<PAGE>
File No. 333-52491
File No. 811-08779
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 1 |X|
-----
Post-Effective Amendment No. |_|
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 1 |X|
-----
(Check appropriate box or boxes)
SBL VARIABLE ANNUITY ACCOUNT X
(Exact Name of Registrant)
Security Benefit Life Insurance Company
(Name of Depositor)
700 Harrison Street, Topeka, Kansas 66636-0001
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, Including Area Code:
(785) 431-3000
Copies To:
Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group Building Dechert, Price & Rhoads
700 Harrison Street 1775 Eye Street, NW
Topeka, KS 66636-0001 Washington, DC 20006
(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Interests in a separate account under
individual and group flexible premium deferred variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Cross Reference Sheet
Pursuant to Rule 495(a)
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
- --------------------------------------------------------------------------------
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- ---------------- ------------------
<S> <C>
1. Cover Page........................................................... Cover Page
2. Definitions.......................................................... Definitions
3. Synopsis............................................................. Summary; Expense Table; Contractual Expenses; Annual
Separate Account Expenses; Annual Mutual Fund Expenses
4. Condensed Financial Information
(a) Accumulated Unit Values......................................... N/A
(b) Performance Data................................................ Performance Information
(c) Additional Financial Information................................ Additional Information; Financial Statements
5. General Description of Registrant, Depositor,
and Portfolio Companies
(a) Depositor....................................................... Information about Security Benefit, the Separate
Account, and the Mutual Fund; Security Benefit Life
Insurance Company
(b) Registrant...................................................... Separate Account; Information about Security Benefit,
the Separate Account, and the Mutual Fund
(c) Portfolio Company............................................... Information about Security Benefit, the Separate
Account, and the Mutual Fund; Advisor's Fund; The
Investment Adviser
(d) Fund Prospectus................................................. Advisor's Fund
(e) Voting Rights................................................... Voting of Mutual Fund Shares
(f) Administrators.................................................. Security Benefit Life Insurance Company
6. Deductions and Expenses
(a) General......................................................... Charges and Deductions; Mortality and Expense Risk
Charge; Premium Tax Charge; Other Charges; Guarantee
of Certain Charges; Mutual Fund Expenses
(b) Sales Load %.................................................... N/A
(c) Special Purchase Plan........................................... N/A
(d) Commissions..................................................... N/A
(e) Fund Expenses................................................... Annual Mutual Fund Expenses
(f) Organization Expenses........................................... N/A
7. General Description of Contracts
(a) Persons with Rights............................................. The Contract; More About the Contract; Ownership;
Joint Owners; Contract Benefits; Reports to Owners
(b) (i) Allocation of Purchase Payments.......................... Purchase Payments; Allocation of Purchase Payments
(ii) Transfers................................................ Transfers of Contract Value; Telephone Transfer
Privileges; Full and Partial Withdrawals
(iii) Exchanges................................................ N/A
(c) Changes......................................................... Substitution of Investments; Changes to Comply with
Law and Amendments
(d) Inquiries....................................................... Contacting Security Benefit
8. Annuity Period....................................................... Annuity Period; General; Annuity Options; Selection of
an Option
9. Death Benefit........................................................ Death Benefit
10. Purchases and Contract Value
(a) Purchases....................................................... The Contract; General; Application for a Contract;
Purchase Payments
(b) Valuation....................................................... Contract Value; Determination of Contract Value;
Transfers of Contract Value
(c) Daily Calculation............................................... Determination of Contract Value
Underwriter..................................................... Security Benefit Life Insurance Company
11. Redemptions
(a) - By Owners..................................................... Full and Partial Withdrawals; Systematic Withdrawals;
Payments from the Separate Account
- By Annuitant.................................................. Annuity Options
(b) Texas ORP....................................................... N/A
(c) Check Delay..................................................... N/A
(d) Lapse........................................................... Full and Partial Withdrawals
(e) Free Look....................................................... Free-Look Right
12. Taxes................................................................ Federal Tax Matters; Introduction; Tax Status of
Security Benefit and the Separate Account; Income
Taxation of Annuities in General - Non-Qualified
Plans; Additional Considerations; Qualified Plans
13. Legal Proceedings.................................................... Legal Proceedings; Legal Matters
14. Table of Contents for the Statement of
Additional Information............................................... Statement of Additional Information
PART B
Item of Form N-4 Statement of Additional Information Caption
- ---------------- -------------------------------------------
15. Cover Page........................................................... Cover Page
16. Table of Contents.................................................... Table of Contents
17. General Information and History...................................... General Information and History
18. Services
(a) Fees and Expenses of Registrant................................. N/A
(b) Management Contracts............................................ N/A
(c) Custodian....................................................... N/A
Independent Public Accountant................................... Experts
(d) Assets of Registrant............................................ N/A
(e) Affiliated Persons.............................................. N/A
(f) Principal Underwriter........................................... N/A
19. Purchase of Securities Being Offered................................. Distribution of the Contract; Limits on Purchase
Payments Paid Under Tax-Qualified Retirement Plans
20. Underwriters......................................................... Distribution of the Contract
21. Calculation of Performance Data...................................... Performance Information
22. Annuity Payments..................................................... N/A
23. Financial Statements................................................. Financial Statements
</TABLE>
<PAGE>
PCG VARIABLE ANNUITY
INDIVIDUAL AND GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY: MAILING ADDRESS:
SECURITY BENEFIT LIFE INSURANCE COMPANY SECURITY BENEFIT LIFE
700 SW HARRISON STREET INSURANCE COMPANY
TOPEKA, KANSAS 66636-0001 700 SW HARRISON STREET
1-800-888-2461 TOPEKA, KANSAS 66636-0001
- --------------------------------------------------------------------------------
This Prospectus describes the PCG Variable Annuity--a flexible purchase
payment deferred variable annuity contract (the "Contract") offered by Security
Benefit Life Insurance Company ("Security Benefit"). The Contract is available
for individuals (the "Individual Contracts") as a non-tax qualified retirement
plan ("Non-Qualified Plan") or in connection with an individual retirement
annuity ("IRA") qualified under Section 408 of the Internal Revenue Code. The
Contract is also available to groups (the "Group Contracts") in connection with
a retirement plan qualified under Section 401, 403(b) or 457 of the Internal
Revenue Code. The Contract is designed to give Contractowners flexibility in
planning for retirement and other financial goals.
During the Accumulation Period, the Contract provides for the accumulation of
a Contractowner's value on a variable basis. The Contract also provides several
options for annuity payments on a variable basis beginning on the Annuity Start
Date. The minimum initial purchase payment is $100,000. Purchase payments may be
allocated at the Contractowner's discretion to one or more of the Subaccounts
that comprise a separate account of Security Benefit called the Variable Annuity
Account X (the "Separate Account"). Each Subaccount of the Separate Account
invests in a corresponding portfolio ("Series") of the Advisor's Fund (the
"Mutual Fund"), which currently consists of four Series: (1) PCG Aggressive
Growth Series, (2) PCG Growth Series, (3) SIM Growth Series, and (4) SIM
Conservative Growth Series.
The Contract Value in the Subaccounts under a Contract will vary based on
investment performance of the Subaccounts to which the Contract Value is
allocated. No minimum amount of Contract Value is guaranteed.
A Contract may be returned according to the terms of its Free-Look Right.
(See "Free-Look Right," page 13.)
This Prospectus concisely sets forth information about the Contract and the
Separate Account that a prospective investor should know before purchasing the
Contract. Certain additional information is contained in a "Statement of
Additional Information," dated _________________, 1998, which has been filed
with the Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, as it may be supplemented from time to time, is
incorporated by reference into this Prospectus and is available at no charge, by
writing Security Benefit at 700 Harrison Street, Topeka, Kansas 66636 or by
calling 1-800-888-2461. The table of contents of the Statement of Additional
Information is set forth on page 29 of this Prospectus.
The SEC maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference and other
information regarding companies that file electronically with the SEC.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE ADVISOR'S FUND.
BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THE CONTRACT INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND IS NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THE CONTRACT
IS NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DATE: __________________________, 1998
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
DEFINITIONS............................................................... 5
SUMMARY .................................................................. 5
Purpose of the Contract................................................. 5
The Separate Account and the Mutual Fund................................ 6
Purchase Payments....................................................... 6
Contract Benefits....................................................... 6
Free-Look Right......................................................... 6
Charges and Deductions.................................................. 6
Mortality and Expense Risk Charge..................................... 6
Premium Tax Charge.................................................... 6
Other Expenses........................................................ 7
Contacting Security Benefit............................................. 7
EXPENSE TABLE............................................................. 7
Contractual Expenses.................................................... 7
Annual Separate Account Expenses........................................ 7
Annual Mutual Fund Expenses............................................. 7
Examples................................................................ 7
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT,
AND THE MUTUAL FUND..................................................... 8
Security Benefit Life Insurance Company................................. 8
Year 2000 Compliance.................................................... 8
Published Ratings....................................................... 9
Separate Account........................................................ 9
Advisor's Fund.......................................................... 9
PCG Aggressive Growth Series.......................................... 10
PCG Growth Series..................................................... 10
SIM Growth Series..................................................... 10
SIM Conservative Growth Series........................................ 10
The Investment Adviser................................................ 10
THE CONTRACT.............................................................. 10
General................................................................. 10
Application for a Contract.............................................. 11
Purchase Payments....................................................... 11
Allocation of Purchase Payments......................................... 11
Transfers of Contract Value............................................. 12
Contract Value.......................................................... 12
Determination of Contract Value......................................... 12
Full and Partial Withdrawals............................................ 12
Systematic Withdrawals.................................................. 13
Free-Look Right......................................................... 13
Death Benefit........................................................... 14
Distribution Requirements............................................... 14
Death of the Annuitant.................................................. 14
CHARGES AND DEDUCTIONS.................................................... 15
Mortality and Expense Risk Charge....................................... 15
Premium Tax Charge...................................................... 15
Other Charges........................................................... 15
Guarantee of Certain Charges............................................ 15
Mutual Fund Expenses.................................................... 15
ANNUITY PERIOD............................................................ 16
General ............................................................... 16
Annuity Options......................................................... 16
Option 1--Life Income with Guaranteed Payments of 25 Years............ 16
Option 2--Payments for a Specified Period............................. 16
Option 3--Payments of a Specified Amount.............................. 16
Option 4--Age Recalculation........................................... 16
Value of Variable Annuity Payments: Assumed Interest Rate............ 17
Selection of an Option.................................................. 17
MORE ABOUT THE CONTRACT................................................... 17
Ownership............................................................... 17
Joint Owners.......................................................... 17
Designation and Change of Beneficiary................................... 17
Participating........................................................... 17
Payments from the Separate Account...................................... 18
Proof of Age and Survival............................................... 18
Misstatements........................................................... 18
Restrictions on Withdrawals from Qualified Plans........................ 18
FEDERAL TAX MATTERS....................................................... 19
Introduction............................................................ 19
Tax Status of Security Benefit and the Separate Account................. 19
General............................................................... 19
Charge for Security Benefit Taxes..................................... 19
Diversification Standards............................................. 19
Income Taxation of Annuities in General--Non-Qualified Plans............ 20
Surrenders or Withdrawals Prior to the Annuity Start Date............. 20
Surrenders or Withdrawals on or after Annuity Start Date.............. 20
Penalty Tax on Certain Surrenders and Withdrawals..................... 21
Additional Considerations............................................... 21
Distribution-at-Death Rules........................................... 21
Gift of Annuity Contracts............................................. 21
Contracts Owned by Non-Natural Persons................................ 21
Multiple Contract Rule................................................ 21
Possible Tax Changes.................................................. 22
Transfers, Assignments or Exchanges of a Contract..................... 22
Qualified Plans......................................................... 22
Section 401........................................................... 22
Section 403(b)........................................................ 23
Section 408........................................................... 24
Section 457........................................................... 24
Rollovers............................................................. 24
Tax Penalties......................................................... 25
Withholding........................................................... 26
OTHER INFORMATION......................................................... 26
Voting of Mutual Fund Shares............................................ 26
Substitution of Investments............................................. 26
Changes to Comply with Law and Amendments............................... 27
Reports to Owners....................................................... 27
Telephone Transfer Privileges........................................... 27
Legal Proceedings....................................................... 28
Legal Matters........................................................... 28
PERFORMANCE INFORMATION................................................... 28
ADDITIONAL INFORMATION.................................................... 29
Registration Statement.................................................. 29
Financial Statements.................................................... 29
STATEMENT OF ADDITIONAL INFORMATION....................................... 29
IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF
ADDITIONAL INFORMATION, THE MUTUAL FUND'S PROSPECTUS OR THE STATEMENT OF
ADDITIONAL INFORMATION OF THE FUND, OR ANY SUPPLEMENT THERETO.
- --------------------------------------------------------------------------------
<PAGE>
DEFINITIONS
Various terms commonly used in this Prospectus are defined as follows:
ACCUMULATION PERIOD -- The period commencing on the Contract Date and ending
on the Annuity Start Date or, if earlier, when the Contract is terminated,
either through a full withdrawal, payment of charges, or payment of the death
benefit proceeds.
ACCUMULATION UNIT -- A unit of measure used to calculate the value of a
Contractowner's interest in a Subaccount during the Accumulation Period.
ANNUITANT -- The person on whose life annuity payments depend or designated
to receive annuity payments.
ANNUITY -- A series of periodic income payments made by Security Benefit to
an Annuitant, Joint Annuitant, or Beneficiary during the period specified in the
Annuity Option.
ANNUITY OPTIONS -- Options under the Contract that prescribe the provisions
under which a series of annuity payments are made.
ANNUITY PERIOD -- The period during which annuity payments are made.
ANNUITY START DATE -- The date when annuity payments are to begin.
CONTRACT DATE -- The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that the initial purchase payment is credited to the Contract.
CONTRACTOWNER OR OWNER -- The person entitled to the ownership rights under
the Contract and in whose name the Contract is issued.
CONTRACT VALUE -- The total value of the amounts in a Contract allocated to
the Subaccounts of the Separate Account.
CONTRACT YEAR -- Each twelve-month period measured from the Contract Date.
DESIGNATED BENEFICIARY -- The person having the right to the death benefit,
if any, payable upon the death of the Owner or the Joint Owner during the
Accumulation Period. The Designated Beneficiary is the first person on the
following list who is alive on the date of death of the Owner or the Joint
Owner: the Owner, the Joint Owner; the Primary Beneficiary; the Secondary
Beneficiary; the Annuitant; or if none of the above are alive, the Owner's
Estate.
GENERAL ACCOUNT -- All assets of Security Benefit other than those allocated
to the Separate Account or to any other separate account of Security Benefit.
GROUP CONTRACT -- A Contract issued to a group in connection with a Qualified
Plan under which record of participant's interest in the Contract is not
maintained by Security Benefit.
HOME OFFICE -- The Annuity Administration Department of Security Benefit,
P.O. Box 750497, Topeka, Kansas 66675-0497.
MUTUAL FUND -- The Advisor's Fund. The Mutual Fund is a diversified, open-end
management investment company commonly referred to as a mutual fund.
PARTICIPANT -- A Participant under a Qualified Plan.
PURCHASE PAYMENT -- The amounts paid to Security Benefit as consideration for
the Contract.
SEPARATE ACCOUNT -- The Variable Annuity Account X. A separate account of
Security Benefit that consists of accounts, referred to as Subaccounts, each of
which invests in a corresponding Series of the Mutual Fund.
SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of the Mutual Fund.
VALUATION DATE -- Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUATION PERIOD -- A period used in measuring the investment experience of
each Subaccount of the Separate Account. The Valuation Period begins at the
close of one Valuation Date and ends at the close of the next succeeding
Valuation Date.
WITHDRAWAL VALUE -- The amount a Contractowner may receive upon full
withdrawal of the Contract, which is equal to Contract Value less any
uncollected premium taxes.
SUMMARY
This summary is intended to provide a brief overview of the more significant
aspects of the Contract. Further detail is provided in this Prospectus, the
Statement of Additional Information, and the Contract.
PURPOSE OF THE CONTRACT
The flexible purchase payment deferred variable annuity contract ("Contract")
described in this Prospectus is designed to give Contractowners flexibility in
planning for retirement and other financial goals. The Contract provides for the
accumulation of values on a variable basis during the Accumulation Period and
provides several options for annuity payments on a variable basis beginning on
the Annuity Start Date. During the Accumulation Period, an Owner can pursue
various allocation options by allocating purchase payments to the various
Subaccounts of the Separate Account. See "The Contract," page 10.
The Contract is eligible for purchase as a non-tax qualified retirement plan
for an individual ("Non-Qualified Plan"). The Contract is also eligible for an
individual in connection with a retirement plan qualified under Section 408 of
the Internal Revenue Code of 1986, as amended and in group form in connection
with a retirement plan qualified under Section 401, 403(b) or 457 of the
Internal Revenue Code. A qualified retirement plan is sometimes referred to in
this Prospectus as a "Qualified Plan."
THE SEPARATE ACCOUNT AND THE MUTUAL FUND
The Separate Account is currently divided into four accounts referred to as
Subaccounts. Each Subaccount invests exclusively in shares of a corresponding
Series of the Mutual Fund. The Series of the Mutual Fund, each of which has a
different investment objective or objectives, are as follows: PCG Aggressive
Growth Series, PCG Growth Series, SIM Growth Series, and SIM Conservative Growth
Series. See "Advisor's Fund," page 9. Amounts held in a Subaccount will increase
or decrease in dollar value depending on the investment performance of the
Series of the Mutual Fund in which such Subaccount invests. The Contractowner
bears the investment risk for amounts allocated to a Subaccount of the Separate
Account.
PURCHASE PAYMENTS
The minimum initial purchase payment is $100,000. Thereafter, the
Contractowner may choose the amount and frequency of purchase payments. See
"Purchase Payments" on page 11.
CONTRACT BENEFITS
During the Accumulation Period, Contract Value may be transferred by the
Contractowner among the Subaccounts of the Separate Account subject to certain
restrictions as described in "The Contract" on page 10.
At any time before the Annuity Start Date, a Contract may be surrendered for
its Withdrawal Value, and partial withdrawals, including systematic withdrawals,
may be taken from the Contract Value. See "Full and Partial Withdrawals," page
12 and "Federal Tax Matters," page 18 for more information about withdrawals,
including the 10 percent penalty tax that may be imposed upon full and partial
withdrawals (including systematic withdrawals) made prior to the Owner attaining
age 59 1/2.
The Contract provides for a death benefit upon the death of the Owner during
the Accumulation Period. A death benefit is not available, however, under a
Group Contract. See "Death Benefit," on page 13 for more information. The
Contract provides for several Annuity Options on a variable basis beginning on
the Annuity Start Date.
