been larger.

The Composition of Portfolio Assets

At the end of the year, the Series held 22% in mortgage backed securities, 2% in asset-backed and commercial mortgage-backed securities, 31% in corporate issues, 43% in U.S. Treasury and Government agencies, and 2% in cash. This portfolio composition is over weighted corporate bonds and mortgage-backed securities and underweighted in Treasury and Agency issues relative to the benchmark.

Outlook for 2007

In 2006 the economy continued to grow but with strong head winds from the long anticipated correction in the housing market, the Federal Reserves rate increases starting to take effect, and commodity prices hitting all time highs. Looking for ward to 2007 the economy should continue to grow but at a slower rate than the recent past. One of the main concerns widely discussed in 2006 was the slowdown in the housing market. The housing slowdown had a negative impact on economic growth in 2006, but it does not appear to be enough to push the economy into a recession with unemployment near all time lows and wage inflation still relatively high. The strong labor market should also drive consumer spending to continue growing at a reasonable rate. Commodity prices also declined in late 2006, which should add some positive stimulus to the economy and lower inflation expectations.

The yield curve remains flat or inverted which traditionally has been a sign of future economic weakness. In the current environment we believe that the strong demand for long U.S. Treasury securities from global investors and investors searching to match long liabilities has largely contributed to this situation rather than a pending recession.

We expect short term rates to remain at 5.25% for most of 2007. We believe the Fed has paused and will remain paused with a wait-and-see attitude. We believe it won’t raise rates because there’s no compelling reason to do so. On the other hand, we believe it won’t cut rates either. For the Fed to raise rates again, inflation would have to increase while the economy remained strong. For the Fed to cut rates, inflation would have to decline into its preferred range and economic growth would have to slow down. At this point, there is limited evidence of either situation. Also, due to the increasing amounts of leverage in the capital markets we believe cutting rates


		Series E
Manager’s Commentary		(Diversified Income Series)
February 15, 2007		(unaudited)

will also send an unwarranted bullish signal to the credit and equity markets. Our bias will be to position the portfolio short of the average maturity of the benchmark because the market is pricing in a higher probability of a Fed rate decrease than we believe will occur.

With a stable and growing economy predicted in 2007, the Series will be overweighted corporate bonds for their additional yield. Fundamentals in the corporate sector remain strong as companies generate strong cash flow and profit growth. The primary short-term risk in corporate bonds is increased share repurchases and leveraged buyouts, which negatively impact credit quality. Our focus will continue to be on companies and sectors where this activity has a low probability.

Our primary concern for 2007 is that most risk assets are priced at high valuations and the economy is entering the fifth year of an expansion. We find ourselves constantly asking when the wind will blow the other direction with the economy slowing and credit spreads widening. At this point the evidence tells us to continue to own the additional yield these assets provide but be prepared to change our views if the data changes.

Sincerely,

Steven M. Bowser and Christopher L. Phalen

Portfolio Managers

PERFORMANCE

Series E vs. Lehman Brothers

Aggregate Bond Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series E (Diversified Income Series) on December 31, 1996 and reflects the fees and expenses of Series E. The Lehman Brothers Aggregate Bond Index is an unmanaged index that tracks investment grade bonds including U.S. Treasury and agency issues, corporate bond issues, asset-backed, commercial mortgage-backed and mortgage-backed securities and Yankee issues.

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		10 Years
Series E	3.80	%	4.36	%	5.12	%

Portfolio Composition by Quality Ratings (Based on Standard and Poor’s Ratings)


AAA	68.43	%
AA	2.02
A	10.21
BBB	14.05
BB	2.47
B	0.43
Asset Backed Commercial Paper	0.79
Commercial Paper	0.66
Repurchase Agreement	0.29
Cash & other assets, less liabilities	0.65
Total net assets	100.00	%

See accompanying notes.


		Series E
Managers’ Commentary		(Diversified Income Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series E (Diversified Income Series)
Actual	$	1,000.00	$	1,048.00	$	4.08
Hypothetical		1,000.00		1,021.22		4.02

²	Expenses are equal to the Series annualized expense ratio of 0.79%, net of expense waivers and earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series E (Diversified Income Series)
December 31, 2006


	Principal Amount		Value
CORPORATE BOND - 28.0%
Automotive - 2.5%
Ford Motor Credit Company
6.50%, 2007	$	650,000	$	650,109
GMAC LLC
6.274%, 2007 (1)		3,000,000		2,999,979
6.31%, 2007		105,000		104,343

				3,754,431

Banking - 3.5%
BankBoston Capital Trust IV
5.95%, 2028 (1)		1,200,000		1,167,324
BOI Capital Funding No. 2, LP
5.57%, 2049 (1)(2)(3)		650,000		634,800
Chase Capital III
5.92%, 2027 (1)		1,200,000		1,160,095
Danske Bank A
7.40%, 2010 (1)(2)(3)		800,000		807,486
Rabobank Capital Funding II
5.26%, 2049 (1)(2)(3)		1,200,000		1,173,534
US Central Federal Credit Union
2.70%, 2009		340,909		327,334

				5,270,573

Building Materials - 0.4%
CRH America, Inc.
6.95%, 2012		600,000		634,203

Chemicals - 0.5%
PPG Industries, Inc.
7.40%, 2019		650,000		732,189

Electric - 2.4%
Arizona Public Service Company
6.38%, 2011		600,000		615,810
Cincinnati Gas & Electric
5.70%, 2012		600,000		605,627
East Coast Power LLC
6.74%, 2008		34,376		34,668
7.07%, 2012		140,867		142,570
Kansas Gas & Electric
5.65%, 2021		650,000		631,157
TXU Electric Delivery Company
6.38%, 2015		600,000		618,466
WPS Resources Corporation
6.11%, 2066 (1)		900,000		893,482

				3,541,780

Financial - Other - 1.9%
Berkshire Hathaway Finance Corporation
4.75%, 2012		1,800,000		1,764,153
Willis North America, Inc.
5.63%, 2015		1,200,000		1,148,666

				2,912,819

Financial Companies - Captive - 3.2%
CIT Group Funding Company of Canada
4.65%, 2010 (4)		1,800,000		1,761,424
Residential Capital LLC
7.204%, 2009 (1)(2)(3)		3,000,000		3,016,098

				4,777,522

Financial Companies - Noncaptive Consumer - 2.5%
Capital One Financial Corporation
4.74%, 2007		650,000		648,121
Nelnet, Inc.
7.40%, 2036 (1)		2,500,000		2,574,395
SLM Corporation
5.05%, 2014		600,000		581,741

				3,804,257

Financial Companies - Noncaptive Diversified - 0.4%
General Electric Capital Corporation
5.88%, 2012		600,000		616,988

Healthcare - 0.4%
Anthem, Inc.
6.80%, 2012		600,000		636,405

Independent Energy - 0.4%
Devon Financing Corporation ULC
6.88%, 2011		600,000		634,451

Insurance - Life - 3.4%
AIG SunAmerica Global Financing X
6.90%, 2032 (2)(3)		1,200,000		1,373,559
AXA S.A.
6.379%, 2049 (1)(2)(3)		700,000		691,154
Lincoln National Corporation
7.00%, 2066 (1)		2,000,000		2,119,772
Metlife, Inc.
6.40%, 2036 (1)		1,000,000		1,004,607

				5,189,092

Insurance - Properly & Casually - 1.8%
Nationwide Mutual Insurance Company
8.25%, 2031 (2)(3)		650,000		796,824
Navigators Group, Inc.
7.00%, 2016		700,000		715,758
Swiss Re Capital I, LP
6.854%, 2049 (1)(2)(3)		1,200,000		1,258,919

				2,771,501

Media - Cable - 0.3%
Jones Intercable, Inc.
7.63%, 2008		500,000		513,348

Natural Gas Pipelines - 0.7%
Consolidated Natural Gas Company
6.63%, 2013		600,000		634,501

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series E (Diversified Income Series)
December 31, 2006 - continued


	Principal
	Amount		Value
CORPORATE BOND (continued)
Natural Gas Pipelines (continued)
Express Pipeline, LP
6.47%, 2013 (2)(3)	$	338,400	$	347,425

				981,926

Railroads - 0.9%
Canadian National Railway Company
6.25%, 2034		1,200,000		1,281,554

REIP’s - 0.8%
Reckson Operating Partnership, LP
5.15%, 2011		1,200,000		1,173,067

Services - 0.0%
American ECO Corporation
9.625%, 2008 (2)(5)(6)(7)		500,000		—

Technology - 0.4%
Science Applications International
Corporation
7.13%, 2032		600,000		646,381

Telecommunications - Wireless - 0.8%
Nextel Communications, Inc.
6.88%, 2013		1,200,000		1,212,396

Transportation Services - 0.4%
TTX Company
4.90%, 2015 (2)(3)		650,000		620,070

U.S. Banking - 0.4%
PartnerRe Finance II
6.44%, 2066 (1)		650,000		652,403


TOTAL CORPORATE BOND (Cost $42,643,776)			$	42,357,356

PREFERRED STOCK - 2.4%
Insurance Brokers - 0.8%
WoodBourne Pass-Through Trust
6.45%, 2008 (1)(2)(3)		12		1,201,875

Property & Casually Insurance - 0.8%
Aspen Insurance Holdings, Ltd.
7.401%, 2017 (1)(4)		48,000		1,228,800

U.S. Banking - 0.8%
Washington Mutual Preferred Funding
Delaware
6.53%, 2041 (1)(2)(3)		1,250,000		1,235,625

TOTAL PREFERRED STOCK (Cost $3,660,506)			$	3,666,300


MORTGAGE BACKED SECURITIES - 58.9%
Other Non - Agency - 12.1%
CMO’s - 12.1%
Chase Commercial Mortgage Securities
Corporation
1998-1, 6.56% - 2030		500,000		506,580
Chase Mortgage Finance Corporation
2005-A1 2A2, 5.247% - 2035 (1)		2,413,393		2,390,960
Chaseflex Trust
2006-1, 5.94% - 2036 (1)		3,000,000		3,016,474
Homebanc Mortgage Trust
2006-1, 6.18% - 2037 (1)		2,519,668		2,553,410
JP Morgan Alternative Loan Trust
2006-S2, 5.81% - 2036		3,007,000		3,003,877
2006-S3, 6.00% - 2036		3,000,000		2,993,414
JP Morgan Mortgage Trust
2006-A3, 5.38% - 2036 (1)		2,100,564		2,096,698
Washington Mutual, Inc.
2005-AR16 1A1, 5.11% - 2035 (1)		1,754,275		1,736,948

				18,298,361

U.S. Government Sponsored
Agencies - 42.4%
CMO’s - 6.7%
Federal Home Loan Mortgage Corporation
FHR 2520 AG, 5.00% - 2016		2,238,791		2,222,805
FHR 188 H, 7.00% - 2021		2,114		2,102
Federal National Mortgage Association
FNR 2005-46 TW, 5.00% - 2018		3,000,000		2,932,298
FNR 1990-68 J, 6.95% - 2020		5,250		5,428
FNR 1990-103 K, 7.50% - 2020		1,500		1,517
FNR 2005-24 AH, 5.00% - 2029 (8)		5,087,149		5,015,808

				10,179,958

Pass-Thru’s - 35.7%
Federal Home Loan Mortgage Corporation
#E01378, 5.00% - 2018		1,999,006		1,969,598
#E01488, 5.00% - 2018		1,794,452		1,767,324
#E01538, 5.00% - 2018		1,829,997		1,801,984
#C44050, 7.00% - 2030		48,811		50,239
#C01079, 7.50% - 2030		24,657		25,663
#C01172, 6.50% - 2031		78,368		79,822
#C01210, 6.50% - 2031		95,742		97,987
#C50964, 6.50% - 2031		94,268		96,016
#C50967, 6.50% - 2031		22,555		23,084
#C01277, 7.00% - 2031		134,289		137,758
#C01292, 6.00% - 2032		392,430		396,526
#C62801, 6.00% - 2032		177,318		179,168
#C01287, 6.50% - 2032		221,561		225,669
#C76358, 5.00% - 2033		2,435,646		2,355,128
#C78238, 5.50% - 2033		2,264,327		2,242,668
#A16943, 6.00% - 2033		1,160,910		1,171,442
#G08014, 5.00% - 2034		2,365,995		2,285,339
#G08015, 5.50% - 2034		2,169,616		2,147,911
#A17903, 6.00% - 2034		1,430,121		1,441,759
#1B2544, 5.292% - 2036 (1)		3,158,813		3,152,651
#G02109, 6.00% - 2036		2,740,149		2,761,033

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series E (Diversified Income Series)
December 31, 2006 - continued


	Principal Amount		Value
	Principal Amount		Value
MORTGAGE BACKED SECURITIES (continued)
U.S. Government Sponsored Agencies (continued)
Pass - Thru’s (continued)
Federal National Mortgage Association
#254473, 5.50% - 2017	$	1,755,909	$	1,760,099
#720714, 4.50% - 2018		1,841,156		1,780,489
#555549, 5.00% - 2018		2,108,020		2,071,889
#750465, 5.00% - 2018		1,839,663		1,812,592
#839353, 5.50% - 2018		1,289,032		1,294,115
#780952, 4.00% - 2019		2,300,499		2,168,088
#252806, 7.50% - 2029		78,621		82,054
#252874, 7.50% - 2029		28,179		29,410
#535277, 7.00% - 2030		46,135		47,356
#551262, 7.50% - 2030		18,008		18,752
#190307, 8.00% - 2030		32,670		34,458
#253356, 8.00% - 2030		36,507		38,505
#541735, 8.00% - 2030		40,450		42,664
#535838, 6.50% - 2031		69,656		70,971
#585348, 6.50% - 2031		69,194		70,500
#591381, 6.50% - 2031		123,946		126,285
#254477, 5.50% - 2032		1,030,406		1,018,256
#254198, 6.00% - 2032		384,837		387,450
#254377, 6.00% - 2032		644,402		650,282
#254478, 6.00% - 2032		301,824		304,578
#666750, 6.00% - 2032		653,647		658,086
#254346, 6.50% - 2032		176,518		179,850
#545691, 6.50% - 2032		264,784		269,782
#659790, 6.50% - 2032		239,576		245,067
#702879, 5.00% - 2033		1,379,513		1,334,443
#709805, 5.00% - 2033		1,943,763		1,880,259
#658077, 5.50% - 2033		1,250,140		1,237,654
#688328, 5.50% - 2033		1,175,426		1,163,445
#689108, 5.50% - 2033		1,123,810		1,112,585
#709748, 5.50% - 2033		1,878,586		1,859,822
#713971, 5.50% - 2033		1,865,959		1,846,938
#754903, 5.50% - 2033		1,058,328		1,041,461
#725033, 6.00% - 2034		836,763		843,818
#255554, 5.50% - 2035		2,161,791		2,138,615

				54,029,387

				64,209,345

U.S. Government Sponsored Securities - 4.4%
CMO’s - 3.1%
Government National Mortgage Association
GNR 2006 - 23 A, 6.00% - 2033		4,766,453		4,714,843

Pass - Thru’s - 1.3%
Government National Mortgage Association
G2 181907, 9.50% - 2020		14,421		15,882
#301465, 9.00% - 2021		20,751		22,488
#305617, 9.00% - 2021		16,629		18,020
#313107, 7.00% - 2022		107,862		111,430
#352022, 7.00% - 2023		71,175		73,529
#369303, 7.00% - 2023		108,246		111,826
#780454, 7.00% - 2026		112,491		116,212
G2 2445, 8.00% - 2027		46,678		49,237
#462680, 7.00% - 2028		69,339		71,632
#482668, 7.00% - 2028		52,284		54,014
#518436, 7.25% - 2029		19,574		20,294
#494109, 7.50% - 2029		23,737		24,726
#510704, 7.50% - 2029		26,721		27,834
#781079, 7.50% - 2029		25,008		26,049
#479229, 8.00% - 2030		17,421		18,446
#479232, 8.00% - 2030		21,209		22,457
#508342, 8.00% - 2030		42,631		45,138
G2 2909, 8.00% - 2030		25,695		27,104
#538285, 6.50% - 2031		84,309		86,502
#561561, 6.50% - 2031		165,679		170,267
#564472, 6.50% - 2031		243,118		249,850
#781414, 5.50% - 2032		354,440		352,736
#552324, 6.50% - 2032		148,756		152,625

				1,868,298

				6,583,141

TOTAL MORTGAGE BACKED SECURITIES (Cost $90,302,172)			$	89,090,847

U.S. GOVERNMENT SPONSORED AGENCY BONDS NOTES - 2.7%
Federal National Mortgage Association
5.00% - 2013 (4)(8)		1,935,000		1,895,683
6.63% - 2030 (8)		750,000		894,973
7.13% - 2030 (8)		1,000,000		1,255,204

TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (Cost $3,786,785)			$	4,045,860

U.S. GOVERNMENT SECURITIES - 3.6%
U.S. Treasury Bill
4.85%, 2007		130,000		129,872
4.87%, 2007		35,000		34,698
U.S. Treasury Bonds
5.38%, 2031		5,000,000		5,355,860

TOTAL U.S. GOVERNMENT SECURITIES (Cost $5,738,605)			$	5,520,430

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series E (Diversified Income Series)
December 31, 2006 - continued


	Principal Amount		Value
ASSET BACKED SECURITIES - 2.0%
Home Equity Loans - 2.0%
Credit-Based Asset Servicing and Securitization LLC
2005-CB5, 5.61%, 2035 (1)	$	3,000,000	$	3,012,982

TOTAL ASSET BACKED SECURITIES (Cost $3,000,000)			$	3,012,982

ASSET BACKED COMMERCIAL PAPER - 0.8%
Financial Companies - Trade
Receivables - 0.8%
Old Line Funding LLC
5.26%, 1/4/2007		1,200,000		1,199,467

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $1,199,467)			$	1,199,467

COMMERCIAL PAPER - 0.7%
Financial-Other - 0.7%
Countrywide Financial Corporation
5.42%, 1/2/2007		1,000,000		999,851

TOTAL COMMERCIAL PAPER (Cost $999,851)			$	999,851

REPURCHASE AGREEMENT - 0.3%
United Missouri Bank, 4.85%, 12-29-06, matures 01-02-07; repurchase amount $436,235 (Collateralized by FHLMC, 5.00%, 08-15-35 with a value of $445,070)	$	436,000	$	436,000

TOTAL REPURCHASE AGREEMENT (Cost $436,000)			$	436,000

Total Investments (SBL E Fund) (Cost $151,767,162) - 99.4%			$	150,329,093
Other Assets in Excess of Liabilities - 0.6%				981,904

TOTAL NET ASSETS -100.0%			$	151,310,997

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments

owned at 12/31/2006 was $152,768,800.

1	- Variable rate security. Rate indicated is rate effective at December 31, 2006.

2	- Security was acquired through a private placement.

3	- Security is a 144A security, which places restrictions on resale. See Notes to financial statements.

4	- Security is a step-up bond. Rate indicated is rate effective at December 31, 2006.

5	- Security is deemed illiquid. See Notes to financial statements.

6	- Security is in default of interest and/or principal obligations.

7	- Security is fair valued by the Board of Directors. See Notes to financial statements.

8	- Security is segregated as collateral for open futures contracts.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series E

(Diversified Income Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	150,329,093
Cash		46,289
Receivables:
Fund shares sold		89,178
Securities sold		4,220
Dividend		16,206
Interest		1,234,753
Prepaid expenses		3,667

Total assets		151,723,406

Liabilities:
Payable for:
Variation margin on futures		9,000
Fund shares redeemed		271,576
Management fees		77,567
Directors’ fees		4,000
Transfer agent/maintenance fees		2,083
Administration fees		15,057
Professional fees		16,560
Other		16,566

Total liabilities		412,409

Net Assets	$	151,310,997

Net assets consist of:
Paid in capital	$	159,715,964
Undistributed net investment income		6,546,424
Accumulated net realized loss on sale of investments and futures		(13,409,473	)
Net unrealized depreciation in value of investments and futures		(1,541,918	)

Net assets	$	151,310,997

Capital shares authorized		unlimited
Capital shares outstanding		12,603,079
Net asset value per share (net assets divided by shares outstanding)	$	12.01

¹Investments, at cost	$	151,767,162

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Interest	$	8,516,144
Dividends		84,592

Total investment income		8,600,736

Expenses:
Management fees		1,184,769
Administration fees		160,834
Transfer agent/maintenance fees		25,224
Custodian fees		27,140
Professional fees		22,584
Directors’ fees		7,613
Reports to shareholders		28,330
Other expenses		6,973

Total expenses		1,463,467
Less: Expenses waived		(236,955	)
Earning credits		(49	)

Net expenses		1,226,463

Net investment income		7,374,273

Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		(1,565,239	)
Futures		53,513

Net realized loss		(1,511,726	)

Net unrealized depreciation during the year on:
Investments		(182,938	)
Futures		(103,849	)

Net unrealized depreciation		(286,787	)

Net realized and unrealized loss		(1,798,513	)

Net increase in net assets resulting from operations	$	5,575,760

See accompanying notes.


		Series E
Statement of Changes in Net Assets		(Diversified Income Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	7,374,273		$	6,633,185
Net realized gain (loss) during the year on investments and futures		(1,511,726	)		975,729
Net unrealized depreciation during the year on investments and futures		(286,787	)		(4,694,841	)

Net increase in net assets resulting from operations		5,575,760			2,914,073

Capital share transactions:
Proceeds from sale of shares		61,806,779			63,916,593
Cost of shares redeemed		(75,457,709	)		(66,971,923	)

Net decrease from capital share transactions		(13,650,930	)		(3,055,330	)

Net decrease in net assets		(8,075,170	)		(141,257	)

Net assets:
Beginning of year		159,386,167			159,527,424

End of year	$	151,310,997		$	159,386,167

Undistributed net investment income at end of year	$	6,546,424		$	5,900,401

Capital Share Activity:
Shares sold		5,337,585			5,569,608
Shares redeemed		(6,512,120	)		(5,836,749	)

Total capital share activity		(1,174,535	)		(267,141	)

See accompanying notes.


Financial Highlights	Series E
Selected data for each share of capital stock outstanding throughout each year	(Diversified Income Series	)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	11.57		$	11.36		$	11.04		$	11.83		$	11.40
Income (loss) from investment operations:
Net investment income		0.63			0.49			0.50			0.68			0.51
Net gain (loss) on securities (realized and unrealized)		(0.19	)		(0.28	)		(0.08	)		(0.31	)		0.51

Total from investment operations		0.44			0.21			0.42			0.37			1.02

Less distributions:
Dividends from net investment income		—			—			(0.10	)		(1.16	)		(0.59	)

Total distributions		—			—			(0.10	)		(1.16	)		(0.59	)

Net asset value, end of period	$	12.01		$	11.57		$	11.36		$	11.04		$	11.83

Total Return^a		3.80	%		1.85	%		3.82	%		3.19	%		9.29	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	151,311		$	159,386		$	159,527		$	159,472		$	195,754

Ratios to average net assets:
Net investment income		4.67	%		4.23	%		4.42	%		4.39	%		5.00	%
Total expenses^b		0.93	%		0.92	%		0.89	%		0.84	%		0.83	%
Net expenses^c		0.78	%		0.77	%		0.75	%		0.84	%		0.83	%

Portfolio turnover rate		64	%		60	%		39	%		45	%		32	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.


		Series H
Manager’s Commentary		(Enhanced Index Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Northern Trust

To Our Shareholders:

Series H of the SBL Fund - Enhanced Index Series posted a total return of 15.55% for the year ended December 31, 2006. Its benchmark, the S&P 500 Index, was up 15.79%.

The U.S. equity market ended up for the fourth straight year in 2006. The first half of 2006 was characterized by mixed macroeconomic and earnings reports, inflation concerns, record oil prices, and increased geopolitical risk. The second half of the year saw a sustained market rally fed by falling oil prices, the announcement of several large M&A deals, and the Fed’s decision to pause on rates.

The Series Management Criteria

The Series is managed using a proprietary quantitative stock selection model that assigns each company in the S&P 500 an expected return based upon multiple factors. These factors are based on four broad characteristics: Valuation (is the stock reasonably priced?), Momentum (price and earnings momentum), Earnings (earnings quality and stability) and Management Signals (signals given by management and insiders trading in company stock). Additionally, there are strict risk constraints that limit deviations from the benchmark with respect to the individual stocks, sectors, industries, style and size.

Keys to the Series’ Gain

Driving the Series’ positive outperformance in 2006 was the portfolio’s exposure to companies with healthy accruals, management share buybacks, and book-to-price, whereas exposure to companies with analyst diffusion and momentum was a detractor.

During 2006, the market rewarded moderately valued securities that displayed attractive growth characteristics, especially within the Information Technology sector, where our bottom up stock selection model worked most effectively. Within that sector, the fund achieved a 15.4% return relative to the benchmark sector return of 8.6%, while maintaining neutral exposure to sectors at the portfolio level. The Series’ portfolio construction methodology is designed to ensure the portfolio will have neutral exposures to all sectors in line with the benchmark, and relies on stock selection within sectors to enhance returns.

Despite a discernable slowdown in U.S. economic growth, global financial markets powered ahead in the final quarter of 2006. Still-higher corporate profits and falling oil prices were the most prominent catalysts driving further advances in risk-based security prices. As 2006 came to a close, a series of positive economic reports also suggested that investors’ percolating recession fears were perhaps overblown, and the U.S. economy’s much-coveted soft-landing was safely “wheels down.”

Investors enter 2007 with a backdrop of favorable economic and financial trends: Global growth remains solid and the global economy appears set to strengthen in the first half of this year, sustaining the strongest business cycle since the early 1970s; credit and liquidity are plentiful; company balance sheet strength is its strongest in a decade; and corporate earnings remains in record territory as U.S. companies report better-than-expected results for the fourth quarter.

We express our gratitude to our shareholders for their confidence in the Series and assure them that we will continue to apply our disciplined, quantitative approach while adhering to our strict risk control process.

Sincerely,

Enhanced Index Team


		Series H
Managers’ Commentary		(Enhanced Index Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series H vs. S&P 500 Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series H (Enhanced Index Series) on May 3, 1999 (date of inception) and reflects the fees and expenses of Series H. 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.

Portfolio Composition by Sector


Consumer Discretionary	10.03	%
Consumer Staples	9.20
Energy	9.42
Financials	21.50
Health Care	11.67
Industrials	10.80
Information Technology	15.07
Materials	3.10
Telecommunication Services	3.46
Utilities	3.33
U.S. Government Securities	0.18
Repurchase Agreement	2.20
Cash & other assets, less liabilities	0.04
Total net assets	100.00	%

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		Since Inception (5-3-99)
Series H	15.55	%	5.58	%	1.86	%

See accompanying notes


		Series H
Managers’ Commentary		(Enhanced Index Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series H (Enhanced Index Series)
Actual	$	1,000.00	$	1,128.40	$	3.86
Hypothetical		1,000.00		1,021.58		3.67

²	Expenses are equal to the Series annualized expense ratio of 0.72%, net of expense waivers and earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series H (Enhanced Index Series)
December 31, 2006


	Shares	Value
COMMON STOCK -9 7.6%
Advertising - 0.4%
Omnicom Group, Inc.	3,800	$	397,252

Aerospace & Defense - 2.6%
Boeing Company	10,771		956,896
Honeywell International, Inc.	10,975		496,509
Lockheed Martin Corporation	7,247		667,231
Northrop Grumman Corporation	8,022		543,089
United Technologies Corporation	3,365		210,380

			2,874,105

Agricultural Products - 0.5%
Archer-Daniels-Midland Company	17,300		552,908

Air Freight & Logistics - 1.1%
FedEx Corporation	5,800		629,996
United Parcel Service, Inc. (CI.B)	7,793		584,319

			1,214,315

Airlines - 0.1%
Southwest Airlines Company	6,571		100,668

Apparel Retail - 0.4%
TJX Companies, Inc.	17,000		484,160

Apparel, Accessories & Luxury Goods - 0.4%
Jones Apparel Group, Inc.	11,700		391,131

Application Software - 0.8%
Citrix Systems, Inc. *	14,382		389,033
Intuit, Inc. *	15,200		463,752

			852,785

Asset Management & Custody Banks - 0.5%
Ameriprise Financial, Inc.	8,133		443,249
Mellon Financial Corporation	3,455		145,628

			588,877

Automobile Manufacturers - 0.4%
Ford Motor Company	400		3,004
General Motors Corporation	15,900		488,448

			491,452

Automotive Retail - 0.1%
Autonation, Inc. *	7,124		151,884

Biotechnology - 1.3%
Amgen, Inc. *	15,242		1,041,181
Gilead Sciences, Inc. *	5,900		383,087

			1,424,268

Brewers - 0.0%
Molson Coors Brewing Company	300		22,932

Broadcasting & Cable TV - 1.7%
CBS Corporation (CI.B)	18,400		573,712
Comcast Corporation *	26,324		1,114,295
DIRECTV Group, Inc. *	6,500		162,110

			1,850,117

Building Products - 0.3%
Masco Corporation	10,796		322,476

Communications Equipment - 2.9%
Ciena Corporation *	14,192		393,260
Cisco Systems, Inc. *	60,283		1,647,535
JDS Uniphase Corporation *	11,300		188,258
Motorola, Inc.	3,629		74,612
Qualcomm, Inc.	19,324		730,254
Tellabs, Inc. *	11,449		117,467

			3,151,386

Computer & Electronics Retail - 0.4%
Best Buy Company, Inc.	2,600		127,894
Circuit City Stores, Inc.	17,773		337,332

			465,226

Computer Hardware - 3.6%
Apple Computer, Inc. *	2,746		232,971
Dell, Inc. *	5,176		129,866
Hewlett-Packard Company	32,436		1,336,039
International Business Machines Corporation	16,716		1,623,959
NCR Corporation *	3,798		162,402
Sun Microsystems, Inc. *	88,324		478,716

			3,963,953

Computer Storage & Peripherals - 0.4%
Lexmark International, Inc. *	5,500		402,600

Construction & Farm Machinery & Heavy Trucks - 0.6%
Caterpillar, Inc.	11,594		711,060

Consumer Finance - 0.8%
American Express Company	4,222		256,149
Capital One Financial Corporation	1,178		90,494
SLM Corporation	11,100		541,347

			887,990

Data Processing & Outsourced Services - 0.9%
Automatic Data Processing, Inc.	12,300		605,775
Convergys Corporation *	11,800		280,604
Paychex, Inc.	100		3,954
Western Union Company	3,500		78,470

			968,803

Department Stores - 1.2%
Dillard’s, Inc.	10,900		381,173
JC Penney Company, Inc.	5,722		442,654
Kohl's Corporation *	7,000		479,010

			1,302,837

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series H (Enhanced Index Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Distillers & Vintners - 0.0%
Brown-Forman Corporation	100	$	6,624

Diversified Banks - 2.4%
U.S. Bancorp	4,325		156,522
Wachovia Corporation	19,728		1,123,510
Wells Fargo & Company	39,138		1,391,747

			2,671,779

Diversified Chemicals -1.0%
Dow Chemical Company	8,089		323,075
E.I. Du Pont de Nemours & Company	7,005		341,213
PPG Industries, Inc.	7,160		459,744

			1,124,032

Diversified Metals & Mining - 0.2%
Phelps Dodge Corporation	1,642		196,580

Drug Retail - 0.7%
CVS Corporation	19,600		605,836
Walgreen Company	4,193		192,417

			798,253

Electric Utilities - 1.3%
Allegheny Energy, Inc. *	9,671		443,996
Edison International	1,278		58,123
Exelon Corporation	6,200		383,718
FirstEnergy Corporation	8,900		535,869
Progress Energy, Inc. - Contingent Value Obligation * (1)	1,100		341

			1,422,047

Electrical Components & Equipment - 0.4%
Cooper Industries, Ltd.	98		8,862
Emerson Electric Company	142		6,258
Rockwell Automation, Inc.	6,100		372,588

			387,708

Electronic Manufacturing Services - 0.4%
Molex, Inc.	13,042		412,518

Environmental & Facilities Services - 0.5%
Waste Management, Inc.	14,873		546,880

Food Retail - 0.5%
Kroger Company	22,100		509,847

Gas Utilities - 0.3%
Questar Corporation	4,200		348,810

General Merchandise Stores - 0.2%
Family Dollar Stores, Inc.	5,900		173,047
Target Corporation	865		49,348

			222,395

Health Care Distributors - 0.9%
AmerisourceBergen Corporation	9,884		444,385
Cardinal Health, Inc.	9,107		586,764

			1,031,149

Health Care Equipment - 1.3%
Baxter International, Inc.	7,200		334,008
Becton Dickinson & Company	4,036		283,125
Medtronic, Inc.	15,325		820,041

			1,437,174

Health Care Services - 0.8%
Laboratory Corporation of America Holdings *	6,258		459,775
Quest Diagnostics, Inc.	8,600		455,800

			915,575

Health Care Technology - 0.0%
IMS Health, Inc.	1,400		38,472

Home Furnishings - 0.4%
Leggett & Platt, Inc.	17,100		408,690

Home Improvement Retail - 0.3%
Home Depot, Inc.	7,776		312,284
Lowe’s Companies, Inc.	752		23,425

			335,709

Hotels, Resorts & Cruise Lines - 0.6%
Starwood Hotels & Resorts Worldwide, Inc.	7,600		475,000
Wyndham Worldwide Corporation *	7,228		231,441

			706,441

Household Appliances - 0.2%
Black & Decker Corporation	900		71,973
Whirlpool Corporation	1,600		132,832

			204,805

Household Products - 1.9%
Clorox Company	995		63,829
Colgate-Palmolive Company	100		6,524
Kimberly-Clark Corporation	9,500		645,525
Procter & Gamble Company	21,329		1,370,815

			2,086,693

Hypermarkets & Super Centers -1.2%
Wal-Mart Stores, Inc.	28,513		1,316,730

Independent Power Producers & Energy Traders - 0.5%
TXU Corporation	10,789		584,872

Industrial Conglomerates - 3.7%
3M Company	11,076		863,153
General Electric Company	82,469		3,068,671
Tyco International, Ltd.	4,685		142,424

			4,074,248

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series H (Enhanced Index Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Industrial Machinery - 0.6%
Ingersoll-Rand Company, Ltd.	5,022	$	196,511
Parker Hannifin Corporation	5,800		445,904

			642,415

Integrated Oil & Gas - 5.8%
Chevron Corporation	13,768		1,012,361
ConocoPhillips	19,117		1,375,468
Exxon Mobil Corporation (2)	47,541		3,643,067
Marathon Oil Corporation	3,300		305,250

			6,336,146

Integrated Telecommunication Services - 3.1%
AT&T, Inc.	28,555		1,020,841
BellSouth Corporation	14,889		701,421
CenturyTel, Inc.	5,300		231,398
Qwest Communications International, Inc. *	60,227		504,100
Verizon Communications, Inc.	25,642		954,908

			3,412,668

Internet Software & Services - 1.1%
Google, Inc. *	2,375		1,093,640
VeriSign, Inc. *	4,098		98,557

			1,192,197

Investment Banking & Brokerage - 1.9%
Goldman Sachs Group, Inc.	5,436		1,083,667
Lehman Brothers Holdings, Inc.	700		54,684
Merrill Lynch & Company, Inc.	9,853		917,314

			2,055,665

Leisure Products - 0.2%
Mattel, Inc.	10,000		226,600

Life & Health Insurance - 1.3%
Aflac, Inc.	8,011		368,506
Metlife, Inc.	12,864		759,105
Principal Financial Group, Inc.	807		47,371
Prudential Financial, Inc.	2,311		198,422

			1,373,404

Life Sciences Tools & Services - 0.0%
Applera Corporation - Applied Biosystems Group	1,000		36,690
Thermo Fisher Scientific, Inc. *	100		4,529

			41,219

Managed Health Care - 0.8%
Aetna, Inc.	2,300		99,314
UnitedHealth Group, Inc.	14,620		785,533
WellPoint, Inc. *	384		30,217

			915,064

Motorcycle Manufacturers - 0.2%
Harley-Davidson, Inc. *	2,331		164,266

Movies & Entertainment - 1.3%
News Corporation	2,594		55,719
Time Warner, Inc.	16,358		356,277
Walt Disney Company	28,422		974,022

			1,386,018

Multi-Line Insurance - 1.4%
American International Group, Inc.	16,765		1,201,380
Genworth Financial, Inc.	3,165		108,274
Hartford Financial Services Group, Inc.	2,187		204,069

			1,513,723

Multi-Utilities - 1.2%
CMS Energy Corporation *	5,600		93,520
Dominion Resources, Inc.	300		25,152
PG&E Corporation	10,916		516,654
Public Service Enterprise Group, Inc.	7,600		504,488
Sempra Energy	100		5,597
Xcel Energy, Inc.	6,900		159,114

			1,304,525

Oil & Gas Drilling - 0.4%
Nabors Industries, Ltd. *	8,376		249,437
Transocean, Inc. *	2,100		169,869

			419,306

Oil & Gas Equipment & Services - 1.0%
Baker Hughes, Inc.	100		7,466
BJ Services Company	4,800		140,736
Halliburton Company	4,356		135,254
National Oilwell Varco, Inc. *	1,931		118,139
Schlumberger, Ltd.	7,047		445,088
Weatherford International, Ltd. *	7,100		296,709

			1,143,392

Oil & Gas Exploration & Production - 1.3%
Anadarko Petroleum Corporation	12,500		544,000
Devon Energy Corporation	7,022		471,036
EOG Resources, Inc.	6,825		426,221

			1,441,257

Oil & Gas Refining & Marketing - 0.9%
Sunoco, Inc.	6,600		411,576
Valero Energy Corporation	10,184		521,013

			932,589

Oil & Gas Storage & Transportation - 0.1%
Kinder Morgan, Inc.	847		89,570

Other Diversified Financial Services - 6.4%
Bank of America Corporation	44,628		2,382,689
Citigroup, Inc.	34,780		1,937,246
JPMorgan Chase & Company	33,810		1,633,023

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series H (Enhanced Index Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Other Diversified Financial Services (continued)
Morgan Stanley	13,693	$	1,115,021

			7,067,979

Packaged Foods & Meats - 0.3%
McCormick & Company, Inc.	8,800		339,328

Paper Packaging - 0.4%
Temple-Inland, Inc.	8,649		398,113

Paper Products - 0.3%
International Paper Company	9,700		330,770

Personal Products - 0.4%
Estee Lauder Companies, Inc.	10,000		408,200

Pharmaceuticals - 6.4%
Abbott Laboratories	5,747		279,936
Barr Pharmaceuticals, Inc. *	7,825		392,189
Bristol-Myers Squibb Company	1,875		49,350
Eli Lilly & Company	1,771		92,269
Forest Laboratories, Inc. *	1,000		50,600
Johnson & Johnson	30,183		1,992,682
King Pharmaceuticals, Inc. *	25,489		405,785
Merck & Company, Inc.	16,476		718,354
Mylan Laboratories, Inc.	20,173		402,653
Pfizer, Inc.	75,638		1,959,024
Schering-Plough Corporation	20,382		481,830
Wyeth	4,155		211,573

			7,036,245

Photographic Products - 0.0%
Eastman Kodak Company	1,400		36,120

Property & Casually Insurance - 2.4%
ACE, Ltd.	3,700		224,109
Allstate Corporation	11,065		720,442
AMBAC Financial Group, Inc.	5,200		463,164
Chubb Corporation	10,800		571,428
Cincinnati Financial Corporation	9,628		436,245
Progressive Corporation	4,200		101,724
St. Paul Travelers Companies, Inc.	1,981		106,360

			2,623,472

Publishing - 0.4%
Gannett Company, Inc.	471		28,477
McGraw-Hill Companies, Inc.	6,600		448,932

			477,409

Railroads - 0.9%
Norfolk Southern Corporation	9,200		462,668
Union Pacific Corporation	6,045		556,261

			1,018,929

Regional Banks - 1.9%
Keycorp	13,465		512,074
M&T Bank Corporation	700		85,512
National City Corporation	15,700		573,992
PNC Financial Services Group, Inc.	622		46,053
Regions Financial Corporation	16,300		609,620
Synovus Financial Corporation	7,700		237,391
Zions Bancorporation	400		32,976

			2,097,618

Residential REIPs - 0.4%
Apartment Investment & Management Company	1,000		56,020
Archstone-Smith Trust	6,164		358,806

			414,826

Restaurants - 0.7%
Darden Restaurants, Inc.	10,589		425,360
McDonald’s Corporation	1,775		78,686
Starbucks Corporation *	6,800		240,856
Yum! Brands, Inc.	200		11,760

			756,662

Retail REITs - 0.5%
Simon Property Group, Inc.	5,458		552,841

Semiconductor Equipment - 0.3%
Novellus Systems, Inc. *	11,000		378,620

Semiconductors - 2.2%
Advanced Micro Devices, Inc. *	21,865		444,953
Intel Corporation	61,091		1,237,093
LSI Logic Corporation *	15,929		143,361
National Semiconductor Corporation	4,947		112,297
Texas Instruments, Inc.	18,494		532,627

			2,470,331

Soft Drinks - 2.2%
Coca-Cola Company	24,934		1,203,066
Pepsi Bottling Group, Inc.	11,273		348,448
PepsiCo, Inc.	14,347		897,405

			2,448,919

Specialized Finance - 0.4%
CIT Group, Inc.	8,536		476,053

Specialty Chemicals - 0.4%
Rohm & Haas Company	8,340		426,341

Specialty Stores - 0.5%
Office Depot, Inc. *	11,336		432,695
Staples, Inc.	5,000		133,500

			566,195

Steel - 0.9%
Nucor Corporation	9,211		503,473
United States Steel Corporation	5,900		431,526

			934,999

Systems Software - 2.5%
Microsoft Corporation	85,250		2,545,565

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series H (Enhanced Index Series)
December 31, 2006 - continued


	Shares		Value
COMMON STOCK (continued)
Systems Software (continued)
Oracle Corporation *		14,929	$	255,883

				2,801,448

Thrifts & Mortgage Finance - 1.2%
Federal Home Loan Mortgage Corporation		689		46,783
Federal National Mortgage Association		2,169		128,817
MGIC Investment Corporation		6,640		415,265
Washington Mutual, Inc.		16,359		744,171

				1,335,036

Tobacco - 1.5%
Altria Group, Inc.		16,500		1,416,030
Reynolds American, Inc.		3,168		207,409

				1,623,439

Wireless Telecommunication
Services - 0.4%
Alltel Corporation		5,100		308,448
Sprint Nextel Corporation		4,854		91,692

				400,140

TOTAL COMMON STOCK (Cost $97,285,731)			$	107,371,273


	Principal Amount		Value
U.S. GOVERNMENT SECURITIES - 0.2%
U.S. Treasury Bill 4.85%, 2007	$	195,000		193,693

TOTAL U.S. GOVERNMENT SECURITIES (Cost $193,634)			$	193,693

REPURCHASE AGREEMENT - 2.2%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount of $2,425,306 (Collateralized by GNMA, 4.50%, 11-16-31 & U.S. Treasury Note, 2.25%, 02-15-07 with a combined value of $2,473,400)	$	2,424,000	$	2,424,000

TOTAL REPURCHASE AGREEMENT (Cost $2,424,000)			$	2,424,000

Total Investments (SBL H Fund) (Cost $99,903,365) - 100.0%			$	109,988,966
Other Assets in Excess of Liabilities - 0.0%				40,784

TOTAL NET ASSETS - 100.0%			$	110,029,750

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $101,473,483.