FREE-LOOK RIGHT
An Owner may return a Contract within the Free-Look Period, which is
generally a ten-day period beginning when the Owner receives the Contract. In
this event, Security Benefit will refund to the Owner the Contract Value in the
Subaccounts plus any charges deducted from Contract Value in the Subaccounts.
Security Benefit will refund purchase payments allocated to the Subaccounts
rather than the Contract Value in those states where it is required to do so.
CHARGES AND DEDUCTIONS
Security Benefit does not make any deductions for sales load from purchase
payments before allocating them to the Contract Value and no surrender charge is
assessed upon withdrawal or surrender of a Contract. Certain charges will be
deducted in connection with the Contract as described below.
MORTALITY AND EXPENSE RISK CHARGE
Security Benefit deducts a daily charge from the assets of each Subaccount
for mortality and expense risks equal to an annual rate of .65 percent of each
Subaccount's average daily net assets that fund the Individual Contracts and .80
percent of each Subaccount's average daily net assets that fund the Group
Contracts. See "Mortality and Expense Risk Charge" on page 14.
PREMIUM TAX CHARGE
Security Benefit assesses a premium tax charge to reimburse itself for any
premium taxes that it incurs with respect to a Contract. This charge will
usually be deducted on annuitization or upon full withdrawal if a premium tax
was incurred by Security Benefit and is not refundable. Partial withdrawals,
including systematic withdrawals, may be subject to a premium tax charge if a
premium tax is incurred on the withdrawal by Security Benefit and is not
refundable. Security Benefit reserves the right to deduct such taxes when due or
anytime thereafter. Premium tax rates currently range from 0 percent to 3.5
percent. See "Premium Tax Charge" on page 15.
OTHER EXPENSES
The operating expenses of the Separate Account are paid by Security Benefit.
Investment advisory fees and operating expenses of the Mutual Fund are paid by
the Mutual Fund and are reflected in the net asset value of the Mutual Fund
shares. For a description of these charges and expenses, see the Prospectus for
the Mutual Fund.
CONTACTING SECURITY BENEFIT
All written requests, notices, and forms required by the Contract, and any
questions or inquiries should be directed to Security Benefit Life Insurance
Company, P.O. Box 750497, Topeka, Kansas 66675-0497 or by phone by calling (785)
431-3112 or 1-800-888-2461, extension 3112.
EXPENSE TABLE
The purpose of this table is to assist investors in understanding the various
costs and expenses borne directly and indirectly by Owners of the Contracts. The
table reflects any contractual charges, expenses of the Separate Account, and
charges and expenses of the Mutual Fund. The table does not reflect premium
taxes that may be imposed by various jurisdictions. See "Premium Tax Charge," on
page 15.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," on page 14. For a more complete description of the Mutual
Fund's costs and expenses, see the Advisor's Fund Prospectus, which accompanies
this Prospectus.
CONTRACTUAL EXPENSES
Sales load on purchase payments.......................................... None
Contingent deferred sales charge......................................... None
Transfer Fee (per transfer).............................................. None
ANNUAL SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE
OF EACH SUBACCOUNT'S AVERAGE DAILY NET ASSETS)
Annual Mortality and Expense Risk Charge
Individual Contracts.................................................. .65%
Group Contracts....................................................... .80%
Total Separate Account Annual Expenses
Individual Contracts.................................................. .65%
Group Contracts....................................................... .80%
ANNUAL MUTUAL FUND EXPENSES (AS A PERCENTAGE
OF EACH SERIES' AVERAGE DAILY NET ASSETS)
Total
Mutual
Management Other Fund
Fee Expenses(1) Expenses
---------- ----------- --------
PCG Aggressive Growth................. .75% .97% 1.72%
PCG Growth............................ .75% .97% 1.72%
SIM Growth............................ .75% .97% 1.72%
SIM Conservative Growth............... .75% .97% 1.72%
1. Other Expenses are based on estimated amounts for the fiscal year ending
April 30, 1999.
EXAMPLES
The example presented below shows expenses that a Contractowner would pay at
the end of one and three years. The information presented applies if, at the end
of those time periods, the Contract is (1) surrendered, (2) annuitized, or (3)
not surrendered or annuitized. The example shows expenses based upon an
allocation of $1,000 to each of the Subaccounts.
THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE 5
PERCENT RETURN ASSUMED IN THE EXAMPLES IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ACTUAL RETURNS, WHICH MAY BE
GREATER OR LESSER THAN THE ASSUMED AMOUNT.
INDIVIDUAL CONTRACTS
Example -- The Owner of an Individual Contract would pay the expenses shown
below on a $1,000 investment, assuming 5 percent annual return on assets:
1 Year 3 Years
------ -------
PCG Aggressive Growth Subaccount........... $24 $74
PCG Growth Subaccount...................... 24 74
SIM Growth Subaccount...................... 24 74
SIM Conservative Growth Subaccount......... 24 74
GROUP CONTRACTS
Example -- The Owner of a Group Contract would pay the expenses shown below
on a $1,000 investment, assuming a 5 percent annual return on assets:
1 Year 3 Years
------ -------
PCG Aggressive Growth Subaccount........... $26 $78
PCG Growth Subaccount...................... 26 78
SIM Growth Subaccount...................... 26 78
SIM Conservative Growth Subaccount......... 26 78
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND THE MUTUAL FUND
SECURITY BENEFIT LIFE INSURANCE COMPANY
Security Benefit is a stock life insurance company organized under the laws
of the State of Kansas. It was organized originally as a fraternal benefit
society and commenced business February 22, 1892. On July 31, 1998, Security
Benefit converted from a mutual life insurance company to a stock life insurance
company ultimately controlled by Security Benefit Mutual Holding Company, a
Kansas mutual holding company. Upon purchase of a contract from Security
Benefit, contractowners automatically become members in the mutual holding
company.
Security Benefit offers variable life insurance policies, fixed and variable
annuity contracts, as well as financial and retirement services. It is admitted
to do business in the District of Columbia, and in all states except New York.
As of December 31, 1997, Security Benefit had total assets of approximately $6.8
billion. Together with its subsidiaries, Security Benefit has total funds under
management of over $7.5 billion.
The Principal Underwriter for the Contracts is Security Distributors, Inc.
("SDI"), 700 SW Harrison Street, Topeka, Kansas 66636-0001. SDI is registered as
a broker/dealer with the SEC and is a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company wholly owned by
Security Benefit.
YEAR 2000 COMPLIANCE
Like other insurance companies, as well as other financial and business
organizations around the world, Security Benefit could be adversely affected if
the computer systems it uses in performing its administrative functions do not
properly process and calculate date-related information and data before, during
and after January 1, 2000. Some computer software and hardware systems currently
cannot distinguish between the year 2000 and the year 1900 or some other date
because of the way date fields were encoded. This is commonly known as the "Year
2000 Problem." If not addressed, the Year 2000 Problem could impact (i) the
administrative services provided by Security Benefit with respect to the
Contract, and (ii) the management services provided to the Mutual Fund by the
Investment Adviser, as well as transfer agency, accounting, custody,
distribution and other services provided to the Mutual Fund.
Security Benefit has adopted a plan to be "Year 2000 Compliant" with respect
to both its internally built systems as well as systems provided by external
vendors. "Year 2000 Compliant" means that systems and programs which require
modification will have the date fields expanded to include the century
information and that for interfaces to external organizations as well as new
systems, development of the year portion of the date field will be expanded to
four digits using the format YYYYMMDD. Security Benefit's overall approach to
addressing the Year 2000 issue is as follows: (1) to inventory its internal and
external hardware, software, telecommunications and data transmissions to
customers and conduct a risk assessment with respect to the impact that a
failure on any such system would have on its business operations; (2) to modify
or replace its internal systems and obtain vendor certifications of Year 2000
compliance for systems provided by vendors or replace such systems that are not
Year 2000 Compliant; and (3) to implement and test its systems for Year 2000
compliance. Security Benefit has completed the inventory of its internal and
external systems and has made substantial progress toward completing the
modification/replacement of its internal systems as well as towards obtaining
Year 2000 Compliant certifications from its external vendors. Overall systems
testing is scheduled to commence in December 1998 and extend into the first six
months of 1999.
Although Security Benefit has taken steps to ensure that its systems will
function properly before, during and after the Year 2000, its key operating
systems and information sources are provided by or through external vendors
which creates uncertainty to the extent Security Benefit is relying on the
assurance of such vendors as to whether its systems will be Year 2000 Compliant.
The costs or consequences of incomplete or untimely resolution of the Year 2000
issue are unknown to Security Benefit at this time but could have a material
adverse impact on the operations of the Separate Account and administration of
the Contract.
The Year 2000 Problem is also expected to impact companies, which may include
issuers of portfolio securities held by the Mutual Fund, to varying degrees
based upon various factors, including, but not limited to, the company's
industry sector and degree of technological sophistication. Security Benefit is
unable to predict what impact, if any, the Year 2000 Problem will have on
issuers of the portfolio securities held by the Mutual Fund.
PUBLISHED RATINGS
Security Benefit may from time to time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A. M. Best Company
and Standard & Poor's. The purpose of the ratings is to reflect the financial
strength and/or claims-paying ability of Security Benefit and should not be
considered as bearing on the investment performance of assets held in the
Separate Account. Each year A. M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of the
Company as measured by Standard & Poor's Insurance Ratings Services may be
referred to in advertisements or sales literature or in reports to Owners. These
ratings are opinions of an operating insurance company's financial capacity to
meet the obligations of its insurance and annuity policies in accordance with
their terms. Such ratings do not reflect the investment performance of the
Separate Account or the degree of risk associated with an investment in the
Separate Account.
SEPARATE ACCOUNT
The Separate Account was established by Security Benefit on March 23, 1998,
under procedures established under Kansas law. The income, gains, or losses of
the Separate Account, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the assets of the Separate Account
without regard to other income, gains, or losses of Security Benefit. K.S.A.
40-436 provides that assets in a separate account attributable to the reserves
and other liabilities under the contracts are not chargeable with liabilities
arising from any other business that the insurance company conducts if, and to
the extent the contracts so provide, the Contract contains such a provision.
Security Benefit owns the assets in the Separate Account and is required to
maintain sufficient assets in the Separate Account to meet all Separate Account
obligations under the Contracts. Security Benefit may transfer to its General
Account assets that exceed anticipated obligations of the Separate Account. All
obligations arising under the Contracts are general corporate obligations of
Security Benefit. Security Benefit may invest its own assets in the Separate
Account for other purposes, but not to support contracts other than variable
annuity contracts, and may accumulate in the Separate Account proceeds from
Contract charges and investment results applicable to those assets.
The Separate Account is currently divided into four Subaccounts. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to, or charged against, the assets of each Subaccount
without regard to the income, gains or losses in the other Subaccounts. Each
Subaccount invests exclusively in shares of a specific Series of the Mutual
Fund. Security Benefit may in the future establish additional Subaccounts of the
Separate Account, which may invest in other Series of the Mutual Fund or in
other securities, mutual funds, or investment vehicles.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with the
SEC does not involve supervision by the SEC of the administration or investment
practices of the Separate Account or of Security Benefit.
ADVISOR'S FUND
Advisor's Fund (the "Mutual Fund") is a diversified, open-end management
investment company of the series type. The Mutual Fund is registered with the
SEC under the 1940 Act. Such registration does not involve supervision by the
SEC of the investments or investment policy of the Mutual Fund. The Mutual Fund
currently has four separate portfolios ("Series"), each of which pursues
different investment objectives and policies.
Shares of the Mutual Fund currently are offered only for purchase by the
Separate Account which serves as an investment medium for variable annuity
contracts issued by Security Benefit, and in the future may serve as an
investment medium for variable life insurance policies. When a mutual fund
serves as an investment medium for both variable life insurance policies and
variable annuity contracts it is called "mixed funding." Shares of the Mutual
Fund may also be sold in the future to separate accounts of other insurance
companies, both affiliated and not affiliated with Security Benefit. This is
called "shared funding." Security Benefit currently does not foresee any
disadvantages to Contractowners arising from either mixed or shared funding;
however, due to differences in tax treatment or other considerations, it is
theoretically possible that the interests of owners of various contracts for
which the Mutual Fund serves as an investment medium might at some time be in
conflict. However, Security Benefit, the Mutual Fund's Board of Directors, and
any other insurance companies that participate in the Mutual Fund in the future
are required to monitor events in order to identify any material conflicts that
arise from the use of the Mutual Fund for mixed and/or shared funding. The
Mutual Fund's Board of Directors are required to determine what action, if any,
should be taken in the event of such a conflict. If such a conflict were to
occur, Security Benefit might be required to withdraw the investment of one or
more of its separate accounts from the Mutual Fund. This might force the Mutual
Fund to sell securities at disadvantageous prices.
A summary of the investment objective of each Series of the Mutual Fund is
described below. There can be no assurance that any Series will achieve its
objective. More detailed information is contained in the accompanying prospectus
of the Mutual Fund, including information on the risks associated with the
investments and investment techniques of each Series.
THE MUTUAL FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
PCG AGGRESSIVE GROWTH SERIES
The investment objective of the PCG Aggressive Growth Series is capital
appreciation through investment in a diversified portfolio of small and
medium-size companies.
PCG GROWTH SERIES
The investment objective of the PCG Growth Series is long-term growth of
capital through investment in a diversified portfolio of equity securities.
SIM GROWTH SERIES
The investment objective of the SIM Growth Series is long-term growth of
capital primarily through investment in a portfolio of publicly traded mutual
funds.
SIM CONSERVATIVE GROWTH SERIES
The investment objective of the SIM Conservative Growth Series is total
return, primarily through investment in a portfolio of publicly traded mutual
funds.
THE INVESTMENT ADVISER
Private Consulting Group, Inc. (the "Investment Adviser") located at 4650 SW
Macadam, Portland, Oregon 97201 serves as investment adviser to each Series of
the Mutual Fund. The Investment Adviser is registered with the SEC as an
investment adviser. The Investment Adviser formulates and implements continuing
programs for the purchase and sale of securities in compliance with the
investment objectives, policies, and restrictions of each Series, and is
responsible for the day to day decisions to buy and sell securities for each
Series except the PCG Aggressive Growth Series. The Investment Adviser has
engaged Mench Financial, Inc., 30 West Third Street, Fourth Floor, Cincinnati,
Ohio 45202 to provide investment advisory services to the PCG Aggressive Growth
Series.
THE CONTRACT
GENERAL
The Contract offered by this Prospectus is a flexible purchase payment
deferred variable annuity that is issued by Security Benefit. The Contract is
significantly different from a fixed annuity contract in that it is the Owner
under a Contract who assumes the risk of investment gain or loss rather than
Security Benefit. Upon the maturity of a Contract, the Contract provides several
Annuity Options on a variable basis, under which Security Benefit will pay
periodic annuity payments beginning on the Annuity Start Date. The amount that
will be available for annuity payments will depend on the investment performance
of the Subaccounts to which purchase payments have been allocated.
The Group Contract offered by this prospectus is identical to the individual
form of the Contract in all material respects except the death benefit and
annuity option provisions. The Group Contract does not provide a death benefit
and makes annuity options available to Participants only upon receipt of certain
distributions from the Qualified Plan. The annuity rates available to
Participants are guaranteed in the Group Contract. An individual annuity
Contract will be issued to a Participant who elects to apply a distribution from
the Plan to purchase an annuity from Security Benefit.
The Contract is available for purchase as a non-tax qualified retirement plan
("Non-Qualified Plan") by an individual. The Contract is also eligible for use
by an individual in connection with a tax qualified retirement plan that meets
the requirements of Section 408 of the Internal Revenue Code and in group form
in connection with a retirement plan qualified under Section 401, 403(b) or 457
of the Internal Revenue Code ("Qualified Plan"). Certain federal tax advantages
are currently available to retirement plans that qualify as (1) self-employed
individuals' retirement plans under Section 401, such as HR-10 and Keogh plans,
(2) pension or profit-sharing plans established by an employer for the benefit
of its employees under Section 401, (3) annuity purchase plans of public school
systems and certain tax-exempt organizations under Section 403(b) or (4)
deferred compensation plans for employees established by a unit of a state or
local government or by a tax-exempt organization under Section 457. Joint Owners
are permitted only on a contract issued pursuant to a Non-Qualified Plan.
APPLICATION FOR A CONTRACT
Any person wishing to purchase a Contract may submit an application and an
initial purchase payment to Security Benefit, as well as any other form or
information that Security Benefit may require. Security Benefit reserves the
right to reject an application or purchase payment for any reason, subject to
Security Benefit's underwriting standards and guidelines and any applicable
state or federal law relating to nondiscrimination.
The maximum age of an Owner or Annuitant for which a Contract will be issued
is 90. If there are Joint Owners or Annuitants, the maximum issue age will be
determined by reference to the older Owner or Annuitant.
PURCHASE PAYMENTS
The minimum initial purchase payment for the purchase of a Contract is
$100,000 for both Non-Qualified and Qualified Plans. Thereafter, the
Contractowner may choose the amount and frequency of purchase payments. With
respect to the Individual Contract, cumulative purchase payments exceeding $5
million will not be accepted without prior approval of Security Benefit.
An initial purchase payment will be applied not later than the end of the
second Valuation Date after the Valuation Date it is received by Security
Benefit at its Home Office if the purchase payment is preceded or accompanied by
an application that contains sufficient information necessary to establish an
account and properly credit such purchase payment. The application form will be
provided by Security Benefit. If Security Benefit does not receive a complete
application, the applicant will be notified by Security Benefit that it does not
have the necessary information to issue a Contract. If the necessary information
is not provided to Security Benefit within five Valuation Dates after the
Valuation Date on which Security Benefit first receives the initial purchase
payment or if Security Benefit determines it cannot otherwise issue the
Contract, Security Benefit will return the initial purchase payment to the
applicant unless the applicant consents to Security Benefit retaining the
purchase payment until the application is made complete.
Subsequent purchase payments will be credited as of the end of the Valuation
Period in which they are received by Security Benefit at its Home Office.
Purchase payments after the initial purchase payment may be made at any time
prior to the Annuity Start Date, so long as the Owner is living. Subsequent
purchase payments under a Qualified Plan may be limited by the terms of the plan
and provisions of the Internal Revenue Code.
ALLOCATION OF PURCHASE PAYMENTS
In an application for a Contract, the Contractowner selects the Subaccounts
to which purchase payments will be allocated. Purchase payments will be
allocated according to the Contractowner's instructions contained in the
application or more recent instructions received, if any, except that no
purchase payment allocation is permitted that would result in less than 1
percent of each payment being allocated to any one Subaccount. The allocations
must be whole percentages and must total 100 percent.