*	- Non-income producing security

1	- Security is deemed illiquid. See Notes to financial statements.

2	- Security is segregated as collateral for open futures contracts.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series H

(Enhanced Index Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	109,988,966
Cash		1,095
Receivables:
Fund shares sold		58,330
Dividends		147,246
Prepaid expenses		2,240

Total assets		110,197,877

Liabilities:
Payable for:
Fund shares redeemed		69,297
Variation margin on futures		9,614
Management fees		46,513
Custodian fees		5,293
Transfer agent/maintenance fees		2,073
Administration fees		10,338
Professional fees		19,301
Directors’ fees		1,800
Other		3,898

Total liabilities		168,127

Net Assets	$	110,029,750

Net assets consist of:
Paid in capital	$	103,829,469
Undistributed net investment income		914,052
Accumulated net realized loss on sale of investments and futures		(4,798,811	)
Net unrealized appreciation in value of investments and futures		10,085,040

Net assets	$	110,029,750

Capital shares authorized		unlimited
Capital shares outstanding		9,937,987
Net asset value per share (net assets divided by shares outstanding)	$	11.07

¹Investments, at cost	$	99,903,365

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	1,414,720
Interest		41,806

Total investment income		1,456,526

Expenses:
Management fees		554,933
Custodian fees		36,577
Transfer agent/maintenance fees		25,139
Administration fees		75,825
Directors’ fees		3,486
Professional fees		20,730
Reports to shareholders		8,730
Other expenses		2,088

Total expenses		727,508
Less: Expenses waived		(184,978	)
Earnings credits		(56	)

Net expenses		542,474

Net investment income		914,052

Net Realized and Unrealized Gain:
Net realized gain during the year on:
Investments		5,639,944
Futures		256,194

Net realized gain		5,896,138

Net unrealized appreciation during the year on:
Investments		8,174,946
Futures		8,304

Net unrealized appreciation		8,183,250

Net realized and unrealized gain		14,079,388

Net increase in net assets resulting from operations	$	14,993,440

See accompanying notes.


		Series H
Statement of Changes in Net Assets		(Enhanced Index Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	914,052		$	436,418
Net realized gain during the year on investments and futures		5,896,138			2,299,595
Net unrealized appreciation (depreciation) during the year on investments and futures		8,183,250			(780,247	)

Net increase in net assets resulting from operations		14,993,440			1,955,766

Capital share transactions:
Proceeds from sale of shares		42,070,411			13,631,499
Issuance of shares in connection with SBL Series W merger (Note 13)		52,171,107			—
Cost of shares redeemed		(39,306,280	)		(14,308,225	)

Net increase (decrease) from capital share transactions		54,935,238			(676,726	)

Net increase in net assets		69,928,678			1,279,040

Net assets:
Beginning of year		40,101,072			38,822,032

End of year	$	110,029,750		$	40,101,072

Undistributed net investment income at end of year	$	914,052		$	436,418

Capital Share Activity:
Shares sold		4,166,677			1,494,268
Shares issued in connection with SBL Series W merger (Note 13)		5,481,948			—
Shares redeemed		(3,896,675	)		(1,563,791	)

Total capital share activity		5,751,950			(69,523	)

See accompanying notes.


Financial Highlights		Series H
Selected data for each share of capital stock outstanding throughout each year		(Enhanced Index Series)


	2006^e			2005			2004			2003^d			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	9.58		$	9.12		$	8.31		$	6.55		$	8.62

Income (loss) from investment operations:
Net investment income		0.03			0.11			0.11			0.07			0.05
Net gain (loss) on securities (realized and unrealized)		1.46			0.35			0.71			1.75			(2.02	)

Total from investment operations		1.49			0.46			0.82			1.82			(1.97	)

Less distributions:
Dividends from net investment income		—			—			(0.01	)		(0.06	)		(0.10	)

Total distributions		—			—			(0.01	)		(0.06	)		(0.10	)

Net asset value, end of period	$	11.07		$	9.58		$	9.12		$	8.31		$	6.55

Total Return^a		15.55	%		5.04	%		9.85	%		27.78	%		(22.98	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	110,030		$	40,101		$	38,822		$	33,371		$	25,052

Ratios to average net assets:
Net investment income		1.23	%		1.15	%		1.32	%		0.94	%		0.56	%
Total expenses^b		0.98	%		1.04	%		0.99	%		0.96	%		0.99	%
Net expenses^c		0.73	%		0.79	%		0.74	%		0.77	%		0.99	%

Portfolio turnover rate		119	%		106	%		98	%		44	%		74	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	Northern Trust became the sub–adviser of Series H effective May 1, 2003. Prior to May 1, 2003, Security Management Company, LLC (SMC) paid Deutsche Asset Management for sub–advisory services.

The financial highlights for Series H as set forth herein exclude the historical financial highlights for Series W. The assets of Series W were acquired by Series H on June 16, 2006. A total of $53,926,052 was excluded from purchases in the portfolio turnover calculation, which represents the cost of the securities Series H received as a result of the merger.

See accompanying notes.

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		Series J
Manager’s Commentary		(Mid Cap Growth Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

James P. Schier

Senior Portfolio Manager

To Our Shareholders:

Series J of the SBL Fund - Mid Cap Growth Series posted a return of 4.93% for the year. These results lagged the benchmark, the Russell 2500 Growth, which gained 12.26%, and the median peer return of 8.70%.

Our approach to the Series 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. We are focused in investing in securities when we find opportunities, with our individual position sizes reflecting the magnitude and the confidence in the opportunity. For this Series, we target securities of companies that appear likely to generate above average profitability at prices that, as of yet, do not reflect that potential.

Stock Selection in Financials and Materials Helped Performance

Stock selection in financials was driven predominantly by First Marblehead Corporation, appreciating 76%. First Marblehead was driven brutally low on misplaced fears of competition and client losses that eventually proved to be ill-founded concerns. The Series benefited by acquiring the stock during this period of opportunity.

Stock selection was also positive in the materials sector lead by a 63% gain in Pactiv Corporation. Pactiv is a packaging company best known for its Hefty consumer plastic bag lines. It posted very solid earnings results in the face of commodity price input pressures.

Overweight Energy Sector Weight and Energy Stock Selection Negatively Affected Returns

The Series’ average energy weighting of 17% versus 7% for the benchmark provided a headwind as energy was a below average performer in 2006. Evergreen Energy, Inc., formerly known as KFx, declined 42%. Evergreen Energy suffered as investors moved away from the coal industry and short sellers spread negative rumors about the company. None of the rumors have proven to have any validity to date. We remain confident that the weakness in the stock is transitory and that the stock’s prior price levels can be easily re-attained. Evergreen Energy has a significant technological lead as the first company to provide a clean coal technology. We believe the clean coal industry has substantial competitive barriers, but will be a scalable business with a large addressable market for its product.

2007 Market Outlook

We continue to expect lack-luster returns for the market in 2007. This is similar to our outlook for the past two years, though the market did quite well.

Despite this, we remain firm on our outlook based on our bottom-up research rather than any global macro forecast. Most companies appear to be operating at very high levels of profitability and it is very difficult to confidently predict continued margin expansion. At present, the market is acting with a high degree of complacency.

The prevailing attitude appears to assume that either the Federal Reserve will panic and ease in the face of any operating weakness that is widespread or that the private equity market will bid for any public company that trades down. We view the recent M&A activity as somewhat bearish. If companies had abundant reinvestment opportunities in their core businesses, they wouldn’t need to pay inflated prices for acquisition candidates. Most recent mergers seem to fit the “acquisition out of desperation” category rather than the “acquisition of opportunity” camp.

Also in this environment, we have seen fewer companies with large revenue growth or large profit margin expansion potential. This is the major reason we maintained the energy overweight last year, even though the commodity price appeared extended and inventories were starting to build. The world consumes about six to seven barrels of oil for every new barrel discovered. Our research suggests that there is less excess capacity than is generally perceived. This coupled with the general political instability in key geographical regions suggests to us that energy could have a move again.

Industrials are also another sector that seems to offer good opportunity. The holdings we have in this sector are generally biased toward infrastructure and energy efficiency names that should benefit from pent up demand and a weaker dollar environment.

On behalf of Security Management Company, I would like to thank you for placing your trust and money with us.

Sincerely,

James P. Schier, Senior Portfolio Manager


		Series J
Manager’s Commentary		(Mid Cap Growth Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series J vs. Russell 2500 Growth Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series J (Mid Cap Growth Series) on December 31, 1996 and reflects the fees and expenses of Series J. The Russell 2500 Growth Index is an unmanaged index that measures the performance of securities of small-to-mid U.S. companies with greater-than-average growth orientation.

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		10 Years
Series J	4.93	%	6.55	%	12.07	%

Portfolio Composition by Sector


Consumer Discretionary	5.79	%
Consumer Staples	1.97
Energy	16.56
Financials	9.42
Health Care	10.63
Industrials	22.77
Information Technology	26.98
Materials	5.56
Warrants	0.21
Repurchase Agreement	0.26
Liabilities, less cash & other assets	(0.15	)
Total net assets	100.00	%

See accompanying notes.


		Series J
Manager’s Commentary		(Mid Cap Growth Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series J (Mid Cap Growth Series)
Actual	$	1,000.00	$	1,029.60	$	4.66
Hypothetical		1,000.00		1,020.62		4.63

²	Expenses are equal to the Series annualized expense ratio of 0.91%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series J (Mid Cap Growth Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 99.6%
Aerospace & Defense - 1.0%
Argon ST, Inc. *	185,850	$	4,003,209

Apparel, Accessories & Luxury Goods - 0.7%
Maidenform Brands, Inc. *	148,000		2,681,760

Application Software - 1.2%
TIBCO Software, Inc. *	490,000		4,625,600

Asset Management & Custody Banks - 3.2%
Northern Trust Corporation (1)	200,900		12,192,621

Auto Parts & Equipment - 0.6%
HydroGen Corporation * (2)	435,324		2,146,148

Biotechnology - 4.1%
Cell Genesys, Inc. *	391,800		1,328,202
Combinatorx, Inc. *	276,700		2,396,222
Human Genome Sciences, Inc. *	312,700		3,889,988
Incyte Corporation *	598,400		3,494,656
lomai Corporation * (2)	417,700		2,080,146
Isis Pharmaceuticals, Inc. *	94,000		1,045,280
Zymogenetics, Inc. *	102,600		1,597,482

			15,831,976

Broadcasting & Cable TV - 1.4%
Salem Communications Corporation	311,700		3,724,815
WorldSpace, Inc. *	508,800		1,780,800

			5,505,615

Coal & Consumable Fuels - 5.0%
Evergreen Energy, Inc. *	1,912,500		18,914,625

Communications Equipment - 7.4%
ADC Telecommunications, Inc. *	366,000		5,317,980
Finisar Corporation *	3,620,100		11,692,923
PC-Tel, Inc. *	461,000		4,310,350
Symmetricom, Inc. *	751,700		6,705,164

			28,026,417

Computer Storage & Peripherals - 0.9%
Novatel Wireless, Inc. *	353,000		3,413,510

Construction & Engineering - 6.4%
Insituform Technologies, Inc. *	306,600		7,928,676
Shaw Group, Inc. * (1)	491,400		16,461,900

			24,390,576

Consumer Finance - 2.1%
First Marblehead Corporation	147,450		8,058,143

Data Processing & Outsourced Services -1.2%
Euronet Worldwide, Inc. *	157,000		4,661,330

Diversified Commercial & Professional Services - 2.3%
Equifax, Inc.	77,000		3,126,200
Navigant Consulting, Inc. *	289,000		5,710,640

			8,836,840

Electrical Components & Equipment - 7.7%
Lime Energy Company * (2)	218,800		196,920
Millennium Cell, Inc. *	262,700		246,938
Power-One, Inc. *	2,351,400		17,118,192
Roper Industries, Inc.	184,500		9,269,280
UQM Technologies, Inc. * (2)	961,172		2,633,611

			29,464,941

Electronic Equipment Manufacturers - 4.9%
Aeroflex, Inc. *	380,000		4,453,600
Cogent, Inc. *	163,000		1,794,630
Flir Systems, Inc. *	386,500		12,302,295

			18,550,525

Electronic Manufacturing Services - 2.3%
Maxwell Technologies, Inc. *	632,700		8,826,165

Health Care Equipment - 0.8%
Orthovita, Inc. *	800,000		2,904,000

Health Care Facilities - 2.2%
United Surgical Partners International, Inc. *	221,300		6,273,855
US Physical Therapy, Inc. *	171,500		2,100,875

			8,374,730

Health Care Services - 2.3%
Hythiam, Inc. *	216,400		1,999,536
Providence Service Corporation *	268,700		6,752,431

			8,751,967

Health Care Supplies - 0.4%
Regeneration Technologies, Inc. *	286,700		1,680,062

Heavy Electrical Equipment - 0.9%
Plug Power, Inc. *	864,800		3,364,072

Homefurnishing Retail - 0.3%
Kirkland’s, Inc. * (2)	221,565		1,112,256

Industrial Machinery -1.3%
Basin Water, Inc. *	416,500		2,819,705
Tennant Company	68,600		1,989,400

			4,809,105

IT Consulting & Other Services - 0.5%
Keane, Inc. *	170,700		2,033,037

Marine Ports & Services - 0.0%
Aegean Marine Petroleum Network, Inc. *
	6,000		98,400

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series J (Mid Cap Growth Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Metal & Glass Containers - 5.6%
Pactiv Corporation *	593,100		$21,167,739
Oil & Gas Drilling - 3.9%
ENSCO International, Inc.	150,900		7,554,054
Helmerich & Payne, Inc.	296,300		7,250,461

			14,804,515

Oil & Gas Equipment & Services - 1.4%
BJ Services Company	143,000		4,192,760
Superior Energy Services, Inc. *	31,300		1,022,884

			5,215,644

Oil & Gas Refining & Marketing - 4.5%
Nova Biosource Fuels, Inc. *	716,200		1,683,070
Rentech, Inc. *	3,581,600		13,502,632
Syntroleum Corporation *	527,000		1,823,420

			17,009,122

Oil & Gas Storage & Transportation - 1.9%
Williams Companies, Inc.	271,600		7,094,192

Packaged Foods & Meats - 2.0%
Hormel Foods Corporation	201,000		7,505,340

Pharmaceuticals - 0.8%
Artes Medical, Inc. *	128,700		1,074,645
Hollis-Eden Pharmaceuticals, Inc. *	353,000		1,856,780

			2,931,425

Publishing - 0.7%
Dow Jones & Company, Inc.	70,400		2,675,200

Railroads - 1.8%
Kansas City Southern *	242,300		7,021,854

Regional Banks - 1.1%
Boston Private Financial Holdings, Inc.	145,600		4,107,376

Semiconductor Equipment - 0.0%
Semitool, Inc. *	10,900		145,079

Semiconductors - 6.2%
Applied Micro Circuits Corporation *	1,765,000		6,283,400
IXYS Corporation * (2)	1,057,400		9,410,860
Mindspeed Technologies, Inc. *	2,613,700		4,992,167
Netlogic Microsystems, Inc. *	65,400		1,418,526
QuickLogic Corporation *	517,900		1,538,163

			23,643,116

Specialized Consumer Services - 2.1%
Weight Watchers International, Inc.	150,900		7,926,777

Systems Software - 2.3%
Progress Software Corporation *	150,000		4,189,500
Sybase, Inc. *	185,800		4,589,260

			8,778,760

Thrifts & Mortgage Finance - 3.0%
Clayton Holdings, Inc. *	613,500		11,478,585

Trading Companies & Distributors - 1.2%
MSC Industrial Direct Company, Inc.	115,000		4,502,250

TOTAL COMMON STOCK (Cost $303,177,380)		$	379,264,604

PREFERRED STOCK - 0.0%
Environmental & Facilities
Services - 0.0%
ThermoEnergy Corporation PIPE * (2)(3)(4)(5)(6)	1,380,000		193,200

TOTAL PREFERRED STOCK (Cost $1,302,103)		$	193,200

WARRANTS - 0.2%
Warrants - 0.2%
Hollis-Eden Pharmaceuticals, Inc.
$ 15.45, 6/19/2007 (4)	18,126		227
Lime Energy Company
$ 1.00, 3/19/2009 (2)(4)	43,050		20,530
Nova Oil, Inc.
$ 2.40, 7/5/2011 (4)	358,100		594,803
Orthovita, Inc.
$ 4.00, 6/26/2008 (4)	175,000		102,837
Syntroleum Corporation
$ 7.60, 5/26/2008	29,100		23,280
ThermoEnergy Corporation
$ 0.75, 7/14/2008 (2)(3)(4)(6)	1,380,000		61,962

			803,639

TOTAL WARRANTS (Cost $1,676,719)		$	803,639


	Principal Amount		Value
REPURCHASE AGREEMENT - 0.3%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount of $970,523 (Collateralized by FHLMC, 5.00%, 08-15-35 & FHLMC, 5.00%, 09-15-36 with a combined value of $990,037)	$	970,000	$	970,000

TOTAL REPURCHASE AGREEMENT (Cost $970,000)			$	970,000

Total Investments (SBL J Fund) (Cost $307,126,202) - 100.1%			$	381,231,443
Liabilities in Excess of Other Assets - (0.1)%				(567,443	)

TOTAL NET ASSETS - 100.0%			$	380,664,000

Footnotes

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series J (Mid Cap Growth Series)
December 31, 2006 - continued

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $307,131,832.

*	- Non-income producing security

1	- Security is segregated as collateral for open written options contracts.

2	- Security is deemed illiquid. See Notes to financial statements.

3	- Security is restricted from resale. See Notes to financial statements.

4	- Security is fair valued by the Board of Directors. See Notes to financial statements.

5	- PIPE (Private Investment in Public Equity)-Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering.

6	- Investment in an affiliated issuer. See Notes to Financials.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series J

(Mid Cap Growth Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments in unaffiliated issues, at value¹	$	380,976,281
Investments in affiliated issues, at value²		255,162
Receivables:
Securities sold		415,780
Fund shares sold		74,447
Dividends		83,776
Prepaid expenses		9,476

Total assets		381,814,922

Liabilities:
Payable for:
Fund shares redeemed .		396,342
Securities purchased		30,133
Written options, at value (premiums received, $ 273,294)		366,750
Management fees		241,143
Custodian fees		4,735
Transfer agent/maintenance fees .		2,083
Aministration fees		30,995
Professional fees		38,552
Directors’ fees		10,000
Other fees		30,189

Total liabilities		1,150,922

Net Assets	$	380,664,000

Net assets consist of:
Paid in capital	$	266,550,022
Undistributed net realized gain on sale of investments and options written		40,102,194
Net unrealized appreciation in value of investments and options written		74,011,784

Net assets	$	380,664,000

Capital shares authorized		unlimited
Capital shares outstanding		12,176,028
Net asset value per share (net assets divided by shares outstanding)	$	31.26

¹Investments in unaffiliated issues, at cost	$	305,470,202
²Investments in affiliated issues, at cost	$	1,656,000

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	1,277,044
Interest		441,876

Total investment income		1,718,920

Expenses:
Management fees		3,091,598
Custodian fees		31,279
Transfer agent/maintenance fees		25,190
Administration fees		393,448
Directors' fees		19,862
Professional fees		55,066
Reports to shareholders		76,778
Other expenses		18,296

Total expenses .		3,711,517
Less: Earnings credits applied		(195	)

Net expenses		3,711,322

Net investment loss		(1,992,402	)

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		41,479,934
Options written		1,427,852

Net realized gain		42,907,786

Net unrealized depreciation during the year on:
Investments		(20,891,208	)
Options written		(183,400	)

Net unrealized depreciation		(21,074,608	)

Net realized and unrealized gain		21,833,178

Net increase in net assets resulting from operations	$	19,840,776

See accompanying notes.


		Series J
Statement of Changes in Net Assets		(Mid Cap Growth Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment loss	$	(1,992,402	)	$	(1,885,536	)
Net realized gain during the year on investments and options written		42,907,786			38,242,429
Net unrealized depreciation during the year on investments and options written		(21,074,608	)		(7,948,763	)

Net increase in net assets resulting from operations		19,840,776			28,408,130

Capital share transactions:
Proceeds from sale of shares		76,838,640			68,323,999
Cost of shares redeemed		(136,813,260	)		(113,722,888	)

Net decrease from capital share transactions		(59,974,620	)		(45,398,889	)

Net decrease in net assets		(40,133,844	)		(16,990,759	)

Net assets:
Beginning of year		420,797,844			437,788,603

End of year	$	380,664,000		$	420,797,844

Accumulated net investment loss at end of year	$	—		$	—

Capital Share Activity:
Shares sold		2,485,919			2,526,797
Shares redeemed		(4,435,068	)		(4,248,530	)

Total capital share activity		(1,949,149	)		(1,721,733	)

See accompanying notes.


Financial Highlights		Series J
Selected data for each share of capital stock outstanding throughout each year		(Mid Cap Growth Series)


	2006			2005			2004			2003^d			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	29.79		$	27.63		$	25.09		$	16.05		$	24.12

Income (loss) from investment operations:
Net investment income (loss)		(0.16	)		(0.13	)		(0.14	)		(0.11	)		(0.11	)
Net gain (loss) on securities (realized and unrealized)		1.63			2.29			2.68			9.15			(6.69	)

Total from investment operations		1.47			2.16			2.54			9.04			(6.80	)

Less distributions:
Distributions from realized gains		—			—			—			—			(1.27	)

Total distributions		—			—			—			—			(1.27	)

Net asset value, end of period	$	31.26		$	29.79		$	27.63		$	25.09		$	16.05

Total Return^a		4.93	%		7.82	%		10.12	%		56.32	%		(29.48	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	380,664		$	420,798		$	437,789		$	447,928		$	293,378

Ratios to average net assets:
Net investment income (loss)		(0.48	%)		(0.47	%)		(0.53	%)		(0.55	%)		(0.56	%)
Total expenses^b		0.90	%		0.90	%		0.88	%		0.83	%		0.83	%
Net expenses^c		0.90	%		0.90	%		0.88	%		0.83	%		0.83	%

Portfolio turnover rate		29	%		29	%		37	%		61	%		41	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	The financial highlights for Series J exclude the historical financial highlights of Series T. The assets of Series T were acquired by Series J on October 3, 2003.

See accompanying notes.

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		Series N
Manager’s Commentary		(Managed Asset Allocation Series)
February 15, 2007		(unaudited)

LOGO

Advisor, T. Rowe Price Associates, Inc.

LOGO

Edmund M. Notzon

Portfolio Manager

Environment

Despite a sharp decline from mid-May through mid-June, U.S. stocks rose strongly in 2006, the market’s fourth consecutive year of gains since the end of the 2000-2002 bear market. In fact, several major indexes reached six-year highs, if not record levels. Equities were lifted by substantial merger and leveraged buyout activity, continued strong corporate earnings growth despite an economic deceleration, and declining oil prices and long-term interest rates in the second half of the year. Investors were also pleased that the Federal Reserve, which increased the federal funds target rate to 5.25% by mid-year, refrained from raising it in the last six months in anticipation that slower economic growth would allow inflation to moderate over time.

U.S. bonds produced good returns in 2006, thanks primarily to favorable performance stemming from falling intermediate- and long-term interest rates in the last six months. The economy appears to be in the middle of a “soft landing”, a period of below-average growth during an economic expansion that allows inflation and interest rates to ease but does not result in a recession. High-yield corporate bonds substantially outperformed investment-grade issues, as investors seeking higher returns continued to embrace risk. In the high-quality universe, mortgage-backed securities fared best, but asset-backed and corporate securities also did well. Treasuries lagged, as yields across all maturities at the end of 2006 were higher than at the end of 2005.

Non-U.S. stocks outperformed their domestic counterparts, as returns were enhanced by the U.S. dollar’s weakness versus European and some Asian currencies. Emerging markets did best, led by shares in Latin America. In the developed regions of the world, European equities produced excellent returns, whereas Japanese stock gains in U.S. dollar terms were more moderate. The MSCI EAFE Index, which measures the performance of equities in Europe, Australia, and the Far East, returned 10.40%.

Performance

Series N of the SBL Fund - Managed Asset Allocation Series returned 12.08% for the year ended December 31, 2006, outperforming its 60% S&P 500/40% Lehman Brothers U.S. Aggregate benchmark, which returned 11.11%. Overweighting stocks relative to bonds added to results. The S&P 500 returned 15.79% over the past year, and the Lehman Brothers U.S. Aggregate Index returned 4.33%.

Portfolio Highlights

At the start of the year, the Series had a 6% overweight in stocks and ended with a 3.5% overweight in stocks which benefited overall performance. Although we remain over weight stocks versus bonds, we have moderated our overweight position in light of lower economic growth expectations.

Stocks significantly outperformed bonds during the year. Series performance was helped by both the U.S. large-cap and international equity components. Following a prolonged period of outperformance by small-cap stocks and due to less compelling valuations, we have been favoring large-cap over small-cap stocks. Against a backdrop of potentially lower U.S. growth, sectors that are more sensitive to the domestic economy, such as small-cap stocks, may face a more challenging profit environment.

Outlook

Economic growth and corporate profits remain supportive of equities, although both are likely to trend lower reflecting the more moderate growth environment and input price pressures.

Sincerely,

Edmund N. Notzon,

Portfolio Manager


		Series N
Manager’s Commentary		(Managed Asset Allocation Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series N vs. Blended Index and S&P 500 Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series N (Managed Asset Allocation Series) on December 31, 1996 and reflects the fees and expenses of Series N. The blended index is 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. 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. The Lehman Brothers Aggregate Bond Index is an unmanaged index that tracks investment grade bonds including U.S. Treasury and agency issues, corporate bond issues, asset-backed, commercial mortgage-backed and mortgage-backed securities and Yankee issues.

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		10 Years
Series N	12.08	%	7.71	%	7.70	%

Portfolio Composition by Sector for Equity Holdings & Quality Ratings (Based on Standard and Poor’s Ratings) for Fixed Income Holdings


Consumer Discretionary	7.09	%
Consumer Staples	5.23
Energy	6.20
Financials	15.23
Health Care	7.46
Industrials	7.63
Information Technology	8.92
Materials	2.26
Telecommunication Services	2.31
Utilities	2.27
AAA	23.95
AA	0.79
A	2.80
BBB	3.14
BB	1.15
B	2.23
CCC	0.10
Not Rated	0.61
Short Term Investments	0.51
Cash & other assets, less liabilities	0.12
Total net assets	100.00	%

See accompanying notes.


		Series N
Manager’s Commentary		(Managed Asset Allocation Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series N (Managed Asset Allocation Series)
Actual	$	1,000.00	$	1,097.60	$	7.51
Hypothetical		1,000.00		1,018.05		7.22

²	Expenses are equal to the Series annualized expense ratio of 1.42%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 55.1%
Advertising - 0.1%
Lamar Advertising Company *	2,300	$	150,397
WPP Group plc ADR	100		6,774

			157,171

Aerospace & Defense - 1.2%
Boeing Company	2,790		247,864
DRS Technologies, Inc.	105		5,531
General Dynamics Corporation	1,400		104,090
Honeywell International, Inc.	4,700		212,628
L-3 Communications Holdings, Inc.	200		16,356
MTC Technologies, Inc. *	300		7,065
Raytheon Company	3,400		179,520
Rockwell Collins, Inc.	3,800		240,502
Teledyne Technologies, Inc. *	100		4,013
Triumph Group, Inc.	300		15,729
United Technologies Corporation	3,710		231,949

			1,265,247

Agricultural Products - 0.1%
Archer-Daniels-Midland Company	1,700		54,332

Air Freight & Logistics - 0.3%
Expediters International Washington, Inc.	3,700		149,850
FedEx Corporation	400		43,448
United Parcel Service, Inc. (CI.B)	1,100		82,478
UTi Worldwide, Inc.	900		26,910

			302,686

Airlines - 0.2%
Republic Airways Holdings, Inc. *	800		13,424
Skywest, Inc.	800		20,408
Southwest Airlines Company	9,100		139,412

			173,244

Aluminum - 0.1%
Alcoa, Inc.	2,000		60,020

Apparel Retail - 0.3%
AnnTaylor Stores Corporation *	100		3,284
Chico’s FAS, Inc. *	1,000		20,690
HOT Topic, Inc. *	400		5,336
Pacific Sunwear of California *	600		11,748
Ross Stores, Inc.	3,800		111,340
TJX Companies, Inc.	6,500		185,120

			337,518

Apparel, Accessories & Luxury Goods - 0.0%
Fossil, Inc. *	600		13,548
Quiksilver, Inc. *	300		4,725

			18,273

Application Software - 0.3%
Autodesk, Inc. *	3,700		149,702
Cadence Design Systems, Inc. *	400		7,164
Factset Research Systems, Inc.	250		14,120
Fair Isaac Corporation	645		26,219
Jack Henry & Associates, Inc.	300		6,420
NAVTEQ Corporation *	1,800		62,946

			266,571

Asset Management & Custody Banks - 0.8%
Affiliated Managers Group, Inc. *	1,050		110,386
Ameriprise Financial, Inc.	1,740		94,830
Eaton Vance Corporation	600		19,806
Franklin Resources, Inc.	1,000		110,170
Investors Financial Services Corporation	2,600		110,942
Legg Mason, Inc.	1,100		104,555
Northern Trust Corporation	1,100		66,759
State Street Corporation	3,700		249,528

			866,976

Auto Parts & Equipment - 0.0%
Autoliv, Inc.	500		30,150
Gentex Corporation	700		10,892

			41,042

Automobile Manufacturers - 0.0%
Winnebago Industries	100		3,291

Biotechnology - 0.9%
Alkermes, Inc. *	900		12,033
Amgen, Inc. *	5,210		355,895
Biogen Idec, Inc. *	2,000		98,380
Celgene Corporation *	2,000		115,060
Cephalon, Inc. *	895		63,017
Digene Corporation *	300		14,376
Genentech, Inc. *	1,300		105,469
Genzyme Corporation *	600		36,948
Gilead Sciences, Inc. *	2,400		155,832
Martek Biosciences Corporation *	200		4,668
Neurocrine Biosciences, Inc. *	300		3,126
Senomyx, Inc. *	200		2,598

			967,402

Brewers - 0.2%
Anheuser-Busch Companies, Inc.	4,200		206,640
Boston Beer Company, Inc. *	400		14,392
Compania Cervecerias Unidas S.A. ADR	900		26,730

			247,762

Broadcasting & Cable TV - 0.7%
Comcast Corporation *	7,700		325,941
Cox Radio, Inc. *	500		8,150
DIRECTV Group, Inc. *	1,340		33,420
Discovery Holding Company *	966		15,543
EchoStar Communications Corporation *	3,800		144,514

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Broadcasting & Cable TV (continued)
Emmis Communications Corporation	200	$	1,648
EW Scripps Company	600		29,964
Liberty Global, Inc. *	275		8,016
Liberty Media Corporation - Capital *	1,198		117,380
Radio One, Inc. (CI.D) *	1,000		6,740

			691,316

Building Products - 0.1%
American Standard Companies, Inc.	700		32,095
Masco Corporation	2,700		80,649
Trex Company, Inc. *	100		2,289
Universal Forest Products, Inc.	200		9,324

			124,357

Casinos & Gaming - 0.4%
Harrah’s Entertainment, Inc.	1,300		107,536
International Game Technology	3,500		161,700
Shuffle Master, Inc. *	400		10,480
Station Casinos, Inc.	400		32,668
Wynn Resorts, Ltd.	1,400		131,390

			443,774

Catalog Retail - 0.0%
Liberty Media Corporation - Interactive *	1,341		28,925

Coal & Consumable Fuels - 0.1%
Consol Energy, Inc.	2,300		73,899

Communications Equipment - 1.5%
Alcatel-Lucent ADR	4,372		62,172
Blue Coat Systems, Inc. *	300		7,185
Ciena Corporation *	600		16,626
Cisco Systems, Inc. *	23,000		628,590
F5 Networks, Inc. *	400		29,684
Inter-Telephone, Inc.	600		13,296
Juniper Networks, Inc. *	15,400		291,676
Motorola, Inc.	13,200		271,392
Nokia Oyj ADR	1,100		22,352
Plantronics, Inc.	200		4,240
Polycom, Inc. *	500		15,455
Qualcomm, Inc.	5,000		188,950

			1,551,618

Computer & Electronics Retail - 0.1%
Best Buy Company, Inc.	2,325		114,367

Computer Hardware - 1.7%
Apple Computer, Inc. *	5,800		492,072
Avid Technology, Inc. *	600		22,356
Dell, Inc. *	15,200		381,368
Hewlett-Packard Company	7,600		313,044
International Business Machines Corporation	1,420		137,953
Sun Microsystems, Inc. *	72,800		394,576

			1,741,369

Computer Storage & Peripherals - 0.2%
EMC Corporation *	7,500		99,000
Network Appliance, Inc. *	1,400		54,992
Rackable Systems, Inc. *	100		3,097
SanDisk Corporation *	1,100		47,333

			204,422

Construction & Engineering - 0.0%
Fluor Corporation	500		40,825
Insituform Technologies, Inc. *	400		10,344

			51,169

Construction & Farm Machinery & Heavy Trucks - 0.1%
Caterpillar, Inc.	700		42,931
Joy Global, Inc.	1,200		58,008
Oshkosh Truck Corporation	700		33,894

			134,833

Consumer Electronics - 0.0%
Harman International Industries, Inc.	400		39,964

Consumer Finance - 0.4%
American Express Company	4,100		248,747
SLM Corporation	3,600		175,572

			424,319

Data Processing & Outsourced Services - 0.6%
Affiliated Computer Services, Inc. *	1,000		48,840
Automatic Data Processing, Inc.	3,800		187,150
Checkfree Corporation *	900		36,144
Computer Sciences Corporation *	700		37,359
DST Systems, Inc. *	500		31,315
Fidelity National Information Services, Inc.	600		24,054
First Data Corporation	3,700		94,424
Global Payments, Inc.	400		18,520
Heartland Payment Systems, Inc.	100		2,825
Iron Mountain, Inc. *	750		31,005
Western Union Company	3,700		82,954

			594,590

Department Stores - 0.5%
Kohl’s Corporation *	7,170		490,643
Lotte Shopping Company, Ltd. GDR * (1)(2)(3)	900		18,678

			509,321

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Distributors - 0.1%
Genuine Parts Company	1,400	$	66,402

Diversified Banks - 1.3%
U.S. Bancorp	15,100		546,469
Wells Fargo & Company	21,840		776,630

			1,323,099

Diversified Chemicals - 0.3%
Cabot Corporation	300		13,071
Dow Chemical Company	4,000		159,760
E.I. Du Pont de Nemours & Company	3,851		187,582

			360,413

Diversified Commercial & Professional Services - 0.1%
Advisory Board Company *	400		21,416
ChoicePoint, Inc. *	266		10,475
Corporate Executive Board Company	500		43,850
Global Cash Access Holdings, Inc. *	400		6,492
Navigant Consulting, Inc. *	300		5,928

			88,161

Diversified Metals & Mining - 0.1%
Phelps Dodge Corporation	200		23,944
Rio Tinto plc ADR	500		106,245

			130,189

Drug Retail - 0.3%
CVS Corporation	3,500		108,185
Walgreen Company	4,400		201,916

			310,101

Education Services - 0.0%
Apollo Group, Inc. *	500		19,485
Corinthian Colleges, Inc. *	100		1,363

			20,848

Electric Utilities - 1.1%
American Electric Power Company, Inc.	1,100		46,838
Duke Energy Corporation	7,200		239,112
Edison International	2,800		127,344
El Paso Electric Company *	300		7,311
Entergy Corporation	2,600		240,032
Exelon Corporation	4,760		294,596
Great Plains Energy, Inc.	900		28,620
Pinnacle West Capital Corporation	800		40,512
PPL Corporation	3,700		132,608

			1,156,973

Electrical Components & Equipment - 0.0%
Belden CDT, Inc.	300		11,727

Electronic Equipment Manufacturers - 0.1%
AVX Corporation	800		11,832
Color Kinetics, Inc. *	600		12,810
Flir Systems, Inc. *	600		19,098
Littelfuse, Inc. *	200		6,376
Tektronix, Inc.	1,000		29,170

			79,286

Electronic Manufacturing Services - 0.1%
Cyberoptics Corporation *	700		8,869
Flextronics International, Ltd. *	3,700		42,476
Jabil Circuit, Inc.	2,900		71,195
Mercury Computer Systems, Inc. *	300		4,008
Plexus Corporation *	600		14,328
TTM Technologies, Inc. *	1,200		13,596

			154,472

Environmental & Facilities Services - 0.2%
Republic Services, Inc.	2,700		109,809
Waste Connections, Inc. *	300		12,465
Waste Management, Inc.	2,400		88,248

			210,522

Fertilizers & Agricultural Chemicals - 0.1%
Monsanto Company	2,400		126,072
Mosaic Company *	800		17,088

			143,160

Food Distributors - 0.2%
Performance Food Group Company *	300		8,292
Sysco Corporation	3,900		143,364
United Natural Foods, Inc. *	500		17,960

			169,616

Food Retail - 0.1%
Kroger Company	2,100		48,447
Whole Foods Market, Inc.	300		14,079

			62,526

Footwear - 0.1%
Nike, Inc. (CI.B)	640		63,379

Forest Products - 0.1%
Weyerhaeuser Company	1,400		98,910

Gas Utilities - 0.1%
AGL Resources, Inc.	1,400		54,474
National Fuel Gas Company	900		34,686
WGL Holdings, Inc.	600		19,548

			108,708

General Merchandise Stores - 0.3%
Dollar Tree Stores, Inc. *	200		6,020

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
General Merchandise Stores (continued)
Target Corporation	5,300	$	302,365

			308,385

Gold - 0.1%
Newmont Mining Corporation	2,400		108,360

Health Care Equipment - 0.8%
Aspect Medical Systems, Inc. *	500		9,405
Baxter International, Inc.	1,200		55,668
Becton Dickinson & Company	1,000		70,150
Boston Scientific Corporation *	7,300		125,414
CR Bard, Inc.	400		33,188
Cytyc Corporation *	1,000		28,300
Edwards Lifesciences Corporation *	300		14,112
Hospira, Inc. *	1,300		43,654
Medtronic, Inc.	6,100		326,411
Respironics, Inc. *	100		3,775
St. Jude Medical, Inc. *	2,800		102,368
STERIS Corporation	700		17,619
Thoratec Corporation *	700		12,306
Zimmer Holdings, Inc. *	200		15,676

			858,046

Health Care Facilities - 0.1%
Community Health Systems, Inc. *	400		14,608
LifePoint Hospitals, Inc. *	200		6,740
Manor Care, Inc.	1,800		84,456
Symbion, Inc. *	400		7,404
Triad Hospitals, Inc. *	210		8,784
United Surgical Partners International, Inc. *	400		11,340

			133,332

Health Care Services - 0.5%
Caremark Rx, Inc.	3,000		171,330
DaVita, Inc. *	550		31,284
Express Scripts, Inc. *	1,400		100,240
Medco Health Solutions, Inc. *	2,963		158,343
Omnicare, Inc.	2,700		104,301

			565,498

Health Care Supplies - 0.1%
Alcon, Inc.	600		67,062
Dentsply International, Inc.	600		17,910
Merit Medical Systems, Inc. *	700		11,088

			96,060

Health Care Technology - 0.0%
Computer Programs & Systems, Inc.	800		27,192

Home Entertainment Software - 0.1%
Activision, Inc. *	1,033		17,809
Electronic Arts, Inc. *	1,100		55,396

			73,205

Home Furnishings - 0.0%
Mohawk Industries, Inc. *	200		14,972

Home Improvement Retail - 0.6%
Home Depot, Inc.	10,550		423,688
Lowe’s Companies, Inc.	5,900		183,785

			607,473

Homebuilding - 0.2%
DR Horton, Inc.	3,100		82,119
Lennar Corporation	2,100		110,166
Meritage Homes Corporation *	150		7,158
Toll Brothers, Inc. *	600		19,338

			218,781

Homefurnishing Retail - 0.3%
Bed Bath & Beyond, Inc. *	6,600		251,460
Cost Plus, Inc. *	200		2,060
Williams-Sonoma, Inc.	400		12,576

			266,096

Hotels, Resorts & Cruise Lines - 0.2%
Hilton Hotels Corporation	1,700		59,330
Marriott International, Inc.	2,800		133,616
Wyndham Worldwide Corporation *	880		28,178

			221,124

Household Appliances - 0.0%
iRobot Corporation *	200		3,612

Household Products - 1.2%
Clorox Company	1,100		70,565
Colgate-Palmolive Company	1,900		123,956
Kimberly-Clark Corporation	1,200		81,540
Procter & Gamble Company	15,715		1,010,003

			1,286,064

Housewares & Specialties - 0.1%
Fortune Brands, Inc.	600		51,234
Jarden Corporation *	100		3,479

			54,713

Human Resource & Employment Services - 0.2%
Manpower, Inc.	200		14,986
Monster Worldwide, Inc. *	2,100		97,944
Robert Half International, Inc.	1,200		44,544
Taleo Corporation *	1,200		16,404

			173,878

Hypermarkets & Super Centers - 0.6%
Costco Wholesale Corporation	2,200		116,314
Wal-Mart Stores, Inc.	11,100		512,598

			628,912

Independent Power Producers & Energy - 0.1%
Constellation Energy Group, Inc.	1,300		89,531

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Independent Power Producers & Energy Traders - 0.3%
AES Corporation *	7,200	$	158,688
Dynegy, Inc. *	11,614		84,085
Mirant Corporation *	1,500		47,355
NRG Energy, Inc. *	800		44,808

			334,936

Industrial Conglomerates - 2.6%
3M Company	4,800		374,064
General Electric Company	44,800		1,667,008
Tyco International, Ltd.	21,600		656,640

			2,697,712

Industrial Gases - 0.1%
Praxair, Inc.	1,300		77,129

Industrial Machinery - 0.7%
Actuant Corporation	700		33,355
Briggs & Stratton Corporation	400		10,780
Danaher Corporation	4,500		325,980
Eaton Corporation	800		60,112
Harsco Corporation	300		22,830
Illinois Tool Works, Inc.	5,900		272,521
Nordson Corporation	200		9,966
Pall Corporation	1,100		38,005

			773,549

Industrial REIPs - 0.1%
AMB Property Corporation	200		11,722
EastGroup Properties, Inc.	400		21,424
First Potomac Realty Trust	200		5,822
Prologis	1,700		103,309

			142,277

Insurance Brokers - 0.3%
AON Corporation	3,500		123,690
Arthur J Gallagher & Company	500		14,775
Marsh & McLennan Companies, Inc.	2,500		76,650
Willis Group Holdings, Ltd.	1,700		67,507

			282,622

Integrated Oil & Gas - 3.4%
BP pic ADR	200		13,420
Chevron Corporation	9,250		680,153
ConocoPhillips	5,100		366,945
Exxon Mobil Corporation	26,380		2,021,499
Murphy Oil Corporation	2,700		137,295
Occidental Petroleum Corporation	2,200		107,426
Petroleo Brasileiro S.A. ADR	1,000		93,480
Royal Dutch Shell pic (CI.B) ADR	100		7,115
Total S.A. ADR	1,400		100,688

			3,528,021

Integrated Telecommunication Services - 1.2%
AT&T, Inc.	14,500		518,375
BellSouth Corporation	8,900		419,279
TELUS Corporation	1,700		75,939
Verizon Communications, Inc.	5,734		213,534

			1,227,127

Internet Retail - 0.2%
Amazon.com, Inc. *	5,100		201,246
Drugstore.com *	1,500		5,490
Expedia, Inc. *	450		9,441
IAC*	550		20,438

			236,615

Internet Software & Services - 0.8%
CNET Networks, Inc. *	1,600		14,544
Cybersource Corporation *	500		5,510
Digital Insight Corporation *	500		19,245
Google, Inc. *	1,210		557,181
VeriSign, Inc. *	4,900		117,845
Websense, Inc. *	900		20,547
Yahoo!, Inc. *	4,800		122,592

			857,464

Investment Banking & Brokerage - 1.6%
Charles Schwab Corporation	4,900		94,766
ETrade Financial Corporation	8,800		197,296
Goldman Sachs Group, Inc.	2,600		518,310
Lehman Brothers Holdings, Inc.	4,100		320,292
Merrill Lynch & Company, Inc.	900		83,790
Morgan Stanley	5,100		415,293
Stifel Financial Corporation *	200		7,846
TD Ameritrade Holding Corporation	1,200		19,416
TradeStation Group, Inc. *	1,300		17,875

			1,674,884

IT Consulting & Other Services - 0.1%
Accenture, Ltd.	2,900		107,097
CACI International, Inc. *	100		5,650
Cognizant Technology Solutions Corporation *	300		23,148
Inforte Corporation *	1,500		5,610
NCI, Inc. *	200		3,058
SRA International, Inc. *	400		10,696

			155,259

Leisure Products - 0.1%
Brunswick Corporation	1,000		31,900
Hasbro, Inc.	1,600		43,600
Marvel Entertainment, Inc. *	400		10,764
Pool Corporation	612		23,972

			110,236

Life & Health Insurance - 0.6%
Metlife, Inc.	5,500		324,555
Protective Life Corporation	500		23,750
Prudential Financial, Inc.	3,000		257,580

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Life & Health Insurance (continued)
Stancorp Financial Group, Inc.	500	$	22,525

			628,410

Life Sciences Tools & Services - 0.2%
Charles River Laboratories International, Inc. *	300		12,975
Invitrogen Corporation *	316		17,882
Techne Corporation *	200		11,090
Thermo Fisher Scientific, Inc. *	2,300		104,167
Waters Corporation *	500		24,485

			170,599

Managed Health Care - 0.9%
Aetna, Inc.	2,300		99,314
Cigna Corporation	900		118,413
Healthspring, Inc. *	100		2,035
Humana, Inc. *	1,200		66,372
UnitedHealth Group, Inc.	6,500		349,245
WellPoint, Inc. *	3,300		259,677

			895,056

Mortgage REIT’s - 0.0%
CapitalSource, Inc.	300		8,193

Motorcycle Manufacturers - 0.1%
Harley-Davidson, Inc.	1,500		105,705

Movies & Entertainment - 0.9%
DreamWorks Animation SKG, Inc.*	400		11,796
News Corporation	7,200		154,656
Time Warner, Inc.	12,700		276,606
Viacom, Inc. (CI.B) *	4,800		196,944
Walt Disney Company	8,000		274,160

			914,162

Multi-Line Insurance - 1.3%
American International Group, Inc.	12,875		922,623
Assurant, Inc.	500		27,625
Genworth Financial, Inc.	3,700		126,577
Hartford Financial Services Group, Inc.	2,200		205,282
Loews Corporation	1,400		58,058

			1,340,165

Multi-Utilities - 0.3%
Alliant Energy Corporation	800		30,216
Energy East Corporation	1,000		24,800
NiSource, Inc.	1,000		24,100
OGE Energy Corporation	1,000		40,000
Public Service Enterprise Group, Inc.	1,200		79,656
TECO Energy, Inc.	3,800		65,474

			264,246

Office REIT’s - 0.3%
Boston Properties, Inc.	1,400		156,632
Corporate Office Properties Trust SBI MD	100		5,047
Duke Realty Corporation	500		20,450
Reckson Associates Realty Corporation	500		22,800
SL Green Realty Corporation	500		66,390

			271,319

Office Services & Supplies - 0.2%
Avery Dennison Corporation	1,100		74,723
Herman Miller, Inc.	1,000		36,360
Pitney Bowes, Inc.	1,800		83,142

			194,225

Oil & Gas Drilling - 0.3%
Grey Wolf, Inc. *	1,500		10,290
Helmerich & Payne, Inc.	1,000		24,470
Nabors Industries, Ltd. *	2,400		71,472
Patterson-UTI Energy, Inc.	800		18,584
Transocean, Inc. *	2,809		227,220

			352,036

Oil & Gas Equipment & Services - 1.0%
Baker Hughes, Inc.	2,200		164,252
BJ Services Company	2,000		58,640
Cameron International Corporation *	500		26,525
FMC Technologies, Inc. *	1,871		115,310
Grant Prideco, Inc. *	2,900		115,333
Halliburton Company	1,100		34,155
National Oilwell Varco, Inc. *	600		36,708
Schlumberger, Ltd.	7,300		461,068
Smith International, Inc.	100		4,107

			1,016,098

Oil & Gas Exploration & Production - 0.4%
Anadarko Petroleum Corporation	1,126		49,004
Bois d’Arc Energy, Inc. *	300		4,389
Comstock Resources, Inc. *	1,000		31,060
Devon Energy Corporation	1,000		67,080
EOG Resources, Inc.	1,400		87,430
Forest Oil Corporation *	400		13,072
Newfield Exploration Company *	800		36,760
Pioneer Natural Resources Company	700		27,783
XTO Energy, Inc.	1,800		84,690

			401,268

Oil & Gas Refining & Marketing - 0.1%
Valero Energy Corporation	2,200		112,552

Oil & Gas Storage & Transportation - 0.2%
Williams Companies, Inc.	8,900		232,468

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Other Diversified Financial Services - 2.6%
Bank of America Corporation	13,776	$	735,501
Citigroup, Inc.	25,773		1,435,556
JPMorgan Chase & Company	11,936		576,509

			2,747,566

Packaged Foods & Meats - 0.3%
General Mills, Inc.	2,500		144,000
Kellogg Company	1,800		90,108
Kraft Foods, Inc.	700		24,990
Sara Lee Corporation	1,300		22,139
SunOpta, Inc. *	2,900		25,520
Tootsie Roll Industries, Inc.	169		5,526

			312,283

Paper Packaging - 0.0%
Smurfit-Stone Container Corporation *	900		9,504

Paper Products - 0.2%
Bowater, Inc.	1,200		27,000
International Paper Company	4,100		139,810

			166,810

Personal Products - 0.1%
Avon Products, Inc.	4,300		142,072

Pharmaceuticals - 3.1%
Abbott Laboratories	5,000		243,550
Allergan, Inc.	1,100		131,714
Barr Pharmaceuticals, Inc. *	900		45,108
Bristol-Myers Squibb Company	1,500		39,480
Eli Lilly & Company	4,840		252,164
GlaxoSmithKline plc ADR	500		26,380
Johnson & Johnson	13,058		862,089
Medicis Pharmaceutical Corporation	300		10,539
Merck & Company, Inc.	9,800		427,280
Noven Pharmaceuticals, Inc. *	600		15,270
Pfizer, Inc.	28,773		745,221
Schering-Plough Corporation	8,200		193,848
Sepracor, Inc. *	300		18,474
Wyeth	5,900		300,428

			3,311,545

Property & Casualty Insurance - 0.4%
Axis Capital Holdings, Ltd.	1,800		60,066
Infinity Property & Casualty Corporation	200		9,678
James River Group, Inc. *	100		3,232
Markel Corporation *	70		33,607
Mercury General Corporation	200		10,546
Ohio Casualty Corporation	200		5,962
ProAssurance Corporation *	200		9,984
Progressive Corporation	3,000		72,660
Selective Insurance Group	100		5,729
St. Paul Travelers Companies, Inc.	2,114		113,501
XL Capital, Ltd.	1,300		93,626

			418,591

Publishing - 0.2%
Gannett Company, Inc.	680		41,113
Getty Images, Inc. *	400		17,128
Idearc, Inc. *	110		3,151
McGraw-Hill Companies, Inc.	1,300		88,426
Meredith Corporation	300		16,905
Scholastic Corporation *	200		7,168
Tribune Company	1,500		46,170

			220,061

Railroads - 0.5%
Norfolk Southern Corporation	6,100		306,769
Union Pacific Corporation	2,300		211,646

			518,415

Regional Banks - 1.2%
City National Corporation	100		7,120
Commerce Bancshares, Inc.	570		27,601
East West Bancorp, Inc.	500		17,710
Fifth Third Bancorp	6,400		261,952
First Horizon National Corporation	4,300		179,654
Mercantile Bankshares Corporation	750		35,092
Popular, Inc.	1,100		19,745
SunTrust Banks, Inc.	5,100		430,695
Synovus Financial Corporation	7,200		221,976
TCF Financial Corporation	300		8,226
UCBH Holdings, Inc.	1,400		24,584
Virginia Commerce Bancorp, Inc. *	150		2,982
Westamerica Bancorporation	100		5,063
Wilmington Trust Corporation	600		25,302

			1,267,702

Residential REIT’s - 0.2%
Archstone-Smith Trust	2,800		162,988
Camden Property Trust	500		36,925

			199,913

Restaurants - 0.0%
California Pizza Kitchen, Inc. *	300		9,993
Cheesecake Factory *	200		4,920
PF Chang’s China Bistro, Inc. *	200		7,676
Sonic Corporation *	900		21,555

			44,144

Retail REIT’s - 0.2%
Kimco Realty Corporation	900		40,455
Kite Realty Group Trust	300		5,586
Pennsylvania Real Estate Investment Trust	100		3,938
Regency Centers Corporation	600		46,902

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Retail REIT’s (continued)
Simon Property Group, Inc.	800	$	81,032
Weingarten Realty Investors	800		36,888

			214,801

Semiconductor Equipment - 0.3%
Advanced Energy Industries, Inc. *	500		9,435
Applied Materials, Inc.	9,800		180,810
ASML Holding N.V. *	2,300		56,649
ATMI, Inc. *	200		6,106
Cymer, Inc. *	200		8,790
Entegris, Inc. *	1,112		12,032
Tessera Technologies, Inc. *	500		20,170
Varian Semiconductor Equipment Associates, Inc. *	300		13,656

			307,648

Semiconductors - 1.2%
Advanced Micro Devices, Inc. *	7,500		152,625
Analog Devices, Inc.	3,900		128,193
Broadcom Corporation *	2,000		64,620
Intel Corporation	24,900		504,225
Intersil Corporation	1,100		26,312
Marvell Technology Group, Ltd. *	10,200		195,738
Maxim Integrated Products, Inc.	3,000		91,860
Microchip Technology, Inc.	400		13,080
Omnivision Technologies, Inc. *	900		12,285
Semtech Corporation *	900		11,763
Texas Instruments, Inc.	3,100		89,280
Zoran Corporation *	989		14,420

			1,304,401

Soft Drinks - 0.8%
Coca-Cola Company	9,700		468,025
PepsiCo, Inc.	6,800		425,340

			893,365

Specialized Consumer Services - 0.1%
H&R Block, Inc.	2,700		62,208
Jackson Hewitt Tax Service, Inc.	500		16,985

			79,193

Specialized Finance - 0.5%
Chicago Mercantile Exchange Holdings, Inc.	550		280,363
IntercontinentalExchange, Inc. *	1,300		140,270
Moody’s Corporation	1,000		69,060

			489,693

Specialized REIT’s - 0.1%
LaSalle Hotel Properties	1,200		55,020
Potlatch Corporation	710		31,112

			86,132

Specialty Chemicals - 0.1%
Arch Chemicals, Inc.	700		23,317
Ecolab, Inc.	1,600		72,320
Sigma-Aldrich Corporation	300		23,316
Symyx Technologies *	700		15,113
Valspar Corporation	200		5,528

			139,594

Specialty Stores - 0.1%
AC Moore Arts & Crafts, Inc. *	300		6,501
Dick’s Sporting Goods, Inc. *	100		4,899
Hibbett Sporting Goods, Inc. *	800		24,424
PetSmart, Inc.	500		14,430
Staples, Inc.	2,850		76,095

			126,349

Steel - 0.1%
Nucor Corporation	2,140		116,972
Steel Dynamics, Inc.	1,000		32,450

			149,422

Systems Software - 1.6%
Borland Software Corporation *	600		3,264
Macrovision Corporation *	100		2,826
McAfee, Inc. *	3,700		105,006
Microsoft Corporation	39,400		1,176,484
Oracle Corporation *	10,000		171,400
Red Hat, Inc. *	8,600		197,800

			1,656,780

Technology Distributors - 0.0%
CDW Corporation	200		14,064
Insight Enterprises, Inc. *	600		11,322
Tech Data Corporation *	400		15,148

			40,534

Thrifts & Mortgage Finance - 0.5%
BankAtlantic Bancorp, Inc.	1,700		23,477
Countrywide Financial Corporation	6,100		258,945
IndyMac Bancorp, Inc.	500		22,580
PMI Group, Inc.	500		23,585
Radian Group, Inc.	300		16,173
Sovereign Bancorp, Inc.	2,200		55,858
Triad Guaranty, Inc. *	400		21,948
Washington Mutual, Inc.	2,600		118,274

			540,840

Tobacco - 0.8%
Altria Group, Inc.	10,130		869,357

Trading Companies & Distributors - 0.0%
Fastenal Company	1,000		35,880

Trucking - 0.0%
Dollar Thrifty Automotive Group *	700		31,927
Old Dominion Freight Line, Inc. *	850		20,460

			52,387

Wireless Telecommunication Services - 0.8%
America Movil S.A. de CV ADR	1,500		67,830
American Tower Corporation *	7,930		295,630

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Wireless Telecommunication Services (continued)
Crown Castle International Corporation *	8,800	$	284,240
NTELOS Holdings Corporation *	300		5,364
Rogers Communications, Inc. (CI.B)	2,100		125,160
Vodafone Group plc ADR	3,900		108,342
Wireless Facilities, Inc. *	1,100		3,135

			889,701

TOTAL COMMON STOCK (Cost $48,935,546)		$	58,022,520

FOREIGN STOCK- 9.5%
Australia - 0.7%
Alinta, Ltd.	5,488		51,200
Australia & New Zealand Banking Group, Ltd.	5,218		116,185
Babcock & Brown, Ltd.	3,497		68,452
BlueScope Steel, Ltd.	12,621		85,870
CSL, Ltd.	707		36,479
Goodman Fielder, Ltd.	9,400		16,471
Insurance Australia Group, Ltd.	10,631		53,283
Macquarie Bank, Ltd.	1,050		65,414
Macquarie Infrastructure Group (4)	7,634		20,848
Mirvac Group	7,631		33,669
Pacific Brands, Ltd.	8,506		17,523
QBE Insurance Group, Ltd.	4,419		100,626
Rio Tinto, Ltd.	944		55,361
Sydney Roads Group	1		1

			721,382

Belgium - 0.2%
Fortis	1,940		82,742
KBC Groep N.V. (4)	538		65,976

			148,718

Bermuda - 0.1%
Esprit Holdings, Ltd.	5,000		55,828

China - 0.0%
Industrial & Commercial Bank of China *	36,000		22,355

Finland - 0.4%
Cargotec Corporation (CI.B)	2,209		122,763
Kesko Oyj	2,122		112,101
Nokia Oyj	6,752		137,972
Sanoma-WSOY Oyj	1,464		41,260

			414,096

France - 1.1%
Accor S.A.	891		69,041
Arkema *	36		1,824
AXA S.A.	2,922		118,299
BNP Paribas	1,206		131,577
Bouygues	1,504		96,548
Pernod-Ricard S.A.	615		141,258
Publicis Groupe	2,561		108,011
Sanofi-Aventis	1,765		162,975
Societe Generale	661		112,210
Technip S.A.	536		36,792
Total S.A.	1,862		134,290

			1,112,825

Germany - 0.6%
Adidas AG	1,092		54,387
BASF AG	648		63,170
Bayerische Motoren Werke (BMW) AG	1,712		98,329
Celesio AG	798		42,810
E.ON AG	1,410		191,394
Hypo Real Estate Holding AG	661		41,656
Muenchener Rueckversicherungs AG	426		73,340
ThyssenKrupp AG	1,251		58,938
Wacker Chemie AG *	174		22,643

			646,667

Hong Kong - 0.2%
China Communications Construction Company, Ltd. *	9,000		8,898
China Overseas Land & Investment, Ltd.	76,000		102,007
China Petroleum & Chemical Corporation	44,000		40,728
Hutchison Whampoa, Ltd.	2,700		27,440

			179,073

Ireland - 0.2%
Allied Irish Banks plc	1,942		57,679
DCC plc	3,790		128,827

			186,506

Italy - 0.4%
AEM SpA	12,299		41,116
Banco Popolare di Verona e Novara SCRL *	3,145		90,296
ENI SpA	4,017		135,111
Piaggio & C SpA *	6,078		25,233
Saipem SpA	2,548		66,395
UniCredito Italiano SpA	11,300		99,045

			457,196

Japan - 1.9%
Ajinomoto Company, Inc.	3,000		39,654
Bank of Yokohama, Ltd.	6,000		46,990
Canon, Inc.	1,700		95,710
Eisai Company, Ltd.	900		49,460
Fanuc, Ltd.	400		39,393
Goldcrest Company, Ltd.	530		27,345
Hamamatsu Photonics KK	1,000		29,999

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares	Value
FOREIGN STOCK (continued)
Japan (continued)
Haseko Corporation *	6,000	$	21,478
Hitachi Maxell, Ltd.	1,900		28,339
Honda Motor Company, Ltd.	2,100		82,938
Hoya Corporation	700		27,293
JS Group Corporation	1,300		27,364
KDDI Corporation	8		54,250
Kobayashi Pharmaceutical Company, Ltd.	1,100		41,040
Mitsubishi Electric Corporation	4,000		36,503
Mitsubishi Gas Chemical Company, Inc.	4,000		41,847
Mitsubishi UFJ Financial Group, Inc.	5		61,762
Mitsui & Company, Ltd.	5,000		74,787
Mitsui Sumitomo Insurance Company, Ltd.	5,000		54,704
Nichias Corporation	3,000		22,411
Nikon Corporation	3,000		65,795
Nippon Mining Holdings, Inc.	2,500		17,982
Nippon Oil Corporation	3,000		20,066
Nippon Steel Corporation	26,000		149,439
Nippon Yusen KK	8,000		58,485
Resona Holdings, Inc.	15		40,965
Seven & I Holdings Company, Ltd.	1,700		52,855
Sony Corporation	1,900		81,425
Sumitomo Trust & Banking Company, Ltd.	14,000		146,817
Takeda Pharmaceutical Company, Ltd.	1,100		75,518
Tokyo Electric Power Company, Inc.	2,400		77,644
Tokyo Electron, Ltd.	800		63,056
Tosoh Corporation	6,000		26,520
Toyoda Gosei Company, Ltd.	1,700		39,355
Toyota Motor Corporation	2,600		173,909
Uniden Corporation	1,000		6,832
Yusen Air & Sea Service Company, Ltd.	1,000		21,722

			2,021,652

Mexico - 0.2%
Cemex S.A. de CV *	12,896		43,701
Grupo Financiero Banorte S.A. de CV	29,116		113,839
Wal-Mart de Mexico S.A. de CV	8,700		38,276

			195,816

Netherlands - 0.1%
Aegon N.V.	3,996		76,170
TomTom N.V. *	991		42,803

			118,973

Norway - 0.1%
Statoil ASA	1,597		42,327
Telenor ASA	3,600		67,701

			110,028

Papua New Guinea - 0.0%
Oil Search, Ltd.	12,681		33,530

Singapore - 0.2%
DBS Group Holdings, Ltd.	6,000		88,419
SembCorp Industries, Ltd.	25,900		64,851
StarHub, Ltd.	29,000		49,733
Venture Corporation, Ltd.	2,000		17,606

			220,609

Spain - 0.4%
Acciona S.A.	945		176,014
Banco Santander Central Hispano S.A.	6,628		123,715
Telefonica S.A.	4,935		105,012

			404,741

Sweden - 0.5%
Autoliv, Inc.	850		51,336
Nordea Bank AB	9,127		140,639
Ssab Svenskt Staal AB	6,359		150,927
Svenska Handelsbanken AB	3,039		91,881
TeliaSonera AB	8,500		69,834
Volvo AB	800		55,093

			559,710

Switzerland - 0.5%
Holcim, Ltd.	470		43,085
Nestle S.A.	399		141,787
Novartis AG	2,516		145,054
Panalpina Welttransport Holding AG	309		42,147
Swiss Life Holding	284		71,146
UBS AG	2,072		125,918

			569,137

Taiwan, Province of China - 0.0%
Acer, Inc.	3,060		6,385

United Kingdom - 1.7%
Aegis Group plc	24,867		68,054
Alliance Boots plc	2,752		45,108
Anglo American plc	2,338		114,004
Arriva plc	3,345		50,046
Aviva plc	4,700		75,702
Barclays plc	10,783		154,465
BP plc	11,598		128,892
Bradford & Bingley plc	3,908		35,969
Close Brothers Group plc	1,387		27,623
Corus Group plc	7,634		79,307
GKN plc	5,382		29,247
GlaxoSmithKline plc	5,174		136,176
HBOS plc	2,930		65,009

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Shares		Value
FOREIGN STOCK (continued)
United Kingdom (continued)
Informa plc		3,491	$	40,745
Persimmon plc		1,234		36,828
QinetiQ plc		4,600		17,318
Rolls-Royce Group plc *		4,155		36,412
Royal Bank of Scotland Group plc		5,816		227,105
Royal Dutch Shell plc (CI.B)		4,491		157,425
Tesco plc		10,338		81,941
Tomkins plc		3,587		17,262
Unilever plc		1,239		34,648
United Utilities plc		5,013		76,621
Vodafone Group plc		12,059		33,416
WPP Group plc		3,118		42,192

				1,811,515

TOTAL FOREIGN STOCK (Cost $6,838,024)			$	9,996,742

PREFERRED STOCK - 0.0%
Apparel, Accessories & Luxury Goods - 0.0%
Anvil Holdings, Inc. (CI.B) * (1)(5)		469		469

TOTAL PREFERRED STOCK (Cost $6,135)			$	469

WARRANTS- 0.0%
Warrants - 0.0%
Travelcenters of America, Inc.
$ 0.001, 5/1/2009 * (1)(5)		150		7,659

TOTAL WARRANTS (Cost $2)			$	7,659


	Principal Amount		Value
CORPORATE BOND - 10.3%
Aerospace & Defense - 0.1%
BE Aerospace, Inc.
8.88%, 2011	$	25,000		25,875
Bombardier, Inc.
6.75%, 2012 (2)(3)		50,000		49,000
United Technologies Corporation
5.40%, 2035		20,000		19,323

				94,198

Automotive - 0.4%
Adesa, Inc.
7.63%, 2012		25,000		25,812
Autonation, Inc.
7.374%, 2013 (6)		25,000		25,125
7.00%, 2014		25,000		25,188
DaimlerChrysler North America Holding Corporation
5.82%, 2009 (6)		30,000		30,049
6.50%, 2013		50,000		51,335
Erac USA Finance Company
5.60%, 2015 (1)(2)(3)		40,000		39,706
Ford Motor Credit Company
5.80%, 2009		65,000		63,820
General Motors Acceptance Corporation
6.75%, 2014		100,000		102,713
Hertz Corporation
8.88%, 2014(2)(3)		100,000		104,750

				468,498

Banking - 1.1%
BAC CAP TRUST VI
5.63%, 2035		35,000		33,132
Bank of America Corporation
4.88%, 2012		55,000		53,901
5.75%, 2016		40,000		40,825
Bank One Corporation
5.25%, 2013		160,000		158,669
BB&T Capital Trust II
6.75%, 2036		60,000		65,517
BCP Crystal US Holdings Corporation
9.63%, 2014(3)		100,000		110,500
Bear Stearns Companies, Inc.
5.50%, 2011		35,000		35,345
5.55%, 2017		20,000		19,983
Capital One Bank
6.50%, 2013		65,000		68,518
Countrywide Financial Corporation
6.25%, 2016		60,000		61,154
Credit Suisse USA, Inc.
5.50%, 2011		30,000		30,327
HSBC Finance Corporation
5.00%, 2015		50,000		48,618
Huntington National Bank
4.38%, 2010		45,000		43,646
Merrill Lynch & Company, Inc.
6.22%, 2026		30,000		30,914
Mizuho Capital Investment 1, Ltd.
6.686%, 2049(1)(2)(3)(6)		16,000		16,143
Morgan Stanley
6.25%, 2026		15,000		15,685
Northern Trust Company
4.60%, 2013		25,000		24,029
Northern Trust Corporation
5.30%, 2011		30,000		30,100
Residential Capital LLC
6.13%, 2008		25,000		25,124
Svensk Exportkredit AB
4.875%, 2011		35,000		34,693
U.S. Bancorp
4.50%, 2010		45,000		43,974
Wachovia Corporation
6.40%, 2008		20,000		20,250
5.50%, 2035		25,000		23,824
Webster Financial Corporation
5.13%, 2014		45,000		43,139

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Banking (continued)
Wells Fargo & Company
4.88%, 2011	$	90,000	$	89,106

				1,167,116

Basic Industry - Other - 0.0%
Vale Overseas, Ltd.
6.875%, 2036		35,000		35,898
Xstrata Finance Canada, Ltd.
5.50%, 2011 (1)(2)(3)		15,000		14,996

				50,894

Brokerage - 0.4%
Allied Capital Corporation
6.00%, 2012		35,000		34,497
Citigroup, Inc.
5.00%, 2014		60,000		58,584
Franklin Resources, Inc.
3.70%, 2008		15,000		14,691
Goldman Sachs Group, Inc.
6.35%, 2034		100,000		101,225
Jefferies Group, Inc.
6.25%, 2036		35,000		33,952
Legg Mason, Inc.
6.75%, 2008		20,000		20,397
Lehman Brothers Holdings, Inc.
5.75%, 2017		50,000		50,640
Merrill Lynch & Company, Inc.
6.05%, 2016		100,000		103,504

				417,490

Building Materials - 0.1%
Celulosa Arauco y Constitucion S.A.
5.13%, 2013		40,000		38,662
Centex Corporation
5.45%, 2012		40,000		39,358
Collins & Aikman Floor Cover
9.75%, 2010		25,000		25,562
CRH America, Inc.
6.00%, 2016		30,000		30,282
Lafarge S.A.
6.15%, 2011		20,000		20,471

				154,335

Capital Goods - Other - 0.1%
Freescale Semiconductor, Inc.
8.875%, 2014 (2)(3)		100,000		99,625

Chemicals - 0.1%
Dow Chemical Company
6.13%, 2011		30,000		30,840
El Du Pont de Nemours & Company
5.60%, 2036		50,000		47,969
Hercules, Inc.
6.75%, 2029		50,000		49,000
Huntsman International LLC
7.875%, 2014 (2)(3)		25,000		25,187

				152,996

Communications - Other - 0.2%
CanWest MediaWorks, Inc.
8.00%, 2012		34,875		36,401
Dun & Bradstreet Corporation
5.50%, 2011		25,000		25,062
Lamar Media Corporation
6.625%, 2015		100,000		99,125

				160,588

Construction Machinery - 0.0%
Owens Corning, Inc.
6.50%, 2016 (1)(2)(3)		15,000		15,238

Consumer Cyclical - Other - 0.1%
Procter & Gamble Company
4.95%, 2014		65,000		63,480

Consumer Products - 0.2%
Bunge, Ltd. Finance Corporation
4.38%, 2008		50,000		48,946
Eastman Kodak Company
7.25%, 2013		100,000		99,413
Fortune Brands, Inc.
5.13%, 2011		30,000		29,439
Sealy Mattress Company
8.25%, 2014		25,000		26,125
Visant Corporation
7.63%, 2012		25,000		25,312

				229,235

Distributors - 0.1%
Atmos Energy Corporation
4.00%, 2009		45,000		43,290
Southern California Gas Company
5.75%, 2035		45,000		44,902

				88,192

Diversified Manufacturing - 0.0%
Hawk Corporation
8.75%, 2014		25,000		24,937

Electric - 0.8%
AES Corporation
9.00%, 2015 (2)(3)		25,000		26,875
Alabama Power Company
5.56%, 2009 (6)		60,000		60,212
Appalachian Power Company
6.38%, 2036		25,000		25,670
Black Hills Corporation
6.50%, 2013		30,000		30,126
CE Electric UK Funding Company
7.00%, 2007 (1)(2)(3)		35,000		35,457

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Electric (continued)
Centerpoint Energy, Inc.
7.25%, 2010	$	25,000	$	26,341
El Paso Electric Company
6.00%, 2035		45,000		43,136
Exelon Generation Company LLC
5.35%, 2014		25,000		24,487
FirstEnergy Corporation
6.45%, 2011		40,000		41,712
Florida Power & Light Company
6.20%, 2036 (1)(3)		20,000		21,283
Midamerican Energy Holdings Company
6.125%, 2036		35,000		35,282
Mirant Americas Generation LLC
8.30%, 2011		100,000		102,500
Monongahela Power Company
5.70%, 2017 (1)(2)(3)		40,000		39,972
Pacific Gas & Electric Company
4.80%, 2014		30,000		28,756
Progress Energy, Inc.
5.63%, 2016		30,000		29,930
Public Service Company of New Mexico
4.40%, 2008		40,000		39,267
Public Service Electric & Gas Company
5.70%, 2036		50,000		48,703
Sierra Pacific Resources
7.80%, 2012 (1)		25,000		26,161
Southern California Edison Company
4.65%, 2015		30,000		28,349
Virginia Electric and Power Company
6.00%, 2036		40,000		39,808
Westar Energy, Inc.
5.10%, 2020		25,000		23,246
Western Power Distribution Holdings, Ltd.
6.88%, 2007 (1)(2)(3)		25,000		25,144

				802,417

Energy - Other - 0.0%
Dresser-Rand Group, Inc.
7.375%, 2014 (7)		22,000		22,165

Entertainment - 0.1%
AMF Bowling Worldwide, Inc.
10.00%, 2010		25,000		25,906
Diageo Capital plc
5.125%, 2012		50,000		49,376
International Speedway Corporation
4.20%, 2009		20,000		19,419
K2, Inc.
7.38%, 2014		25,000		25,250

				119,951

Environmental - 0.0%
Allied Waste North America, Inc.
8.50%, 2008		25,000		26,281
Casella Waste Systems, Inc.
9.75%, 2013		25,000		26,188

				52,469

Financial - Other - 0.2%
AvalonBay Communities, Inc.
6.13%, 2012		30,000		31,081
Boeing Capital Corporation, Ltd.
6.10%, 2011		50,000		51,656
EnCana Holdings Finance Corporation
5.80%, 2014		45,000		45,268
Kinder Morgan Finance Company ULC
5.70%, 2016		45,000		41,288
Orion Power Holdings, Inc.
12.00%, 2010		25,000		28,375
Sovereign Capital Trust VI
7.908%, 2036		35,000		39,368

				237,036

Financial Companies - Noncaptive Consumer - 0.2%
American Express Company
5.25%, 2011		40,000		40,043
American General Finance Corporation
5.40%, 2015		50,000		49,497
SLM Corporation
3.19%, 2009 (6)		35,000		34,031
5.577%, 2009 (6)		55,000		55,194

				178,765

Financial Companies - Noncaptive Diversified - 0.4%
CIT Group, Inc.
6.00%, 2036		30,000		29,579
FIA Card Services North America
4.63%, 2009		45,000		44,385
General Electric Capital Corporation
5.88%, 2012		70,000		71,982
6.00%, 2012		140,000		144,924
5.375%, 2016		60,000		60,080
International Lease Finance Corporation
5.45%, 2011		50,000		50,168
John Deere Capital Corporation
7.00%, 2012		45,000		48,156

				449,274

Food & Beverage - 0.1%
B&G Foods, Inc.
8.00%, 2011		25,000		25,250
McCormick & Company, Inc.
5.20%, 2015		40,000		38,993
Pantry, Inc.
7.75%, 2014		25,000		25,156

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Food & Beverage (continued)
SABMiller plc
6.20%, 2011(1)(2)(3)	$	50,000	$	51,177
WM Wrigley Jr Company
4.65%, 2015		15,000		14,259

				154,835

Gaming - 0.0%
Harrah’s Operating Company, Inc.
5.50%, 2010		45,000		44,107

Health Care - 0.3%
Amgen, Inc.
4.00%, 2009		25,000		24,255
Cardinal Health, Inc.
5.64%, 2009(1)(2)(3)(6)		30,000		30,014
Concentra Operating Corporation
9.13%, 2012		25,000		26,250
Genentech, Inc.
4.75%, 2015		35,000		33,507
Genesis HealthCare Corporation
8.00%, 2013		25,000		26,062
Highmark, Inc.
6.80%, 2013(1)(2)(3)		30,000		31,464
Kroger Company
8.05%, 2010		45,000		48,148
Medtronic, Inc.
4.75%, 2015		55,000		52,102
Vanguard Health Holding Company II LLC
9.00%, 2014		25,000		25,312
WellPoint, Inc.
5.00%, 2011		30,000		29,634

				326,748

Home Construction - 0.2%
DR Horton, Inc.
5.63%, 2014		30,000		28,976
Lennar Corporation
5.60%, 2015		30,000		28,685
MDC Holdings, Inc.
5.50%, 2013		55,000		52,586
NVR, Inc.
5.00%, 2010		20,000		19,510
Pulte Homes, Inc.
5.20%, 2015		50,000		47,638

				177,395

Independent Energy - 0.2%
Devon Financing Corporation ULC
6.88%, 2011		55,000		58,158
Forest Oil Corporation
8.00%, 2011		25,000		26,000
Hilcorp Energy I, LP
10.50%, 2010(2)(3)		50,000		53,500
NRG Energy, Inc.
7.25%, 2014		25,000		25,187

				162,845

Insurance - Life - 0.4%
Genworth Financial, Inc.
5.75%, 2014		40,000		40,757
6.15%, 2066 (6)		18,000		17,975
Hartford Financial Services Group, Inc.
5.25%, 2011		25,000		24,945
4.75%, 2014		55,000		52,223
Metlife, Inc.
6.13%, 2011		50,000		51,687
Nationwide Financial Services
5.90%, 2012		50,000		50,958
NLV Financial Corporation
7.50%, 2033 (1)(2)(3)		30,000		32,672
Principal Financial Group, Inc.
6.05%, 2036		30,000		30,710
Principal Life Global Funding I
5.13%, 2013 (1)(2)(3)		45,000		44,563
Sun Life Financial Global Funding, LP
5.614%, 2013 (1)(2)(3)(6)		45,000		44,947
Torchmark Corporation
6.38%, 2016		30,000		30,987

				422,424

Insurance - Property & Casualty - 0.1%
Ace INA Holdings, Inc.
5.88%, 2014		35,000		35,672
Fund American Companies, Inc.
5.88%, 2013		45,000		44,731
Nationwide Mutual Insurance Company
6.60%, 2034 (1)(2)(3)		25,000		24,471

				104,874

Integrated Energy - 0.1%
ConocoPhillips
5.90%, 2032		40,000		40,635
Hess Corporation
7.88%, 2029		20,000		23,346
Petro-Canada
5.95%, 2035		40,000		37,930

				101,911

Media - Cable - 0.5%
Charter Communications Operating LLC
8.00%, 2012 (2)(3)		25,000		25,969
Comcast Cable Communications Holdings Inc.
8.38%, 2013		45,000		51,258
Comcast Corporation
4.95%, 2016		30,000		28,065
5.875%, 2018		45,000		44,516

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Media - Cable (continued)
COX Communications, Inc.
7.13%, 2012	$	50,000	$	53,303
CSC Holdings, Inc.
7.25%, 2008		100,000		100,875
Rogers Cable, Inc.
5.50%, 2014		40,000		38,248
Time Warner Entertainment Company, LP
7.25%, 2008		40,000		41,125
8.38%, 2023		40,000		46,926
Time Warner, Inc.
5.50%, 2011		30,000		29,923
Viacom, Inc.
6.25%, 2016		35,000		34,758

				494,966

Media - Non Cable - 0.2%
Advanstar Communications, Inc.
10.75%, 2010		25,000		26,906
Affinity Group, Inc.
9.00%, 2012		25,000		24,750
Dex Media East LLC
9.88%, 2009		25,000		26,187
12.13%, 2012		32,000		35,240
Idearc, Inc.
8.00%, 2016 (2)(3)		100,000		101,500
News America, Inc.
6.40%, 2035		45,000		44,705

				259,288

Metals & Mining - 0.2%
Alcan, Inc.
5.00%, 2015		55,000		52,312
Alcoa, Inc.
6.00%, 2012		30,000		30,784
Newmont Mining Corporation
5.88%, 2035		20,000		18,591
Russel Metals, Inc.
6.38%, 2014		25,000		23,844
Sunoco, Inc.
5.75%, 2017		34,000		33,262

				158,793

Natural Gas Pipelines - 0.1%
Boardwalk Pipelines LLC
5.50%, 2017		10,000		9,633
Duke Capital LLC
6.25%, 2013		40,000		41,213
Williams Companies, Inc.
8.75%, 2032 (7)		25,000		28,250

				79,096

Oil Field Services - 0.4%
Baker Hughes, Inc.
6.88%, 2029		55,000		60,839
Chesapeake Energy Corporation
6.50%, 2017		100,000		97,750
Denbury Resources, Inc.
7.50%, 2015		50,000		51,000
Diamond Offshore Drilling, Inc.
5.15%, 2014		25,000		23,994
Halliburton Company
5.50%, 2010		60,000		59,893
Pemex Project Funding Master Trust
6.66%, 2010 (1)(2)(3)(6)		45,000		46,192
5.75%, 2015		45,000		44,685
XTO Energy, Inc.
5.65%, 2016		25,000		24,715

				409,068

Packaging - 0.1%
BWAY Corporation
10.00%, 2010 (7)		25,000		26,187
Graphic Packaging International Corporation
8.50%, 2011		25,000		25,875
Owens Brockway Glass Container, Inc.
8.88%, 2009		25,000		25,563
8.75%, 2012		25,000		26,500
Owens-Illinois, Inc.
7.35%, 2008		25,000		25,156

				129,281

Paper - 0.2%
Boise Cascade LLC
7.13%, 2014		25,000		24,187
Georgia-Pacific Corporation
7.13%, 2017 (2)(3)		100,000		99,750
Sealed Air Corporation
5.38%, 2008 (1)(2)(3)		40,000		39,808

				163,745

Pharmaceuticals - 0.2%
HCA, Inc.
8.75%, 2010		125,000		130,312
Teva Pharmaceutical Finance LLC
5.55%, 2016		20,000		19,557
VWR International, Inc.
8.00%, 2014		25,000		25,750

				175,619

Pipelines - 0.1%
ANR Pipeline Company
8.88%, 2010		25,000		26,227
Panhandle Eastern Pipe Line
4.80%, 2008		20,000		19,703
Roseton
7.27%, 2010		25,000		25,563

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Pipelines (continued)
Williams Companies, Inc.
7.75%, 2031	$	25,000	$	26,250

				97,743

Railroads - 0.1%
CSX Corporation
6.00%, 2036		25,000		24,996
Norfolk Southern Corporation
6.00%, 2008		50,000		50,394

				75,390

Refining - 0.1%
Denbury Resources, Inc.
7.50%, 2013		25,000		25,375
Diamond Offshore Drilling, Inc.
4.88%, 2015		30,000		28,160
Valero Energy Corporation
3.50%, 2009		35,000		33,611

				87,146

REITs - 0.1%
Archstone-Smith Operating Trust
5.25%, 2015		40,000		39,247
Federal Realty Invs Trust
6.00%, 2012		15,000		15,309
Reckson Operating Partnership, LP
6.00%, 2016		30,000		29,278
Simon Property Group, LP
3.75%, 2009		45,000		43,706

				127,540

Retailers - 0.3%
AmeriGas Partners, LP
7.125%, 2016		100,000		100,000
Home Depot, Inc.
5.40%, 2016		65,000		63,573
JC Penney Corporation, Inc.
9.00%, 2012		30,000		34,303
Wal-Mart Stores, Inc.
5.25%, 2035		45,000		41,324
Yum! Brands, Inc.
7.70%, 2012		25,000		27,329

				266,529

Services - 0.0%
Brickman Group, Ltd.
11.75%, 2009		25,000		26,562

Sovereigns - 0.2%
Federal Home Loan Mortgage Corporation
5.13%, 2009		75,000		74,889
Italy Government International Bond
5.25%, 2016		85,000		85,585

				160,474

Technology - 0.3%
Cisco Systems, Inc.
5.25%, 2011		45,000		45,113
Oracle Corporation and Ozark Holding, Inc.
5.00%, 2011 (3)		50,000		49,497
STATS ChipPAC, Ltd.
6.75%, 2011		25,000		24,500
Sungard Data Systems, Inc.
9.125%, 2013		100,000		105,000
Xerox Corporation
6.75%, 2017		100,000		104,500

				328,610

Telecommunications - Wireless - 0.4%
America Movil S.A. de CV
6.38%, 2035		25,000		24,391
New Cingular Wireless Services, Inc.
7.88%, 2011		30,000		32,723
Rogers Wireless, Inc.
9.63%, 2011		100,000		113,500
Sprint Capital Corporation
6.88%, 2028		7,000		7,007
TELUS Corporation
8.00%, 2011		55,000		60,145
UbiquiTel Operating Company
9.88%, 2011		25,000		27,000
Verizon Communications, Inc.
5.55%, 2016		75,000		74,741
Verizon Global Funding Corporation
7.75%, 2030		40,000		46,919

				386,426

Telecommunications - Wirelines - 0.6%
AT&T, Inc.
5.30%, 2010		30,000		30,004
5.10%, 2014		35,000		33,983
6.45%, 2034		60,000		60,890
Citizens Communications Company
6.25%, 2013		100,000		98,125
Qwest Corporation
7.50%, 2014		100,000		106,000
Telecom Italia Capital S.A.
5.25%, 2013		95,000		90,582
Telefonica Emisiones SAU
6.42%, 2016		75,000		77,371
Telefonos de Mexico S.A. de CV
5.50%, 2015		30,000		29,204
Windstream Corporation
8.63%, 2016 (2)(3)		100,000		109,500

				635,659

Textile - 0.1%
Invista
9.25%, 2012 (2)(3)		100,000		107,250

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Transportation Services - 0.0%
GATX Financial Corporation
5.50%, 2012	$	30,000	$	29,806

Utility - Other - 0.1%
NRG Energy, Inc.
7.38%, 2016		75,000		75,375

TOTAL CORPORATE BOND (Cost $10,773,681)			$	10,818,404

FOREIGN BOND - 0.1%
Luxembourg - 0.1%
Tyco International Group S.A.
6.38%, 2011		40,000		41,860