A Contractowner may change the purchase payment allocation instructions by
submitting a proper written request to Security Benefit's Home Office. A proper
change in allocation instructions will be effective upon receipt by Security
Benefit at its Home Office and will continue in effect until subsequently
changed. Changes in purchase payment allocation may be made by telephone
provided the Telephone Transfer Section of the application or an Authorization
for Telephone Requests form is properly completed, signed, and filed at Security
Benefit's Home Office. Changes in the allocation of future purchase payments
have no effect on existing Contract Value. Such Contract Value, however, may be
transferred among the Subaccounts of the Separate Account in the manner
described in "Transfers of Contract Value" on page 11.
TRANSFERS OF CONTRACT VALUE
During the Accumulation Period, Contract Value may be transferred among the
Subaccounts by the Contractowner upon proper written request to Security
Benefit's Home Office. Transfers may be made by telephone unless the Owner
elected not to have Telephone Transfer privileges in the application.
Contractowners that elected not to have Telephone Transfer privileges in the
application may subsequently establish such privilege by properly completing,
signing and filing at Security Benefit's Home Office a Telephone Transfer
Authorization form. There is no minimum transfer amount.
The frequency of transfers generally is not limited, although Security
Benefit reserves the right at a future date to limit the number of transfers to
14 in a Contract Year. Security Benefit also reserves the right to limit the
size and frequency of such transfers, and to discontinue telephone transfers.
CONTRACT VALUE
The Contract Value is the sum of the amounts under the Contract held in each
Subaccount of the Separate Account as of any Valuation Date.
On each Valuation Date, the portion of the Contract Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience of
that Subaccount. See "Determination of Contract Value," below. No minimum amount
of Contract Value is guaranteed. A Contractowner bears the entire investment
risk relating to the Contract.
DETERMINATION OF CONTRACT VALUE
The Contract Value will vary to a degree that depends upon several factors,
including investment performance of the Subaccounts to which Contract Value has
been allocated, payment of purchase payments, partial withdrawals, and the
charges assessed in connection with the Contract. The amounts allocated to the
Subaccounts will be invested in shares of the corresponding Series of the Mutual
Fund. The investment performance of the Subaccounts will reflect increases or
decreases in the net asset value per share of the corresponding Series and any
dividends or distributions declared by a Series. Any dividends or distributions
from any Series of the Mutual Fund will be automatically reinvested in shares of
the same Series, unless Security Benefit, on behalf of the Separate Account,
elects otherwise.
Assets in the Subaccounts are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's
interest in a Subaccount. When a Contractowner allocates purchase payments to a
Subaccount, the Contract is credited with Accumulation Units. The number of
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the particular Subaccount by the Accumulation Unit value for the
Subaccount at the end of the Valuation Period in which the purchase payment is
credited. In addition, other transactions including full or partial withdrawals,
transfers, and assessment of certain charges against the Contract affect the
number of Accumulation Units credited to a Contract. The number of units
credited or debited in connection with any such transaction is determined by
dividing the dollar amount of such transaction by the unit value of the affected
Subaccount. The Accumulation Unit value of each Subaccount is determined on each
Valuation Date. The number of Accumulation Units credited to a Contract shall
not be changed by any subsequent change in the value of an Accumulation Unit,
but the dollar value of an Accumulation Unit may vary from Valuation Date to
Valuation Date depending upon the investment experience of the Subaccount and
charges against the Subaccount.
The Accumulation Unit value of each Subaccount's unit initially was $10. The
unit value of a Subaccount on any Valuation Date is calculated by dividing the
value of each Subaccount's net assets by the number of Accumulation Units
credited to the Subaccount on that date. Determination of the value of the net
assets of a Subaccount takes into account the following: (1) the investment
performance of the Subaccount, which is based upon the investment performance of
the corresponding Series of the Mutual Fund, (2) any dividends or distributions
paid by the corresponding Series, (3) the charges, if any, that may be assessed
by Security Benefit for taxes attributable to the operation of the Subaccount,
and (4) the mortality and expense risk charge under the Contract.
FULL AND PARTIAL WITHDRAWALS
A Contractowner may obtain proceeds from a Contract by surrendering the
Contract for its Withdrawal Value or by making a partial withdrawal. A full or
partial withdrawal, including a systematic withdrawal, may be taken from the
Contract Value at any time while the Owner is living and before the Annuity
Start Date, subject to limitations under the applicable plan for Qualified Plans
and applicable law. A full or partial withdrawal request will be effective as of
the end of the Valuation Period that a proper written request is received by
Security Benefit at its Home Office. A proper written request must include the
written consent of any effective assignee or irrevocable Beneficiary, if
applicable.
The proceeds received upon a full withdrawal will be the Contract's
Withdrawal Value. The Withdrawal Value is equal to the Contract Value as of the
end of the Valuation Period during which a proper withdrawal request is received
by Security Benefit at its Home Office, minus any uncollected premium taxes. A
partial withdrawal may be requested for a specified percentage or dollar amount
of Contract Value. A request for a partial withdrawal will result in a payment
by Security Benefit in accordance with the amount specified in the partial
withdrawal request. Upon payment, the Contract Value will be reduced by an
amount equal to the payment and any applicable premium tax. If a partial
withdrawal is requested that would leave the Withdrawal Value in the Contract
less than $5,000, then Security Benefit reserves the right to treat the partial
withdrawal as a request for a full withdrawal.
The amount of a partial withdrawal will be allocated from the Contract Value
among the Subaccounts according to the Contractowner's instructions to Security
Benefit.
A full or partial withdrawal, including a systematic withdrawal, may be
subject to a premium tax charge to reimburse Security Benefit for any tax on
premiums on a Contract that may be imposed by various states and municipalities.
See "Premium Tax Charge," on page 15.
A full or partial withdrawal, including a systematic withdrawal, may result
in receipt of taxable income to the Owner and, if made prior to the Owner
attaining age 59 1/2, may be subject to a 10 percent penalty tax. In the case of
Contracts issued in connection with retirement plans that meet the requirements
of Section 401(a), 403(b), 408 or 457 of the Internal Revenue Code, reference
should be made to the terms of the particular Qualified Plan for any limitations
or restrictions on withdrawals. For more information, see "Restrictions on
Withdrawals from Qualified Plans" on page 18. The tax consequences of a
withdrawal under the Contract should be carefully considered. See "Federal Tax
Matters" on page 18.
SYSTEMATIC WITHDRAWALS
Security Benefit currently offers a feature under which systematic
withdrawals may be elected. Under this feature, a Contractowner may elect to
receive systematic withdrawals before the Annuity Start Date by sending a
properly completed Systematic Withdrawal Request form to Security Benefit at its
Home Office. This option may be elected at any time. A Contractowner may
designate the systematic withdrawal amount as a percentage of Contract Value
allocated to the Subaccounts, as a fixed period, as a specified dollar amount,
as all earnings in the Contract, or as based upon the life expectancy of the
Owner or the Owner and a Beneficiary. A Contractowner may also designate the
desired frequency of the systematic withdrawals, which may be monthly,
quarterly, semiannually or annually. Systematic withdrawals may be stopped or
modified upon proper written request by the Contractowner received by Security
Benefit at its Home Office at least 30 days in advance of the requested date of
termination or modification. A proper request must include the written consent
of any effective assignee or irrevocable Beneficiary, if applicable.
Each systematic withdrawal must be at least $100. Upon payment, the
Contractowner's Contract Value will be reduced by an amount equal to the payment
proceeds plus any applicable premium tax. Any systematic withdrawal that equals
or exceeds the Withdrawal Value will be treated as a full withdrawal. In no
event will payment of a systematic withdrawal exceed the Withdrawal Value. The
Contract will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.
Each systematic withdrawal will be effected as of the end of the Valuation
Period during which the withdrawal is scheduled. The deduction caused by the
systematic withdrawal will be allocated from the Contractowner's Contract Value
in the Subaccounts as directed by the Contractowner.
Security Benefit may, at any time, discontinue, modify, suspend or charge a
fee for systematic withdrawals. The tax consequences of a systematic withdrawal,
including the 10 percent penalty tax which may be imposed on withdrawals made
prior to the Owner attaining age 59 1/2, should be carefully considered. See
"Federal Tax Matters" on page 18.
FREE-LOOK RIGHT
An Owner may return a Contract within the Free-Look Period, which is
generally a ten-day period beginning when the Owner receives the Contract. The
returned Contract will then be deemed void and Security Benefit will refund the
Contract Value in the Subaccounts as of the end of the Valuation Period during
which the returned Contract is received by Security Benefit. Security Benefit
will refund purchase payments allocated to the Subaccounts rather than Contract
Value in those states that require it to do so.
DEATH BENEFIT
If the Owner dies during the Accumulation Period, Security Benefit will pay
the death benefit proceeds to the Designated Beneficiary upon receipt of due
proof of the Owner's death and instructions regarding payment to the Designated
Beneficiary. If there are Joint Owners, the death benefit proceeds will be
payable upon receipt of due proof of death of either Owner during the
Accumulation Period and instructions regarding payment. If the surviving spouse
of the deceased Owner is the sole Designated Beneficiary, such spouse may elect
to continue the Contract in force, subject to certain limitations. See
"Distribution Requirements," page 14. If the Owner is not a natural person, the
death benefit proceeds will be payable upon receipt of due proof of death of the
Annuitant during the Accumulation Period and instructions regarding payment.