United Kingdom - 0.0%
HBOS plc
6.00%, 2033 (1)(2)(3)		40,000		40,885

TOTAL FOREIGN BOND (Cost $82,237)			$	82,745

MUNICIPAL BOND 0.1%
Kansas - 0.0%
Kansas Development Finance Authority Revenue Bonds
5.50%, 2034		30,000		30,074

New York - 0.1%
New York City Housing Development Corporation Revenue Bonds
6.42%, 2027		30,000		31,005

Oregon - 0.0%
State of Oregon General Obligation Unlimited
5.89%, 2027		15,000		15,706

TOTAL MUNICIPAL BOND (Cost $75,000)			$	76,785

FOREIGN GOVERNMENT BOND - 0.1
Mexico - 0.0%
Mexico Government International Bond
6.38%, 2013		45,000		47,318

South Africa - 0.1%
South Africa Government International Bond
6.50%, 2014		65,000		68,331

TOTAL FOREIGN GOVERNMENT BOND (Cost $112,468)			$	115,649

MORTGAGE BACKED SECURITIES - 10.2%
Federal Home Loan Mortgage Corporation - 0.4%
Pass-Thru’s - 0.4%
Federal Home Loan Mortgage Corporation
#G12463, 5.50% - 2021		82,822		82,927
#J03615, 6.00% - 2021		122,948		124,603
#J03640, 6.00% - 2021		81,230		82,324
#J03672, 6.00% - 2021		36,712		37,206
#1H2581, 5.145% - 2036 (6)		91,391		91,279

				418,339

Other Non - Agency - 1.7%
CMO’s - 1.7%
Banc of America Commercial Mortgage Inc.
2003-1, 4.65% - 2036		75,000		72,711
Banc of America Mortgage Securities
2005-J, 5.266% - 2035 (6)		48,265		47,704
Banc of America Mortgage Securities, Inc.
2004-A, 4.116% - 2034 (6)		56,875		55,916
2004-D, 4.197% - 2034 (6)		4,571		4,504
2003-L, 4.259% - 2034 (6)		101,060		99,530
2004-H, 4.75% - 2034 (6)		26,906		26,691
2004-I, 4.92% - 2034 (6)		27,918		27,544
Bear Stearns Commercial Mortgage Securities
2005-PW10, 5.09% - 2040		132,843		132,238
2005-PWR8, 4.67% - 2041		60,000		57,439
2006-PW13, 5.54% - 2041		150,000		152,168
Citigroup
2005-CD1, 5.225% - 2044 (6)		60,000		59,613
Citigroup Mortgage Loan Trust, Inc.
2006-AR2, 5.59% - 2036		45,370		45,325
Commercial Mortgage Pass Through Certificates
2005-LP5, 4.24% - 2043		71,375		70,190
DLJ Commercial Mortgage Corporation
1999-CG2, 7.30% - 2032		75,000		77,884
GMAC Commercial Mortgage Securities Inc.
2001-C2, 6.70% - 2034		125,000		131,880
Greenwich Capital Commercial Funding Corporation
2004-GG1, 3.84% - 2036		16,277		16,152
JP Morgan Chase Commercial Mortgage Securities Corporation
2001-CIBC, 6.26% - 2033		104,664		107,884
2001-CIB2, 6.24% - 2035		47,561		48,127
2004-LDP4, 4.82% - 2042 (6)		75,000		73,088
LB-UBS Commercial Mortgage Trust
2004-C4, 4.567% - 2029 (6)		75,000		73,874
2006-C1, 5.16% - 2031		150,000		148,183
Morgan Stanley Dean Witter Capital I
2002-TOP7, 5.98% - 2039		200,000		206,368

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
MORTGAGE BACKED SECURITIES (continued)
Other Non-Agency (continued)
CMO’s (continued)
Washington Mutual, Inc.
2004-AR1, 4.23% - 2034 (6)	$	31,190	$	30,639

				1,765,652

U.S. Government Sponsored Agencies - 7.3%
CMO’s - 0.4%
Federal Home Loan Mortgage Corporation
FHR 2631 IG, 4.50% - 2011 (1)(8)		92,311		1,304
FHR 2614 IH, 4.50% - 2016 (1)(8)		102,000		10,444
FHR 2681 PC, 5.00% - 2019		100,000		99,197
Federal National Mortgage Association
FNR 2003-92 NM, 3.50% - 2013		58,026		57,020
FNR 2002-74 PJ, 5.00% - 2015		150,000		149,037
FNR 2003-40 NI, 5.50% - 2028 (1)(8)		13,441		1,088
FNR 2006-35 GK, 6.00% - 2032		121,554		122,718
FNS 319 2, 6.50% - 2032 (1)(8)		14,699		3,354

				444,162

Pass-Thru’s - 6.9%
Federal Home Loan Mortgage Corporation
#M80714, 5.00% - 2008		24,338		24,166
#E81544, 6.00% - 2009		123,000		123,028
#B10343, 5.00% - 2018		7,644		7,527
#E99933, 5.00% - 2018		4,819		4,745
#E99966, 5.00% - 2018		27,340		26,921
#E01341, 5.50% - 2018		8,684		8,698
#G11759, 5.50% - 2018		228,239		228,626
#B19214, 5.50%-2020		32,806		32,779
#J02272, 5.50% - 2020		81,236		81,170
#J02554, 5.50% - 2020		88,802		88,729
#J03203, 6.00% - 2021		96,032		97,325
#J03254, 6.00% - 2021		30,104		30,509
#1B0527, 4.52% - 2032 (6)		11,352		11,331
#C72128, 6.00% -2032		70,922		71,614
#C68205, 7.00% - 2032		6,756		6,945
#A12118, 5.00% - 2033		57,812		55,880
#A15852, 5.00% - 2033		20,787		20,092
#A15907, 5.00% - 2033		27,791		26,863
#D86309, 5.00% - 2033		32,078		31,006
#G01628, 6.00% - 2033		139,221		140,484
#A21263, 4.50% - 2034		143,038		134,188
#A46897, 4.50% - 2035		99,298		93,051
#G01805, 4.50% - 2035		323,834		304,862
#1G1762, 5.061% - 2035 (6)		42,523		42,170
#1G0661, 5.428% - 2036 (6)		22,747		22,820
Federal National Mortgage Association
#254140, 5.50% - 2017		6,112		6,130
#254234, 5.50% - 2017		6,030		6,047
#625931, 5.50% - 2017		5,396		5,412
#357280, 6.50% - 2017		26,610		27,254
#254720, 4.50% - 2018		119,703		115,759
#555345, 5.50% - 2018		6,008		6,025
#555446, 5.50% - 2018		9,185		9,207
#555526, 5.50% - 2018		142,691		143,031
#555693, 5.50% - 2018		83,223		83,421
#685202, 5.50% - 2018		74,199		74,340
#725098, 5.50% - 2018		17,985		18,020
#357475, 4.50% - 2019		122,930		118,879
#725528, 5.50% - 2019		13,940		13,966
#789885, 5.50% - 2019		16,459		16,491
#829028, 4.50% - 2020		200,155		193,109
#896595, 6.00% - 2021		117,823		119,482
TBA, 7.00% - 2031		75,000		76,969
#254514, 5.50% - 2032		3,376		3,342
#254550, 6.50% - 2032		21,844		22,345
#545759, 6.50% - 2032		131,050		133,524
#650075, 6.50% - 2032		19,786		20,240
#728720, 5.00% - 2033		125,237		121,146
#745944, 5.00% - 2033		74,591		72,004
#254767, 5.50% - 2033		166,212		164,518
#254983, 5.50% - 2033		78,843		78,039
#744692, 5.50% - 2033		41,748		41,323
#744750, 5.50% - 2033		17,107		16,932
#747387, 5.50% - 2033		26,885		26,611
#747549, 5.50% - 2033		8,657		8,569
#750362, 5.50% - 2033		33,814		33,469
#756190, 5.50% - 2033		40,706		40,291
#555417, 6.00% - 2033		92,184		93,087
#725232, 5.00% - 2034		24,377		23,581
#255028, 5.50% - 2034		19,326		19,098
#725424, 5.50% - 2034		372,180		368,386
#725773, 5.50% - 2034		285,922		282,550
#762076, 5.50% - 2034		49,562		49,057
#789293, 5.50% - 2034		157,759		156,338
#796104, 5.50% - 2034		41,359		40,916
#804395, 5.50% - 2034		108,706		107,541
#255459, 6.00% - 2034		46,168		46,514
#725162, 6.00% - 2034		85,609		86,331
#725690, 6.00% - 2034		47,495		47,851
#725704, 6.00% - 2034		393,666		396,985
#790044, 6.00% - 2034		48,766		49,132
#790217, 6.00% - 2034		19,430		19,575
#790237, 6.00% - 2034		45,942		46,287

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
MORTGAGE BACKED SECURITIES (continued)
U.S. Government Sponsored Agencies (continued)
Pass-Thru’s (continued)
Federal National Mortgage Association (continued)
#790629, 6.00% - 2034	$	45,831	$	46,175
#790788, 6.00% - 2034		51,265		51,649
#791574, 6.00% - 2034		48,725		49,090
#745216, 4.777% - 2035 (6)		76,386		76,167
#821765, 4.801% - 2035 (6)		39,097		38,938
#830880, 5.00% - 2035		77,957		75,286
#835753, 5.00% - 2035		654,032		631,627
#850863, 5.32% - 2035 (6)		37,057		37,044
#846551, 5.353% - 2035 (6)		43,594		43,625
#848476, 5.517% - 2035 (6)		66,140		66,430
#848522, 5.669% - 2035 (6)		20,887		20,938
#745275, 5.00% - 2036		34,842		33,649
#745167, 5.674% - 2036 (6)		44,186		44,260
#893353, 6.00% - 2036		65,273		65,715
#745554, 6.50% - 2036		498,954		508,465
#896329, 6.50% - 2036		48,746		49,665

				7,203,376

				7,647,538

U.S. Government Sponsored
Securities - 0.8%
Pass-Thru’s - 0.8%
Government National Mortgage
Association
#780766, 7.00% - 2013		5,215		5,266
#781312, 7.00% - 2013		25,997		26,831
#67365,11.50% - 2013		1,564		1,725
G2 2102, 8.00% - 2025		1,152		1,216
#427029, 8.50% - 2026		7,970		8,550
G2 3295, 5.50% - 2032		14,026		13,947
#604639, 5.00% - 2033		75,035		73,065
#612919, 5.00%-2033		204,475		199,106
#615278, 5.00% - 2033		93,741		91,279
G2 3442, 5.00% - 2033		181,679		176,190
G2 3458, 5.00% - 2033		51,150		49,599
G2 3443, 5.50% - 2033		60,786		60,412
G2 3490, 6.50% - 2033		11,864		12,135
G2 3513, 5.00% - 2034		64,325		62,340
G2 3529, 5.00% - 2034		16,094		15,597
G2 3530, 5.50% - 2034		28,337		28,148
G2 3517, 6.00% - 2034		39,551		40,027
G2 3612, 6.50% - 2034		21,350		21,830

				887,263

TOTAL MORTGAGE BACKED SECURITIES (Cost $10,850,580)			$	10,718,792


	Principal Amount	Value
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 2.0%
Federal Home Loan Bank
5.60% - 2011	10,000		10,259
5.125% - 2013	165,000		166,362
5.25% - 2014	135,000		137,206
Federal Home Loan Mortgage Corporation
4.13% - 2010	145,000		141,016
Federal National Mortgage Association
3.25% - 2008	690,000		670,636
3.38% - 2008	185,000		179,354
6.63% - 2010	140,000		148,269
6.00% - 2011	362,000		376,926
4.38% - 2012	105,000		102,018
4.875% - 2016	165,000		163,153

TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (Cost $2,122,107)		$	2,095,199

U.S. GOVERNMENT SECURITIES - 10.8%
U.S. Treasury Bonds
3.50%, 2010	925,000		892,481
4.25%, 2013	1,240,000		1,207,257
4.25%, 2014	330,000		320,126
7.50%, 2016	215,000		261,258
8.50%, 2020	55,000		74,280
6.25%, 2023	55,000		63,306
5.50%, 2028	505,000		545,558
6.25%, 2030	80,000		95,300
5.38%, 2031	195,000		208,878
4.50%, 2036	300,000		285,282
U.S. Treasury Inflation Indexed Bonds
2.00%, 2014	317,208		307,877
U.S. Treasury Notes
3.63%, 2007	775,000		769,793
4.25%, 2007	50,000		49,656
3.38%, 2008	325,000		316,672
4.375%, 2008	455,000		451,339
4.00%, 2009	765,000		751,821
3.875%, 2010	180,000		174,973
5.75%, 2010	795,000		822,421
5.00%, 2011	1,225,000		1,242,130
4.88%, 2012	1,650,000		1,665,083
4.75%, 2014	55,000		55,142
5.125%, 2016	560,000		576,822
United States Treasury Inflation Indexed Bonds
2.50%, 2016	296,074		298,317

TOTAL U.S. GOVERNMENT SECURITIES (Cost $11,472,630)		$	11,435,772

The accompanying notes are an integral part of the financial statements.


Schedule of Investments		Series N (Managed Asset Allocation Series)
December 31, 2006 - continued


	Principal Amount		Value
ASSET BACKED SECURITIES - 1.2%
Auto - 0.6%
AmeriCredit Automobile Receivables Trust
2006-RM, 5.53%, 2014	$	150,000	$	151,589
Capital Auto Receivables Asset Trust
2006-1, 5.26%, 2010		60,000		59,874
2006-SN1A B, 5.32%,
2010 (1)(2)(3)		175,000		175,198
2006-SN1A A4A, 5.50%,
2010 (1)(2)(3)		25,000		25,055
Hyundai Auto Receivables Trust
2006-A, 5.26%, 2012		70,000		70,095
Triad Auto Receivables Owner Trust
2006-B, 5.52%, 2012		100,000		100,897

				582,708


Credit Cards - 0.1%
Capital One Multi-Asset Execution Trust
2005-A7, 4.70%, 2015		70,000		68,811
GE Capital Credit Card Master Note Trust
2006-1, 5.08%, 2012		50,000		50,064

				118,875


Home Equity Loans - 0.1%
BankBoston Home Equity Loan Trust
1998-1, 6.35%, 2013		16,369		16,418
Chase Funding Mortgage Loan
Asset-Backed Certificates
2002-2, 5.60%, 2031		9,072		9,008
New Century Home Equity Loan Trust
2005-A, 4.95%, 2035		50,000		48,586
2005-A, 5.34%, 2035		45,000		44,073

				118,085


Other - 0.4%
CenterPoint Energy Transition Bond
Company LLC
2001-1, 5.63%, 2015		75,000		76,701
GE Equipment Small Ticket LLC
2005-1A, 4.51%, 2014 (1)(2)(3)		100,000		98,564
Marriott Vacation Club Owner Trust
2006-2A, 5.362%,
2028 (1)(2)(3)(5)		44,924		44,875
2006-1A, 5.74%,
2028 (1)(2)(3)(5)		120,822		122,195
Peco Energy Transition Trust
2001-A, 6.52%, 2010 (3)		100,000		104,336

				446,671

TOTAL ASSET BACKED SECURITIES (Cost $1,269,672)			$	1,266,339

SHORT TERM INVESTMENTS - 0.5%
State Street GA Money Market Fund	$	30,158	$	30,158
State Street GA Money Market Fund	$	30,158	$	30,158
T. Rowe Price Reserve Investment Fund	$	502,471	$	502,471

TOTAL SHORT TERM INVESTMENTS (Cost $532,629)			$	532,629

Total Investments (SBL N Fund) (Cost $93,070,711) - 99.9%			$	105,169,704
Other Assets in Excess of Liabilities - 0.1%				130,609

TOTAL NET ASSETS - 100.0%			$	105,300,313

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $93,739,930.

*	- Non-income producing security

1	- Security is deemed illiquid. See Notes to financial statements.

2	- Security was acquired through a private placement.

3	- Security is a 144A security, which places restrictions on resale. See Notes to financial statements.

4	- Security is a PFIC (Passive Foreign Investment Company)

5	- Security is fair valued by the Board of Directors. See Notes to financial statements.

6	- Variable rate security. Rate indicated is rate effective at December 31, 2006.

7	- Security is a step-up bond. Rate indicated is rate effective at December 31, 2006.

8	- Security is an interest-only strip. Rate indicated is effective yield at December 31, 2006.

Glossary:

ADR

- American Depositary Receipt

GDR

- Global Depositary Reciept

plc

- Public Limited Company

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

Series N

(Managed Asset Allocation Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	105,169,704
Cash		17,082
Cash denominated in a foreign currency, at value²		11,682
Receivables:
Fund shares sold		102,456
Securities sold		552,310
Interest		391,079
Dividends		87,633
Foreign taxes recoverable		3,701
Prepaid expenses		2,374

Total assets		106,338,021

Liabilities:
Payable for:
Securities purchased		601,152
Fund shares redeemed		269,398
Management fees		89,713
Custodian fees		8,732
Transfer agent/maintenance fees		2,083
Administration fees		43,457
Professional fees		14,036
Directors’ fees		2,500
Other fees		6,637

Total liabilities		1,037,708

Net Assets	$	105,300,313

Net assets consist of:
Paid in capital	$	85,982,212
Undistributed net investment income		1,461,148
Undistributed net realized gain on sale of investments and foreign currency transactions		5,759,233
Net unrealized appreciation in value of investments and translation of assets and liabilities in foreign currency		12,097,720

Net assets	$	105,300,313

Capital shares authorized		unlimited
Capital shares outstanding		5,677,439
Net asset value per share (net assets divided by shares outstanding)	$	18.55

¹Investments, at cost	$	93,070,711
²Cash denominated in a foreign currency, at cost		11,627

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends (net of foreign withholding tax of $ 33,171)	$	1,263,356
Interest		1,823,255

Total investment income		3,086,611

Expenses:
Management fees		1,017,950
Administration fees		273,424
Custodian fees		67,754
Transfer agent/maintenance fees		25,210
Directors’ fees		4,861
Professional fees		18,704
Reports to shareholders		17,755
Other expenses		5,872

Total expenses		1,431,530
Less: Earnings credits applied		(1,034	)

Net expenses		1,430,496

Net investment income		1,656,115


Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		6,403,318
Securities sold short		(79,576	)
Foreign currency transactions		(3,476	)

Net realized gain		6,320,266

Net unrealized appreciation during the year on:
Investments		3,602,340
Securities sold short		2,143
Translation of assets and liabilities in foreign currencies		601

Net unrealized appreciation		3,605,084

Net realized and unrealized gain		9,925,350

Net increase in net assets resulting from operations	$	11,581,465

See accompanying notes.


		Series N
Statement of Changes in Net Assets		(Managed Asset Allocation Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	1,656,115		$	1,346,957
Net realized gain during the year on investments and foreign currency transactions		6,320,266			6,118,086
Net unrealized appreciation (depreciation) during the year on investments and translation of assets and liabilities in foreign currencies		3,605,084			(3,416,224	)

Net increase in net assets resulting from operations		11,581,465			4,048,819

Capital share transactions:
Proceeds from sale of shares		28,766,803			23,341,178
Cost of shares redeemed		(32,737,523	)		(22,787,887	)

Net increase (decrease) from capital share transactions		(3,970,720	)		553,291

Net increase in net assets		7,610,745			4,602,110

Net assets:
Beginning of year		97,689,568			93,087,458

End of year	$	105,300,313		$	97,689,568

Undistributed net investment income at end of year	$	1,461,148		$	1,197,845


Capital Share Activity:
Shares sold		1,670,487			1,455,631
Shares redeemed		(1,896,770	)		(1,421,396	)

Total capital share activity		(226,283	)		34,235

See accompanying notes.


Financial Highlights		Series N
Selected data for each share of capital stock outstanding throughout each year		(Managed Asset Allocation Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	16.55		$	15.86		$	14.40		$	11.80		$	13.63

Income (loss) from investment operations:
Net investment income		0.30			0.23			0.27			0.23			0.30
Net gain (loss) on securities (realized and unrealized)		1.70			0.46			1.27			2.59			(1.59	)

Total from investment operations		2.00			0.69			1.54			2.82			(1.29	)

Less distributions:
Dividends from net investment income		—			—			(0.08	)		(0.22	)		(0.54	)

Total distributions		—			—			(0.08	)		(0.22	)		(0.54	)

Net asset value, end of period	$	18.55		$	16.55		$	15.86		$	14.40		$	11.80

Total Return^a		12.08	%		4.35	%		10.72	%		23.90	%		(9.63	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	105,300		$	97,690		$	93,087		$	86,383		$	67,762

Ratios to average net assets:
Net investment income		1.63	%		1.44	%		1.75	%		1.86	%		2.22	%
Total expenses^b		1.41	%		1.41	%		1.39	%		1.23	%		1.26	%
Net expenses^c		1.40	%		1.41	%		1.39	%		1.23	%		1.26	%

Portfolio turnover rate		63	%		67	%		79	%		98	%		116	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.


		Series O
Manager’s Commentary		(Equity Income Series)
February 15, 2007		(unaudited)

LOGO

Subadvisor, T. Rowe Price Associates, Inc.

LOGO

Brian C. Rogers

Portfolio Manager

Performance

Series O of the SBL Fund - Equity Income Series returned 18.82% during the year, outperforming its benchmark the S&P 500 Index return of 15.79%. The portfolio also outpaced the Lipper Equity Income Funds Index, a measure of the performance of leading equity income funds. Effective stock selection and allocation decisions across a number of sectors helped the portfolio beat its benchmark. Energy was the only sector that detracted from relative returns.

Market Environment

Every sector contributed positively to the index’s gains for the year, led by telecommunication services; energy and utilities also per formed very well. Health care performed the worst of the broad sectors but was still up more than 7%. Information technology was the only other sector in the index to post single-digit returns for the year. Looking at returns by size among the S&P indexes, large- and small-caps outperformed shares of medium-sized companies, while value again outperformed growth by a wide margin.

Portfolio Review

Stock selection in industrials and business services was key to the portfolio’s outperformance, led by positioning in the machinery and commercial services and supplies industries. The single largest contributor in the sector was equipment company Deere, which enjoyed record fourth-quarter earnings. Waste Management was a leading contributor in the commercial services industry, as healthy economic growth early in the year meant strong demand for its products.

In information technology, effective stock selection and an under weight to this lagging sector contributed to relative results. In particular, the portfolio had no exposure to the relatively poor performing Internet software and services industry. It was a similar story in computers and peripherals, where the portfolio was overweight in Dell, which had negative returns for the year. At the same time, we were over weight in IBM, which rallied after reporting strong third-quarter revenue growth. It’s worth mentioning that we added select tech names where we saw attractive values, building a sizable position in Microsoft during the year.

Health care was another sector where stock selection and an underweight position helped relative returns. The portfolio’s health care holdings are focused largely on the pharmaceutical industry, which performed well for the full year. Merck was the leading contributor in this segment, benefiting when one of its vaccines was made part of the routine vaccination schedule for girls.

At the other end of the spectrum, our performance would have been even better relative to the benchmark but for disappointing stock selection among energy shares. An underweight to ExxonMobil and poor performance by portfolio holding Anadarko limited the portfolio’s relative return.

In addition, our stock selection detracted in both the telecommunication services and consumer discretionary sectors; however, overweights to these winning sectors made them positive contributors overall.

Outlook

Going forward, we expect the pace of corporate earnings growth to slow along with the economy, though we still find equity valuations to be reasonable-valuations are neither too high nor compellingly attractive, and liquidity is good. Overall, we’re generally constructive on the outlook for stocks over the next few years, and we think the greater risk today is not a substantial decline from current levels but rather the improbability of earning higher-than-average returns over the foreseeable future. We will continue to employ the discipline that has served investors well over the years, seeking out reasonably valued stocks of high-quality companies while monitoring general economic conditions.

Sincerely,

Brian C. Rogers, Portfolio Manager


		Series O
Manager’s Commentary		(Equity Income Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series O vs. S&P 500 Index

LOGO

$10,000 Over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series O (Equity Income Series) on December 31, 1996, and reflects the fees and expenses of Series O. 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.

Portfolio Composition by Sector


Consumer Discretionary	14.58	%
Consumer Staples	8.69
Energy	9.35
Financials	17.45
Health Care	9.29
Industrials	12.95
Information Technology	6.70
Materials	5.23
Telecommunication Services	5.34
Utilities	5.55
Convertible Bond	0.44
Short Term Investments	4.44
Liabilities, less cash & other assets	(0.01	)
Total net assets	100.00	%

Average Annual Returns


Periods Ended 12-31-06¹	1 Year	5 Years	10 Years
Series O	18.82%	8.87%	9.70%

See accompanying notes.


		Series O
Manager’s Commentary		(Equity Income Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series O (Equity Income Series)
Actual	$	1,000.00	$	1,132.50	$	6.18
Hypothetical		1,000.00		1,019.41		5.85

²	Expenses are equal to the Series annualized expense ratio of 1.15%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).


Schedule of Investments		Series O (Equity Income Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 94.5%
Aerospace & Defense - 1.9%
Honeywell International, Inc.	77,100	$	3,488,004
Raytheon Company	42,100		2,222,880

			5,710,884

Aluminum - 0.6%
Alcoa, Inc.	56,000		1,680,560

Asset Management & Custody Banks - 2.0%
Mellon Financial Corporation	79,200		3,338,280
State Street Corporation	38,800		2,616,672

			5,954,952

Automobile Manufacturers - 0.2%
Ford Motor Company	74,300		557,993

Biotechnology - 0.4%
Medimmune, Inc. *	39,100		1,265,667

Brewers - 1.1%
Anheuser-Busch Companies, Inc.	65,600		3,227,520

Broadcasting & Cable TV - 1.0%
CBS Corporation (CLB)	70,200		2,188,836
EchoStar Communications Corporation *	18,200		692,146

			2,880,982

Building Products - 0.6%
Masco Corporation	60,700		1,813,109

Communications Equipment - 1.6%
Cisco Systems, Inc. *	44,300		1,210,719
Motorola, Inc.	59,300		1,219,208
Nokia Oyj ADR	109,400		2,223,008

			4,652,935

Computer & Electronics Retail - 0.2%
RadioShack Corporation	43,100		723,218

Computer Hardware - 2.0%
Dell, Inc. *	92,500		2,320,825
International Business Machines Corporation	37,100		3,604,265

			5,925,090

Construction & Farm Machinery & Heavy Trucks - 0.0%
Deere & Company	700		66,549

Construction Materials - 0.7%
Vulcan Materials Company	22,200		1,995,114

Data Processing & Outsourced Services - 0.2%
Computer Sciences Corporation *	8,800		469,656

Distributors - 0.6%
Genuine Parts Company	35,600		1,688,508

Diversified Banks - 0.9%
U.S. Bancorp	40,700		1,472,933
Wells Fargo & Company	33,000		1,173,480

			2,646,413

Diversified Chemicals - 1.0%
E.I. Du Pont de Nemours & Company	60,500		2,946,955

Electric Utilities - 2.7%
Entergy Corporation	30,700		2,834,224
FirstEnergy Corporation	30,557		1,839,837
Pinnacle West Capital Corporation	23,900		1,210,296
Progress Energy, Inc.	43,000		2,110,440

			7,994,797

Electrical Components & Equipment - 0.5%
Cooper Industries, Ltd.	16,088		1,454,838

Environmental & Facilities Services - 0.6%
Waste Management, Inc.	51,222		1,883,433

Food Distributors - 0.3%
Sysco Corporation	24,500		900,620

Health Care Equipment - 1.0%
Baxter International, Inc.	39,000		1,809,210
Boston Scientific Corporation *	68,400		1,175,112

			2,984,322

Home Improvement Retail - 1.0%
Home Depot, Inc.	72,000		2,891,520

Homebuilding - 0.5%
DR Horton, Inc.	51,700		1,369,533

Homefurnishing Retail - 0.5%
Bed Bath & Beyond, Inc. *	38,100		1,451,610

Household Products - 1.9%
Colgate-Palmolive Company	56,300		3,673,012
Kimberly-Clark Corporation	28,100		1,909,395

			5,582,407

Housewares & Specialties - 1.6%
Fortune Brands, Inc.	22,800		1,946,892
Newell Rubbermaid, Inc.	92,600		2,680,770

			4,627,662

Hypermarkets & Super Centers - 0.9%
Wal-Mart Stores, Inc.	59,100		2,729,238

Industrial Conglomerates - 4.6%
3M Company	32,300		2,517,139
General Electric Company	235,100		8,748,071
Tyco International, Ltd.	77,600		2,359,040

			13,624,250

The accompanying notes are an integral part of the financial statements.

100


Schedule of Investments		Series O (Equity Income Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Industrial Machinery - 2.0%
Eaton Corporation	15,300	$	1,149,642
Illinois Tool Works, Inc.	37,700		1,741,363
Ingersoll-Rand Company, Ltd.	34,200		1,338,246
Pall Corporation	51,000		1,762,050

			5,991,301

Insurance Brokers - 1.6%
Marsh & McLennan Companies, Inc.	149,500		4,583,670

Integrated Oil & Gas - 8.0%
BP plc ADR	34,384		2,307,166
Chevron Corporation	78,332		5,759,752
Exxon Mobil Corporation	75,968		5,821,428
Hess Corporation	63,000		3,122,910
Murphy Oil Corporation	40,900		2,079,765
Royal Dutch Shell plc ADR	64,000		4,530,560

			23,621,581

Integrated Telecommunication Services - 3.8%
AT&T, Inc.	150,201		5,369,686
Qwest Communications International, Inc. *	323,901		2,711,051
Verizon Communications, Inc.	69,636		2,593,245
Windstream Corporation	42,804		608,673

			11,282,655

Investment Banking & Brokerage - 1.0%
Charles Schwab Corporation	155,400		3,005,436

Leisure Products - 1.0%
Mattel, Inc.	127,400		2,886,884

Life & Health Insurance - 1.5%
Lincoln National Corporation	41,924		2,783,753
UnumProvident Corporation	82,700		1,718,506

			4,502,259

Movies & Entertainment - 3.0%
Time Warner, Inc.	187,800		4,090,284
Viacom, Inc. (CLB) *	48,000		1,969,440
Walt Disney Company	78,300		2,683,341

			8,743,065

Multi-Line Insurance - 1.3%
American International Group, Inc.	52,500		3,762,150

Multi-Utilities - 2.8%
Duke Energy Corporation	88,400		2,935,764
NiSource, Inc.	123,900		2,985,990
TECO Energy, Inc.	30,800		530,684
Xcel Energy, Inc.	83,700		1,930,122

			8,382,560

Office Services & Supplies - 0.9%
Avery Dennison Corporation	38,200		2,594,926

Oil & Gas Equipment & Services - 0.7%
Schlumberger, Ltd.	31,800	$	2,008,488

Oil & Gas Exploration & Production - 0.7%
Anadarko Petroleum Corporation	45,000		1,958,400

Other Diversified Financial Services - 4.7%
Bank of America Corporation	6,588		351,733
Citigroup, Inc.	57,233		3,187,878
JPMorgan Chase & Company	149,762		7,233,505
Morgan Stanley	37,800		3,078,054

			13,851,170

Packaged Foods & Meats - 2.1%
Campbell Soup Company	37,600		1,462,264
General Mills, Inc.	42,900		2,471,040
Hershey Company	3,300		164,340
McCormick & Company, Inc.	32,100		1,237,776
Sara Lee Corporation	41,600		708,448

			6,043,868

Paper Products - 1.9%
International Paper Company	125,920		4,293,872
MeadWestvaco Corporation	47,300		1,421,838

			5,715,710

Personal Products - 0.8%
Avon Products, Inc.	73,300		2,421,832

Pharmaceuticals - 7.9%
Abbott Laboratories	48,400		2,357,564
Bristol-Myers Squibb Company	82,900		2,181,928
Eli Lilly & Company	65,900		3,433,390
Johnson & Johnson	45,700		3,017,114
Merck & Company, Inc.	103,000		4,490,800
Pfizer, Inc.	125,100		3,240,090
Schering-Plough Corporation	51,900		1,226,916
Wyeth	63,100		3,213,052

			23,160,854

Photographic Products - 0.7%
Eastman Kodak Company	81,500		2,102,700

Property & Casualty Insurance - 1.3%
Chubb Corporation	22,100		1,169,311
St. Paul Travelers Companies, Inc.	51,184		2,748,069

			3,917,380

Publishing - 3.1%
Dow Jones & Company, Inc.	58,800		2,234,400
Gannett Company, Inc.	12,800		773,888
Idearc, Inc. *	3,481		99,731
New York Times Company	109,400		2,664,984
Tribune Company	111,000		3,416,580

			9,189,583

The accompanying notes are an integral part of the financial statements.

101


Schedule of Investments		Series O (Equity Income Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Railroads - 1.7%
Norfolk Southern Corporation	25,400	$	1,277,366
Union Pacific Corporation	41,200		3,791,224

			5,068,590

Regional Banks - 2.6%
Fifth Third Bancorp	75,400		3,086,122
Mercantile Bankshares Corporation	21,450		1,003,645
National City Corporation	33,800		1,235,728
SunTrust Banks, Inc.	28,600		2,415,270

			7,740,765

Semiconductors - 1.2%
Analog Devices, Inc.	68,900		2,264,743
Intel Corporation	62,900		1,273,725

			3,538,468

Soft Drinks - 1.1%
Coca-Cola Company	68,300		3,295,475

Specialized Consumer Services - 0.7%
H&R Block, Inc.	89,800		2,068,992

Specially Chemicals - 1.0%
Chemtura Corporation	55,100		530,613
International Flavors & Fragrances, Inc.	52,000		2,556,320

			3,086,933

Systems Software - 1.8%
Microsoft Corporation	173,300		5,174,738

Thrifts & Mortgage Finance - 0.5%
Federal National Mortgage Association	25,700		1,526,323

Tobacco - 0.5%
UST, Inc.	24,500		1,425,900

Wireless Telecommunication Services - 1.5%
Alltel Corporation	39,100		2,364,768
Sprint Nextel Corporation	112,000		2,115,680

			4,480,448

TOTAL COMMON STOCK (Cost $224,366,036)		$	278,833,439

FOREIGN STOCK - 0.6%
Japan - 0.6%
Sony Corporation	42,700		1,829,923

TOTAL FOREIGN STOCK (Cost $1,583,432)		$	1,829,923


	Principal Amount		Value
CONVERTIBLE BOND - 0.4%
Automotive - 0.1%
Ford Motor Company
4.25%, 2036	$	380,000		406,125

Communications - 0.3%
Lucent Technologies, Inc.
8.00%, 2031	$	895,000	$	895,000

TOTAL CONVERTIBLE BOND (Cost $1,0033,216)			$	1,301,125

SHORT TERM INVESTMENTS - 4.5%
State Street GA Money Market Fund	$	6,342,080	$	6,342,080
T. Rowe Price Reserve Investment Fund		6,784,102		6,784,102

TOTAL SHORT TERM INVESTMENTS (Cost $13,126,182)			$	13,126,182

Total Investments (SBLO Fund) (Cost $240,108,866) - 100.0%				$295,090,669
Liabilities in Excess of Other Assets - 0.0%				(41.325)

TOTAL NET ASSETS - 100.0%				$295,049,344

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $241,346,882.

*	- Non-income producing security

Glossary:

ADR

- American Depositary Receipt

plc

- Public Limited Company

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

102

Series O

(Equity Income Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	295,090,669
Cash denominated in a foreign currency, at value²		3,751
Receivables:
Fund shares sold		208,958
Securities sold		984,153
Interest		80,984
Dividends		401,160
Prepaid expenses		6,403

Total assets		296,776,078

Liabilities:
Cash overdraft		32,875
Payable for:
Fund shares redeemed		387,933
Securities purchased		983,212
Management fees		250,629
Custodian fees		1,728
Transfer agent/maintenance fees		2,083
Administration fees		24,559
Professional fees		23,828
Directors’ fees		5,000
Other fees		14,887

Total liabilities		1,726,734

Net Assets .	$	295,049,344

Net assets consist of:
Paid in capital	$	223,816,430
Undistributed net investment income		3,879,221
Undistributed net realized gain on sale of investments and foreign currency transactions		12,372,003
Net unrealized appreciation in value of investments and translation of assets and liabilities in foreign currency		54,981,690

Net assets	$	295,049,344

Capital shares authorized		unlimited
Capital shares outstanding		12,982,017
Net asset value per share
(net assets divided by shares outstanding)	$	22.73

¹Investments, at cost	$	240,108,866
²Cash denominated in a foreign currency, at cost		3,638

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends (net of foreign withholding tax of $ 1,845)	$	6,440,802
Interest		597,493

Total investment income		7,038,295

Expenses:
Management fees		2,753,696
Custodian fees		19,413
Transfer agent/maintenance fees		25,216
Administration fees		264,495
Directors’ fees		12,226
Professional fees		33,185
Reports to shareholders		43,429
Other expenses		12,012

Total expenses		3,163,672
Less: Earnings credits applied		(2,279	)

Net expenses		3,161,393

Net investment income		3,876,902

Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		14,012,498
Foreign currency transactions		(2,272	)

Net realized gain		14,010,226

Net unrealized appreciation during the year on:
Investments		29,953,376
Translation of assets and liabilities in foreign currencies		27

Net unrealized appreciation		29,953,403

Net realized and unrealized gain		43,963,629

Net increase in net assets resulting from operations	$	47,840,531

See accompanying notes.

103


		Series O
Statement of Changes in Net Assets		(Equity Income Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	3,876,902		$	3,214,208
Net realized gain during the year on investments and foreign currency transactions		14,010,226			13,982,774
Net unrealized appreciation (depreciation) during the year on investments and translation of assets and liabilities in foreign currencies		29,953,403			(7,751,800	)

Net increase in net assets resulting from operations		47,840,531			9,445,182

Capital share transactions:
Proceeds from sale of shares		67,270,515			74,046,642
Cost of shares redeemed		(79,789,663	)		(64,596,753	)

Net increase (decrease) from capital share transactions		(12,519,148	)		9,449,889

Net increase in net assets		35,321,383			18,895,071

Net assets:
Beginning of year		259,727,961			240,832,890

End of year	$	295,049,344		$	259,727,961

Undistributed net investment income at end of year	$	3,879,221		$	3,213,835

Capital Share Activity:
Shares sold		3,278,641			3,984,349
Shares redeemed		(3,873,880	)		(3,466,553	)

Total capital share activity		(595,239	)		517,796

See accompanying notes.

104

Financial Highlights

Selected data for each share of capital stock outstanding throughout each year

Series O

(Equity Income Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	19.13		$	18.44		$	16.14		$	13.17		$	16.00

Income (loss) from investment operations:
Net investment income		0.31			0.23			0.21			0.22			0.20
Net gain (loss) on securities (realized and unrealized)		3.29			0.46			2.12			3.09			(2.26	)

Total from investment operations		3.60			0.69			2.33			3.31			(2.06	)

Less distributions:
Dividends from net investment income		—			—			(0.03	)		(0.20	)		(0.39	)
Distributions from realized gains		—			—			—			(0.14	)		(0.38	)

Total distributions		—			—			(0.03	)		(0.34	)		(0.77	)

Net asset value, end of period	$	22.73		$	19.13		$	18.44		$	16.14		$	13.17

Total Return^a		18.82	%		3.74	%		14.43	%		25.25	%		(13.43	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	295,049		$	259,728		$	240,833		$	196,720		$	163,555

Ratios to average net assets:
Net investment income		1.41	%		1.29	%		1.31	%		1.55	%		1.40	%
Total expenses^b		1.15	%		1.15	%		1.13	%		1.09	%		1.09	%
Net expenses^c		1.15	%		1.15	%		1.13	%		1.08	%		1.08	%

Portfolio turnover rate		18	%		20	%		20	%		19	%		23	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.

105

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106

Manager’s Commentary

February 15, 2007

Series P

(High Yield Series)

(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

David Toussaint

Portfolio Manager

To Our Shareholders:

The high yield market, after producing lackluster results in 2005, came roaring back with an 11.9% return in 2006, its second best year since 1997. The U.S. economy’s continued growth allowed corporations to continue to increase profits and to further generate cash flow and improve their balance sheets, which helped move the high yield default rate near historic lows. At mid-year 2006, the Federal Reserve paused in its interest rate tightening cycle and this provided a spark to the equity and high yield markets. Series P of the SBL Fund—High Yield Series recorded a 11.18% return and the Series’ peer group was up 10.1% for the year. Part of the index's strong return is due to the large index weightings of automotive giants, General Motors and Ford. Both of these are around 6% of the index and GM returned 25% and Ford 22% during 2006. The high yield index without these two would have returned 10.2%, a full 1.7% lower. The high yield market was able to keep pace with the S&P 500’s return of 15.8% and easily outdistanced other competing fixed income returns such as government bonds which returned 3.5%, higher quality corporate bonds at 4.3%, and leveraged bank loans at 7.1%.

One of the primary reasons for high yield’s strong performance was the high yield corporate bond default rate nearly reaching historic lows. The high yield corporate default rate, which was expected to increase from 2005’s 2.3%, actually fell throughout the second half of 2006 and finished the year at 1.8%, the lowest since April 1997’s 1.7%. As a result, high yield corporate bond spreads, after widening slightly in the second quarter, tightened significantly in the second half and nearly reached historic lows by year-end.

The biggest story for 2006 was the amount of new issuance in the high yield market. In 2006, a record $142.4 billion was issued, surpassing the previous record of $137.3 in 1998. The issuance resulted from highly publicized mergers, acquisitions and leveraged buyouts. In fact, the top three LBO-related issues were almost $6 billion each. New issuance is expected to remain near these levels in 2007 as these transactions continue.

Shorter Maturity Bonds Provide Stable Income

The Series’ core holdings in shorter maturity bonds provided solid income generation and stable current yields for the Series during the year. These shor ter maturity bonds are not as sensitive to interest rate movements. Therefore, as rates moved higher during the year, these bonds lost little, if any, of their principal value while collecting their interest payments. Furthermore, most of these positions were in higher coupon issues. With ample liquidity in the bank loan market, these companies were able to refinance these bonds and tendered them at a premium. One such holding, Evergreen Aviation, returned 30% as it was able to refinance its bonds with a new bank loan.

Specific Portfolio Investments Enhanced Returns

The Series was able to enhance its return by investing in some lower quality, higher yielding securities. As the liquidity in the market was abundant, many of the Series’ holdings benefited. One of the Series’ best contributors was Worldspan, a travel services company, which returned 31% as air travel and lodging soared and the company was acquired in December. GMAC, the finance subsidiary of General Motors, returned 25% as a controlling interest in the company was sold to a private equity consortium and the corporate credit ratings were upgraded. United Rentals, an equipment rental company that is leveraged to the economy and to commercial construction booms, returned 20%.

Airline Exposure Proved Successful

The Series’ overweight to the airline sector helped the Fund. The Series was positioned in EETCs (Enhanced Equipment Trust Certificates) that performed well with the recovery in the airline industry and with the increasing value of the underlying aircraft collateral, returning around 20%, The Series’ position in these securities was a more conservative strategy to increase exposure to a risky industry.

Underweight to Riskier Large Issuers Hurt Performance versus Index

As mentioned earlier, some of the largest issuers in the index produced great returns in 2006. GM and Ford, each with a weighting of 6% of the index, returned approximately 25% and 22%, respectively. Charter Communications, a highly leveraged cable television company and 1.5% of the index, returned 34%. The Series had only a 2% weight in GM and 0.5% weight in Ford throughout the year and did not hold Charter. The Series does not think it is prudent to hold large concentrations in one issuer and typically will not hold more than 3% in any one issuer. Charter remained free cash flow negative throughout the year but was helped by some debt restructuring and the liquidity in the market.

107

Manager’s Commentary

February 15, 2007

Series P

(High Yield Series)

(unaudited)

Outlook and Strategy for 2007

For 2007, the economy’s growth rate is expected to moderate. The corporate default rate is expected to slightly increase throughout the year and possibly reach 2.5% to 3% by year-end, but still remain well below the long run average of around 5%. The significant increase in mergers, acquisitions and leveraged buyouts may continue to help the high yield bonds for those companies being acquired. However, as a result of these leveraging transactions, new issuance will be of much lower quality. Additionally, highly levered issuers will be less able to weather an economic slowdown. Lower quality issuance may cause the default rate to increase over the next few years. Therefore, the Series will continue to hold shor ter maturity bonds to reduce interest rate and credit risk, while oppor tunistically adding selective lower quality securities to enhance returns.

Thank you for being an investor in the Series.

Sincerely,

David Toussaint, Portfolio Manager

PERFORMANCE

Series P vs. Lehman Brothers High Yield Indes

LOGO

$10,000 over 10 Years

The chart above assumes a hypothetical $10,000 investment in Series P (High Yield Series) on December 31, 1996 (date of inception) and reflects the fees and expenses of Series P. The Lehman Brothers High Yield Index is an unmanaged index that tracks below investment grade bonds.

Average Annual Returns

Periods Ended 12-31-06¹

1 Year

5 Years

Since Inception

(8-5-96)

Series P

11.18

9.50

7.00

Quality Ratings


A	0.12	%
BBB	4.10
BB	20.84
B	42.56
CCC	16.69
CC	0.02
D	0.06
NR	6.16
Common Stocks	0.72
Repurchase Agreement	5.74
Cash & other assets, less liablities	2.99
Total net assets	100.00	%

See accompanying notes.

108

Manager’s Commentary

December 31, 2006

Series P

(High Yield Series)

(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series P (High Yield Series)
Actual	$	1,000.00	$	1,067.00	$	4.79
Hypothetical		1,000.00		1,020.57		4.69

²	Expenses are equal to the Series annualized expense ratio of 0.92%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

109


Schedule of Investments		Series P (High Yield Series)
December 31, 2006


	Shares		Value
COMMON STOCK - 0.7%
Air Freight & Logistics - 0.0%
Atlas Air Worldwide Holdings, Inc. *		26	$	1,153

Airlines - 0.0%
ACE Aviation Holdings, Inc.		32		1,039

Broadcasting & Cable TV - 0.0%
Cebridge Connections * (1)(2)		558		—

Electronic Manufacturing Services - 0.0%
Viasystems Group, Inc. * (1)(2)		1,207		—

Health Care Equipment - 0.0%
MEDIQ, Inc. * (1)(2)		92		—

Household Products - 0.0%
WKI Holding Company, Inc. * (1)(2)		202		—

Mortgage REIT’s - 0.3%
HomeBanc Corporation		30,000		126,900
Opteum, Inc.		30,450		231,420

				358,320

Oil & Gas Storage & Transportation - 0.4%
Double Hull Tankers, Inc.		25,000		404,750

TOTAL COMMON STOCK (Cost $1,087,807)			$	765,262

PREFERRED STOCK - 0.0%
Steel - 0.0%
Weirton Steel Corporation * (1)(2)		315		—

TOTAL PREFERRED STOCK (Cost $264)			$	—


	Principal Amount		Value
CONVERTIBLE BOND - 2.1%
Aerospace & Defense - 0.8%
DRS Technologies, Inc.
2.00%, 2026 (3)(4)	$	800,000		842,000

Automobiles (including Replacement Parts) - 0.6%
Sonic Automotive, Inc.
5.25%, 2009		650,000		637,000

Telecommunications - 0.7%
Nextel Communications, Inc.
5.25%, 2010		750,000		737,813

TOTAL CONVERTIBLE BOND (Cost $2,162,778			$	2,216,813

CORPORATE BOND - 83.4%
Aerospace & Defense - 4.7%
Bombardier, Inc.
6.75%, 2012 (3)(4)		1,075,000		1,053,500
Esterline Technologies Corporation
7.75%, 2013 (4)		610,000		622,200
L-3 Communications Corporation
7.63%, 2012		1,275,000		1,319,625
Sequa Corporation
8.875%, 2008		280,000		288,400
9.00%, 2009		200,000		214,000
Vought Aircraft Industries, Inc.
8.00%, 2011		1,575,000		1,515,937

				5,013,662

Airlines - 3.2%
Calair Capital Corporation
8.13%, 2008		675,000		676,688
Continental Airlines, Inc.
7.03%, 2011		398,379		396,885
8.31%, 2011		621,768		624,877
Delta Air Lines, Inc.
7.90%, 2009 (5)		75,000		50,250
7.71%, 2011		530,000		528,012
7.78%, 2012		1,146,500		1,139,334
Northwest Airlines, Inc.
9.875%, 2007(5)		10,000		9,650

				3,425,696

Automotive - 4.4%
Dura Operating Corporation
8.625%, 2012(5)		10,000		3,400
General Motors Acceptance Corporation
6.75%, 2014		650,000		667,636
8.00%, 2031		1,250,000		1,435,085
Group 1 Automotive, Inc.
8.25%, 2013		1,050,000		1,076,250
Sonic Automotive, Inc.
8.63%, 2013		600,000		618,000
Tenneco, Inc.
8.63%, 2014		550,000		561,000
TRW Automotive, Inc.
9.38%, 2013		312,000		334,620

				4,695,991

Banking - 3.2%
Cardtronics, Inc.
9.25%, 2013(6)		900,000		947,250
Doral Financial Corporation
6.204%, 2007(7)		2,250,000		2,044,697
E*Trade Financial Corporation
8.00%, 2011		300,000		313,500
FCB Capital Trust
8.05%, 2028		75,000		78,855
Western Financial Bank
9.625%, 2012		5,000		5,463

				3,389,765

The accompanying notes are an integral part of the financial statements.

110


Schedule of Investments		Series P (High Yield Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Basic Industry - Other - 0.1%
Mobile Services Group, Inc.
9.75%, 2014 (3)(4)	$	125,000	$	130,625

Building Materials - 1.7%
Building Materials Corporation of America
8.00%, 2007		550,000		558,965
8.00%, 2008		825,000		862,125
Interline Brands, Inc.
8.13%, 2014		400,000		411,000

				1,832,090

Chemicals - 0.3%
CNA Holdings, Inc.
7.13%, 2009 (2)		145,000		142,825
Lyondell Chemical Company
8.25%, 2016		150,000		157,500
Methanex Corporation
8.75%, 2012		5,000		5,437

				305,762

Communications - Other - 1.6%
Lamar Media Corporation
6.63%, 2015		150,000		148,688
Satelites Mexicanos S.A. de CV
14.11%, 2011 (7)		1,464,175		1,548,365

				1,697,053

Construction Machinery - 1.8%
Case New Holland, Inc.
9.25%, 2011		650,000		688,187
United Rentals North America, Inc.
6.50%, 2012		625,000		617,188
7.00%, 2014		625,000		613,281

				1,918,656

Consumer Products - 0.2%
Hanesbrands, Inc.
8.735%, 2014 (3)(4)(7)		150,000		152,625
Hasbro, Inc.
6.15%, 2008		56,000		56,402
Icon Health & Fitness
11.25%, 2012		25,000		26,000

				235,027

Distributors - 1.1%
SemGroup, LP
8.75%, 2015 (3)(4)		1,200,000		1,206,000

Diversified Manufacturing - 0.6%
Briggs & Stratton Corporation
8.88%, 2011		625,000		676,563

Electric - 4.3%
AES Corporation
9.50%, 2009		1,400,000		1,498,000
Avista Corporation
9.75%, 2008		50,000		52,419
CMS Energy Corporation
9.875%, 2007		10,000		10,312
7.50%, 2009		610,000		629,063
East Coast Power LLC
6.74%, 2008		20,625		20,801
7.07%, 2012		84,520		85,542
GrafTech Finance, Inc.
10.25%, 2012		890,000		937,838
Reliant Energy, Inc.
9.25%, 2010		550,000		577,500
6.75%, 2014		650,000		635,375
Westar Energy, Inc.
7.125%, 2009		90,000		93,025

				4,539,875

Entertainment - 0.9%
AMC Entertainment, Inc.
9.88%, 2012		300,000		315,000
Speedway Motorsports, Inc.
6.75%, 2013		625,000		625,000

				940,000

Environmental - 0.4%
Allied Waste North America, Inc.
8.50%, 2008		20,000		21,025
Casella Waste Systems, Inc.
9.75%, 2013		400,000		419,000

				440,025

Financial - Other - 0.3%
Ford Motor Credit Company
9.824%, 2012 (7)		300,000		317,922

Food & Beverage - 2.5%
Dean Foods Company
8.15%, 2007		650,000		658,125
Dole Food Company, Inc.
7.25%, 2010		400,000		381,000
8.88%, 2011		200,000		197,000
Harry & David Holdings, Inc.
9.00%, 2013		900,000		877,950
Land O’ Lakes, Inc.
8.75%, 2011		60,000		62,400
Pilgrim’s Pride Corporation
9.63%, 2011		450,000		470,250

				2,646,725

Gaming - 3.7%
American Casino & Entertainment Properties LLC
7.85%, 2012		300,000		306,375

The accompanying notes are an integral part of the financial statements.

111


Schedule of Investments		Series P (High Yield Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Gaming (continued)
Galaxy Entertainment Finance Company, Ltd.
9.88%, 2012 (3)(4)	$	975,000	$	1,044,469
Mandalay Resort Group
10.25%, 2007		45,000		46,069
6.50%, 2009		300,000		303,375
MGM Mirage
8.50%, 2010		15,000		16,050
8.375%, 2011		55,000		57,062
6.75%, 2012		625,000		615,625
6.75%, 2013 (4)		500,000		488,750
Station Casinos, Inc.
6.00%, 2012		925,000		877,594
Turning Stone Resort Casino Enterprise
9.13%, 2014 (3)(4)		150,000		153,375

				3,908,744

HealthCare - 3.4%
Coventry Health Care, Inc.
6.13%, 2015		575,000		566,663
HCA, Inc.
6.50%, 2016		1,850,000		1,558,625
Johnsondiversey, Inc.
9.625%, 2012		5,000		5,238
U.S. Oncology Holdings, Inc.
10.675%, 2015 (7)		1,400,000		1,438,500

				3,569,026

Home Construction - 0.0%
KB Home
9.50%, 2011		35,000		36,050

Independent Energy - 2.8%
El Paso Production Holding Company
7.75%, 2013		250,000		261,562
Forest Oil Corporation
8.00%, 2008		15,000		15,356
Hilcorp Energy I, LP
10.50%, 2010 (3)(4)		1,200,000		1,284,000
Magnum Hunter Resources, Inc.
9.60%, 2012		918,000		965,048
MarkWest Energy Partners, LP
8.50%, 2016 (3)(4)		400,000		416,000
Range Resources Corporation
7.38%, 2013		75,000		76,875

				3,018,841

Industrial - Other - 2.7%
Anixter International, Inc.
5.95%, 2015		250,000		231,250
Corrections Corporation of America
7.50%, 2011		200,000		206,000
Iron Mountain, Inc.
8.25%, 2011		800,000		802,000
USEC, Inc.
6.75%, 2009	$	1,625,000	$	1,576,250

				2,815,500

Insurance - Life - 0.2%
Genamerica Capital I
8.53%, 2027 (3)(4)		175,000		184,327

Insurance - Property & Casualty - 2.6%
Fairfax Financial Holdings, Ltd.
7.75%, 2012		2,825,000		2,782,625

Lodging - 0.6%
Starwood Hotels & Resorts Worldwide, Inc.
7.375%, 2007 (6)		600,000		602,451

Media - Cable - 1.5%
Cablevision Systems Corporation
9.87%, 2009 (7)		250,000		263,750
CSC Holdings, Inc.
7.25%, 2008		375,000		378,281
8.125%, 2009 to 2009		35,000		36,269
6.75%, 2012 (3)(4)(6)		325,000		316,875
Frontiervision Holdings, LP
11.875%, 2007 (5)		20,000		26,500
Jones Intercable, Inc.
7.63%, 2008		200,000		205,339
Shaw Communications, Inc.
7.25%, 2011		375,000		389,531

				1,616,545

Media-Non Cable - 3.6%
Block Communications, Inc.
8.25%, 2015 (3)(4)		975,000		972,562
CMP Susquehanna Corporation
9.88%, 2014 (3)(4)		1,200,000		1,194,000
Fisher Communications, Inc.
8.63%, 2014		250,000		265,000
Historic TW, Inc.
9.125%, 2013		30,000		34,950
Intelsat, Ltd.
7.63%, 2012		725,000		676,062
Morris Publishing Group LLC
7.00%, 2013 (4)		625,000		592,188
RH Donnelley Finance Corporation I
10.88%, 2012 (3)		125,000		136,250

				3,871,012

Metals & Mining - 3.5%
AK Steel Corporation
7.88%, 2009		1,495,000		1,495,000
Asia Aluminum Holdings, Ltd.
8.00%, 2011 (3)(4)		1,400,000		1,396,500
Bulong Operations Pty, Ltd.
12.50%, 2008 (1)(2)(5)		185,000		—

The accompanying notes are an integral part of the financial statements.

112


Schedule of Investments		Series P (High Yield Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Metals & Mining (continued)
National Steel Corporation
9.875%, 2009 (1)(2)(5)	$	15,915	$	—
Noble Group, Ltd.
6.63%, 2015 (3)(4)		550,000		499,598
PNA Group, Inc.
10.75%, 2016 (3)(4)		325,000		335,969
Steel Dynamics, Inc.
9.50%, 2009		5,000		5,150

				3,732,217

Natural Gas Pipelines - 1.7%
Regency Energy Partners, LP
8.38%, 2013 (3)(4)		300,000		300,750
Sonat, Inc.
7.63%, 2011		1,050,000		1,113,000
Williams Companies, Inc.
6.38%, 2010 (3)(4)		200,000		201,250
Williams Partners, LP
7.25%, 2017 (3)(4)		150,000		153,000

				1,768,000

Oil Field Services - 0.5%
Parker Drilling Company
10.119%, 2010 (7)		450,000		460,125
Pemex Project Funding Master Trust
8.50%, 2008		30,000		30,900
7.875%, 2009 (6)		35,000		36,680
9.125%, 2010		40,000		44,860

				572,565

Packaging - 5.1%
Ball Corporation
6.88%, 2012		250,000		255,000
Graham Packaging Company, Inc.
9.88%, 2014		1,300,000		1,313,000
Owens Brockway Glass Container, Inc.
7.75%, 2011		200,000		205,500
Owens-Illinois, Inc.
8.10%, 2007		575,000		576,437
7.50%, 2010		30,000		30,113
Smurfit-Stone Container Enterprises, Inc.
9.75%, 2011		1,699,000		1,752,094
Solo Cup Company
8.50%, 2014		1,425,000		1,232,625

				5,364,769

Paper -1.7%
Georgia-Pacific Corporation
7.13%, 2017 (3)(4)		325,000		324,187
Sino-Forest Corporation
9.13%, 2011 (3)(4)		1,375,000		1,486,719

				1,810,906

Pharmaceuticals - 0.8%
Valeant Pharmaceuticals International
7.00%, 2011		850,000		816,000

Refining - 0.3%
Frontier Oil Corporation
6.63%, 2011		300,000		299,250

REITs - 1.4%
American Real Estate Partners, LP
8.13%, 2012		1,000,000		1,032,500
7.13%, 2013		400,000		402,000

				1,434,500

Retailers - 2.1%
GSC Holdings Corporation
8.00%, 2012		625,000		653,125
JC Penney Corporation, Inc.
7.375%, 2008		40,000		40,962
Michaels Stores, Inc.
11.38%, 2016 (3)(4)		1,500,000		1,563,750
PCA LLC
11.875%, 2009 (2)		30,000		5,400

				2,263,237

Services - 0.2%
American Commercial Lines
9.50%, 2015		146,000		162,242
American ECO Corporation
9.625%, 2008 (1)(2)(3)(5)		200,000		—

				162,242

Supermarkets - 0.0%
Fleming Companies, Inc.
9.88%, 2012 (1)(2)(5)		400,000		—

Technology - 4.7%
Amkor Technology, Inc.
7.75%, 2013		1,200,000		1,104,000
Freescale Semiconductor, Inc.
10.13%, 2016 (3)(4)		1,275,000		1,276,594
NXP BV
9.50%, 2015 (3)(4)		650,000		666,250
Seagate Technology HDD Holdings
6.80%, 2016		650,000		653,250
Worldspan, LP
11.624%, 2011 (7)		1,250,000		1,287,500

				4,987,594

Telecommunications - Wireless - 4.6%
American Cellular Corporation
10.00%, 2011		975,000		1,031,062
Dobson Communications Corporation
9.624%, 2012 (7)		350,000		357,000
iPCS, Inc.
11.50%, 2012		500,000		555,000

The accompanying notes are an integral part of the financial statements.

113


Schedule of Investments		Series P (High Yield Series)
December 31, 2006 - continued


	Principal Amount		Value
CORPORATE BOND (continued)
Telecommunications - Wireless (continued)
MetroPCS Wireless, Inc.
9.25%, 2014 (3)(4)	$	500,000	$	522,500
Rural Cellular Corporation
9.75%, 2010		1,175,000		1,207,313
11.121%, 2012 (7)		650,000		677,625
UbiquiTel Operating Company
9.88%, 2011		500,000		540,000

				4,890,500

Telecommunications-Wirelines - 2.7%
EXDS, Inc.
11.625%, 2010 (1)(2)(5)		340,726		—
LCI International, Inc.
7.25%, 2007		2,675,000		2,681,688
Qwest Corporation
7.88%, 2011		150,000		159,750
Telecommunications Technique
9.75%, 2008 (1)(2)(5)		30,000		—

				2,841,438

Textile - 0.3%
Invista
9.25%, 2012 (3)(4)		250,000		268,125

Transportation Services - 1.4%
Overseas Shipholding Group
8.25%, 2013		400,000		420,500
Stena AB
9.63%, 2012		425,000		452,625
U.S. Shipping Partners, LP Shipping Finance Corporation
13.00%, 2014 (3)(4)		625,000		656,250

				1,529,375

TOTAL CORPORATE BOND (Cost $87,226,741)			$	88,557,276

FOREIGN BOND - 0.1%
Tunisia - 0.1%
Banque Centrale de Tunisie
7.375%, 2012		80,000		86,640

TOTAL FOREIGN BOND (Cost $79,198)			$	86,640

FOREIGN GOVERNMENT BOND - 0.8%
Chile - 0.1%
Chile Government International Bond
5.625%, 2007		100,000		100,140
7.125%, 2012		25,000		26,925

				127,065

Mexico - 0.2%
Mexico Government International Bond
8.375%, 2011		85,000		94,563
7.50%, 2012		116,000		127,136

				221,699

Peru - 0.1%
Peru Government International Bond
5.00%, 2017 (6)(7)		110,400		109,572

Philippines - 0.0%
Philippine Government International Bond
8.375%, 2009		30,000		31,875

Russia - 0.2%
Russia Government International Bond
10.00%, 2007		100,000		102,120
8.25%, 2010 (3)(4)		28,389		29,667
Russian Ministry of Finance
3.00%, 2011		80,000		72,174

				203,961

South Africa - 0.2%
South Africa Government International Bond
9.125%, 2009		95,000		102,600
7.375%, 2012		35,000		37,625

				140,225

Ukraine - 0.0%
Ukraine Government International Bond
11.00%, 2007		7,002		7,070

TOTAL FOREIGN GOVERNMENT BOND (Cost $750,981)			$	841,467

SENIOR FLOATING RATE INTERESTS - 4.2%
Automotive - 1.2%
Ford Motor Company
8.36%, 2013 (7)(8)		1,300,000		1,300,812

Business Equipment & Services - 1.2%
VNU
8.125%, 2013 (7)(8)		1,250,000		1,258,160

Health Care - 0.9%
DaVita, Inc.
7.422%, 2012 (7)(8)		920,985		925,425

Utilities - 0.9%
NRG Energy, Inc.
7.364%, 2013 (7)(8)		924,642		929,266

TOTAL SENIOR FLOATING RATE INTERESTS (Cost $4,415,854)			$	4,413,663

ASSET BACKED SECURITIES - 0.0%
Other - 0.0%
Pegasus Aviation Lease Securitization
2000-1, 8.42%, 2030 (1)(2)(3)(5)		489,231		—
TOTAL ASSET BACKED SECURITIES (Cost $370,950)	$			—

The accompanying notes are an integral part of the financial statements.

114


Schedule of Investments		Series P (High Yield Series)
December 31, 2006 - continued


	Principal Amount		Value
REPURCHASE AGREEMENT - 5.7%
United Missouri Bank, 4.85%, 12-29-06, matures 01-02-07; repuchase amount $6,099,285 (Collateralized by FHLMC, 4.00%, 05-01-09, FHLB, 5.125%, 09-10-10, FNMA, 5.00%, 09-25-30 & GNMA, 4.50%-5.00%, 10-16-28 thru 11-20-29, with a combined value of $6,218,111)	$	6,096,000	$	6,096,000

TOTAL REPURCHASE AGREEMENT (Cost $6,096,000)			$	6,096,000

Total Investments (SBL P Fund) (Cost $102,190,573) - 97.0%			$	102,977,121
Other Assets in Excess of Liabilities - 3.0%				3,166,991

TOTAL NET ASSETS -100.0%			$	106,144,112

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $101,458,943.

*	- Non-income producing security

1	- Security is deemed illiquid. See Notes to financial statements.

2	- Security is fair valued by the Board of Directors. See Notes to financial statements.

3	- Security was acquired through a private placement.

4	- Security is a 144A security, which places restrictions on resale. See Notes to financial statements.

5	- Security is in default of interest and/or principal obligations.

6	- Security is a step-up bond. Rate indicated is rate effective at December 31, 2006.

7	- Variable rate security. Rate indicated is rate effective at December 31, 2006.

8	- Security is a senior floating rate interest. See Notes to financial statements.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

115


		Series P
		(High Yield Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	102,977,121
Cash		170,870
Receivables:
Fund shares sold		1,333,393
Interest		1,892,447
Dividends		7,523
Prepaid expenses		1,985

Total assets		106,383,339

Liabilities:
Payable for:
Fund shares redeemed		140,482
Management fees		65,624
Custodian fees		996
Transfer agent/maintenance fees		2,083
Administration fees		11,912
Professional fees		11,072
Directors’ fees		1,500
Other		5,558

Total liabilities		239,227

Net Assets	$	106,144,112

Net assets consist of:
Paid in capital	$	97,837,797
Undistributed net investment income		6,964,398
Undistributed net realized gain on sale of investments		555,369
Net unrealized appreciation in value of investments		786,548

Net assets	$	106,144,112

Capital shares authorized		unlimited
Capital shares outstanding		5,650,298
Net asset value per share (net assets divided by shares outstanding)	$	18.79

¹Investments, at cost	$	102,190,573

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	87,673
Interest		7,090,784

Total investment income		7,178,457

Expenses:
Management fees		658,247
Custodian fees		6,048
Transfer agent/maintenance fees		25,153
Administration fees		96,700
Directors’ fees		3,810
Professional fees		12,458
Reports to shareholders		12,380
Other expenses		3,305

Total expenses		818,101
Less: Earnings credits applied		(215	)

Net expenses		817,886

Net investment income		6,360,571

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		1,004,753

Net realized gain		1,004,753

Net unrealized appreciation during the year on:
Investments		1,995,013

Net unrealized appreciation		1,995,013

Net realized and unrealized gain		2,999,766

Net increase in net assets resulting from operations	$	9,360,337

See accompanying notes.

116


		Series P
Statement of Changes in Net Assets		(High Yield Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income	$	6,360,571		$	5,102,008
Net realized gain during the year on investments		1,004,753			1,405,466
Net unrealized appreciation (depreciation) during the year on investments		1,995,013			(3,797,233	)

Net increase in net assets resulting from operations		9,360,337			2,710,241

Capital share transactions:
Proceeds from sale of shares		63,798,723			47,469,252
Cost of shares redeemed		(44,986,293	)		(46,523,696	)

Net increase from capital share transactions		18,812,430			945,556

Net increase in net assets		28,172,767			3,655,797

Net assets:
Beginning of year		77,971,345			74,315,548

End of year	$	106,144,112		$	77,971,345

Undistributed net investment income at end of year	$	6,964,398		$	5,556,465

Capital Share Activity:
Shares sold		3,584,516			2,888,743
Shares redeemed		(2,547,382	)		(2,840,004	)

Total capital share activity		1,037,134			48,739

See accompanying notes.

117


Financial Highlights	Series P
Selected data for each share of capital stock outstanding throughout each year	(High Yield Series	)


	2006			2005			2004			2003			Year Ended, December 31, 2002^d
Per Share Data
Net asset value, beginning of period	$	16.90		$	16.28		$	14.71		$	12.79		$	13.60
Income (loss) from investment operations:
Net investment income		0.90			1.09			1.12			0.90			0.93
Net gain (loss) on securities (realized and unrealized)		0.99			(0.47	)		0.58			1.87			(0.88	)

Total from investment operations		1.89			0.62			1.70			2.77			0.05

Less distributions:
Dividends from net investment income		—			—			(0.13	)		(0.85	)		(0.86	)

Total distributions		—			—			(0.13	)		(0.85	)		(0.86	)

Net asset value, end of period	$	18.79		$	16.90		$	16.28		$	14.71		$	12.79

Total Return^a		11.18	%		3.81	%		11.61	%		21.71	%		0.41	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	106,144		$	77,971		$	74,316		$	78,491		$	41,381

Ratios to average net assets:
Net investment income		7.24	%		7.13	%		7.08	%		7.53	%		8.12	%
Total expenses^b		0.93	%		0.97	%		0.94	%		0.87	%		0.88	%
Net expenses^c		0.93	%		0.97	%		0.94	%		0.87	%		0.88	%

Portfolio turnover rate		52	%		64	%		63	%		52	%		80	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	The financial highlights for Series P exclude the historical financial highlights of Series K. The assets of Series K were acquired by Series P on August 27, 2002.

See accompanying notes.

118

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119


	Series Q
Manager’s Commentary	(Small Cap Value Series	)
February 15, 2007	(unaudited	)

LOGO

Subadvisor, Wells Capital Management

LOGO

I. Charles Rinaldi

Portfolio Manager

To Our Shareholders:

This year’s market performance surprised many investors, especially those who thought the small cap, emerging and real estate markets had cooled off at the end of 2005. Small cap stocks, evidenced by value stocks in the Russell 2000 Index, turned in a very strong 4th quarter to finish the year at 23.48%. Series Q of the SBL Fund - Small Cap Value Series returned 13.41% in 2006, underperforming the Russell 2000 Value. As we look back to September 2005, we note the value of the portfolio’s energy stocks contributed to the overall investment results for 2005. We believe the portfolio’s natural gas infrastructure and crude oil producers stand to outperform the market as domestic companies race to ramp up supply across all energy sub-industries, in light of strong global demand for natural resources. In addition, our thorough stock selection in a number of industries has positioned the portfolio to outperform the market. With respect to the index’s strong performance in 2006, our significant underweight in banks and real estate investment trusts (REITs) was a major source of underperformance versus the benchmark. On a capitalization basis, large caps outperformed in December but small caps outperformed for the year. This was the eighth straight year that the Russell 2000 Index outperformed the S&P 500 Index. The two most recent years, however, have seen that margin narrow.

Our selection of materials and industrial processing stocks for the Series is comprised of 29 stocks that have met our requirements for inclusion in the portfolio. For the year, our materials stocks, specifically steel, chemical and gold, added the most value in terms of contribution to return. Much of the drive behind steel stocks has been the winds of worldwide steel mergers. While the steel stocks in the portfolio make up a small percentage of the total, the excellent returns in this area added over 1% to the year’s return. Chemicals stocks were also strong; a welcome change. Our identification of these stocks took place a number of years ago, with many of the companies coming through our intrinsic value process.

Gold dipped late in the year, yet still finished up 20% for the year. Gold mining stocks represent a small part of the portfolio, and have been solid performers, displaying sustained strength over the past four years. Paper companies staged a turnaround after a tough year in 2005. A top ten holding, Chicago Bridge & Iron, was up in the year. The power, environmental and natural gas services company continues to win large projects and has a significant backlog in the pipeline. We saw weakness in synthetic fiber company, Wellman and in Intertape Polymer, a resin and synthetic products company. Higher commodity prices, among other factors, caused pressure on these companies. Fifteen industries are represented in this sector, diversifying exposure to a broad slice of these types of stocks. For 2007, we look to the high cash levels at companies and the overall liquidity in the system to push projects at each of these industrials.

Total holdings in technology, a place where we have found cheap stocks and good values, have increased in the year. At least one of the themes we are seeing materialize is in radio frequency identification (RFID), a technology to allow for better inventory control in warehouses and stores. We’ve identified undervalued companies with excellent prospects and strong balance sheets as potential candidates. Technology stocks are represented by 17 companies spread throughout multiple sub-industries, including enterprise software, semi-conductors, testing hardware, and networking to name a few. For the year, we saw a small group of unrelated companies experience increased volatility in their prices. A significant detractor was Embarcadero, mired in an accounting issue. On the positive side, Symbol Technologies, a maker of handheld scanners commonly used at checkouts, was acquired by Motorola in September.

Cray Computer had a strong year, adding value to the portfolio’s return. The supercomputer maker in Seattle won a number of government and education contracts, fueling its stock price. Cray, a small niche player in a large market, has a long history developing large scale computers. Intermec, a company involved in barcode technology and also RFID research and development, was down sharply in the year. The company is in the midst of restructuring and has announced a reduction in its workforce. For 2007, we look to our selection of technology stocks to add value relative to the index.

The portfolio’s consumer stocks were up in the year; however, they underperformed the benchmark’s return in this sector. Our over weight in commercial services proved to add value to the year’s results from a broad group of companies.

Consumer stocks represent about 17% of the portfolio, with half of these stocks in commercial services, an area where we have found attractive valuations. ABM Industries, a company servicing high rise buildings, is an

120


	Series Q
Manager’s Commentary	(Small Cap Value Series	)
February 15, 2007	(unaudited	)

example of a well run company with large contracts to run everything from janitorial to security operations for companies. Commercial information services company ProQuest was off sharply, dragging down the sector following its announcement of a potential restatement of quarterly earnings. Traditional retailers contributed to performance, but underperformed the market. We have found the best value in companies with predictable revenue streams, such as those found in commercial services.

Our overweight in energy stocks helped boost performance for the year. Despite widespread concern over energy prices in the summer of 2006, the portfolio’s oil well and natural gas equipment and service stocks per formed well relative to the index, adding almost 200 basis points to the year’s return. We believe we are in a multi-year period of capital projects expansion in this industry, due to an extended time of underinvestment in domestic energy projects. Under water pipeline repair company Oceaneering International had a strong year, up over 50%. The company, which utilizes remote operated vehicles to repair lines, serves a niche market in deep water pipeline repair and has been an excellent addition to the portfolio. Global Industries, a top holding in the portfolio, began serving the offshore oil and gas industry over 25 years ago and has evolved into one of the largest providers of offshore services in the Gulf of Mexico. The company’s earnings have been improving as the framework laid a number of years ago has continued to reap benefits for shareholders.

Key Energy Services, also a top holding, continues to post improving rig hours in the U.S. and internationally amid strong demand for its services. The company has yet to file regulatory documents for previous years, a situation we are monitoring closely. Helmerich & Payne, a Tulsa, OK-based driller, was down in the year, despite a rather strong earnings announcement in November. Since September 2005, we have been reducing portfolio holdings in crude oil related companies, on our thesis that while there is opportunity in the long-term in these stocks, near term pressure may not be favorable to owning oil stocks. We witnessed extended volatility in oil throughout the year and used our vast research to steer us from a negative impact on performance. Lastly, another Tulsa-based oil service company, Matrix Service, positively contributed to the year’s return. In utilities, Cincinnati Bell continues to increase its revenue and operating income, sending its shares up in the past year. The company fits our investment criteria, having a solid customer base and multiple lines of business.

Financials were very strong in the year and our under weight in the area hurt our performance. The benchmark’s financials sector makes up 35% of the entire index, dominated by banks and real estate investment trusts (REIT). Our bottom-up process has identified a small number of REITs. The portfolio currently maintains approximately 4 percent in property and casualty insurance companies, an area where we believe value exists. REITs have been a large part of the index’s performance for the year; however, in December the small cap portfolio outperformed in this area.

Our underweight in banking and REITs has been an area of underperformance due to the continued extraordinary returns seen in commercial property, hotels and other related real estate vehicles. We have found a select number of REITs, of which some are recent IPOs, and added them to the portfolio throughout the year. We also continue to favor some insurance companies on the thesis their valuations may not be fully realized.

In healthcare, the services industry comprised of companies providing ser vices to hospitals, nursing homes, prisons and clinics, was the leading contributor in our healthcare stocks for the year. Gentiva Health Services and Healthcare Services Group were steady per formers throughout the year. Gentiva provides comprehensive home health services including nursing in the U.S. In February, Gentiva acquired the Healthfield Group, another provider of services to southeastern states with over 130 locations. Healthcare Services Group provides housekeeping, laundry, linen and food services to the healthcare industry. Laundry and linen represent a significant part of the company’s revenue. The portfolio is slightly over weight in the index in healthcare.

Our healthcare facilities stocks added value to the year’s performance. The portfolio has a small exposure to biotech research companies. One stock is Infinity Pharmaceuticals, a cancer drug development company, which had a busy year making progress on a number of its cancer drugs and completing a reverse merger with Discovery Partners. In pharma stocks, the portfolio’s holdings detracted largely due to CV Therapeutics, which was pushed lower on a delay in obtaining regulatory approval for its main drug Ranexa. Late in the year, the company filed for EU approval of its heart drug, in the face of domestic regulatory challenges.

The eight transportation stocks added a small contribution to the year’s return, with railroader Rail America coming in with a strong year, up nearly 50%. The short-haul transporter agreed to be sold to a hedge fund group at a 32% premium to its trading price in mid-November. In air transport, an industry in which the portfolio has 5 holdings, results were flat for the year. EGL Inc. was a detractor in this sector, pushed lower by flat revenue from its air transport segment, which accounts for over 60% of its sales. Slightly over 5% of the portfolio is invested in transportation related stocks.

121


	Series Q
Manager’s Commentary	(Small Cap Value Series	)
February 15, 2007	(unaudited	)

Producer durables account for approximately 2% of the portfolio, versus 6% in the index. Our allocation to this area was a detractor to performance; in addition, stock selection also did not work in our favor. In the past year, we have begun adding manufactured housing related stocks, on our belief that the value proposition for these types of companies fits well into current housing climate. Late in the year, these stocks were not favored by investors, being dragged down by the market’s overall negative investment view towards housing.

Thank you for your confidence in our investment team. We wish you all the best in 2007 and look forward to our partnership for many years to come.

Sincerely,

I. Charles Rinaldi

Portfolio Manager

PERFORMANCE

Series Q vs. Russell 2000 Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series Q (Small Cap Value Series) on May 1, 2000 (date of inception), and reflects the fees and expenses of Series Q. The Russell 2000 Index is a capitalization-weighted index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

Average Annual Returns


Periods Ended 12-31-06¹	1 Year		5 Years		Since Inception (5-1-00)
Series Q	13.41	%	17.02	%	17.18	%

Portfolio Composition by Sector


Consumer Discretionary	6.87	%
Consumer Staples	2.01
Energy	25.56
Financials	2.16
Health Care	6.93
Industrials	12.83
Information Technology	14.44
Materials	20.82
Telecommunication Services	0.72
Repurchase Agreement	9.81
Liabilities, less cash & other assets	(2.15	)
Total net assets	100.00	%

See accompanying notes.


122


		Series Q
Manager’s Commentary		(Small Cap Value Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series Q (Small Cap Value Series)
Actual	$	1,000.00	$	1,057.00	$	6.58
Hypothetical		1,000.00		1,018.80		6.46

²	Expenses are equal to the Series annualized expense ratio of 1.27%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

123


Schedule of Investments		Series Q (Small Cap Value Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 91.6%
Aerospace & Defense - 0.8%
Armor Holdings, Inc. *	22,000	$	1,206,700

Air Freight & Logistics - 0.6%
EGL, Inc. * (1)	29,600		881,488

Airlines - 0.9%
Lan Airlines S.A. ADR	27,700		1,520,453

Apparel Retail - 1.5%
Bakers Footwear Group, Inc. *	44,295		400,427
Foot Locker, Inc.	49,565		1,086,960
Payless ShoeSource, Inc. * (1)	4,000		131,280
Tween Brands, Inc. * (1)	20,700		826,551

			2,445,218

Apparel, Accessories & Luxury Goods - 0.6%
Hanesbrands, Inc. *	39,600		935,352

Automobile Manufacturers - 0.6%
Fleetwood Enterprises, Inc. *	123,800		979,258

Biotechnology - 1.8%
CV Therapeutics, Inc. * (1)	188,000		2,624,480
Infinity Pharmaceuticals, Inc. *	19,500		242,775

			2,867,255

Broadcasting & Cable TV - 0.5%
Discovery Holding Company *	51,700		831,853

Casinos & Gaming - 1.2%
Boyd Gaming Corporation (1)	13,200		598,092
Empire Resorts, Inc. *	55,200		478,584
Progressive Gaming International Corporation *	87,000		789,090

			1,865,766

Coal & Consumable Fuels - 0.3%
Aventine Renewable Energy Holdings, Inc. *	22,840		538,110

Commercial Printing - 0.4%
Deluxe Corporation	27,000		680,400

Commodity Chemicals - 0.5%
Calgon Carbon Corporation (1)	79,500		492,900
Wellman, Inc.	89,200		284,548

			777,448

Communications Equipment - 2.8%
3Com Corporation *	335,600		1,379,316
China GrenTech Corporation, Ltd. ADR *	59,280		1,093,123
Mastec, Inc. *	80,700		931,278
Nortel Networks Corporation *	40,230		1,075,348

			4,479,065

Computer Hardware - 0.9%
Cray, Inc. *	122,815		1,459,042

Computer Storage & Peripherals - 2.6%
Electronics for Imaging *	27,500		730,950
Intermec, Inc. *	138,300		3,356,541

			4,087,491

Construction & Engineering - 2.6%
Chicago Bridge & Iron Company N.V. (1)	150,600		4,117,404

Construction Materials - 0.6%
U.S. Concrete, Inc. * (1)	129,200		919,904

Data Processing & Outsourced Services - 1.1%
Lightbridge, Inc. *	124,700		1,688,438

Diversified Chemicals - 0.5%
Ashland, Inc. (1)	12,500		864,750

Diversified Commercial & Professional Services - 1.9%
Geo Group, Inc. *	66,755		2,504,648
Healthcare Services Group	20,400		590,784

			3,095,432

Electrical Components & Equipment - 2.2%
Encore Wire Corporation * (1)	42,250		929,922
GrafTech International, Ltd. *	220,655		1,526,933
Power-One, Inc. *	152,900		1,113,112

			3,569,967

Electronic Equipment Manufacturers - 4.1%
Cognex Corporation	41,700		993,294
Coherent, Inc. *	38,600		1,218,602
OSI Systems, Inc. *	50,200		1,050,686
Symbol Technologies, Inc.	225,800		3,373,452

			6,636,034

Environmental & Facilities Services - 2.1%
ABM Industries, Inc. (1)	102,520		2,328,229
Layne Christensen Company *	29,900		981,617

			3,309,846

Gold - 8.5%
Goldcorp, Inc.	264,990		7,536,316
Meridian Gold, Inc.	47,500		1,320,025
Randgold Resources, Ltd. ADR *	199,900		4,689,654

			13,545,995

Health Care Facilities - 1.0%
Manor Care, Inc.	34,800		1,632,816

Health Care Services - 1.7%
Cross Country Healthcare, Inc. *	52,465		1,144,786
Gentiva Health Services, Inc. *	78,618		1,498,459

The accompanying notes are an integral part of the financial statements.

124


Schedule of Investments		Series Q (Small Cap Value Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Health Care Services (continued)
Omnicare, Inc. (1)	3,000	$	115,890

			2,759,135

Health Care Supplies - 0.9%
OraSure Technologies, Inc. *	179,200		1,480,192

Homebuilding - 0.1%
Champion Enterprises, Inc. *	20,800		194,688

Housewares & Specialties - 0.3%
Jarden Corporation * (1)	12,600		438,354

Human Resource & Employment Services - 0.9%
CDI Corporation	15,770		392,673
Kforce, Inc. *	87,100		1,060,007

			1,452,680

Integrated Oil & Gas - 1.1%
InterOil Corporation * (1)	56,900		1,723,501

Integrated Telecommunication Services - 0.7%
Cincinnati Bell, Inc. *	251,000		1,147,070

Internet Software & Services - 0.9%
Earthlink, Inc. *	11,200		79,520
Vignette Corporation *	76,300		1,302,441

			1,381,961

IT Consulting & Other Services - 0.7%
MPS Group, Inc. * (1)	47,500		673,550
Tier Technologies, Inc. (CI.B) *	63,700		404,495

			1,078,045

Life Sciences Tools & Services - 0.7%
Applera Corporation - Applied Biosystems Group (1)	8,600		315,534
MDS, Inc.	43,800		796,284

			1,111,818

Metal & Glass Containers - 0.8%
Constar International, Inc. *	32,000		224,000
Intertape Polymer Group, Inc. *	206,000		1,087,680

			1,311,680

Office REITs - 0.6%
Government Properties Trust, Inc.	86,800		920,080

Oil & Gas Drilling - 3.0%
Helmerich & Payne, Inc.	83,500		2,043,245
Parker Drilling Company * (1)	30,800		251,636
Pride International, Inc. *	41,416		1,242,480
Transocean, Inc. * (1)	15,500		1,253,795

			4,791,156

Oil & Gas Equipment & Services - 11.3%
Global Industries, Ltd. *	502,100		6,547,384
Hydril * (1)	9,800		736,862
Input/Output, Inc. *	56,200		766,006
Key Energy Services, Inc. *	158,835		2,484,179
Matrix Service Company * (1)	28,200		454,020
Newpark Resources *	262,300		1,891,183
Oceaneering International, Inc. * (1)	51,200		2,032,640
PHI, Inc. (Non Voting) *	34,900		1,142,277
PHI, Inc. *	6,400		202,688
Smith International, Inc. (1)	13,700		562,659
Willbros Group, Inc. *	67,500		1,275,750

			18,095,648

Oil & Gas Exploration & Production - 8.9%
Forest Oil Corporation * (1)	37,900		1,238,572
Helix Energy Solutions Group, Inc.*	41,200		1,292,444
Mariner Energy, Inc. * (1)	20,800		407,680
McMoRan Exploration Company * (1)	108,885		1,548,345
Newfield Exploration Company * (1)	22,500		1,033,875
Noble Energy, Inc. (1)	26,200		1,285,634
PetroHawk Energy Corporation * (1)	27,200		312,800
Petroquest Energy, Inc. *	39,400		501,956
Pioneer Natural Resources Company (1)	17,100		678,699
Range Resources Corporation	216,417		5,942,811

			14,242,816

Oil & Gas Storage & Transportation - 0.4%
El Paso Corporation	37,400		571,472

Packaged Foods & Meats - 1.4%
Del Monte Foods Company	203,360		2,243,061

Paper Packaging - 0.3%
Chesapeake Corporation	26,950		458,689

Paper Products - 0.9%
Wausau Paper Corporation	93,700		1,404,563

Personal Products - 0.6%
Prestige Brands Holdings, Inc. *	74,100		964,782

Pharmaceuticals - 0.8%
Alpharma, Inc.	50,800		1,224,280

Precious Metals & Minerals - 2.0%
Apex Silver Mines, Ltd. *	202,300		3,214,547

Properly & Casualty Insurance - 1.3%
Argonaut Group, Inc. *	37,075		1,292,434
Donegal Group, Inc.	7,850		153,782

The accompanying notes are an integral part of the financial statements.