Additionally, if the Owner is not a natural person, the amount of the death
benefit will be based on the age of the oldest annuitant on the date the
Contract was issued. If the death of the Owner occurs on or after the Annuity
Start Date, no death benefit proceeds will be payable under the Contract, except
that any guaranteed payments remaining unpaid will continue to be paid to the
Annuitant pursuant to the Annuity Option in force at the date of death.
The death benefit proceeds will be the death benefit reduced by any
uncollected premium taxes. If an Owner dies during the Accumulation Period and
the age of each Owner was 75 or younger on the date the Contract was issued, the
amount of the death benefit will be the greatest of (1) the Contract Value on
the date due proof of death is received by Security Benefit, less any
uncollected premium tax, or (2) the Guaranteed Death Benefit defined below. The
Guaranteed Death Benefit is the sum of all Purchase Payments paid under the
Contract reduced, as described below, for each partial withdrawal and reduced
for any uncollected premium tax. The Guaranteed Death Benefit after each partial
withdrawal is calculated according to the following formula:
B
A x ----- = D
C
where A is equal to the Guaranteed Death Benefit immediately prior to the
partial withdrawal, B is equal to the Contract Value immediately after the
partial withdrawal, and C is equal to the Contract Value immediately prior to
the partial withdrawal.
If an Owner dies during the Accumulation Period and the age of any Owner was
76 or greater on the date the Contract was issued, or if due proof of death
(regardless of the age of any Owner on the date the Contract was issued) and
instructions regarding payment are not received by Security Benefit at its Home
Office within six months of the date of the Owner's death, the death benefit
will be the Contract Value on the date due proof of death is received by
Security Benefit at its Home Office less any uncollected premium tax.
The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as directed by the Owner or as
elected by the Designated Beneficiary. If the Designated Beneficiary is to
receive annuity payments under one of the Annuity Options, there may be limits
under applicable law on the amount and duration of payments that the Beneficiary
may receive, and requirements respecting timing of payments. A tax adviser
should be consulted in considering Annuity Options. See "Federal Tax Matters" on
page 18 for a discussion of the tax consequences in the event of death.
A death benefit is not available under a Group Contract.
DISTRIBUTION REQUIREMENTS
For Contracts issued in connection with Non-Qualified Plans, if the surviving
spouse of the deceased Owner is the sole Designated Beneficiary, such spouse may
elect to continue this Contract in force until the earliest of the spouse's
death or the Annuity Start Date or receive the death benefit proceeds.
For any Designated Beneficiary other than a surviving spouse, only those
options may be chosen that provide for complete distribution of such Owner's
interest in the Contract within five years of the death of the Owner. If the
Designated Beneficiary is a natural person, that person alternatively can elect
to begin receiving annuity payments within one year of the Owner's death over a
period not extending beyond his or her life or life expectancy. If the Owner of
the Contract is not a natural person, these distribution rules are applicable
upon the death of or a change in the primary Annuitant.
For Contracts issued in connection with Qualified Plans, the terms of the
particular Qualified Plan and the Internal Revenue Code should be reviewed with
respect to limitations or restrictions on distributions following the death of
the Owner or Annuitant. Because the rules applicable to Qualified Plans are
extremely complex, a competent tax adviser should be consulted.
DEATH OF THE ANNUITANT
If the Annuitant dies prior to the Annuity Start Date, and the Owner is a
natural person and is not the Annuitant, no death benefit proceeds will be
payable under the Contract. The Owner may name a new Annuitant within 30 days of
the Annuitant's death. If a new Annuitant is not named, Security Benefit will
designate the Owner as Annuitant. On the death of the Annuitant after the
Annuity Start Date, any guaranteed payments remaining unpaid will continue to be
paid to the Designated Beneficiary pursuant to the Annuity Option in force at
the date of death.
CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Security Benefit deducts a daily charge from the assets of each Subaccount
for mortality and expense risks assumed by Security Benefit under the Contracts.
The charge under the Individual Contracts is equal to an annual rate of .65
percent of each Subaccount's average daily net assets that fund the Individual
Contracts. This amount is intended to compensate Security Benefit for certain
mortality and expense risks Security Benefit assumes in offering and
administering the Contracts and in operating the Subaccounts.
The mortality and expense risk charge under the Group Contracts is equal to
an annual rate of .80 percent of each Subaccount's average daily net assets that
fund the Group Contracts. This amount is intended to compensate Security Benefit
for certain mortality and expense risks Security Benefit assumes in offering and
administering the Group Contracts and in operating the Subaccounts.
The expense risk is the risk that Security Benefit's actual expenses in
issuing and administering the Contracts and operating the Subaccounts will be
more than the charges assessed for such expenses. The mortality risk borne by
Security Benefit is the risk that Annuitants, as a group, will live longer than
Security Benefit's actuarial tables predict. In this event, Security Benefit
guarantees that annuity payments will not be affected by a change in mortality
experience that results in the payment of greater annuity income than assumed
under the Annuity Option in the Contract. Security Benefit also assumes a
mortality risk in connection with the death benefit under the Individual
Contract.
Security Benefit may ultimately realize a profit from this charge to the
extent it is not needed to cover mortality and administrative expenses, but
Security Benefit may realize a loss to the extent the charge is not sufficient.
Security Benefit may use any profit derived from this charge for any lawful
purpose, including distribution expenses.
PREMIUM TAX CHARGE
Various states and municipalities impose a tax on premiums on annuity
contracts received by insurance companies. Whether or not a premium tax is
imposed will depend upon, among other things, the Owner's state of residence,
the Annuitant's state of residence, and the insurance tax laws and Security
Benefit's status in a particular state. Security Benefit assesses a premium tax
charge to reimburse itself for premium taxes that it incurs in connection with a
Contract. This charge is currently deducted upon annuitization or upon full or
partial withdrawal if a premium tax was incurred and is not refundable. Security
Benefit reserves the right to deduct premium taxes when due or any time
thereafter. Premium tax rates currently range from 0 percent to 3.5 percent, but
are subject to change by a governmental entity.
OTHER CHARGES
Security Benefit may charge the Separate Account or the Subaccounts for the
federal, state, or local taxes incurred by Security Benefit that are
attributable to the Separate Account or the Subaccounts, or to the operations of
Security Benefit with respect to the Contracts, or that are attributable to
payment of premiums or acquisition costs under the Contracts. No such charge is
currently assessed. See "Tax Status of Security Benefit and the Separate
Account" and "Charge for Security Benefit Taxes."
GUARANTEE OF CERTAIN CHARGES
Security Benefit guarantees that the charge for mortality and expense risks
will not exceed an annual rate of .65 percent under the Individual Contracts and
.80 percent under the Group Contracts.
MUTUAL FUND EXPENSES
Each Subaccount of the Separate Account purchases shares at the net asset
value of the corresponding Series of the Mutual Fund. Each Series' net asset
value reflects the investment advisory fee and other expenses that are deducted
from the assets of the Series. These fees and expenses are not deducted from the
Subaccounts, but are paid from the assets of the corresponding Series. As a
result, the Owner indirectly bears a pro rata portion of such fees and expenses.
The advisory fees and other expenses, if any, which are more fully described in
the Mutual Fund's prospectus, are not specified or fixed under the terms of the
Contract.
ANNUITY PERIOD
GENERAL
The Contractowner of an Individual Contract selects the Annuity Start Date at
the time of application. The Annuity Start Date may not be prior to the first
annual Contract anniversary and may not be deferred beyond the Annuitant's 95th
birthday, although the terms of a Qualified Plan and the laws of certain states
may require annuitization at an earlier age. If the Contractowner does not
select an Annuity Start Date, the Annuity Start Date will be the later of the
Annuitant's 95th birthday or the tenth annual Contract Anniversary. If there are
Joint Annuitants, the birthdate of the older Annuitant will be used to determine
the latest Annuity Start Date.
A Participant under a Qualified Plan in connection with which a Group
Contract is issued may elect to use an eligible rollover distribution (or with
respect to a Section 457 Plan, any distribution) from the Plan to purchase an
annuity contract from Security Benefit that offers the annuity options and rates
set forth in the Contract. The Participant's purchase payment and application
must be acceptable to Security Benefit under its rules and practices and the
provisions of the Contract. On the Annuity Start Date, the proceeds under the
Contract (or in the case of a Group Contract, the distribution from the Plan)
will be applied to provide an annuity under one of the options described below.
Because annuity payments are based on the performance of the underlying mutual
funds, annuity payments will fluctuate. The proceeds under the Contract will be
equal to the Contractowner's Contract Value in the Subaccounts as of the Annuity
Start Date, reduced by any applicable premium taxes.
The Contracts provide for four Annuity Options. Other Annuity Options may be
available upon request at the discretion of Security Benefit. Annuity payments
under Option 1 are based on annuity rates. The annuity rates will vary based on
the age and sex of the Annuitant, except that unisex rates are available where
required by law. The annuity rates are based upon an assumed interest rate of
3.5 percent, compounded annually. In the case of Options 2, 3 and 4 as described
below, annuity rates are not used to calculate annuity payments. If no Annuity
Option has been selected, annuity payments will be made to the Annuitant under
an automatic option which shall be an annuity payable for a fixed period of 10
years under Option 2.