125


Schedule of Investments		Series Q (Small Cap Value Series)
December 31, 2006 - continued


	Shares		Value
COMMON STOCK (continued)
Property & Casualty Insurance (continued)
Mercury General Corporation		11,900	$	627,487

				2,073,703

Publishing - 1.9%
McClatchy Company		17,500		757,750
ProQuest Company *		39,400		411,730
RH Donnelley Corporation		30,600		1,919,538

				3,089,018

Regional Banks - 0.3%
Colonial BancGroup, Inc.		18,100		465,894

Semiconductor Equipment - 0.6%
Credence Systems Corporation *		186,175		968,110

Semiconductors - 0.8%
STATS ChipPAC, Ltd. ADR *		169,333		1,300,478

Specialty Chemicals - 0.5%
OM Group, Inc. * (1)		18,100		819,568

Specialty Stores - 0.1%
Hancock Fabrics, Inc. *		15,500		53,320
Sharper Image Corporation *		16,340		151,145

				204,465

Steel - 6.2%
Carpenter Technology Corporation (1)		20,100		2,060,652
IPSCO, Inc. (1)		41,500		3,895,605
Steel Dynamics, Inc. (1)		97,440		3,161,928
United States Steel Corporation (1)		5,700		416,898
Webco Industries, Inc. *		4,740		369,720

				9,904,803

Trucking - 0.3%
Covenant Transport, Inc. *		40,850		465,690

TOTAL COMMON STOCK (Cost $109,770,030)			$	146,437,432

FOREIGN STOCK- 0.8%
Canada - 0.8%
Air Canada *		11,400		172,046
Air Canada * (2)		2,450		36,975
Southwestern Resources Corporation *		9,850		67,063
Trilogy Energy Trust		92,000		899,331

				1,175,415

TOTAL FOREIGN STOCK (Cost $1,703,864)			$	1,175,415

REPURCHASE AGREEMENT - 9.8%
State Street, 2.75%, dated 12-29-06, matures 01-02-07; repurchase amount of $15,684,401 (Collateralized by FHLB, 04-16-07 with a value of $15,996,200)	$	15,679,610	$	15,679,611

TOTAL REPURCHASE AGREEMENT (Cost $15,679,611)			$	15,679,611

Total Investments (SBL Q Fund) (Cost $127,153,505) - 102.2%			$	163,292,458
Liabilities in Excess of Other Assets - (2.2)% (1)				(3,440,525	)

TOTAL NET ASSETS - 100.0%			$	159,851,933

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $127,753,000.

*	- Non-income producing security

1	- Security is segregated as collateral for open written options contracts.

2	- Security is a 144A security, which places restrictions on resale. See Notes to financial statements.

Glossary:

ADR

- American Depositary Receipt

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

126

Series Q

(Small Cap Value Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	163,292,458
Cash		109,676
Receivables:
Fund shares sold		603,765
Securities sold		637,611
Dividends		42,449
Prepaid expenses		3,777

Total assets		164,689,736

Liabilities:
Payable for:
Securities purchased		2,001,405
Fund shares redeemed		377,770
Written options, at value (premiums received $2,869,580)		2,267,495
Management fees		136,100
Custodian fees		11,728
Transfer agent/maintenance fees		2,083
Administration fees		16,529
Professional fees		13,028
Directors’ fees		2,500
Other		9,165

Total liabilities		4,837,803

Net Assets	$	159,851,933

Net assets consist of:
Paid in capital	$	108,719,396
Accumulated net investment loss		(152	)
Undistributed net realized gain on sale of investments, options written and foreign currency transactions		14,391,860
Net unrealized appreciation in value of investments, options written and translation of assets and liabilities in foreign currency		36,740,829

Net assets	$	159,851,933

Capital shares authorized		Unlimited
Capital shares outstanding		6,115,641
Net asset value per share (net assets divided by shares outstanding)	$	26.14

¹Investments, at cost	$	127,153,505

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends (net of foreign tax withholding of $14,590)	$	854,577
Interest		536,386

Total investment income		1,390,963

Expenses:
Management fees		1,571,718
Custodian fees		145,616
Transfer agent/maintenance fees		25,143
Administration fees		164,480
Directors’ fees		7,091
Professional fees		17,958
Reports to shareholders		22,964
Other expenses		5,638

Total expenses		1,960,608
Less: Earnings credits applied		(5,984	)

Net expenses		1,954,624

Net investment loss		(563,661	)

Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		16,032,712
Options written		(1,150,323	)
Foreign currency transactions		(35	)

Net realized gain		14,882,354

Net unrealized appreciation during the year on:
Investments		3,652,999
Options written		958,158
Translation of assets and liabilities in foreign currencies		(253	)

Net unrealized appreciation		4,610,904

Net realized and unrealized gain		19,493,258

Net increase in net assets resulting from operations	$	18,929,597

See accompanying notes.

127


		Series Q
Statement of Changes in Net Assets		(Small Cap Value Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment loss	$	(563,661	)	$	(705,100	)
Net realized gain during the year on investments, options written and foreign currency transactions		14,882,354			12,654,238
Net unrealized appreciation during the year on investments, options written and translation of assets and liabilities in foreign currencies		4,610,904			4,976,015

Net increase in net assets resulting from operations		18,929,597			16,925,153

Capital share transactions:
Proceeds from sale of shares		72,004,481			66,615,051
Cost of shares redeemed		(75,248,438	)		(51,506,782	)

Net increase from capital share transactions		(3,243,957	)		15,108,269

Net increase in net assets		15,685,640			32,033,422

Net assets:
Beginning of year		144,166,293			112,132,871

End of year	$	159,851,933		$	144,166,293

Accumulated net investment loss at end of year	$	(152	)	$	—

Capital Share Activity:
Shares sold		2,918,282			3,141,404
Shares redeemed		(3,057,766	)		(2,458,032	)

Total capital share activity		(139,484	)		683,372

See accompanying notes.

128


Financial Highlights		Series Q
Selected data for each share of capital stock outstanding throughout each year		(Small Cap Value Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	23.05		$	20.13		$	16.84		$	11.24		$	12.79

Income (loss) from investment operations:
Net investment loss		(0.09	)		(0.11	)		(0.12	)		(0.03	)		(0.09	)
Net gain (loss) on securities (realized and unrealized)		3.18			3.03			3.53			5.73			(0.79	)

Total from investment operations		3.09			2.92			3.41			5.70			(0.88	)

Less distributions:
Distributions from realized gains		—			—			(0.12	)		(0.10	)		(0.67	)

Total distributions		—			—			(0.12	)		(0.10	)		(0.67	)

Net asset value, end of period	$	26.14		$	23.05		$	20.13		$	16.84		$	11.24

Total Return^a		13.41	%		14.51	%		20.37	%		50.90	%		(6.96	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	159,852		$	144,166		$	112,133		$	87,297		$	50,830

Ratios to average net assets:
Net investment loss		(0.36	%)		(0.58	%)		(0.68	%)		(0.28	%)		(0.59	%)
Total expenses^b		1.25	%		1.22	%		1.19	%		1.22	%		1.22	%
Net expenses^c		1.24	%		1.22	%		1.19	%		1.22	%		1.22	%

Portfolio turnover rate		46	%		37	%		43	%		37	%		56	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

See accompanying notes.

129

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130


		Series V
Manager’s Commentary		(Mid Cap Value Series)
February 15, 2007		(unaudited)

LOGO

Advisor, Security Management Company, LLC

LOGO

James P. Schier

Portfolio Manager

To Our Shareholders:

Series V of the SBL Fund - Mid Cap Value Series posted a solid return year gaining 14.66%. While these numbers were better than most broad market indices, the results lagged the gains provided by the Series’ benchmark. The Russell 2500 Value index was up 20.18%, but exceeded the Series’ median peer fund return of 14.46%.

Our approach to the Mid-Cap Value Series is to seek appreciable securities of companies that are able to grow and/or reinvest in increasingly profitable ventures and hold them over three to five years to capture the better part of the improvements in profitability. We are focused on investing in securities when we find opportunities, with our individual position sizes reflecting the magnitude and the confidence in the opportunity. For this Series, we target securities priced at or below a market multiple that are able to increase their return on invested capital over time.

Stock Selection in Energy, Consumer Staples, and Financials Drove Outperformance

McDermott, an energy company, gained 71% during the year. The company benefited from strong end markets in marine oil drilling construction and nuclear power. The company was also the beneficiary of a favorable resolution and settlement of its asbestos liabilities.

Archer Daniels Midland gained 55% as it continued to benefit from interest in its ethanol production capabilities. Having realized a four-fold appreciation in our investment in this stock since 1999, we sold our entire position in 2006.

Stock selection was also favorable in financials driven predominantly by First Marblehead, appreciating 151% during 2006. First Marblehead was driven brutally low on misplaced fears of competition and client losses that eventually proved to be ill-founded concerns. The Series benefited by acquiring the stock during this period of opportunity.

Overweight Energy Sector Weight and Energy Stock Selection Negatively Affected Returns

The Series’ average energy weighting of 15% versus 4% for the benchmark provided a headwind as energy was a below average performer in 2006. Evergreen Energy, formerly known as KFx, declined 42%. Evergreen Energy suffered as investors moved away from the coal industry and short sellers spread negative rumors about the company. None of the rumors have proven to have any validity to date. We remain confident that the weakness in the stock is transitory and that the stock’s prior price levels can be easily re-attained. Evergreen Energy has a significant technological lead as the first company to provide a clean coal technology. We believe the clean coal industry has substantial competitive barriers, but will be a scalable business with a large addressable market for its product.

2007 Market Outlook

We continue to expect lack-luster returns for the market in 2007. This is similar to our outlook for the past two years, though the market has done quite well.

Despite this, we remain firm in our outlook based on our bottom-up research rather than any global macro forecast. Most companies appear to be operating at very high levels of profitability and it is very difficult to confidently predict continued margin expansion. At present, the market is acting with a high degree of complacency.

On behalf of Security Management Company, I would like to thank you for placing your trust and money with us.

Sincerely,

James P. Schier, Senior Portfolio Manager

131


		Series V
Manager’s Commentary		(Mid Cap Value Series)
December 31, 2006		(unaudited)

PERFORMANCE

Series V vs. Russell 2500 Value Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series V (Mid Cap Value Series) on May 1, 1997 (date of inception) and reflects the fees and expenses of Series V. 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 12-31-06¹	1 Year		5 Years		Since Inception (5-1-97)
Series V	14.66	%	17.53	%	20.41	%

Portfolio Composition by Sector


Consumer Discretionary	5.52	%
Consumer Staples	8.25
Energy	18.13
Financials	12.49
Health Care	2.51
Industrials	20.90
Information Technology	15.61
Materials	3.63
Utilities	6.71
Warrants	0.15
Convertible Bonds	0.37
Commercial Paper	2.27
Asset Backed Commercial Paper	3.56
U.S. Government Sponsored Agencies	0.45
Repurchase Agreement	0.17
Liabilities, less cash & other assets	(0.72	)
Total net assets	100.00	%

See accompanying notes.

132


		Series V
Manager’s Commentary		(Mid Cap Value Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series V (Mid Cap Value Series)
Actual	$	1,000.00	$	1,049.10	$	4.65
Hypothetical		1,000.00		1,020.67		4.58

²	Expenses are equal to the Series annualized expense ratio of 0.90%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

133


Schedule of Investments		Series V (Mid Cap Value Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 93.5%
Aerospace & Defense -1.7%
Orbital Sciences Corporation *	402,500	$	7,422,100

Agricultural Products - 0.9%
Corn Products International, Inc.	119,800		4,137,892

Air Freight & Logistics - 0.0%
Stonepath Group, Inc. *	520,000		83,200

Application Software - 2.0%
EPIQ Systems, Inc. *	383,100		6,501,207
PLATO Learning, Inc. *	440,000		2,380,400

			8,881,607

Auto Parts & Equipment - 0.4%
HydroGen Corporation * (1)	403,000		1,986,790

Building Products - 0.6%
Quixote Corporation	126,300		2,484,321

Coal & Consumable Fuels - 6.7%
Arch Coal, Inc.	300,000		9,009,000
Consol Energy, Inc.	145,400		4,671,702
Evergreen Energy, Inc. *	958,000		9,474,620
USEC, Inc.	533,100		6,781,032

			29,936,354

Communications Equipment - 2.7%
Dycom Industries, Inc. *	127,000		2,682,240
Mastec, Inc. *	580,000		6,693,200
MRV Communications, Inc. *	780,000		2,761,200

			12,136,640

Computer & Electronics Retail - 1.1%
RadioShack Corporation	290,000		4,866,200

Construction & Engineering - 9.4%
Granite Construction, Inc. (2)	50,000		2,516,000
Insituform Technologies, Inc. *	163,750		4,234,575
Quanta Services, Inc. *	600,700		11,815,769
Shaw Group, Inc. * (2)	700,000		23,450,000

			42,016,344

Consumer Finance - 1.6%
First Marblehead Corporation	132,000		7,213,800

Data Processing & Outsourced Services - 5.4%
Affiliated Computer Services, Inc. *	225,000		10,989,000
Computer Sciences Corporation *	250,000		13,342,500

			24,331,500

Diversified Commercial & Professional Services - 2.6%
FTI Consulting, Inc. *	225,000		6,275,250
PHH Corporation *	185,000		5,340,950

			11,616,200

Drug Retail - 1.0%
Longs Drug Stores Corporation	105,700		4,479,566

Electric Utilities - 6.2%
Allete, Inc.	33,500		1,559,090
Empire District Electric Company	48,200		1,190,058
Great Plains Energy, Inc.	661,350		21,030,930
Northeast Utilities	125,300		3,528,448
Pepco Holdings, Inc.	1,400		36,414
Westar Energy, Inc.	15,600		404,976

			27,749,916

Electrical Components & Equipment - 2.0%
Lime Energy Company *	80,000		72,000
Powell Industries, Inc. *	63,000		1,988,910
Power-One, Inc. *	925,000		6,734,000

			8,794,910

Electronic Manufacturing Services - 2.6%
Maxwell Technologies, Inc. *	343,200		4,787,640
Merix Corporation *	735,000		6,828,150

			11,615,790

Gas Utilities - 0.5%
Southern Union Company	78,000		2,180,100

General Merchandise Stores - 0.3%
Dollar General Corporation	98,350		1,579,501

Health Care Equipment - 0.4%
HealthTronics, Inc. *	250,000		1,665,000

Health Care Facilities - 2.1%
Community Health Systems, Inc. *	90,000		3,286,800
Triad Hospitals, Inc. *	150,000		6,274,500

			9,561,300

Home Furnishings - 0.7%
Leggett & Platt, Inc.	130,200		3,111,780

Independent Power Producers & Energy Traders - 0.0%
Dynegy, Inc. *	11,430		82,753

Industrial Conglomerates - 3.4%
McDermott International, Inc. *	295,900		15,049,474

Insurance Brokers - 0.3%
Hub International, Ltd.	45,700		1,434,523

Integrated Oil & Gas - 1.6%
Murphy Oil Corporation	137,000		6,966,450

Life & Health Insurance - 0.9%
KMG America Corporation *	438,600		4,206,174

Mortgage REITs - 2.1%
HomeBanc Corporation	321,600		1,360,368

The accompanying notes are an integral part of the financial statements.

134


Schedule of Investments		Series V (Mid Cap Value Series)
December 31, 2006 - continued


	Shares	Value
COMMON STOCK (continued)
Mortgage REIT’s (continued)
MFA Mortgage Investments, Inc.	276,400	$	2,125,516
Opteum, Inc.	768,100		5,837,560

			9,323,444

Multi - Line Insurance - 1.6%
American Financial Group, Inc.	198,000		7,110,180

Multi-Utilities - 0.0%
TECO Energy, Inc.	1,300		22,399

Oil & Gas Drilling - 2.0%
Helmerich & Payne, Inc.	365,000		8,931,550

Oil & Gas Equipment & Services - 1.2%
Key Energy Services, Inc. *	350,000		5,474,000

Oil & Gas Exploration & Production -1.7%
Gulfport Energy Corporation *	125,300		1,702,827
Newfield Exploration Company *	129,000		5,927,550

			7,630,377

Oil & Gas Refining & Marketing - 0.4%
Nova Biosource Fuels, Inc. *	738,700		1,735,945

Oil & Gas Storage & Transportation - 4.6%
Double Hull Tankers, Inc.	274,200		4,439,298
Williams Companies, Inc.	611,500		15,972,380

			20,411,678

Packaged Foods & Meats - 4.0%
Hormel Foods Corporation	233,000		8,700,220
JM Smucker Company	150,000		7,270,500
Tyson Foods, Inc.	105,000		1,727,250

			17,697,970

Paper Packaging - 2.9%
Bemis Company, Inc.	172,000		5,844,560
Sonoco Products Company	184,700		7,029,682

			12,874,242

Personal Products - 2.4%
Alberto-Culver Company	90,000		1,930,500
Playtex Products, Inc. *	600,000		8,634,000

			10,564,500

Properly & Casualty Insurance - 4.8%
Alleghany Corporation *	14,357		5,220,205
First American Corporation	174,000		7,078,320
Hanover Insurance Group, Inc.	16,200		790,560
North Pointe Holdings Corporation * (1)	254,000		2,692,400
United America Indemnity, Ltd. *	70,000		1,773,100
W.R. Berkley Corporation	115,900		3,999,709

			21,554,294

Regional Banks - 1.1%
Wilmington Trust Corporation	113,000		4,765,210

Reinsurance - 0.0%
Arch Capital Group, Ltd. *	3,500		236,635

Semiconductor Equipment - 0.9%
Ultratech, Inc. *	310,000		3,868,800

Semiconductors - 2.0%
Applied Micro Circuits Corporation *	460,000		1,637,600
IXYS Corporation *	450,000		4,005,000
STATS ChipPAC, Ltd. ADR *	434,000		3,333,120

			8,975,720

Specialized Consumer Services - 1.1%
Regis Corporation	129,900		5,136,246

Specialty Chemicals - 0.5%
Material Sciences Corporation *	57,000		737,580
Minerals Technologies, Inc.	29,600		1,740,184

			2,477,764

Specialty Stores - 0.2%
Sally Beauty Holdings, Inc. *	90,000		702,000

Tires & Rubber - 1.6%
Bandag, Inc.	145,000		7,312,350

Trading Companies & Distributors - 1.3%
United Rentals, Inc. * (2)	230,000		5,848,900

TOTAL COMMON STOCK (Cost $304,158,616)		$	418,244,389

PREFERRED STOCK - 0.2%
Diversified Metals & Mining - 0.2%
Arch Coal, Inc.	5,200		759,200

Environmental & Facilities Services - 0.0%
ThermoEnergy Corporation PIPE * (1)(3)(4)(5)	1,130,000		158,200

Metal & Glass Containers - 0.0%
Owens-Illinois, Inc.	3,700		136,900

TOTAL PREFERRED STOCK (Cost $1,462,275)		$	1,054,300

WARRANTS - 0.1%
Warrants - 0.1%
Electric City Corporation $1.00, 3/19/2009 (4)	23,333		11,127
Nova Oil, Inc. $2.40, 7/5/2011 (4)	369,350		613,490
ThermoEnergy Corporation $0.75, 7/14/2008 (3)(4)	1,130,000		50,737
			675,354

TOTAL WARRANTS (Cost $999,024)		$	675,354

The accompanying notes are an integral part of the financial statements.

135


Schedule of Investments		Series V (Mid Cap Value Series)
December 31, 2006 - continued


	Principal Amount		Value
CONVERTIBLE BOND - 0.4%
Natural Gas - 0.4%
Hanover Compressor Company
4.75%, 2008	$	1,700,000	$	1,663,875

TOTAL CONVERTIBLE BOND (Cost $1,676,332)			$	1,663,875

U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 0.4%
Federal National Mortgage Association
5.15% - 2007		2,000,000		1,998,856

TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES			$	1,998,856

(Cost $1,998,856)
ASSET BACKED COMMERCIAL PAPER - 3.6%
Financial Companies - Diversified - 1.6%
Amstel Funding Corporation
5.275%, 1/16/2007		1,420,000		1,416,835
5.27%, 1/18/2007		2,000,000		1,995,023
Amsterdam Funding Corporation
5.25%, 1/5/2007		1,300,000		1,299,424
5.26%, 1/17/2007		1,000,000		997,662
Govco, Inc.
5.28%, 1/8/2007		1,330,000		1,328,635

				7,037,579

Financial Companies - Miscellaneous Receivables - 0.5%
Fairway Finance Corporation
5.35%, 1/11/2007		1,000,000		998,536
5.26%, 1/16/2007		1,200,000		1,197,370

				2,195,906

Financial Companies - Securities - 0.2%
Perry Global Funding LLC
5.35%, 1/9/2007		1,000,000		998,811

Financial Companies - Trade & Term Receivables - 0.2%
Eureka Securitization
5.264%, 1/8/2007		1,000,000		998,977

Financial Companies - Trade Receivables - 1.1%
Old Line Funding LLC
5.27%, 1/3/2007		1,000,000		999,707
5.31%, 1/11/2007		1,200,000		1,198,223
5.26%, 1/12/2007		1,500,000		1,497,585
Sheffield Receivables Corporation
5.265%, 1/2/2007		1,000,000		999,854

				4,695,369

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $15,926,445)			$	15,926,642

COMMERCIAL PAPER - 2.3%
Automotive - 0.2%
American Honda Finance
5.23%, 1/9/2007		1,000,000		998,838

Banking - 0.4%
UBS Finance (DE) LLC
5.28%, 1/2/2007		1,591,000		1,590,767

Brokerage - 1.1%
Citigroup Funding, Inc.
5.25%, 1/4/2007		1,000,000		999,563
5.25%, 1/10/2007		1,500,000		1,498,031
Goldman Sachs Group, Inc.
5.30%, 1/12/2007		2,200,000		2,196,437

				4,694,031

Electric - 0.3%
Florida Power & Light Company
5.30%, 1/3/2007		1,384,000		1,383,592

Non U.S. Banking - 0.3%
Societe Generale
5.35%, 1/4/2007		1,500,000		1,499,331

TOTAL COMMERCIAL PAPER (Cost $10,166,559)			$	10,166,559

REPURCHASE AGREEMENT - 0.2%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount of $779,420 (Collateralized by FHLMC, 5.00%, 09-15-36 with a value of $794,735)	$	779,000	$	779,000

TOTAL REPURCHASE AGREEMENT (Cost $779,000)			$	779,000

Total Investments (SBL V Fund) (Cost $337,167,107) - 100.7%			$	450,508,975
Liabilities in Excess of Other Assets - (0.7)%				(3,238,440	)

TOTAL NET ASSETS -100.0%			$	447,270,535

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $337,165,274.

*	- Non-income producing security

1	- Security is deemed illiquid. See Notes to financial statements.

2	- Security is segregated as collateral for open written options contracts.

3	- Security is restricted from resale. See Notes to financial statements.

4	- Security is fair valued by the Board of Directors. See Notes to financial statements.

The accompanying notes are an integral part of the financial statements.

136


Schedule of Investments		Series V (Mid Cap Value Series)
December 31, 2006 - continued

5	- PIPE (Private Investment in Public Equity) - Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering.

Glossary:

ADR

- American Depositary Receipt

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

137

Series V

(Mid Cap Value Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	450,508,975
Cash		3,341
Receivables:
Fund shares sold		255,275
Securities sold		262,130
Interest		24,001
Dividends		246,472
Prepaid expenses		10,158

Total assets		451,310,352

Liabilities:
Payable for:
Securities purchased		2,846,342
Fund shares redeemed		543,669
Written options, at value (premiums received, $305,606)		259,000
Management fees		287,101
Custodian fees		5,277
Transfer agent/maintenance fees		2,083
Administration fees		36,936
Professional fees		30,722
Directors’ fees		7,000
Other fees		21,687

Total liabilities		4,039,817

Net Assets	$	447,270,535

Net assets consist of:
Paid in capital	$	285,437,694
Undistributed net investment income		4,271,958
Undistributed net realized gain on sale of investments and options written		44,172,409
Net unrealized appreciation in value of investments and options written		113,388,474

Net assets	$	447,270,535

Capital shares authorized		unlimited
Capital shares outstanding		9,560,754
Net asset value per share (net assets divided by shares outstanding)	$	46.78

¹Investments, at cost	$	337,167,107

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	7,212,760
Interest		848,283

Total investment income		8,061,043

Expenses:
Management fees		3,183,614
Custodian fees		33,020
Transfer agent/maintenance fees		25,148
Administration fees		405,418
Directors’ fees		18,827
Professional fees		46,853
Reports to shareholders		60,978
Other expenses		15,375

Total expenses		3,789,233
Less: Earnings credits		(148	)

Net expenses		3,789,085

Net investment income		4,271,958

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		42,182,046
Options written		1,990,362

Net realized gain		44,172,408

Net unrealized appreciation (depreciation) during the year on:
Investments		9,136,507
Options written		(608,132	)

Net unrealized appreciation		8,528,375

Net realized and unrealized gain		52,700,783

Net increase in net assets resulting from operations	$	56,972,741

See Accompanying notes.

138


		Series V
Statement of Changes in Net Assets		(Mid Cap Value Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase in net assets from operations:
Net investment income	$	4,271,958		$	1,434,043
Net realized gain during the year on investments and options written		44,172,408			37,176,541
Net unrealized appreciation during the year on investments and options written		8,528,375			13,415,356

Net increase in net assets resulting from operations		56,972,741			52,025,940

Capital share transactions:
Proceeds from sale of shares		138,329,829			112,313,976
Cost of shares redeemed		(132,525,763	)		(87,382,578	)

Net increase from capital share transactions		5,804,066			24,931,398

Net increase in net assets		62,776,807			76,957,338

Net assets:
Beginning of year		384,493,728			307,536,390

End of year	$	447,270,535		$	384,493,728

Undistributed net investment income at end of year	$	4,271,958		$	1,434,043

Capital Share Activity:
Shares sold		3,124,489			3,070,386
Shares redeemed		(2,988,899	)		(2,407,774	)

Total capital share activity		135,590			662,612

See accompanying notes.

139


Financial Highlights		Series V
Selected data for each share of capital stock outstanding throughout each year		(Mid Cap Value Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	40.79		$	35.10		$	28.33		$	18.68		$	23.49

Income (loss) from investment operations:
Net investment income		0.44			0.14			0.11			0.07			0.10
Net gain (loss) on securities (realized and unrealized)		5.55			5.55			7.39			10.03			(3.16	)

Total from investment operations		5.99			5.69			7.50			10.10			(3.06	)

Less distributions:
Dividends from net investment income		—			—			(0.01	)		(0.06	)		(0.19	)
Distributions from realized gains		—			—			(0.72	)		(0.39	)		(1.56	)

Total distributions		—			—			(0.73	)		(0.45	)		(1.75	)

Net asset value, end of period	$	46.78		$	40.79		$	35.10		$	28.33		$	18.68

Total Return^a		14.66	%		16.21	%		26.97	%		54.27	%		(14.07	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	447,271		$	384,494		$	307,536		$	223,658		$	147,512

Ratios to average net assets:
Net investment income		1.01	%		0.44	%		0.37	%		0.36	%		0.46	%
Total expenses^b		0.89	%		0.90	%		0.88	%		0.83	%		0.84	%
Net expenses^c		0.89	%		0.90	%		0.88	%		0.83	%		0.84	%

Portfolio turnover rate		42	%		29	%		43	%		59	%		65	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects expense ratios after expense reductions, fee waivers or reduction to custodian expenses, as applicable.

See accompanying notes.

140


		Series X
Manager’s Commentary		(Small Cap Growth Series)
February 15, 2007		(unaudited)

LOGO

Subadvisor, RS Investments

LOGO

Bill Wolfenden

Portfolio Manager

To Our Shareholders:

The stock market and small-cap stocks continued their strong run in 2006. After three years of solid performance, 2006 proved to be a strong follow-on to what is now a multi-year small-cap rally. Unfortunately, Series X of the SBL Fund - Small-Cap Growth Series did not fare as well in 2006. The portfolio finished the fourth quarter with a 7.68% gross of fees (7.53% net of fees) rise, slightly trailing the 8.77% return of the benchmark Russell 2000^® Growth Index. For the calendar year, the portfolio was up a disappointing 5.71% gross of fees (5.13% net of fees) compared with a strong increase of 13.35% for the benchmark.

Although the portfolio has often trailed in sharp small-cap rallies like those in the first and fourth quarters of 2006, our underperformance for the calendar year can be attributed to poor stock selection. We endured a number of problem stocks in the technology sector, which contributed nearly 50% of our 2006 underperformance. We are disappointed with this year’s return, but retain confidence in our investment process, which has served investors well over longer periods of time. In fact, we saw some encouraging performance signs in the fourth quarter that give us reason for optimism as we enter 2007.

Technology, Energy Sectors Yield Positive Returns

The technology sector was a source of positive returns in the fourth quarter. Over the past two quarters, our tech exposure has eased as we seek to concentrate assets in only the highest-conviction companies. That paid off as we experienced healthy gains from a number of top 20 positions, and avoided any further meaningful tech stock problems.

Omniture provides online business optimization software to a broad range of institutional clients. The company went public in summer 2006, and we started our position at that time. We built the position as the stock treaded water for much of the summer. In Omniture we have a business in a large secular growth market that is capable of growing both the revenue and the earnings line at more than 50% year over year. The stock provided a strong source of fourth quarter returns. We also enjoyed strong gains from Equinix, a leading provider of co-location data centers for businesses’ critical Internet and Internet Protocol operations. The stock was a strong contributor to gains in the second half of 2006.

One company in the tech universe that exhibits the attributes we look for in our process is SRS Labs. SRS had a breakout year in 2006, and we believe that the future looks bright for the company. SRS has a patented, defensible market position in delivering surround-sound systems and audio enhancement products for the flat-panel TV, mobile handset, automotive, PDA, PC and home theater markets. While operating results were satisfactory, the stock treaded water. We remained patient because the company possesses the critical elements that we look for: a definable competitive advantage, attractive valuation, and solid long-term anchor points (long-term goals and objectives that we or the company’s management team have set) around which it was growing its business.

We believed that SRS Labs could shed its money-losing semiconductor business and focus solely on its licensing business, which would greatly lower costs and improve margins, and free up management bandwidth to focus on new licensees and accelerate growth. In addition we believed that over time, SRS would gain market share to the point that it could tap into high-volume applications such as flat-panel TVs in China and mobile handsets (Motorola and Samsung were major wins). Management executed on its plan and now has a huge unit-growth opportunity as its technology is designed into many of the above-mentioned customers’ appliances. In essence, SRS has built a solid franchise through its design wins, and a waterfall of license revenues is imminent. We saw that come through in strong third quarter 2006 earnings results, and the stock responded with a 150% increase over its August low. This sharp rise in a short period of time has prompted us to reduce our position. We think SRS is in the early stages of discovery by other small-cap investors, however, and that we will be rewarded for early recognition and patience.

Energy-related positions also contributed positive returns in the final quarter, after proving difficult for much of the year. We had good returns from Superior Energy Services and Oil States International. Both companies provide equipment and services to offshore and land-based oil and natural gas drillers. The stocks had been beaten down over the summer and enjoyed a nice rally through the fourth quarter. We finished the year with modest energy exposure of approximately 5%, less than the benchmark weighting. We expect a tougher environment for these stocks in 2007.

Financial Sector Mixed

Financial services currently represent approximately 14% of the portfolio, a healthy overweighting with the index. We own a broad range of companies in this segment, ranging from specialty insurance providers, to asset management and private banking, to companies leverging technology across a number of financial ser vices applications. Some of these companies endured stock declines in the fourth quarter, detracting from our returns during the period. Investment Technology Group provides a number of trade management and execution services to money managers. Its stock declined during the fourth quarter as October trade volumes from its client base were lower than expected. We viewed the trade volume decline as transitory, and confirmed that long-term anchor points for the business remained solidly in place. The weakness hurt fourth quarter returns, but the stock has climbed back from much of the decline.

Online Resources Corporation is a leading provider of online banking technology services to small banks. It’s capturing significant market share as the small-bank market seeks to modernize its ser vice offering with online banking and automated bill payment. The company acquired Princeton eCom last year, thereby bolstering its client reach and removing a

141


		Series X
Manager’s Commentary		(Small Cap Growth Series)
February 15, 2007		(unaudited)

competitor from the marketplace. The acquisition looks to be dilutive in the short-term, which prompted a decline in the stock in the fourth quarter. We remain optimistic about the long-term opportunity and retain our position in Online Resources.

2007 Outlook

Interest rates have stopped rising (at least for the time being), oil prices have declined, and it seems as though the housing correction is near an end. These headwinds have historically been bad for the consumer and for small companies, yet the broad stock market, and small-caps have per formed well throughout. I am looking forward to a time when the wind may actually be at our backs for a change, and that could be 2007. As I have mentioned in previous letters, however, the Series is not dependent on positive macro events and is structured for flat-to-modestly positive growth in the Gross Domestic Product. The Series holds companies offering unique products, services, and/or business models that can grow sales and earnings by creating new markets or capturing market share. We measure the success (or the lack thereof) by pegging them to anchor points. We believe that fast-growing companies with seasoned management teams, unique business models, and a strong competitive advantage can usually achieve their goals over time and hit these anchor points. When this execution success occurs, great stock performance often accompanies it.

Looking to 2007, I continue to believe that our investment process works over the long-term, which is reflected in our long-term results. As a fellow investor in the strategy, I thank you for your continued confidence and support.

Sincerely,

Bill Wolfenden, Portfolio Manager

PERFORMANCE

Series X vs. Russell 2000 Growth Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series X (Small Cap Growth Series) on October 15, 1997 (date of inception), and reflects the fees and expenses of Series X. 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 12-31-06¹	1 Year		5 Years		Since Inception (10-15-97)
Series X	5.13	%	8.77	%	7.84	%

The performance data quoted above represents past per formance. Past performance is not predictive of future performance. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Portfolio Composition by Sector


Consumer Discretionary	14.87	%
Consumer Staples	3.17
Energy	4.42
Financials	14.30
Health Care	21.55
Industrials	14.82
Information Technology	19.49
Telecommunications Services	1.10
Repurchase Agreement	5.83
Cash & other assets, less liabilities	0.45
Total net assets	100.00	%

See accompanying notes.

142


		Series X
Manager’s Commentary		(Small Cap Growth Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series X (Small Cap Growth Series)
Actual	$	1,000.00	$	1,036.00	$	6.21
Hypothetical		1,000.00		1,019.11		6.16

²	Expenses are equal to the Series annualized expense ratio of 1.21%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

143


Schedule of Investments
December 31, 2006		Series X (Small Cap Value Series)


	Shares	Value
COMMON STOCK - 93.7%
Aerospace & Defense - 3.5%
BE Aerospace, Inc. *	54,130	$	1,390,058
Ceradyne, Inc. *	22,130		1,250,345
Heico Corporation	14,960		580,897

			3,221,300

Alternative Carriers - 1.1%
Time Warner Telecom, Inc. *	51,030		1,017,028

Apparel Retail - 2.7%
Cache, Inc. *	54,050		1,364,222
Jos A. Bank Clothiers, Inc. *	37,627		1,104,352

			2,468,574

Apparel, Accessories & Luxury Goods - 0.9%
Carter’s, Inc. *	31,490		802,995

Application Software - 2.7%
Advent Software, Inc. *	36,890		1,301,848
Concur Technologies, Inc. *	72,750		1,166,910

			2,468,758

Automotive Retail - 1.3%
Midas, Inc. *	53,080		1,220,840

Biotechnology - 1.1%
Solexa, Inc. *	80,530		1,058,970

Casinos & Gaming - 4.2%
Century Casinos, Inc. *	131,770		1,470,553
Pinnacle Entertainment, Inc. *	19,500		646,230
Scientific Games Corporation *	58,690		1,774,199

			3,890,982

Communications Equipment - 1.6%
Occam Networks, Inc. *	42,480		700,920
Oplink Communications, Inc. *	40,350		829,596

			1,530,516

Computer Hardware - 0.9%
Cray, Inc. *	68,800		817,344

Construction & Farm Machinery & Heavy Trucks - 1.4%
American Railcar Industries, Inc.	38,270		1,302,711

Diversified Commercial & Professional Services - 1.7%
FirstService Corporation *	68,730		1,587,663

Electrical Components & Equipment - 0.7%
Regal-Beloit Corporation	12,960		680,530

Environmental & Facilities Services - 3.1%
Rollins, Inc.	62,590		1,383,865
Team, Inc. *	43,260		1,506,746

			2,890,611

Food Distributors - 0.9%
Central European Distribution Corporation *	26,740		794,178

Footwear - 1.2%
Iconix Brand Group, Inc. *	59,730		1,158,165

Health Care Equipment - 12.3%
American Medical Systems Holdings, Inc. *	80,260		1,486,415
Angiodynamics, Inc. *	67,250		1,445,203
Arthrocare Corporation *	19,120		763,270
Cutera, Inc. *	37,010		999,270
Kyphon, Inc. *	16,400		662,560
LeMaitre Vascular, Inc. *	126,680		760,080
Micrus Endovascular Corporation *	58,900		1,123,812
NuVasive, Inc. *	34,790		803,649
Orthovita, Inc. *	201,550		731,627
Resmed, Inc. *	21,670		1,066,597
Spectranetics Corporation *	124,640		1,407,186
Vital Signs, Inc.	3,370		168,230

			11,417,899

Health Care Facilities - 2.8%
Five Star Quality Care, Inc. *	158,700		1,769,505
NovaMed, Inc. *	104,100		788,037

			2,557,542

Health Care Services - 1.9%
AMN Healthcare Services, Inc. *	33,820		931,403
HMS Holdings Corporation *	57,190		866,428

			1,797,831

Health Care Supplies - 1.6%
PolyMedica Corporation	36,646		1,480,865

Health Care Technology - 1.3%
Systems Xcellence, Inc. *	21,300		429,621
Vital Images, Inc. *	23,130		804,924

			1,234,545

Home Entertainment Software - 1.6%
The9, Ltd. ADR *	44,760		1,442,167

Hotels, Resorts & Cruise Lines - 0.5%
Ctrip.com International, Ltd. ADR	7,400		462,352

Household Products - 1.3%
Central Garden and Pet Company *	25,390		1,229,384

Human Resource & Employment Services - 1.3%
Barrett Business Services	50,810		1,189,970

Industrial Machinery - 1.2%
Flow International Corporation *	103,150		1,136,713

The accompanying notes are an integral part of the financial statements.

144


Schedule of Investments
December 31, 2006 - continued		Series X (Small Cap Value Series)


	Shares		Value
COMMON STOCK (continued)
Internet Retail - 1.5%
Nutri/System, Inc. *		22,030	$	1,396,482

Internet Software & Services - 8.4%
DealerTrack Holdings, Inc. *		29,570		869,949
Equinix, Inc. *		9,510		719,146
j2 Global Communications, Inc. *		51,540		1,404,465
Marchex, Inc. (CI.B)		74,140		991,993
Online Resources Corporation *		116,270		1,187,117
Perficient, Inc. *		48,130		789,813
RADVision, Ltd. *		41,830		839,947
WebEx Communications, Inc. *		28,540		995,761

				7,798,191

Investment Banking & Brokerage - 4.3%
Greenhill & Company, Inc.		13,300		981,540
Investment Technology Group, Inc. *		40,430		1,733,638
optionsXpress Holdings, Inc.		23,450		532,081
TradeStation Group, Inc. *		55,740		766,425

				4,013,684

Leisure Facilities - 1.2%
Life Time Fitness, Inc. *		23,760		1,152,598

Marine Ports & Services - 0.9%
Aegean Marine Petroleum Network, Inc. *		48,400		793,760

Mortgage REIT’s - 1.5%
KKR Financial Corporation		52,250		1,399,778

Office Services & Supplies -1.0%
American Reprographics Company *		28,340		944,005

Oil & Gas Equipment & Services - 4.4%
Core Laboratories N.V. *		5,230		423,630
Dril-Quip, Inc. *		24,280		950,805
Oil States International, Inc. *		42,280		1,362,684
Superior Energy Services, Inc. *		41,840		1,367,331

				4,104,450

Packaged Foods & Meats - 1.0%
SunOpta, Inc. *		104,350		918,280

Pharmaceuticals -0.5%
KV Pharmaceutical Company *		19,090		453,960

Property & Casualty Insurance - 5.1%
Amerisafe, Inc. *		95,290		1,473,183
Amtrust Financial Services, Inc.		95,850		819,518
First Mercury Financial Corporation *		44,490		1,046,405
Security Capital Assurance, Ltd.		48,780		1,357,547

				4,696,653

Regional Banks - 0.6%
PrivateBancorp, Inc.		14,280		594,476

Semiconductor Equipment - 0.8%
Cymer, Inc. *		16,650		731,767

Semiconductors - 3.5%
Atheros Communications, Inc. *		41,250		879,450
Silicon Image, Inc. *		69,110		879,079
Silicon Motion Technology Corporation ADR *		61,080		969,340
SRS Labs, Inc. *		52,030		562,964

				3,290,833

Specialized Consumer Services - 1.4%
Steiner Leisure, Ltd. *		27,610		1,256,255

Specialized Finance - 2.8%
International Securities Exchange Holdings, Inc.		9,750		456,203
NewStar Financial, Inc. *		41,130		758,849
Portfolio Recovery Associates, Inc. *		28,750		1,342,337

				2,557,389

TOTAL COMMON STOCK (Cost $77,512,369)			$	86,962,994


	Principal Amount		Value
REPURCHASE AGREEMENT - 5.9%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount $5,416,918 (Collateralized by FHLB, 5.25%, 06-10-11, FNMA, 5.00%, 09-25-30 & U.S. Treasury Notes, 3.375% & 3.50%, 10-15-09 & 08-15-09, with a combined value of $5,523,547)	$	5,414,000	$	5,414,000

TOTAL REPURCHASE AGREEMENT (Cost $5,414,000)			$	5,414,000

Total Investments (SBL X Fund) (Cost $82,926,369) - 99.6%			$	92,376,994
Other Assets in Excess of Liabilities - 0.4%				412,500

TOTAL NET ASSETS -100.0%			$	92,789,494

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $83,061,778.

*	- Non-income producing security

Glossary:

ADR

- American Depositary Receipt

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

145

Series X

(Small Cap Growth Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	92,376,994
Cash		411,985
Receivables:
Fund shares sold		31,146
Securities sold		495,772
Dividends		4,592
Prepaid expenses		2,055

Total assets		93,322,544

Liabilities:
Payable for:
Securities purchased		217,068
Fund shares redeemed		205,538
Management fees		79,271
Custodian fees		3,517
Transfer agent/maintenance fees		2,083
Administration fees		8,071
Professional fees		10,625
Directors’ fees		2,000
Other fees		4,877

Total liabilities		533,050

Net Assets	$	92,789,494

Net assets consist of:
Paid in capital	$	101,022,486
Accumulated net realized loss on sale of investments		(17,683,617	)
Net unrealized appreciation in value of investments		9,450,625

Net assets	$	92,789,494

Capital shares authorized		unlimited
Capital shares outstanding		4,815,752
Net asset value per share (net assets divided by shares outstanding)	$	19.27

¹Investments, at cost	$	82,926,369

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	213,154
Interest		278,795

Total investment income		491,949

Expenses:
Management fees		928,345
Custodian fees		26,048
Transfer agent/maintenance fees		25,148
Administration fees		90,282
Directors’ fees		4,334
Professional fees		17,769
Reports to shareholders		15,700
Other expenses		3,864

Total expenses		1,111,490
Less: Earnings credits applied		(2,190	)

Net expenses		1,109,300

Net investment loss		(617,351	)

Net Realized and Unrealized Gain (Loss):
Net realized gain during the year on:
Investments		7,308,120

Net realized gain		7,308,120

Net unrealized depreciation during the year on:
Investments		(2,144,750	)

Net unrealized depreciation		(2,144,750	)

Net realized and unrealized gain		5,163,370

Net increase in net assets resulting from operations	$	4,546,019

See accompanying notes.

146


		Series X
Statement of Changes in Net Assets		(Small Cap Growth Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment loss	$	(617,351	)	$	(726,687	)
Net realized gain during the year on investments		7,308,120			8,252,526
Net unrealized depreciation during the year on investments		(2,144,750	)		(1,603,848	)

Net increase in net assets resulting from operations		4,546,019			5,921,991

Capital share transactions:
Proceeds from sale of shares		40,950,861			25,405,430
Cost of shares redeemed		(43,378,540	)		(32,524,330	)

Net decrease from capital share transactions		(2,427,679	)		(7,118,900	)

Net increase (decrease) in net assets		2,118,340			(1,196,909	)

Net assets:
Beginning of year		90,671,154			91,868,063

End of year	$	92,789,494		$	90,671,154

Accumulated net investment loss at end of year	$	—		$	—

Capital Share Activity:
Shares sold		2,187,874			1,479,550
Shares redeemed		(2,319,526	)		(1,920,417	)

Total capital share activity		(131,652	)		(440,867	)

See accompanying notes.

147


Financial Highlights		Series X
Selected data for each share of capital stock outstanding throughout each year		(Small Cap Growth Series)


	2006			2005			2004			2003			Year Ended, December 31, 2002^d
Per Share Data
Net asset value, beginning of period	$	18.33		$	17.05		$	14.55		$	9.30		$	12.66
Income (loss) from investment operations:
Net investment loss		(0.13	)		(0.15	)		(0.14	)		(0.10	)		(0.10	)
Net gain (loss) on securities (realized and unrealized)		1.07			1.43			2.64			5.35			(3.26	)

Total from investment operations		0.94			1.28			2.50			5.25			(3.36	)

Net asset value, end of period	$	19.27		$	18.33		$	17.05		$	14.55		$	9.30

Total Return^a		5.13	%		7.51	%		17.18	%		56.45	%		(26.54	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	92,789		$	90,671		$	91,868		$	89,740		$	48,193

Ratios to average net assets:
Net investment loss		(0.66	%)		(0.85	%)		(0.89	%)		(1.00	%)		(0.89	%)
Total expenses^b		1.20	%		1.19	%		1.17	%		1.17	%		1.15	%
Net expenses^c		1.19	%		1.18	%		1.17	%		1.16	%		1.15	%

Portfolio turnover rate		149	%		116	%		146	%		208	%		282	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	RS Investments, Inc. became the sub–adviser of Series X effective September 3, 2002. Prior to September 3, 2002, Security Management Company, LLC (SMC) paid Strong Capital Management, Inc. for sub–advisory services.

See accompanying notes.

148


		Series Y
Manager’s Commentary		(Select 25 Series)
February 15, 2007		(unaudited)

LOGO

Advisor Security Management Company, LLC

LOGO

Mark A. Mitchell

Portfolio Manager

To Our Shareholders:

Series Y of the SBL Fund - Select 25 Series returned 7.54% in the year, lagging the benchmark Russell 1000 Growth Index’s return of 9.07%, but out performing the Series’ peer group median return of 6.37%. Poor stock selection was only partially offset by solid sector positioning in 2006. While being disappointed that our results were below the benchmark, we believe that our approach delivers performance over the long-term.

Our bottom-up research driven investment process attempts to identify companies that have a competitive advantage or have the ability to become more competitive in the future. We focus on owning these companies for three to five years or longer which we believe differentiates us from a majority of our peers and ultimately allows us to make better investment decisions. We buy these companies when their current price trades below their intrinsic value. We closely monitor each company’s progress. We will sell a company if the valuation no longer makes sense, we’ve made a mistake and our investment thesis is no longer valid, or we have a more attractive investment alternative.

We ultimately structure the portfolio with 25-30 names. This philosophy is applied to a broad range of growth names.

Financials and Technology Stocks Top Performers

The Series’ Financial holdings were up 54% compared to 17% for the index. This was driven almost entirely by our position in First Marblehead, up over 150%. III-placed short-term concerns over the company’s competitive position offered a great buying opportunity for a leading student lender with a significant competitive advantage as a result of its loan underwriting capability, superior economics, and additional value-added services.

The Technology sector was up 12% versus the comparable sector index return of 7%. The largest contributor was an overweight position in Cisco, up 60%. Cisco benefited from strong enterprise equipment demand and continued solid business execution. ADC Telecom had a negative impact, down 35%. The company was hurt by unanticipated spending delays by telecom carriers as the industry has undergone significant consolidation.

Energy and Industrial Sectors Disappoint

The Energy sector was down over 14%, compared to up 4% for the benchmark. Evergreen Energy, down 42% (previously known as KFx), and BJ Services, down 20%, both contributed negatively to the fund. Evergreen Energy was hurt by concerns over the viability of the initial production results of its proprietary clean coal technology. BJ Services was impacted more generally by the recent exodus from oil services related names as a result of a weakening energy commodity market.

Holdings in the Industrial sector performed poorly this year. We were positioned to take advantage of several unique opportunities in companies that benefit broadly from strong global economic growth. Concerns regarding a slowdown in the U.S. have impacted the group. We still like the fundamentals of the companies we own, including FedEx Corporation, W.W. Grainger, L-3 Communications, and Shaw Group.

2007 Market Outlook

As we noted in last year’s shareholder letter, we’ve been concerned about a slowdown in U.S. consumer spending for some time. This concern has yet to materialize, but we still think in will happen. Lower energy prices will help, however, higher interest rates and a housing market slowdown provide likely headwinds. The Federal Reserve is walking a fine line between managing inflation risks while supporting economic growth. We’re unsure, like most in the market, what the Fed’s next move is. This uncertainty will weigh on the markets until it’s resolved.

149



		Series Y
Manager’s Commentary		(Select 25 Series)
February 15, 2007		(unaudited)

We believe that investing is a long-term pursuit that requires patience and a consistent approach. Dollar cost averaging is a sound way to build long-term value.¹We recognize there are many investment fund alternatives available today and thank you for your business and the confidence you place in us.

Sincerely,

Mark A. Mitchell, Portfolio Manager

¹	Dollar cost averaging does not assure profits or protect against loss in a declining market.

PERFORMANCE

Series Y vs. Russell 1000 Growth Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series Y (Select 25 Series) on May 3, 1999 (date of inception), and reflects the fees and expenses of Series Y. 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 12-31-06¹	1 Year		5 Years		Since Inception (5-3-99)
Series Y	7.54	%	3.00	%	1.06	%

Portfolio Composition by Sector


Consumer Discretionary	14.97	%
Consumer Staples	5.20
Energy	11.96
Financials	14.38
Health Care	15.94
Industrials	16.09
Information Technology	11.66
Materials	0.82
Exchange Traded Funds	6.31
Asset Backed Commercial Paper	2.80
Repurchase Agreement	0.30
Liabilities, less cash & other assets	(0.43	)
Total net assets	100.00	%

See accompanying notes.

150


		Series Y
Manager’s Commentary		(Select 25 Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series Y (Select 25 Series)
Actual	$	1,000.00	$	1,061.70	$	4.94
Hypothetical		1,000.00		1,020.42		4.84

²	Expenses are equal to the Series annualized expense ratio of 0.95%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

151


Schedule of Investments		Series Y (Select 25 Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 97.3%
Aerospace & Defense - 2.0%
L-3 Communications Holdings, Inc.	21,300	$	1,741,914

Air Freight & Logistics - 4.5%
FedEx Corporation	35,600		3,866,872

Biotechnology - 5.3%
Amgen, Inc. *	66,400		4,535,784

Broadcasting & Cable TV - 3.6%
CBS Corporation (CI.B)	40,300		1,256,554
Univision Communications, Inc. *	52,600		1,863,092

			3,119,646

Coal & Consumable Fuels - 2.7%
Evergreen Energy, Inc. *	233,000		2,304,370

Communications Equipment - 5.4%
ADC Telecommunications, Inc. *	155,071		2,253,175
Cisco Systems, Inc. *	86,800		2,372,244

			4,625,419

Construction & Engineering - 5.1%
Shaw Group, Inc. * (1)	131,000		4,388,500

Consumer Finance - 5.5%
First Marblehead Corporation	85,650		4,680,773

Data Processing & Outsourced Services - 4.2%
First Data Corporation	59,600		1,520,992
Western Union Company	94,300		2,114,206

			3,635,198

Exchange Traded Funds - 6.3%
iShares Russell 1000 Growth Index Fund	50,000		2,750,000
iShares S&P 500 Growth Index Fund	41,000		2,661,310

			5,411,310

Health Care Equipment - 2.2%
Zimmer Holdings, Inc. *	24,200		1,896,796

Home Improvement Retail - 5.1%
Home Depot, Inc.	107,900		4,333,264

Hotels, Resorts & Cruise Lines - 4.3%
Carnival Corporation	75,900		3,722,895

Hypermarkets & Super Centers - 3.7%
Wal-Mart Stores, Inc.	68,100		3,144,858

Industrial Gases - 0.8%
Praxair, Inc.	11,900		706,027

Life Sciences Tools & Services - 4.1%
Covance, Inc. *	59,300		3,493,363

Movies & Entertainment - 1.9%
Viacom, Inc. (CI.B) *	40,300		1,653,509

Multi-Line Insurance - 5.7%
American International Group, Inc.	67,600		4,844,216

Oil & Gas Equipment & Services - 3.4%
BJ Services Company	98,600		2,890,952

Oil & Gas Storage & Transportation - 5.9%
Williams Companies, Inc.	193,500		5,054,220

Other Diversified Financial Services - 3.3%
Citigroup, Inc.	50,200		2,796,140

Pharmaceuticals - 4.4%
Johnson & Johnson	56,500		3,730,130

Soft Drinks -1.5%
PepsiCo, Inc.	21,000		1,313,550

Systems Software -2.0%
Microsoft Corporation	57,900		1,728,894

Trading Companies & Distributors - 4.4%
W.W. Grainger, Inc.	54,200		3,790,748

TOTAL COMMON STOCK (Cost $70,345,176)		$	83,409,348


	Principal Amount		Value
ASSET BACKED COMMERCIAL PAPER - 2.8%
Financial Companies - Diversified -1.2%
Amsterdam Funding Corporation
5.31%, 1/3/2007		1,000,000		999,705

Financial Companies - Miscellaneous Receivables -1.6%
Fairway Finance Corporation
5.35%, 1/5/2007		1,400,000		1,399,174

TOTAL ASSET BACKED COMMERCIAL PAPER (Cost $2,398,879)			$	2,398,879

REPURCHASE AGREEMENT - 0.3%
United Missouri Bank, 4.85%, dated 12-29-06, matures 01-02-07; repurchase amount of $257,138 (Collateralized by FHLMC, 5.00%, 09-15-36 with a value of $262,957)	$	257,000	$	257,000

TOTAL REPURCHASE AGREEMENT (Cost $257,000)			$	257,000

Total Investments (SBL Y Fund) (Cost $73,001,055) -100.4%			$	86,065,227
Liabilities in Excess of Other Assets - (0.4)%				(370,179	)

TOTAL NET ASSETS -100.0%			$	85,695,048

Footnotes

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of the financial statements.

152


Schedule of Investments		Series Y (Select 25 Series)
December 31, 2006 - continued

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $73,388,747.

*	- Non-income producing security

1	- Security is segregated as collateral for open written options contracts.

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

153

Series Y

(Select 25 Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	86,065,227
Cash		104
Receivables:
Fund shares sold		49,787
Dividends		35,689
Prepaid expenses		2,368

Total assets		86,153,175

Liabilities:
Payable for:
Fund shares redeemed		85,708
Written options, at value
(premiums received, $ 93,926)		286,560
Management fees		54,491
Custodian fees		1,641
Transfer agent/maintenance fees		2,083
Administration fees		6,992
Professional fees		15,757
Other		3,495
Directors’ fees		1,400

Total liabilities		458,127

Net Assets	$	85,695,048

Net assets consist of:
Paid in capital	$	105,799,928
Undistributed net investment income		140,430
Accumulated net realized loss on sale of investments and options written		(33,116,848	)
Net unrealized appreciation in value of investments and options written		12,871,538

Net assets	$	85,695,048

Capital shares authorized		Unlimited
Capital shares outstanding		7,905,694
Net asset value per share (net assets divided by shares outstanding)	$	10.84

¹Investments, at cost	$	73,001,055

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	594,899
Interest		165,948

Total investment income		760,847

Expenses:
Management fees		490,145
Custodian fees		11,975
Transfer agent/maintenance fees		25,148
Administration fees		62,343
Directors’ fees		2,944
Professional fees		17,389
Reports to shareholders		8,597
Other expenses		1,888

Total expenses		620,429
Less: Earnings credits applied		(12	)

Net expenses		620,417

Net investment income		140,430

Net Realized and Unrealized Gain:
Net realized gain during the year on:
Investments		3,680,983
Options written		176,247

Net realized gain		3,857,230

Net unrealized appreciation (depreciation) during the year on:
Investments		5,719,478
Options written		(202,405	)

Net unrealized appreciation		5,517,073

Net realized and unrealized gain		9,374,303

Net increase in net assets resulting from operations	$	9,514,733

See accompanying notes.

154


		Series Y
Statement of Changes in Net Assets		(Select 25 Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment income (loss)	$	140,430		$	(13,661	)
Net realized gain during the year on investments and options written		3,857,230			1,552,451
Net unrealized appreciation during the year on investments and options written		5,517,073			2,068,207

Net increase in net assets resulting from operations		9,514,733			3,606,997

Capital share transactions:
Proceeds from sale of shares		37,946,575			13,147,535
Issuance of shares in connection with SBL G merger (Note 14)		42,870,151			—
Cost of shares redeemed		(41,654,270	)		(13,568,691	)

Net increase (decrease) from capital share transactions		39,162,456			(421,156	)

Net increase in net assets		48,677,189			3,185,841

Net assets:
Beginning of year		37,017,859			33,832,018

End of year	$	85,695,048		$	37,017,859

Undistributed net investment income at end of year	$	140,430		$	—

Capital Share Activity:
Shares sold		3,680,058			1,425,367
Shares issued in connection with SBL Series G merger (Note 14)		4,606,863			—
Shares redeemed		(4,055,072	)		(1,501,879	)

Total capital share activity		4,231,849			(76,512	)

See accompanying notes.

155


Financial Highlights	Series Y
Selected data for each share of capital stock outstanding throughout each year	(Select 25 Series	)


	2006^d			2005			2004			2003			Year Ended, December 31, 2002
Per Share Data
Net asset value, beginning of period	$	10.08		$	9.02		$	8.08		$	6.86		$	9.35

Income (loss) from investment operations:
Net investment income (loss)		0.02			—			(0.01	)		—			(0.01	)
Net gain (loss) on securities (realized and unrealized)		0.74			1.06			0.95			1.22			(2.48	)

Total from investment operations		0.76			1.06			0.94			1.22			(2.49	)

Net asset value, end of period	$	10.84		$	10.08		$	9.02		$	8.08		$	6.86

Total Return^a		7.54	%		11.75	%		11.63	%		17.78	%		(26.63	%)

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	85,695		$	37,018		$	33,832		$	34,790		$	34,286

Ratios to average net assets:
Net investment income (loss)		0.21	%		(0.04	%)		(0.15	%)		(0.01	%)		(0.18	%)
Total expenses^b		0.95	%		0.99	%		0.95	%		0.93	%		0.89	%
Net expenses^c		0.95	%		0.99	%		0.95	%		0.93	%		0.89	%

Portfolio turnover rate		40	%		28	%		42	%		49	%		34	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

The financial highlights for Series Y as set forth herein exclude the historical financial highlights of Series G. The assets of Series G were acquired by Series Y on June 16, 2006. A total of $40,543,215 was excluded from purchases in the portfolio turnover calculation, which represents the cost of the securities Series Y received as a result of the merger.

See accompanying notes.

156


		Series Z
Managers’ Commentary		(Alpha Opportunity Series)
February 15, 2007		(unaudited)



Bill Jenkins		Mark Lamb
Co-Portfolio Manager		Co-Portfolio Manager

To Our Shareholders:

For the year ended December 31, 2006, Series Z of the SBL Fund - Alpha Opportunity Series total return was 13.13%, trailing the Series’ median peer group return of 13.92% and the 15.79% return for the costless S&P 500 Total Return Index. Although disappointed with the Series’ return that trailed its S&P 500 benchmark, we believe our investment approach delivers significant long-term value, as demonstrated by the Series’ cumulative total return of 60.72% since its July 7, 2003 inception, which exceeded the S&P 500’s Total Return by 10.27%.

During this period, the performance of the Series’ assets managed using the active value strategy underperformed the index, while the passive strategy of the Series performed as expected. The passive strategy replicates the index by investing in high-quality, short-term fixed income instruments and by being long the index futures. While the passive strategy provides the necessary liquidity, the active strategy focuses on adding long-term value while maintaining a risk profile that is less than the marketplace in general.

The 2006 underperformance of the Series’ assets managed using the active value strategy can be partially attributed to the strong rise in stocks in 2006 which made it difficult to make absolute return in the portfolio’s short positions. Further contributing to underperformance were the strong performances by non-theme sectors such as finance where we were not only underweighted but short in some portions.

The fundamental investment philosophy of the active value strategy 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. We believe those decisions are best made using technical analysis. We believe technical analysis, the study of price trends, allows us to efficiently capture gains and avoid material losses. The third tenet of our philosophy is that changes in stock prices lead changes in fundamental corporate developments. A proactive asset management approach helps to keep our investment themes fresh and our risk levels moderate.

2006 was a year marked by great volatility. Our active value strategy investments in the Energy sector performed well as that sector returned over 22% during the year. Individual holdings remain broadly diversified within sector concentrations in Industrials and Materials of 23.5% and 22.5%, respectively. Our top five profitable positions were in these three sectors: McDermott in Energy; General Cable, Amphenol and Commscope in Industrials; and Votorantim Cellulose in Materials.

We were most disappointed in the short exposure of the active value strategy portfolio. It is very difficult to achieve an absolute positive return in a year when stocks record double digit gains. We ended the year at a low 4% short position, for the active value portion of the Series, primarily due to our constructive view of the 2007 market. The most disappointing short position for us was PNC Bank. Despite this disappointment, however, we remain negative on regional banks and select consumer stocks. Regional bank profits should continue to suffer from a competitive lending environment and an inverted yield curve. Subdued economic growth in 2007 will put added pressure on the consumer, negatively impacting the profits of restaurants and other retail companies.

We are optimistic on the outlook for stocks in 2007. Equity valuations in general remain fair across most sectors, with no individual sector appearing meaningfully overvalued. Also favoring stocks is the large amount of cash on the sidelines. These large cash positions, coupled with net equity exposures for long/short funds near historic lows, suggest stock prices will continue to trend higher in 2007. Fundamentally, the revision of third quarter GDP growth up from 1.6% to 2.0% leads us to believe that the U.S. economy is basing, thereby averting recession next year. This should allow for the resumption of the secular uptrend in commodities.

157


		Series Z
Managers’ Commentary		(Alpha Opportunity Series)
February 15, 2007		(unaudited)

There continue to be opportunities within commodities and companies related to their production. In our active value strategy, we like a broad spectrum of agricultural related stocks ranging from seed producers, such as Monsanto, to makers of fertilizers, like Potash. The agricultural theme carries over into industrial companies such as Deere and Case New Holland. Current weakness in commodities may take awhile to work out. In the meantime, opportunities in transportation and infrastructure are being addressed.

All the best for 2007,

Mark Lamb

Co-Portfolio Manager

Security Management Company, LLC

William H. Jenkins

Mainstream Investment Advisers, LLC

(Sub-adviser for the active value portion of the Fund)

PERFORMANCE

Series Z vs. S&P 500 Index

LOGO

$10,000 Since Inception

The chart above assumes a hypothetical $10,000 investment in Series Z (Alpha Opportunity Series) on July 7, 2003 (date of inception), and reflects the fees and expenses of Series Z. 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 12-31-06¹	1 Year	Since Inception (7-7-03)
Series Z	13.13%	14.59%

Portfolio Composition by Sector*


Consumer Discretionary	2.82	%
Consumer Staples	0.67
Energy	4.55
Financials	(0.54	)
Industrials	16.88
Information Technology	3.54
Materials	12.48
Exchange Traded Funds	0.03
U.S. Agency Bonds & Notes	41.24
Cash & other assets, less liabilities	18.33
Total net assets	100.00	%

*	Securities sold short are netted with long positions in common stocks in the appropriate sectors.

See accompanying notes.

158


		Series Z
Managers’ Commentary		(Alpha Opportunity Series)
December 31, 2006		(unaudited)

PERFORMANCE

Information About Your Series Expenses

Calculating your ongoing series expenses

Example

Actual Expenses

Hypothetical Example for Comparison Purposes

Series Expenses


	Beginning Account Value 07-01-06		Ending Account Value 12-31-06¹		Expenses Paid During Period²
Series Z (Alpha Opportunity Series)
Actual	$	1,000.00	$	1,052.80	$	13.35
Hypothetical		1,000.00		1,012.20		13.09

²	Expenses are equal to the Series annualized expense ratio of 2.58%, net of earnings credits, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

159


Schedule of Investments		Series Z (Alpha Opportunity Series)
December 31, 2006


	Shares	Value
COMMON STOCK - 42.2%
Aerospace & Defense - 1.0%
Empresa Brasileira de Aeronautica S.A. ADR	5,300	$	219,473
Goodrich Corporation	3,200		145,760

			365,233

Airlines - 1.9%
Continental Airlines, Inc. *	2,700		111,375
Copa Holdings S.A.	1,000		46,560
JetBlue Airways Corporation *	17,300		245,660
US Airways Group, Inc. *	5,700		306,945

			710,540

Apparel Retail - 0.3%
Guess ?, Inc. *	1,800		114,174

Apparel, Accessories & Luxury Goods - 1.2%
Jones Apparel Group, Inc.	10,300		344,329
Kellwood Company	3,100		100,812

			445,141

Building Products - 0.3%
American Standard Companies, Inc.	2,000		91,700

Commodity Chemicals - 0.0%
Lyondell Chemical Company	600		15,342

Computer Hardware - 0.3%
Sun Microsystems, Inc. *	18,200		98,644

Computer Storage & Peripherals - 0.9%
Imation Corporation	6,700		311,081

Construction & Engineering - 2.9%
Chicago Bridge & Iron Company N.V.	4,200		114,828
EMCOR Group, Inc. *	2,400		136,440
Insituform Technologies, Inc. *	4,200		108,612
URS Corporation *	9,400		402,790
Washington Group International, Inc. *	5,100		304,929

			1,067,599

Construction & Farm Machinery & Heavy Trucks - 3.8%
AGCO Corporation *	7,900		244,426
American Railcar Industries, Inc.	600		20,424
CNH Global N.V.	500		13,650
Deere & Company (1)	6,200		589,434
Lindsay Corporation	12,400		404,860
Trinity Industries, Inc.	3,400		119,680

			1,392,474

Construction Materials - 0.7%
Texas Industries, Inc.	3,800		244,074

Diversified Chemicals - 0.3%
Dow Chemical Company	2,500		99,850

Diversified Commercial & Professional Services - 0.3%
Ritchie Bros Auctioneers, Inc.	2,000		107,080

Diversified Metals & Mining - 3.1%
AMCOL International Corporation	2,400		66,576
Anglo American plc ADR	9,300		227,013
Brush Engineered Materials, Inc. *	1,400		47,278
Freeport-McMoRan Copper & Gold, Inc. (CI.B)	7,400		412,402
Northern Orion Resources, Inc. *	1,100		4,026
Peru Copper, Inc. *	28,500		97,470
Teck Cominco, Ltd. (CI.B)	2,900		218,515
Titanium Metals Corporation *	1,600		47,216

			1,120,496

Electrical Components & Equipment - 2.1%
Belden CDT, Inc.	3,200		125,088
General Cable Corporation *	6,600		288,486
Thomas & Betts Corporation *	7,500		354,600

			768,174

Environmental & Facilities Services - 0.5%
Allied Waste Industries, Inc. *	3,100		38,099
Layne Christensen Company *	1,500		49,245
Waste Connections, Inc. *	2,200		91,410

			178,754

Exchange Traded Funds - 0.0%
PowerShares DB Commodity Index Tracking Fund	400		9,832

Fertilizers & Agricultural Chemicals - 3.8%
Agrium, Inc.	1,700		53,533
Mosaic Company *	3,400		72,624
Potash Corporation of Saskatchewan, Inc. (1)	6,500		932,620
Sociedad Quimicay Minera de Chile S.A. ADR	2,400		325,368

			1,384,145

General Merchandise Stores - 0.2%
Dollar General Corporation	4,200		67,452

Gold - 1.3%
Barrick Gold Corporation	5,600		171,920
Bema Gold Corporation *	2,600		13,650
Miramar Mining Corporation *	2,500		11,300
Randgold Resources, Ltd. ADR *	12,600		295,596

			492,466

The accompanying notes are an integral part of the financial statements.

160


Schedule of Investments		Series Z (Alpha Opportunity Series)
December 31, 2006 - continued


	Shares		Value
COMMON STOCK (continued)
Homefurnishing Retail - 1.2%
Bed Bath & Beyond, Inc. *		11,200	$	426,720

Hotels, Resorts & Cruise Lines - 0.4%
Lodgian, Inc. *		1,600		21,760
Starwood Hotels & Resorts Worldwide, Inc.		1,800		112,500

				134,260

Industrial Conglomerates - 0.5%
McDermott International, Inc. *		3,400		172,924

Industrial Gases - 0.2%
Praxair, Inc.		1,000		59,330

Industrial Machinery - 2.1%
Ampco-Pittsburgh Corporation		3,300		110,484
Badger Meter, Inc.		400		11,080
Barnes Group, Inc.		3,900		84,825
Nordson Corporation		1,100		54,813
Valmont Industries, Inc.		9,200		510,508

				771,710

Integrated Oil & Gas - 1.8%
Imperial Oil, Ltd.		600		22,098
Suncor Energy, Inc. (1)		8,100		639,171

				661,269

Marine - 0.6%
Kirby Corporation *		5,900		201,367

Office Electronics - 0.2%
Xerox Corporation *		5,300		89,835

Oil & Gas Drilling - 0.8%
ENSCO International, Inc.		2,200		110,132
Pride International, Inc. *		1,000		30,000
Rowan Companies, Inc.		4,400		146,080

				286,212

Oil & Gas Equipment & Services - 0.7%
Lone Star Technologies, Inc. *		5,400		261,414

Oil & Gas Exploration & Production - 0.9%
Devon Energy Corporation		4,900		328,692

Oil & Gas Storage & Transportation - 0.3%
Tsakos Energy Navigation, Ltd.		2,600		119,340

Packaged Foods & Meats - 0.3%
Dean Foods Company *		2,400		101,472
Perdigao S.A. ADR *		400		11,028

				112,500

Paper Products - 1.4%
Aracruz Celulose S.A. ADR		1,900		116,356
Stora Enso Oyj ADR		3,800		60,002
Votorantim Celulose e Papel S.A. ADR		16,800		329,448

				505,806

Personal Products - 0.4%
Estee Lauder Companies, Inc.		3,200		130,624

Precious Metals & Minerals - 0.3%
Coeur d’Alene Mines Corporation *		2,900		14,355
Stillwater Mining Company *		6,200		77,438

				91,793

Real Estate Management & Development - 0.3%
Brookfield Asset Management, Inc.		2,500		120,450

Semiconductor Equipment - 0.2%
MEMC Electronic Materials, Inc. *		2,300		90,022

Semiconductors - 0.1%
Volterra Semiconductor Corporation *		2,100		31,500

Specially Chemicals - 0.5%
Chemtura Corporation		14,900		143,487
Nalco Holding Company *		2,800		57,288

				200,775

Steel - 0.9%
Gerdau Ameristeel Corporation		2,000		17,840
Reliance Steel & Aluminum Company		1,700		66,946
Steel Technologies, Inc.		14,100		247,455

				332,241

Technology Distributors - 2.2%
Anixter International, Inc. * (1)		14,900		809,070

Trading Companies & Distributors - 1.0%
UAP Holding Corporation		14,200		357,556

TOTAL COMMON STOCK (Cost $15,632,007)			$	15,379,661


	Principal Amount		Value
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES - 41.2%
Federal Farm Credit Discount Note
5.13% - 2007 (1)	$	1,150,000		1,147,866
Federal Home Loan Bank
5.125% - 2007 (1)		725,000		716,338
5.14% - 2007 (1)		375,000		372,382
5.14% - 2007 (1)		1,000,000		992,732
Federal Home Loan Mortgage Corporation
5.087% - 2007 (2)		2,975,000		2,972,450
5.125% - 2007 (1)		200,000		198,379
5.143% - 2007 (1)		300,000		298,547

The accompanying notes are an integral part of the financial statements.

161


Schedule of Investments		Series Z (Alpha Opportunity Series)
December 31, 2006 - continued


	Principal Amount		Value
U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (continued)
Federal Home Loan Mortgage Corporation (continued)
5.16% - 2007 (1)	$	475,000	$	471,277
5.155% - 2007 (1)		350,000		346,565
Federal National Mortgage Association
5.115% - 2007 (1)		2,017,000		2,017,000
5.13% - 2007 (1)		1,550,000		1,544,910
5.14% - 2007 (1)		700,000		697,107
5.14% - 2007 (1)		250,000		248,753
5.14% - 2007 (1)		1,200,000		1,192,818
5.15% - 2007 (1)		575,000		573,276
5.145% - 2007 (1)		175,000		173,581
5.152% - 2007 (1)		575,000		569,848
5.16% - 2007 (1)		500,000		494,525

TOTAL U.S. GOVERNMENT SPONSORED AGENCY BONDS & NOTES (Cost $15,023,912)			$	15,028,354

Total Investments (SBL Z Fund) (Cost $30,655,919) - 83.4%			$	30,408,015
Other Assets in Excess of Liabilities - 16.6%				6.034.151

TOTAL NET ASSETS - 100.0%			$	36,442,166

Schedule of Securities Sold Short

December 31, 2006

SBL Z Fund


	Shares		Value
COMMON STOCK - (1.8)%
Asset Management & Custody Banks - (0.2)%
Calamos Asset Management, Inc.	(2,100	)	$	(56,343	)

Building Products - (0.1)%
Griffon Corporation *	(1,000	)		(25,500	)

Computer & Electronics Retail - (0.3)%
RadioShack Corporation	(6,500	)		(109,070	)

Electronic Equipment Manufacturers - 0.0%
AU Optronics Corporation ADR	(500	)		(6,905	)

Regional Banks - (0.7)%
Sterling Bancorp	(2,900	)		(57,130	)
UnionBanCal Corporation	(500	)		(30,625	)
Zions Bancorporation	(1,900	)		(156,636	)

				(244,391	)

Restaurants - (0.1)%
Wendy’s International, Inc.	(1,500	)		(49,635	)

Semiconductor Equipment - (0.2)%
Rudolph Technologies, Inc. *	(4,400	)		(70,048	)

Systems Software - (0.2)%
CA, Inc.	(3,100	)		(70,215	)

Thrifts & Mortgage Finance - 0.0%
Flagstar Bancorp, Inc.	(1,000	)		(14,840	)

TOTAL COMMON STOCK (Proceeds $641,909)				(646,947	)

Total Securities Sold Short (SBL Z Fund) (Proceeds $641,909)				(646,947	)

Footnotes

Percentages are stated as a percent of net assets.

For federal income tax purposes the identified cost of investments owned at 12/31/2006 was $30,738,165.

*	- Non-income producing security

1	- Security is segregated as collateral for open futures contracts.

2	- Security is segregated as collateral for short positions.

Glossary:

ADR

- American Depositary Receipt

plc

- Public Limited Company

See notes to financial statements.

The accompanying notes are an integral part of the financial statements.

162

Series Z

(Alpha Opportunity Series)

Statement of Assets and Liabilities

December 31, 2006


Assets:
Investments, at value¹	$	30,408,015
Cash		6,192,633
Receivables:
Fund shares sold		57,395
Securities sold		3,254,705
Dividends		11,925
Prepaid expenses		1,865

Total assets		39,926,538

Liabilities:
Securities sold short, at value²		646,947
Payable for:
Securities purchased		2,638,087
Fund shares redeemed		55,577
Variation margin in futures		57,756
Management fees		61,782
Transfer agent/maintenance fees		2,083
Administration fees		6,034
Professional fees		14,245
Directors’ fees		500
Other fees		1,361

Total liabilities		3,484,372

Net Assets	$	36,442,166

Net assets consist of:
Paid in capital	$	32,916,558
Undistributed net realized gain on sale of investments, futures and securities sold short		3,781,561
Net unrealized depreciation in value of investments, futures and securities sold short		(255,953	)

Net assets	$	36,442,166

Capital shares authorized		unlimited
Capital shares outstanding		2,611,313
Net asset value per share (net assets divided by shares outstanding)	$	13.96

¹Investments, at cost	$	30,655,919
²Securites sold short, at proceeds		641,909

Statement of Operations

For the Year Ended December 31, 2006


Investment Income:
Dividends	$	156,474
Interest		622,197

Total investment income		778,671

Expenses:
Management fees		646,278
Custodian fees		56,134
Transfer agent/maintenance fees		25,104
Administration fees		49,468
Directors’ fees		1,299
Professional fees		23,603
Reports to shareholders		4,073
Other expenses		1,001
Dividends on securities sold short		27,219

Total expenses		834,179

Less: Earnings credits applied		(47,753	)

Net expenses		786,426

Net investment loss		(7,755	)

Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the year on:
Investments		3,008,951
Futures		1,135,612
Securities sold short		(431,843	)

Net realized gain		3,712,720

Net unrealized appreciation (depreciation) during the year on:
Investments		(169,373	)
Futures		132,809
Securities sold short		(5,038	)

Net unrealized depreciation		(41,602	)

Net realized and unrealized gain		3,671,118

Net increase in net assets resulting from operations	$	3,663,363

See accompanying notes.

163


		Series Z
Statement of Changes in Net Assets		(Alpha Opportunity Series)


	Year Ended December 31, 2006			Year Ended December 31, 2005
Increase (decrease) in net assets from operations:
Net investment loss	$	(7,755	)	$	(45,586	)
Net realized gain during the year on investments, futures, and securities sold short		3,712,720			2,178,395
Net unrealized depreciation during the year on investments, futures, and securities sold short		(41,602	)		(576,530	)

Net increase in net assets resulting from operations		3,663,363			1,556,279

Capital share transactions:
Proceeds from sale of shares		19,973,403			14,871,584
Cost of shares redeemed		(12,854,101	)		(9,929,853	)

Net increase from capital share transactions		7,119,302			4,941,731

Net increase in net assets		10,782,665			6,498,010

Net assets:
Beginning of year		25,659,501			19,161,491

End of year	$	36,442,166		$	25,659,501

Accumulated net investment loss at end of year	$	—		$	—

Capital Share Activity:
Shares sold		1,505,711			1,269,271
Shares redeemed		(973,096	)		(846,525	)

Total capital share activity		532,615			422,746

See accompanying notes.

164


Financial Highlights		Series Z
Selected data for each share of capital stock outstanding throughout each period		(Alpha Opportunity Series)


	Period Ended, December 31,
	2006			2005			2004			2003^d
Per Share Data
Net asset value, beginning of period	$	12.34		$	11.57		$	11.18		$	10.00

Income (loss) from investment operations:
Net investment income (loss)		—			(0.02	)		(0.07	)		(0.06	)
Net gain (loss) on securities (realized and unrealized)		1.62			0.79			1.42			1.88

Total from investment operations		1.62			0.77			1.35			1.82

Less distributions:
Distributions from realized gains		—			—			(0.96	)		(0.64	)

Total distributions		—			—			(0.96	)		(0.64	)

Net asset value, end of period	$	13.96		$	12.34		$	11.57		$	11.18

Total Return^a		13.13	%		6.66	%		12.58	%		18.33	%

Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	36,442		$	25,660		$	19,161		$	6,738

Ratios to average net assets:
Net investment loss		(0.03	%)		(0.21	%)		(1.12	%)		(1.33	%)
Total expenses^b		2.94	%		2.50	%		2.78	%		2.62	%
Net expenses^c		2.62	%		2.50	%		2.57	%		2.50	%
Expenses prior to custodian earnings credits and net of expense waivers		2.78	%		2.50	%		2.57	%		2.52	%
Net expenses prior to performance fee adjustment^e		2.47	%		2.47	%		—			—

Portfolio turnover rate		1,285	%		1,509	%		1,054	%		966	%

^b	Total expense information reflects expense ratios absent fund expense reductions by the Investment Manager, and earnings credits, as applicable.

^c	Net expense information reflects the expense ratios after voluntary expense waivers, reimbursements and custodian earnings credits, as applicable.

^d	Series Z was initially capitalized on July 7, 2003 with a net asset value of $10 per share. Percentage amounts for the period, except for total return, have been annualized.

^e	Net expenses prior to performance fee adjustment reflect ratios after voluntary expense waivers, reimbursements, custodian earnings credits, and before performance fee adjustments, as applicable.

See accompanying notes.

165

Notes to Financial Statements

December 31, 2006

1.	Significant Accounting Policies

SBL Fund (The Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company of the series type. Each series, in effect, represents a separate fund. The Fund is required to account for the assets of each series separately and to allocate general liabilities of the Fund to each series based on the net asset value of each series. Shares of the Fund will be sold only to separate accounts of Security Benefit Life Insurance Company (SBL). The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.

A. Security Valuation - Valuations of the Fund’s securities are supplied by pricing services approved by the Board of Directors. The Fund’s officers, under the general supervision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing services. Each security owned by a Fund that is listed on a securities exchange is valued at its last sale price on that exchange on the date as of which assets are valued. Where the security is listed on more than one exchange, the Fund will use the price of that exchange that it generally considers to be the principal exchange on which the stock is traded. Securities listed on the Nasdaq Stock Market, Inc. (“Nasdaq”) will be valued at the Nasdaq Official Closing Price. Securities for which market quotations are not readily available are valued by a pricing service considering securities with similar yields, quality, type of issue, coupon, duration and rating. If there is no bid price or if the bid price is deemed to be unsatisfactory by the Board of Directors or by the Fund's investment manager, then the securities are valued in good faith by such method as the Board of Directors determines will reflect the fair value. If events occur after the close of a foreign exchange that will affect the value of a fund’s 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’s 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. The Fund generally will value short-term debt securities at prices based on market quotations for such securities or securities of similar type, yield, quality and duration, except those securities purchased with 60 days or less to maturity are valued on the basis of amortized cost which approximates market value.

Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange. The values of foreign securities are determined as of the close of such foreign markets or the close of the New York Stock Exchange, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of business. 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 Interactive Data Corporation’s Fair Value Information Service in valuing foreign securities. Since foreign securities may be denominated in a foreign currency and involve settlement and pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Series to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market value and/or credit risk of the investments.

The senior floating rate interests (loans) in which Series P invests are not listed on any securities exchange or board of trade. Accordingly, determinations of the value of loans may be based on infrequent and dated trades. Typically loans are valued using information provided by an independent third party pricing service. If the pricing service cannot or does not provide a valuation for a particular loan or such valuation is deemed unreliable, such loan is fair valued. In determining fair value, consideration is given to several factors, which may include, among others, one or more of the following: the fundamental business data relating to the issuer or borrower; an evaluation of the forces which influence the market in which these loans are purchased and sold; type of holding; financial statements of the borrower; cost at date of purchase; size of holding; credit worthiness and cash flow of issuer; information as to any transactions in, or offers for, the holding; price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; coupon payments; quality, value and saleability of collateral securing the loan; business prospects of the issuer/borrower, including any ability to obtain money or resources from a parent or affiliate; the portfolio manager’s and/or the market’s assessment of the borrower’s management; prospects for the borrower’s industry, and multiples (of earnings and/or cash flow) being paid for similar businesses in that industry; borrower’s competitive position within the industry; borrower’s ability to access additional liquidity through public and/or private markets; and other relevant factors.

B. Repurchase Agreements - In connection with transactions in repurchase agreements, it is the Fund’s policy that its custodian take possession of the underlying collateral and that the fair value of the collateral exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Funds may be delayed or limited.

166

Notes to Financial Statements

December 31, 2006

C. Foreign Currency Transactions – The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.

The Fund does not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains and 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 other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates.

D. Forward Foreign Currency Exchange Contracts – The Fund may enter into forward foreign exchange contracts in order to manage foreign currency risk from purchase or sale of securities denominated in foreign currency. A 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 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 Fund 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 rates. The Fund 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 series 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 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 series. The series realizes a gain or loss when the contract is closed or expires.

F. Options Written – The Fund may purchase put and call options and write such options on a covered basis on securities that are traded on recognized securities exchanges and over-the-counter markets. Call and put options on securities give the holder the right to purchase or sell (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 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 series and the price of the option, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract.

The premium received for a written option is recorded as an asset with an equal liability which is marked to market based on the option’s quoted daily settlement price. Fluctuations in the value of such instruments are recorded as unrealized appreciation (depreciation) until terminated, at which time realized gains and losses are recognized.

G. Security Transactions and Investment Income – Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Dividend income is accrued as of 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 is informed of the dividend in the exercise of reasonable diligence. Interest income is recognized on the accrual basis including the amortization of premiums and accretion of discounts on debt securities.

H. Expenses – Expenses that are directly related to one of the series are charged directly to that series. Other operating expenses are allocated to the series on the basis of relative net assets within the Fund.

I. Distributions to Shareholders – Distributions to shareholders are recorded on the ex-dividend date. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes.

J. Taxes – The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its taxable net income and net realized gains sufficient to relieve it from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.

167

Notes to Financial Statements

December 31, 2006

K. Earnings Credits – Under the fee agreement with the custodian, the Fund 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.