Annuity payments can be made on a monthly, quarterly, semiannual, or annual
basis, although no payments will be made for less than $100. If the frequency of
payments selected would result in payments of less than $100, Security Benefit
reserves the right to change the frequency.
An Owner may designate or change an Annuity Start Date, Annuity Option, and
Annuitant, provided proper written notice is received by Security Benefit at its
Home Office at least 30 days prior to the Annuity Start Date set forth in the
Contract. The date selected as the new Annuity Start Date must be at least 30
days after the date written notice requesting a change of Annuity Start Date is
received at Security Benefit's Home Office.
Once annuity payments have commenced, an Annuitant or Owner cannot change the
Annuity Option and cannot surrender his or her annuity and receive a lump-sum
settlement in lieu thereof.
ANNUITY OPTIONS
OPTION 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS OF 25 YEARS
Periodic annuity payments will be made during the lifetime of the Annuitant
with the promise that if, at the death of the Annuitant, payments have been made
for less than twenty-five years, annuity payments will be continued during the
remainder of such period to the Designated Beneficiary.
OPTION 2 -- PAYMENTS FOR SPECIFIED PERIOD
Periodic annuity payments will be made for a fixed period, which may be from
five to twenty years, as elected, with the guarantee that, if, at the death of
all Annuitants, payments have been made for less than the selected fixed period,
the remaining unpaid payments will be paid to the Designated Beneficiary.
OPTION 3 -- PAYMENTS OF A SPECIFIED AMOUNT
Periodic payments of the amount elected will be made until the amount applied
and earnings thereon are exhausted, with the guarantee that, if, at the death of
all Annuitants, all guaranteed payments have not yet been made, the remaining
unpaid payments will be paid to the Designated Beneficiary.
OPTION 4 -- AGE RECALCULATION
Periodic annuity payments will be made based upon the Annuitant's life
expectancy, or the joint life expectancies of the Annuitant and a beneficiary,
at the Annuitant's attained age (and the beneficiary's attained age or adjusted
age, if applicable) each year. The payments are computed by reference to
actuarial tables prescribed by the Treasury Secretary, until the amount applied
is exhausted. This option should be elected only under Contracts funding
Qualified Plans.
VALUE OF VARIABLE ANNUITY PAYMENTS:
ASSUMED INTEREST RATE
The annuity table in the Contract which is used to calculate the first
variable annuity payment for Annuity Option 1 is based on an "assumed interest
rate" of 3.5 percent. If the actual investment performance of the Subaccount
selected is such that the net investment return is 3.5 percent per annum,
payments under Option 1 will remain constant. If the net investment return
exceeds 3.5 percent, the payments will increase and if the return is less than
3.5 percent, the payments will decline. Use of a higher assumed interest rate
would mean a higher initial payment but a more slowly rising series of
subsequent payments in a rising market (or a more rapidly falling series of
subsequent payments in a declining market). A lower assumption would have the
opposite effect.
SELECTION OF AN OPTION
Contractowners should carefully review the Annuity Options with their
financial or tax advisers, and, for Contracts used in connection with a
Qualified Plan, reference should be made to the terms of the particular plan and
the requirements of the Internal Revenue Code for pertinent limitations
respecting annuity payments and other matters. For instance, Qualified Plans
generally require that annuity payments begin no later than April 1 of the
calendar year following the year in which the Annuitant reaches age 70 1/2. In
addition, under Qualified Plans, the period elected for receipt of annuity
payments under Annuity Options generally may be no longer than the joint life
expectancy of the Annuitant and Beneficiary in the year that the Annuitant
reaches age 70 1/2, and must be shorter than such joint life expectancy if the
Beneficiary is not the Annuitant's spouse and is more than ten years younger
than the Annuitant. For Non-Qualified Plans, SBL does not allow annuity payments
to be deferred beyond the Annuitant's 95th birthday.
MORE ABOUT THE CONTRACT
OWNERSHIP
The Contractowner is the person named as such in the application or in any
later change shown in Security Benefit's records. While living, the
Contractowner alone has the right to receive all benefits and exercise all
rights that the Contract grants or Security Benefit allows. The Owner may be an
entity that is not a living person such as a trust or corporation referred to
herein as "Non-Natural Persons." See "Federal Tax Matters," page 18.
JOINT OWNERS. The Joint Owners will be joint tenants with rights of
survivorship and upon the death of an Owner, the surviving Owner shall be the
sole Owner. Any Contract transaction requires the signature of all persons named
jointly.
DESIGNATION AND CHANGE OF BENEFICIARY
The Designated Beneficiary is the person having the right to the death
benefit, if any, payable upon the death of the Owner or Joint Owner during the
Accumulation Period. The Designated Beneficiary is the first person on the
following list who is alive on the date of death of the Owner or the Joint
Owner: the Owner; the Joint Owner; the Primary Beneficiary; the Secondary
Beneficiary; the Annuitant; or if none of the above are alive, the Owner's
estate. The Primary Beneficiary is the individual named as such in the
application or any later change shown in Security Benefit's records. The Primary
Beneficiary will receive the death benefit of the Contract only if he or she is
alive on the date of death of both the Owner and any Joint Owner during the
Accumulation Period. Because the death benefit of the Contract goes to the first
person on the above list who is alive on the date of death of any Owner, careful
consideration should be given to the manner in which the Contract is registered,
as well as the designation of the Primary Beneficiary. The Contractowner may
change the Primary Beneficiary at any time while the Contract is in force by
written request on forms provided by Security Benefit and received by Security
Benefit at its Home Office. The change will not be binding on Security Benefit
until it is received and recorded at its Home Office. The change will be
effective as of the date this form is signed subject to any payments made or
other actions taken by Security Benefit before the change is received and
recorded. A Secondary Beneficiary may be designated. The Owner may designate a
permanent Beneficiary whose rights under the Contract cannot be changed without
his or her consent.
Reference should be made to the terms of a particular Qualified Plan and any
applicable law for any restrictions or limitations on the designation of a
Beneficiary.
PARTICIPATING
The Contract is participating and will share in the surplus earnings of
Security Benefit. However, the current dividend scale is zero and Security
Benefit does not anticipate that dividends will be paid.
PAYMENTS FROM THE SEPARATE ACCOUNT
Security Benefit will pay any full or partial withdrawal benefit or death
benefit proceeds from Contract Value allocated to the Subaccounts, and will
effect a transfer between Subaccounts on the Valuation Date a proper request is
received at Security Benefit's Home Office. However, Security Benefit can
postpone the calculation or payment of such a payment or transfer of amounts
from the Subaccounts to the extent permitted under applicable law, which is
currently permissible only for any period: (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings, (b) during
which trading on the New York Stock Exchange is restricted as determined by the
SEC, (c) during which an emergency, as determined by the SEC, exists as a result
of which (i) disposal of securities held by the Separate Account is not
reasonably practicable, or (ii) it is not reasonably practicable to determine
the value of the assets of the Separate Account, or (d) for such other periods
as the SEC may by order permit for the protection of investors.
PROOF OF AGE AND SURVIVAL
Security Benefit may require proof of age or survival of any person on whose
life annuity payments depend.
MISSTATEMENTS
If the age or sex of an Annuitant or age of an Owner has been misstated, the
correct amount paid or payable by Security Benefit under the Contract shall be
such as the Contract Value would have provided for the correct age or sex
(unless unisex rates apply).
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS
Generally, a Qualified Plan may not provide for the distribution or
withdrawal of amounts accumulated under such Qualified Plan until after a fixed
number of years, the attainment of a stated age or upon the occurrence of a
specific event such as hardship, disability, retirement, death or termination of
employment. Therefore, the Owner of a contract purchased in connection with a
Qualified Plan may not be entitled to make a full or partial withdrawal, as
described in this Prospectus, unless one of the above-described conditions has
been satisfied. For this reason reference should be made to the terms of the
particular Qualified Plan, the Internal Revenue Code and other applicable law
for any limitation or restriction on distributions and withdrawals, including
the 10 percent penalty tax that may be imposed in the event of a distribution
from a Qualified Plan before the participant reaches age 59 1/2. See the
discussion under "Tax Penalties" on page 25.
Section 403(b) imposes restrictions on certain distributions from tax
sheltered annuity contracts meeting the requirements of Section 403(b) that
apply to tax years beginning on or after January 1, 1989. Section 403(b)
requires that distributions from Section 403(b) tax-sheltered annuities that are
attributable to employee contributions made after December 31, 1988 under a
salary reduction agreement begin only after the employee reaches age 59 1/2,
separates from service, dies, becomes disabled, or incurs a hardship.
Furthermore, distributions of gains attributable to such contributions accrued
after December 31, 1988 may not be made on account of hardship. Hardship for
this purpose, is generally defined as an immediate and heavy financial need,
such as paying for medical expenses, the purchase of a residence, or paying
certain tuition expenses, that may ONLY be met by distribution.
An Owner of a Contract purchased as a tax-sheltered Section 403(b) annuity
contract will not, therefore, be entitled to make a full or partial withdrawal,
as described in this Prospectus, in order to receive proceeds from the Contract
attributable to contributions under a salary reduction agreement or any gains
credited to such Contract after December 31, 1988 unless one of the
above-described conditions has been satisfied. In the case of transfers of
amounts accumulated in a different Section 403(b) contract to this Contract
under a Section 403(b) program, the withdrawal constraints described above would
not apply to the amount transferred to the Contract attributable to the Owner's
December 31, 1988 account balance under the old contract, provided the amounts
transferred between contracts qualified as a tax-free exchange under the
Internal Revenue Code. An Owner of a Contract may be able to transfer the
Contract's Full Withdrawal Value to certain other investment alternatives
meeting the requirements of Section 403(b) that are available under an
employer's Section 403(b) arrangement.