L. 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.

M. Securities Sold Short – Certain of the Series may make short sales “against the box,” in which the Series enters into a short sale of a security it owns. At no time will more than 15% of the value of the Series’ net assets be in deposits on short sales against the box. If a Series makes a short sale, the 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 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 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 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 Series may make short sales that are not “against the box,” which create opportunities to increase the 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 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 Series are liable for any dividends or interest payable on securities while those securities are in a short position. As collateral for its short positions, the Series are required under the Investment Company Act of 1940 to maintain segregated assets consisting of cash, cash equivalents or liquid securities. These segregated assets are valued consistent with Note 1a above. These segregated assets are required to be adjusted daily to reflect changes in the market value of the securities sold short.

N. Indemnifications – Under the Fund’s organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnification to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred, and may not occur. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

O. Recent Accounting Pronouncements – 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 e taken in the course of preparing the Company’s 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. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 but not before its last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined.

In September 2006, FASB issued Statement of 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 December 31, 2006, the Fund is currently evaluating the impact of FAS 157.

P. Senior Loans – Senior loans in which certain of the Series invests generally pay interest rates which are periodically adjusted by reference to short-term, floating rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the London Inter-Bank Offered Rate (LIBOR), (ii) the prime rate offered by one or more major United States banks, or (iii) the bank’s certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. The interest rate indicated is the rate in effect at December 31, 2006.

168

Notes to Financial Statements

December 31, 2006

2.	Management fees and other transactions with affiliates

Management fees are paid monthly to Security Management Company, LLC (SMC), based on the following annual rates:


	Management Fees (as a % of net assets)		Management Fee Waivers (as a % of net assets)
Series A (Equity Series)	0.75	%	N/A
Series B (Large Cap Value Series)	0.65		N/A
Series C (Money Market Series)	0.50		N/A
Series D (Global Series)	1.00		N/A
Series E (Diversified Income Series)	0.75		0.15
Series H (Enhanced Index Series)	0.75		0.25
Series J (Mid Cap Growth Series)	0.75		N/A
Series N (Managed Asset Allocation Series)	1.00		N/A
Series O (Equity Income Series)	1.00		N/A
Series P (High Yield Series)	0.75		N/A
Series Q (Small Cap Value Series)	1.00		N/A
Series V (Mid Cap Value Series)	0.75		N/A
Series X (Small Cap Growth Series)	1.00		N/A
Series Y (Select 25 Series)	0.75		N/A
Series Z (Alpha Opportunity Series)*	2.15	¹	N/A

*	Series Z’s management fee will range from 1.25% to 2.75% of average daily net assets as discussed below.

SMC receives a management fee from Series Z that consists of two components. The first component is an annual base fee equal to 2.00% of Series Z’s average daily net assets. The second component is a base fee adjustment that either increases or decreases the base fee, depending on how Series Z performed relative to the S&P 500 Index over the prior 12-month period (the “Measuring Period”). SMC will receive the base fee of 2.00% without adjustment if the performance of Series Z matches the performance of the S&P 500 Index. The maximum base fee adjustment at each calculation period is 0.75% up or down in the event that Series Z outperforms or underperforms the S&P 500 Index by 15% or more. SMC calculates the base fee adjustment each month based upon Series Z’s performance relative to the S&P 500 Index during the Performance Period ending on the last day of the month. If Series Z outperforms the S&P 500 Index over the Measuring Period, the base fee is adjusted upward. The upward adjustment is equal to the amount by which Series Z’s performance exceeds that of the S&P 500 Index divided by 15 and multiplied by the average daily net assets of Series Z during the Measuring Period to determine the base fee adjustment for the month. If Series Z underperforms the Index, the base fee is adjusted downward on the same basis. SMC will determine the dollar amount of any performance adjustment each month by multiplying the adjustment percentage by the average daily net assets of Series Z during the Measuring Period and dividing by 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.

SMC also acts as the administrative agent and transfer agent for the Fund, and as such performs administrative functions, transfer agency and dividend disbursing services, and the bookkeeping, accounting and pricing functions for each series. For these services, the Investment Manager receives the following:


	Administrative Fees (as a % of net assets)*
Series A (Equity Series)	0.095	%
Series B (Large Cap Value Series)	0.095
Series C (Money Market Series)	0.095
Series D (Global Series)	0.150
Series E (Diversified Income Series)	0.095
Series H (Enhanced Index Series)	0.095
Series J (Mid Cap Growth Series)	0.095
Series N (Managed Asset Allocation Series)	0.150
Series O (Equity Income Series)	0.095
Series P (High Yield Series)	0.095
Series Q (Small Cap Value Series)	0.095
Series V (Mid Cap Value Series)	0.095
Series X (Small Cap Growth Series)	0.095
Series Y (Select 25 Series)	0.095
Series Z (Alpha Opportunity Series)	0.150

*	The minimum annual charge for administrative fees is $25,000 for Series A, B, C, E, H, J, O, P, Q, V, X, Y and Z and $60,000 for Series D and N.

SMC is paid the following for providing transfer agent services to the Fund:


Annual charge per account	$	5.00 - $8.00
Transaction fee	$	0.60 -$1.10
Minimum annual charge per series	$	25,000
Certain out-of-pocket charges		Varies

The investment advisory contract between the Fund and SMC provides that the total annual expenses of each series (including management fees, but excluding interest, taxes, brokerage commissions and extraordinary expenses) will not exceed the level of expenses which the series is permitted to bear under the most restrictive expense limitation imposed by any state in which shares of the Fund are then offered for sale. For the year ended December 31, 2006, SMC agreed to limit the total expenses for Series P, V and X to an annual rate of 2% of the average daily net asset value of each respective series, and limit Series H, Q and Y to an annual rate of 1.75%. SMC has agreed to limit the total other expenses for Series Z to 0.50%.

At December 31, 2006, Security Benefit Life Insurance Company, through their insurance company separate accounts, owned 100% of the outstanding shares of each Series of the Fund, except for Series P in which it owned 99%.

169

Notes to Financial Statements

December 31, 2006

3.	Unrealized Appreciation/Depreciation

For federal income tax purposes, the amounts of unrealized appreciation (depreciation) on investments at December 31, 2006, were as follows:


	Gross unrealized appreciation		Gross unrealized (depreciation)			Net unrealized appreciation (depreciation)
Series A (Equity)	$	102,291,232	$	(18,968,201	)	$	83,323,031
Series B (Large Cap Value)		102,885,813		(1,154,319	)		101,731,494
Series C (Money Market)		6,903		(2,752	)		4,151
Series D (Global)		180,148,650		(6,218,217	)		173,930,433
Series E (Diversified Income)		260,906		(2,700,613	)		(2,439,707	)
Series H (Enhanced Index)		9,836,898		(1,321,415	)		8,515,483
Series J (Mid Cap Growth)		107,612,153		(33,512,542	)		74,099,611
Series N (Managed Asset Allocation)		13,195,817		(1,766,043	)		11,429,774
Series O (Equity Income)		59,392,156		(5,648,369	)		53,743,787
Series P (High Yield)		3,808,267		(2,290,089	)		1,518,178
Series Q (Small Cap Value)		39,441,814		(3,902,356	)		35,539,458
Series V (Mid Cap Value)		126,436,208		(13,092,507	)		113,343,701
Series X (Small Cap Growth)		10,891,692		(1,576,476	)		9,315,216
Series Y (Select 25)		14,684,897		(2,008,417	)		12,676,480
Series Z (Alpha Opportunity)		61,680		(391,830	)		(330,150	)

4.	Restricted Securities

As of December 31, 2006, the following funds contained restricted securities. Market value, cost, percentage of total net assets and acquisition dates are as follows:


	Number of Shares	Price Per Share		Market Value		Cost		% of Net Assets		Acquisition Dates
Series J
ThermoEnergy Corporation PIPE	1,380,000	$	0.14	$	193,200	$	1,302,103	0.1	%	07-14-05
ThermoEnergy Corporation Warrant	1,380,000		0.0449		61,962		353,897	0.0	%	07-14-05
Series V
ThermoEnergy Corporation PIPE	1,130,000		0.14		158,200		1,066,215	0.1	%	07-14-05
ThermoEnergy Corporation Warrant	1,130,000		0.0449		50,737		289,785	0.0	%	07-14-05

These securities have been valued after considering certain pertinent factors, including the results of operations since the date of purchase, and the recent sales price of its common stock. No quoted market price exists for these shares. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and difference could be material.

170

Notes to Financial Statements

December 31, 2006

5.	Fair Valued Securities

As of December 31, 2006, the following Series contained securities that were valued using procedures approved by the Board of Directors. Market value, cost and percentage of total net assets are as follows:


	Market Value		% of Net Assets
Series C	$	4,089,050	4.1	%
Series D		5,591,492	1.0	%
Series E		—	0.0	%
Series J		973,559	0.3	%
Series N		175,198	0.2	%
Series P		148,225	0.1	%
Series V		833,554	0.2	%

6.	Illiquid Securities

As of December 31, 2006, the following Series contained securities that were considered illiquid. Market value, cost and percentage of total net assets are as follows:


	Market Value		Cost		% of Net Assets
Series E	$	—	$	500,000	0.0	%
Series H		341		529	0.0	%
Series J		17,855,633		30,572,514	4.7	%
Series N		1,110,498		1,121,209	1.1	%
Series P		—		1,463,258	0.0	%
Series V		4,837,390		6,027,030	1.1	%

7.	144A Securities

As of December 31, 2006, the following Series contained securities that were considered 144A securities. Market value, cost and percentage of total net assets are as follows:


	Market Value		Cost		% of Net Assets
Series C	$	1,550,970	$	1,550,805	1.6	%
Series E		13,157,369		13,140,000	8.7	%
Series N		2,145,936		2,113,596	2.0	%
Series P		20,334,605		19,919,651	19.2	%
Series Q		36,975		45,053	0.0	%

8.	Investment Transactions

Investment transactions for the year ended December 31, 2006, (excluding overnight investments, short–term commercial paper and U.S. government securities) were as follows:


	Purchases		Proceeds from Sales
Series A (Equity)	$	111,472,345	$	186,930,966
Series B (Large Cap Value)		83,940,646		105,861,994
Series C (Money Market)		—		—
Series D (Global)		124,296,345		153,042,585
Series E (Diversified Income)		60,407,639		43,776,619
Series H (Enhanced Index)		86,529,588		86,084,192
Series J (Mid Cap Growth)		118,239,439		176,426,524
Series N (Managed Asset Allocation)		40,671,217		43,203,719
Series O (Equity Income)		48,225,625		60,158,090
Series P (High Yield)		63,306,592		41,822,498
Series Q (Small Cap Value)		65,231,022		64,581,454
Series V (Mid Cap Value)		179,157,774		171,467,116
Series X (Small Cap Growth)		130,127,584		134,893,273
Series Y (Select 25)		25,189,264		27,220,905
Series Z (Alpha Opportunity)		204,129,353		206,158,761

9.	Open Futures Contracts

Open futures contracts for Series E, Series H and Series Z as of December 31, 2006 were as follows:


	Position	Number of Contracts	Expiration Date	Contract Amount		Market Value		Unrealized Loss
Series E
U.S. 5-Year Note Future	Long	15	03-30-2007	$	1,587,474	$	1,575,938	$	(11,536	)
U.S. 10-Year Note Future	Long	57	03-21-2007		6,196,278		6,125,719		(70,559	)
U.S. Long Bond Future	Long	10	03-21-2007		1,136,129		1,114,375		(21,754	)

				$	8,919,881	$	8,816,032	$	(103,849	)

Series H
S&P 500 E-Mini Future	Long	37	03-16-2007	$	2,644,273	$	2,642,725	$	(1,548	)
Series Z
S&P 500 Index Future	Long	42	03-16-2007	$	15,001,211	$	14,998,200	$	(3,0.11	)

171

Notes to Financial Statements

December 31, 2006

10.

Options Written

Information as to options written by the Series during the year ended December 31, 2006 and options outstanding at year end is provided below.

Series A Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
Shaw Group, Inc.	1-19-07	$	30.00	373	$	134,280
Transocean, Inc.	1-12-07		85.00	402		44,220

Total call options outstanding (premiums received, $121,596)				775	$	178,500

Series A Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	—		$	—
Opened	9,531			1,117,698
Expired	(2,952	)		(409,330	)
Exercised	(5,804	)		(586,772	)

Balance at December 31, 2006	775		$	121,596

Series A Put Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	747		$	149,266
Opened	10,665			1,483,632
Bought Back	(166	)		(49,466	)
Expired	(8,915	)		(1,268,212	)
Exercised	(2,331	)		(315,220	)

Balance at December 31, 2006	—		$	—

Series B Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
Shaw Group, Inc.	1-19-07	$	30.00	220	$	79,200
Transocean, Inc.	1-12-07		85.00	391		43,010

Total call options outstanding (premiums received, $101,419)				611	$	122,210

Series B Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	—		$	—
Opened	10,170			1,206,872
Expired	(4,158	)		(436,846	)
Exercised	(5,401	)		(668,607	)

Balance at December 31, 2006	611		$	101,419

Series B Put Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	650		$	135,564
Opened	3,268			779,019
Bought Back	(161	)		(47,976	)
Expired	(3,366	)		(750,093	)
Exercised	(391	)		(116,514	)

Balance at December 31, 2006	—		$	—

Series J Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
Northern Trust Corporation	1-19-07	$	55.00	500	$	295,000
Shaw Group, Inc.	2-16-07		35.00	574		71,750

Total call options outstanding (premiums received, $273,293)				1,074	$	366,750

Series J Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	2,630		$	664,314
Opened	10,165			1,470,097
Bought Back	(1,132	)		(82,634	)
Expired	(6,985	)		(960,675	)
Exercised	(3,604	)		(817,809	)

Balance at December 31, 2006	1,074		$	273,293

Series J Put Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	2,118		$	350,735
Opened	929			202,174
Expired	(3,047	)		(552,909	)

Balance at December 31, 2006	—		$	—

Series Q Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
ABM Industries, Inc.	01-19-07	$	20.00	5	$	1,275
Applera Corporation - Applied Biosystems Group	01-19-07 03-16-07		35.00 40.00	55 25		10,450 1,375
Ashland, Inc.	01-19-07 02-16-07 04-20-07		65.00 65.00 60.00	15 55 55		21,300 28,600 56,650
Boyd Gaming Corporation	01-19-07 01-19-07 03-16-07		40.00 50.00 45.00	10 10 25		5,300 300 7,750
Calgon Carbon Corporation	01-19-07		5.00	25		3,125

172

Notes to Financial Statements

December 31, 2006


Common Stock (con’t)	Expiration Date	Exercise Price		Number of Contracts	Market Value
Carpenter Technology Corporation	03-16-07 03-16-07	$	90.00 95.00	91 110	$	141,960 134,200
Chicago Bridge & Iron Company N.V.	01-19-07 01-19-07 04-20-07		22.50 25.00 30.00	105 180 25		50,400 42,300 2,500
CV Therapeutics, Inc.	02-16-07 02-16-07 04-20-07 04-20-07 04-20-07 04-20-07 04-20-07		12.50 15.00 10.00 12.50 15.00 17.50 20.00	10 10 10 20 65 90 40		2,250 900 5,200 7,400 17,875 15,750 4,400
EGL, Inc.	02-16-07 02-16-07		30.00 35.00	180 5		27,900 100
Encore Wire Corporation	02-16-07 02-16-07		20.00 22.50	215 207		53,750 22,770
Forest Oil Corporation Hydril	01-19-07 03-16-07 03-16-07		35.00 60.00 65.00	50 75 15		750 123,750 18,600
InterOil Corporation	01-19-07 02-16-07 02-16-07		30.00 30.00 35.00	15 5 20		3,600 1,750 3,800
IPSCO, Inc.	03-16-07 01-19-07 01-19-07 01-19-07 03-16-07		90.00 80.00 85.00 90.00 85.00	60 70 120 5 125		52,800 98,700 93,600 2,650 147,500
Jarden Corporation	01-19-07 01-19-07 04-20-07		30.00 35.00 25.00	60 30 35		27,600 1,950 35,000
Mariner Energy, Inc.	02-16-07 02-16-07		17.50 20.00	45 65		10,350 4,875
Matrix Service Company	02-16-07 02-16-07		12.50 15.00	30 30		11,400 4,950
McMoRan Exploration Company	02-16-07		17.50	40		200
MPS Group, Inc.	03-16-07		15.00	35		1,750
Newfield Exploration Company	01-19-07 03-16-07 03-16-07		35.00 45.00 50.00	35 20 40		38,150 7,200 5,800
Noble Energy, Inc.	01-19-07 02-16-07 02-16-07 02-16-07 05-18-07		50.00 55.00 40.00 50.00 50.00	10 5 20 10 10		750 200 18,600 1,800 3,600
Oceaneering International, Inc.	01-19-07 01-19-07		35.00 37.50	15 25		7,050 6,250
OM Group, Inc.	01-19-07 03-16-07 03-16-07		45.00 40.00 45.00	41 70 70		9,840 50,400 28,000
Omnicare, Inc.	01-19-07 03-16-07		40.00 37.50	5 20		150 5,800
Parker Drilling Company	01-19-07		7.50	25		1,625
Payless ShoeSource, Inc.	03-16-07		25.00	40		32,800
Petrowawk Energy Corporation	03-16-07		10.00	25		4,750
Pioneer Natural Resources Company	01-19-07 01-19-07 03-16-07 03-16-07		35.00 40.00 35.00 40.00	55 35 20 15		25,850 2,625 10,600 3,450
Smith International, Inc.	01-19-07		37.50	40		14,800
Steel Dynamics, Inc.	01-19-07 02-16-07 02-16-07 02-16-07 05-18-07 05-18-07		27.50 25.00 27.50 30.00 30.00 32.50	75 484 50 165 25 25		37,500 372,680 27,500 59,400 12,250 8,750
Transocean, Inc.	02-16-07		80.00	10		5,200
Tween Brands, Inc.	02-16-07 02-16-07 05-18-07 05-18-07		35.00 40.00 35.00 40.00	45 80 25 25		24,300 15,600 18,000 8,750
U.S. Concrete, Inc.	03-16-07		7.50	40		2,200
United States Steel Corporation	01-19-07 01-19-07 01-19-07		50.00 60.00 55.00	20 12 10		46,000 15,720 18,000

Total call options outstanding (premiums received $2,865,200)				4,315	$	2,263,295

Series Q Put Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
CV Therapeutics, Inc.	2-16-07	$	12.50	25	$	1,500
	2-16-07		15.00	15		2,700

Total put options outstanding (premiums received, $4,380)				40	$	4,200

Series Q Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	6,197		$	2,559,077
Opened	54,858			23,348,210
Bought Back	(53,449	)		(21,997,615	)
Expired	(1,815	)		(294,975	)
Exercised	(1,476	)		(749,497	)

Balance at December 31, 2006	4,315		$	2,865,200

Series Q Put Options Written


	Number of Contracts	Premium Amount
Balance at December 31, 2005	—	$	—
Opened	40		4,380

Balance at December 31, 2006	40	$	4,380

173

Notes to Financial Statements

December 31, 2006

Series V Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
Granite Construction, Inc.	2-16-07	$	50.00	500	$	135,000
Shaw Group, Inc.	2-16-07		35.00	650		81,250
United Rentals, Inc.	2-16-07		25.00	342		42,750

Total call options outstanding (premiums received, $305,606)				1,492	$	259,000

Series V Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	2,226		$	307,776
Opened	16,480			3,499,860
Bought Back	(870	)		(392,348	)
Expired	(5,889	)		(1,063,709	)
Exercised	(10,455	)		(2,045,973	)

Balance at December 31, 2006	1,492		$	305,606

Series V Put Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	2,794		$	448,752
Opened	5,696			629,240
Expired	(5,275	)		(747,393	)
Exercised	(3,215	)		(330,599	)

Balance at December 31, 2006	—		$	—

Series Y Call Options Outstanding


Common Stock	Expiration Date	Exercise Price		Number of Contracts	Market Value
Shaw Group, Inc.	1-19-07	$	30.00	796	$	286,560

Total call options outstanding (premiums received, $93,926)				796	$	286,560

Series Y Call Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	—		$	—
Opened	2,256			275,248
Bought Back	(787	)		(109,880	)
Expired	(673	)		(71,442	)

Balance at December 31, 2006	796		$	93,926

Series Y Put Options Written


	Number of Contracts		Premium Amount
Balance at December 31, 2005	90		$	18,771
Opened	330			61,192
Expired	(288	)		(66,367	)
Exercised	(132	)		(13,596	)

Balance at December 31, 2006	—		$	—

11.

Federal Tax Matters

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 interest income accrued for defaulted and variable rate securities for tax purposes, differing book and tax amortization methods for premium and market discount, consent dividends, ordinary net operating losses and the expiration of capital loss carryovers. To the extent these differences are permanent differences, adjustments are made to the approriate equity accounts in the period that the differences arise. The following adjustments were made to the Statement of Assets and Liabilities at December 31, 2006 to reflect permanent differences:


	Accumulated Net Realized Gain/(Loss)			Undistributed Net Investment Income			Paid-in-Capital
Series A	$	(19,401,500	)	$	(2,686,549	)	$	22,088,049
Series B		—			(3,971,506	)		3,971,506
Series C		—			(2,001,810	)		2,001,810
Series D		(24,721,481	)		(1,291,026	)		26,012,507
Series E		(199,200	)		(6,728,250	)		6,927,450
Series H		(498,555	)		(436,418	)		934,973
Series J		(36,353,377	)		1,992,402			34,360,975
Series N		(6,083,139	)		(1,392,812	)		7,475,951
Series O		(13,704,200	)		(3,211,516	)		16,915,716
Series P		204,950			(4,952,638	)		4,747,688
Series Q		(12,111,328	)		563,509			11,547,819
Series V		(37,176,541	)		(1,434,043	)		38,610,584
Series X		—			617,351			(617,351	)
Series Z		(1,843,787	)		7,755			1,836,032

174

Notes to Financial Statements

December 31, 2006

11.

Federal Tax Matters (continued)

At December 31, 2006, the following funds had capital loss carryovers and deferred post-October losses to offset future realized capital gains as follows:


	Capital Loss Carryover Utilized in 2006		Capital Loss Carryovers		Expires In	Deferred Post-October Losses
Series B	$	27,019,837	$	108,210,500	2008	$	—
		—		5,057,813	2009
		—		87,172,720	2010
		—		26,620,854	2011

	$	27,019,837	$	227,061,887


Series E	$	—	$	389,008	2007		700
		—		9,322,945	2008
		—		719,015	2010
		—		350,320	2012
		—		2,731,334	2014

	$	—	$	13,512,622


Series H	$	207,817	$	—	2009		193,640
		3,351,705		—	2010
		2,047,588		3,036,601	2011

	$	5,607,110	$	3,036,601


Series J	$	—	$	—			157,698

	$	—	$	—


Series P	$	653,319	$	—	2011		32,945

	$	653,319	$	—


Series Q	$	—	$	—			152

	$	—	$	—


Series X	$	7,214,871	$	7,775,955	2009		—
		–		9,772,253	2010

	$	7,214,871	$	17,548,208


Series Y	$	3,128,347	$	—	2007		—
		477,438		6,578,402	2008
		—		10,435,906	2009
		—		9,284,391	2010
		—		6,092,310	2011
		—		338,14	2012

	$	3,605,785	$	32,729,156

175

Notes to Financial Statements

December 31, 2006

11.

Federal Tax Matters (continued)

The Fund declared ordinary and long-term capital gain consent dividends for the year ended December 31, 2005, as shown below. These amounts have been deemed paid and contributed to the Fund as additional paid in capital.


	Ordinary Consent Dividends		Long-term Capital Gain Consent Dividends
Series A	$	2,686,549	$	19,401,500
Series B		3,971,506		—
Series C		2,001,810		—
Series D		1,801,782		24,210,725
Series E		6,927,450		—
Series H		436,418		—
Series J		—		34,360,975
Series N		2,204,979		5,270,972
Series O		4,493,249		12,422,467
Series P		4,747,688		—
Series Q		—		12,111,362
Series V		4,649,462		33,961,122
Series Z		1,764,168		71,864

Short term distributions are treated as ordinary distributions for federal income tax purposes.

It is the Fund’s intent to utilize consent dividends for their 2006 taxable earnings.

As of December 31, 2006, the components of distributable earnings/(deficit) on a tax basis were as follows:


	Undistributed Ordinary Income		Undistributed Long-term Gain		Accumulated Capital and Other Losses			Unrealized Appreciation (Depreciation)			Distributable Earnings (Deficit)
Series A	$	13,085,742	$	35,756,077	$	—		$	83,266,128		$	132,107,947
Series B		3,504,848		—		(227,061,887	)		101,710,703			(121,846,336	)
Series C		4,176,757		—		—			4,151			4,180,908
Series D		4,908,631		43,812,167		—			173,966,428			222,687,226
Series E		7,548,062		—		(13,513,322	)		(2,439,707	)		(8,404,967	)
Series H		914,052		—		(3,230,241	)		8,516,470			6,200,281
Series J		6,393,748		33,871,774		(157,698	)		74,006,154			114,113,978
Series N		3,036,928		4,852,672		—			11,428,501			19,318,101
Series O		4,582,353		12,906,887		—			53,743,674			71,232,914
Series P		6,792,790		308,596		(32,945	)		1,237,874			8,306,315
Series Q		—		14,991,355		(152	)		36,141,334			51,132,537
Series V		14,196,620		34,245,913		—			113,390,308			161,832,841
Series X		—		—		(17,548,208	)		9,315,216			(8,232,992	)
Series Y		140,430		—		(32,729,156	)		12,483,846			(20,104,880	)
Series Z		3,099,744		761,053		—			(335,189	)		3,525,608

The difference between book basis and tax basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on certain forward foreign currency contracts and passive foreign investment companies.

176

Notes to Financial Statements

December 31, 2006

For federal income tax purposes, the following Series designate the amounts set forth below as capital gain dividends for the year ended December 31, 2006:


	Long-Term Capital Gain Distributions*
Series A	$	35,756,077
Series D		43,812,167
Series J		33,871,774
Series N		4,852,672
Series O		12,906,887
Series P		308,596
Series Q		14,991,355
Series V		34,245,913
Series Z		761,053

*	Paid via consent dividends

12.

Affiliated Transactions*

Investments representing 5% or more of the outstanding voting securities of a portfolio company of a fund result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act. The aggregate market value of all securities of affiliated companies held in Series J as of December 31, 2006 amounted to $255,162 which represents 0.06% of net assets. There were no affiliated companies held in any other Series. Transactions in Series J during the year ended December 31, 2006 in which the portfolio company is an “affiliated person” are as follows:


	ThermoEnergy Corporation PIPE		ThermoEnergy Corporation Warrants
December 31, 2005
Balance
Shares		1,380,000		1,380,000
Cost	$	1,302,103	$	353,897
Gross Additions
Shares		—		—
Cost	$	—	$	—

Gross Reductions
Shares		—		—
Cost	$	—	$	—

December 31, 2006
Balance
Shares		1,380,000		1,380,000
Cost	$	1,302,103	$	353,897

Realized Gain/(Loss)		—		—

Investment Income		—		—

As a result of Series J’s 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.

13.

Acquisition of Series W of SBL Fund

Pursuant to a plan of reorganization approved by the stockholders of Series W of SBL Fund, Series H of SBL Fund acquired all of the net assets of Series W on June 16, 2006 which totaled $52,914,356. A total of 5,615,796 shares of Series W were exchanged for 5,481,948 shares of Series H immediately after the closing date. This exchange qualified as a tax-free reorganization under Section 368(a)(1)(c) of the Internal Revenue Code. Series W’s net assets included $743,249 of unrealized appreciation. The aggregate net assets of Series H immediately before the acquisition totaled $43,263,368 and following the acquisition, the combined net assets of Series H totalled $96,177,724.

14.

Acquisition of Series G of SBL Fund

Pursuant to a plan of reorganization approved by the stockholders of Series G of SBL Fund, Series Y of SBL Fund acquired all of the net assets of Series G on June 16, 2006 which totaled $46,089,706. A total of 7,094,570 shares of Series G were exchanged for 4,606,863 shares of Series Y immediately after the closing date. This exchange qualified as a tax-free reorganization under Section 368(a)(1)(c) of the Internal Revenue Code. Series G’s net assets included $3,219,555 of unrealized appreciation and $16,205,387 of accumulated realized loss on sale of investments. The aggregate net assets of Series Y immediately before the acquisition totaled $45,276,152 and following the acquisition, the combined net assets of Series Y totalled $91,365,858.

15.

Acquisition of Series S of SBL Fund

Pursuant to a plan of reorganization approved by the stockholders of Series S of SBL Fund, Neuberger Berman AMT Socially Responsive, Class S shares acquired all of the net assets of Series S on June 16, 2006 which totaled $85,059,343. This exchange qualified as a tax-free reorganization under Section 368(a)(1)(c) of the Internal Revenue Code.

177

Report of Independent Registered Public Accounting Firm

To the Contractholders and Board of Directors

SBL Fund

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of SBL Fund (comprised of Series A, B, C, D, E, H, J, N, O, P, Q, V, X, Y and Z portfolios) (the Fund), as of December 31, 2006, and the related statements of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s 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 Fund’s 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 of the effectiveness of the Fund’s 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 investments owned as of December 31, 2006, by correspondence with 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 Fund at December 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

LOGO

Kansas City, Missouri

February 23, 2007

178

Directors’ Disclosure

(unaudited)

Director Approval of Investment Advisory Agreement

At an in-person meeting of the Fund’s Boards of Directors held on November 16-17, 2006, called for the purpose of, among other things, voting on the renewal of the investment advisory and sub-advisory agreements applicable to the Fund, the Fund’s Board of Directors, including the Independent Directors, unanimously approved the continuation for a one-year period of the investment advisory agreement between the Fund and Security Management Company, LLC (“SMC”), as well as each investment sub-advisory agreement applicable to the Fund. In reaching this conclusion, the Directors requested and obtained from SMC and each investment sub-adviser such information as the Directors deemed reasonably necessary to evaluate the proposed renewal of the agreements. The Fund’s Board of Directors carefully evaluated this information, and was advised by legal counsel with respect to its deliberations.

In considering the proposed continuation of the investment advisory and sub-advisory agreements, the Independent Directors evaluated a number of considerations, including, among others, (1) the nature, extent, and quality of the advisory services to be provided by SMC and the investment sub-advisers; (2) the investment performance of the Fund, SMC and the various investment sub-advisers; (3) the costs of the services to be provided and profits to be realized by SMC and its affiliates from the relationship with the Fund; (4) the extent to which economies of scale would be realized as the Fund grows; and (5) whether advisory and sub-advisory fee levels reflect these economies of scale for the benefit of Fund investors. Each Board of Directors also took into account other considerations that it believed, in light of the legal advice furnished to the Independent Directors by their independent legal counsel and the Directors’ own business judgment, to be relevant. Following its review, the Fund’s Board of Directors determined that the investment advisory agreement and each investment sub-advisory agreement applicable to the Fund (if any) will enable Fund shareholders to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of shareholders. Accordingly, the Directors, including the Independent Directors, unanimously approved the renewal of the investment advisory and investment sub-advisory agreements based upon the following considerations, among others:

•

The nature, extent and quality of the advisory services to be provided. The Board of Directors concluded that SMC and the investment sub-advisers retained to provide portfolio management services with respect to the Fund are capable of providing high quality services to the Fund, as indicated by the nature and quality of services provided in the past, SMC’s management capabilities demonstrated with respect to the Fund and other mutual funds managed by SMC, the professional qualifications and experience of SMC’s and the various sub-advisers’ portfolio managers, and SMC’s investment and management oversight processes. The Directors also determined that SMC and the sub-advisers proposed to provide investment and related services that were of the same quality and quantity as services provided to the Fund in the past, and that these services are appropriate in scope and extent in light of the Fund’s operations, the competitive landscape of the investment company business and investor needs.

•

The investment performance of the Fund. With respect to the Fund, the Directors concluded on the basis of information supplied by Lipper that SMC and the investment sub-advisers had achieved investment performance that was acceptable, and competitive or superior relative to comparable funds over trailing periods. On the basis of the Directors’ assessment of the nature, extent and quality of advisory services to be provided or procured by SMC, the Directors concluded that SMC is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other investment companies.

•

The cost of advisory services provided and the level of profitability. On the basis of each Board’s review of the fees to be charged by SMC for investment advisory and other services, and the estimated profitability of SMC's relationship with the Fund, each Board concluded that the level of investment advisory fees and SMC’s profitability are appropriate in light of the management fees and overall expense ratios of comparable investment companies and the anticipated profitability of the relationship between the Fund and SMC and its affiliates. On the basis of comparative information supplied by Lipper the Directors determined that the advisory fees and estimated overall expense ratio of the Fund are consistent with, and often below, industry medians, particularly with respect to mutual funds of comparable size. With respect to the Series Z (Alpha Opportunity Series), the Directors noted that the Series had a competitive performance record for the year to date, and one year periods ended September 30, 2006 and strong performance for the three year period which helped to compensate for Series Z’s higher than average expense ratio. Further, the Directors noted that the Series Z’s investment advisory fee and expense ratio were above median due, at least in part, to its strong performance relative to its benchmark index, which increased the advisory fee payable under that Fund’s “fulcrum” advisory fee arrangement.

•

Whether the advisory fees reflect economies of scale. The Directors concluded that the Fund’s investment advisory fees appropriately reflect the current economic environment for SMC and the competitive nature of the mutual fund market. The Directors further determined that the Fund has yet to achieve meaningful economies of scale, which, therefore, cannot be reflected in the investment advisory fees.

179

Directors’ Disclosure

(unaudited) (continued)

•

The extent to which economies of scale will be realized as the Fund grows. While the Fund’s investment advisory fees do not reduce should Fund assets grow meaningfully, the Directors determined that the investment advisory fees payable by the Fund other than Series Z (Alpha Opportunity Series) (whose investment advisory fee varies depending on that Fund’s performance relative to its benchmark index) already reflect potential future economies of scale to some extent by virtue of their competitive levels (determined with reference to industry standards as reported by Lipper and SMC’s estimated profitability at current or foreseeable asset levels. The Directors also considered that they will have the opportunity to periodically reexamine whether a Fund has achieved economies of scale, and the appropriateness of investment advisory fees payable to SMC and fees payable by SMC to the investment sub-advisers, in the future.

•

Benefits (such as soft dollars) to SMC from its relationship with the Fund (and any corresponding benefits to the Fund). The Directors concluded that other benefits described by SMC and the investment sub-advisers from their relationships with the Fund, including “soft dollar” benefits in connection with Fund brokerage transactions, are reasonable and fair, and consistent with industry practice and the best interests of the Fund and their shareholders. In addition, the Directors determined that the administration, transfer agency and fund accounting fees paid by the Fund to SMC are reasonable, fair and in the best interests of Fund shareholders in light of the nature and quality of the services provided, the associated costs, and the necessity of the services for the Fund’s operations.

•

Other Considerations: In approving the investment advisory and sub-advisory agreements, the Directors determined that SMC has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the Fund in a professional manner that is consistent with the best interests of the Fund and their shareholders. In this regard, the Directors favorably considered the compliance track record of the Fund and SMC. The Directors also concluded that SMC has made a significant entrepreneurial commitment to the management and success of the Fund, which entails a substantial financial and professional commitment, including investment advisory fee waivers and expense limitation arrangements with respect to the Fund to the benefit of Fund shareholders.

180

Special Shareholders’ Meeting

(unaudited)

A special meeting of the shareholders of Series G, Series S and Series W of the SBL Fund was held on June 1, 2006. Each matter voted upon at the meeting, as well as the number of votes cast for, against or withheld, and the number of abstentions with respect to such matters are set forth below:

(1)

The approval of a plan of reorganization providing for the acquisition of all of the assets and liabilities of SBL Fund Series G solely in exchange for shares of the SBL Fund Series Y, followed by the complete liquidation of Series G. The following votes were cast regarding this matter:


	Votes For	Votes Against/Abstentions
Series G	7,012,314	961,409

(2)

The approval of a plan of reorganization providing for the acquisition of all of the assets and liabilities of SBL Fund Series W solely in exchange for shares of the SBL Fund Series H, followed by the complete liquidation of Series W. The following votes were cast regarding this matter:


	Votes For	Votes Against/Abstentions
Series W	3,582,282	491,142

(3)

The approval of a plan of reorganization providing for the acquisition of all of the assets and liabilities of the SBL Fund Series S solely in exchange for shares of Neuberger Berman AMT Socially Responsive Fund, Class S shares, followed by the complete liquidation of Series S. The following votes were cast regarding this matter:


	Votes For	Votes Against/Abstentions
Series S	3,351,972	459,565

181

Directors and Officers (unaudited)

The business address of each director and officer is One Security Benefit Place, Topeka, KS 66636-0001.

Directors


Name (Date of Birth) Year Elected***		Principal Occupation(s) During Past 5 Years
Donald A. Chubb, Jr.**		Business broker, Griffith & Blair Realtors
(12-14-46)		Director - Jayhawk Area Boy Scouts Council
1994

Harry W. Craig, Jr.**		Chairman, CEO, Secretary & Director, 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, Vivians’ Gift Shop (Corporate Retail)
(08-20-39)		Vice President, Palmer Companies, Inc. (Small Business and Shopping Center Development)
1993		Vice President, PLB (Real Estate Equipment Leasing)
		Vice President, Town Crier (Retail)
		Prior to 1999:
		Vice President & Treasurer, Palmer News, Inc.
		Vice President, M/S News, Inc.
		Secretary, Kansas City Periodicals
		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

Michael G. Odlum*		President & Managing Member Representative, Security Management Company, LLC
(01-12-52)		Senior Vice President and Chief Investment Officer, Security Benefit Corporation and
2006 (Acting Chairman		Security Benefit Life Insurance Company
of the Board)		Vice President & Director, Security Distributors, Inc.
2004 (President)		Director, Vice President and Chief Investment Officer, First Security Benefit Life Insurance and
2004 (Director)		Annuity Company of New York

*	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.

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 Management Company, LLC of the accounting function for the Fund.

***	Each director oversees 28 Security Fund portfolios and serves until the next annual meeting, or until a successor has been duly elected and qualified.

182

Directors and Officers (unaudited) (continued)

Officers


Name (Date of Birth) Title - Year Elected*		Principal Occupation(s) During Past 5 Years
Steven M. Bowser		Vice President & Senior Portfolio Manager, Security Management Company, LLC;
(02-11-60)		Vice President & Senior Portfolio Manager, Security Benefit Life Insurance Company
Vice President - 2003

Christina Fletcher		Vice President & Portfolio Manager, Security Management Company, 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, Security Management Company, LLC;
(11-03-63)		Assistant Vice President, Security Benefit Life Insurance Company
Chief Compliance Officer - 2004		Vice President, Assistant Treasurer & Director, Security Distributors, Inc.
Treasurer - 1988

Richard J. King		Vice President & Head of Fixed Income Asset Management, Security Management Company, LLC;
(03-59)		Vice President & Head of Fixed Income Asset Management, Security Benefit Life Insurance Company
Vice President - 2005		Partner, Head of Portfolio Management, INVESCO

Mark Lamb		Vice President, Security Management Company, LLC,
(02-03-60)		Vice President, Security Benefit Life Insurance Company
Vice President - 2003

Amy J. Lee		Secretary, Security Management Company, 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 Management Company, LLC
(08-24-64)		Vice President & Portfolio Manager, Security Benefit Life Insurance Company
Vice President - 2003

Christopher Phalen		Vice President & Portfolio Manager, Security Management
(11-9-70)		Company, LLC;
Vice President - 2002		Assistant Vice President & Portfolio Manager, Security Benefit Life Insurance Company

James P. Schier		Vice President & Senior Portfolio Manager, Security Management Company, LLC;
(12-28-57)		Vice President & Senior Portfolio Manager, Security Benefit Life Insurance Company
Vice President - 1998

Cindy L. Shields		Vice President & Head of Equity Asset Management, Security Management Company, LLC,
(06-05-67)		Vice President & Head of Equity Asset Management, Security Benefit Life Insurance Company
Vice President - 1988

Christopher D. Swickard		Assistant Secretary, Security Management Company, LLC;
(10-09-65)		Second Vice President & Assistant General Counsel, Security Benefit Corporation &
Assistant Secretary - 1996		Security Benefit Life Insurance Company
		Assistant Secretary, Security Distributors, Inc.

David G. Toussaint		Vice President & Portfolio Manager, Security Management Company, LLC;
(10-10-66)		Assistant Vice President & Portfolio Manager, Security Benefit Life Insurance Company
Vice President - 2001

Eric Welt		Vice President, Director of Portfolio Risk Analysis & Consultant Relations,
(10-31-67)		Portfolio Risk Manager, Security Management Company, LLC;
Vice President - 2006		Associate Director - Senior Due Diligence Analyst, Bear Stearns & Company

*	Officers serve until the next annual meeting or until a successor has been duly elected and qualified.

183

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184

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, 2006 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.

185

The Security Group of Mutual Funds

Security Equity Fund

•

Alpha Opportunity Series

•

Equity Series

•

Global Series

•

Mid Cap Value Series

•

Select 25 Series

•

Small Cap Growth Series

Security Large Cap Value Fund

Security Mid Cap Growth Fund

Security Income Fund

•

Capital Preservation Series

•

Diversified Income Series

•

High Yield Series

•

Income Opportunity Series

Security Cash Fund

Security Funds Officers and Directors

Directors

Donald A. Chubb, Jr.

Harry W. Craig, Jr.

Jerry B. Farley

Penny A. Lumpkin

Michael G. Odlum

Maynard F. Oliverius

Officers

Michael G. Odlum, President

Steve M. Bowser, Vice President

Christina Fletcher, Vice President

Richard J. King, Vice President

Mark Lamb, Vice President

Mark Mitchell, Vice President

Christopher Phalen, Vice President

James P. Schier, Vice President

Cindy L. Shields, Vice President

David G. Toussaint, Vice President

Eric Welt, Vice President

Amy J. Lee, Secretary

Christopher D. Swickard, Assistant Secretary

Brenda M. Harwood, Chief Compliance Officer & Treasurer

This report is submitted for the general information of the shareholders of the Funds. The report is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective prospectus which contains details concerning the sales charges and other pertinent information.

LOGO

One Security Benefit Place Ÿ Topeka, Kansas 66636-0001 Ÿ securitybenefit.com

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 $327,000 in 2005 and $327,000 in 2006.

(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 $5,000 in 2005 and $5,000 in 2006. 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 $17,000 in 2005 and $18,000 in 2006, 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 $37,000 in 2005 and $45,000 in 2006. These services consisted of (i) review or 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 or held, and (iv) calculation of tax adjustments for potential Passive Foreign Investment Companies (as determined by Fund personnel) and (v) review of U.S. federal excise distribution calculations.

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 2005 and $0 in 2006.

(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 2005 and $0 in 2006.

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 2005 and $0 in 2006.

(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 $59,000 in 2005 and $68,000 in 2006.

(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.

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.

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.


SBL FUND

By:		/s/ MICHAEL G. ODLUM
		Michael G. Odlum, President

Date:		March 5, 2007

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/ MICHAEL G. ODLUM
		Michael G. Odlum, President

Date:		March 5, 2007

By:		/s/ BRENDA M. HARWOOD
		Brenda M. Harwood, Treasurer

Date:		March 5, 2007