The distribution or withdrawal of amounts under a Contract purchased in
connection with a Qualified Plan may result in the receipt of taxable income to
the Owner or Annuitant and in some instances may also result in a penalty tax.
Therefore, the tax consequences of a distribution or withdrawal under a Contract
should be carefully considered and a competent tax adviser should be consulted.
See "Federal Tax Matters" below.
FEDERAL TAX MATTERS
INTRODUCTION
The Individual Contract described in this Prospectus is designed for use by
individuals as a non-tax qualified retirement plan and as an individual
retirement annuity under Section 408 of the Internal Revenue Code ("Code"). The
Group Contract described in this Prospectus is designed for use in connection
with a Qualified Plan under Section 401, 403(b) or 457 of the Code. The ultimate
effect of federal income taxes on the amounts held under a Contract, on annuity
payments, and on the economic benefits to the Owner, the Annuitant, and the
Beneficiary or other payee will depend upon the type of retirement plan, if any,
for which the Contract is purchased, the tax and employment status of the
individuals involved and a number of other factors. The discussion contained
herein and in the Statement of Additional Information is general in nature and
is not intended to be an exhaustive discussion of all questions that might arise
in connection with a Contract. It is based upon Security Benefit's understanding
of the present federal income tax laws as currently interpreted by the Internal
Revenue Service ("IRS"), and is not intended as tax advice. No representation is
made regarding the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the IRS or the courts. Future
legislation may affect annuity contracts adversely. Moreover, no attempt has
been made to consider any applicable state or other laws. Because of the
inherent complexity of the tax laws and the fact that tax results will vary
according to the particular circumstances of the individual involved and, if
applicable, the Qualified Plan, a person should consult with a qualified tax
adviser regarding the purchase of a Contract, the selection of an Annuity Option
under a Contract, the receipt of annuity payments under a Contract or any other
transaction involving a Contract. SECURITY BENEFIT DOES NOT MAKE ANY GUARANTEE
REGARDING THE TAX STATUS OF, OR TAX CONSEQUENCES ARISING FROM, ANY CONTRACT OR
ANY TRANSACTION INVOLVING THE CONTRACTS.
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT
GENERAL
Security Benefit intends to be taxed as a life insurance company under Part
I, Subchapter L of the Code. Because the operations of the Separate Account form
a part of Security Benefit, Security Benefit will be responsible for any federal
income taxes that become payable with respect to the income of the Separate
Account and its Subaccounts.
CHARGE FOR SECURITY BENEFIT TAXES
A charge may be made for any federal taxes incurred by Security Benefit that
are attributable to the Separate Account, the Subaccounts or to the operations
of Security Benefit with respect to the Contracts or attributable to payments,
premiums, or acquisition costs under the Contracts. Security Benefit will review
the question of a charge to the Separate Account, the Subaccounts or the
Contracts for Security Benefit's federal taxes periodically. Charges may become
necessary if, among other reasons, the tax treatment of Security Benefit or of
income and expenses under the Contracts is ultimately determined to be other
than what Security Benefit currently believes it to be, if there are changes
made in the federal income tax treatment of variable annuities at the insurance
company level, or if there is a change in Security Benefit's tax status.
Under current laws, Security Benefit may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, Security Benefit reserves the right to charge the Separate Account or the
Subaccounts for such taxes, if any, attributable to the Separate Account or
Subaccounts.
DIVERSIFICATION STANDARDS
Each Series of the Mutual Fund will be required to adhere to regulations
adopted by the Treasury Department pursuant to Section 817(h) of the Code
prescribing asset diversification requirements for investment companies whose
shares are sold to insurance company separate accounts funding variable
contracts. Pursuant to these regulations, on the last day of each calendar
quarter (or on any day within 30 days thereafter), no more than 55 percent of
the total assets of a Series may be represented by any one investment, no more
than 70 percent may be represented by any two investments, no more than 80
percent may be represented by any three investments, and no more than 90 percent
may be represented by any four investments. For purposes of Section 817(h),
securities of a single issuer generally are treated as one investment but
obligations of the U.S. Treasury and each U.S. Governmental agency or
instrumentality generally are treated as securities of separate issuers. The
Separate Account, through the Series, intends to comply with the diversification
requirements of Section 817(h).
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contractowner's gross income. The IRS has stated in published rulings that a
variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." As of the date of this Prospectus, no such guidance has been
issued.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Contractowner has additional flexibility in allocating purchase
payments and Contract Values. These differences could result in a Contractowner
being treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, Security Benefit does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Security Benefit therefore reserves the right to
modify the Contract, as it deems appropriate, to attempt to prevent a
Contractowner from being considered the owner of a pro rata share of the assets
of the Separate Account. Moreover, in the event that regulations or rulings are
adopted, there can be no assurance that the Series will be able to operate as
currently described in the Prospectus, or that the Mutual Fund will not have to
change any Series' investment objective or investment policies.
INCOME TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS
Section 72 of the Code governs the taxation of annuities. In general, a
Contractowner is not taxed on increases in value under an annuity contract until
some form of distribution is made under the contract. However, the increase in
value may be subject to tax currently under certain circumstances. See
"Contracts Owned by Non-Natural Persons" on page 21 and "Diversification
Standards" above. Withholding of federal income taxes on all distributions may
be required unless a recipient who is eligible elects not to have any amounts
withheld and properly notifies Security Benefit of that election.
SURRENDERS OR WITHDRAWALS PRIOR TO THE ANNUITY START DATE
Code Section 72 provides that amounts received upon a total or partial
withdrawal (including systematic withdrawals) from a Contract prior to the
Annuity Start Date generally will be treated as gross income to the extent that
the cash value of the Contract immediately before the withdrawal (determined
without regard to any surrender charge in the case of a partial withdrawal)
exceeds the "investment in the contract." The "investment in the contract" is
that portion, if any, of purchase payments paid under a Contract less any
distributions received previously under the Contract that are excluded from the
recipient's gross income. The taxable portion is taxed at ordinary income tax
rates. For purposes of this rule, a pledge or assignment of a contract is
treated as a payment received on account of a partial withdrawal of a Contract.
SURRENDERS OR WITHDRAWALS ON OR AFTER THE ANNUITY START DATE
Upon a complete surrender, the receipt is taxable to the extent that the cash
value of the Contract exceeds the investment in the Contract. The taxable
portion of such payments will be taxed at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment generally is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed at ordinary income rates. For variable annuity
payments, the taxable portion of each payment is determined by using a formula
known as the "excludable amount," which establishes the non-taxable portion of
each payment. The non-taxable portion is a fixed dollar amount for each payment,
determined by dividing the investment in the Contract by the number of payments
to be made. The remainder of each variable annuity payment is taxable. Once the
excludable portion of annuity payments to date equals the investment in the
Contract, the balance of the annuity payments will be fully taxable.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10 percent of the portion of such
amount which is includable in gross income. However, the penalty tax is not
applicable to withdrawals: (i) made on or after the death of the owner (or where
the owner is not an individual, the death of the "primary annuitant," who is
defined as the individual the events in whose life are of primary importance in
affecting the timing and amount of the payout under the Contract); (ii)
attributable to the taxpayer's becoming totally disabled within the meaning of
Code Section 72(m)(7); (iii) which are part of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancies) of
the taxpayer and his or her beneficiary; (iv) from certain qualified plans; (v)
under a so-called qualified funding asset (as defined in Code Section 130(d));
(vi) under an immediate annuity contract; or (vii) which are purchased by an
employer on termination of certain types of qualified plans and which are held
by the employer until the employee separates from service.
If the penalty tax does not apply to a surrender or withdrawal as a result of
the application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year in which the modification occurs will be increased by an amount (determined
by the regulations) equal to the tax that would have been imposed but for item
(iii) above, plus interest for the deferral period, if the modification takes
place (a) before the close of the period which is five years from the date of
the first payment and after the taxpayer attains age 59 1/2, or (b) before the
taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract, a contract must provide the
following two distribution rules: (a) if any owner dies on or after the Annuity
Start Date, and before the entire interest in the Contract has been distributed,
the remainder of the owner's interest will be distributed at least as quickly as
the method in effect on the owner's death; and (b) if any owner dies before the
Annuity Start Date, the entire interest in the Contract must generally be
distributed within five years after the date of death, or, if payable to a
designated beneficiary, must be annuitized over the life of that designated
beneficiary or over a period not extending beyond the life expectancy of that
beneficiary, commencing within one year after the date of death of the owner. If
the sole designated beneficiary is the spouse of the deceased owner, the
Contract (together with the deferral of tax on the accrued and future income
thereunder) may be continued in the name of the spouse as owner.
Generally, for purposes of determining when distributions must begin under
the foregoing rules, where an owner is not an individual, the primary annuitant
is considered the owner. In that case, a change in the primary annuitant will be
treated as the death of the owner. Finally, in the case of joint owners, the
distribution-at-death rules will be applied by treating the death of the first
owner as the one to be taken into account in determining generally when
distributions must commence, unless the sole Beneficiary is the deceased owner's
spouse.
GIFT OF ANNUITY CONTRACTS
Generally, gifts of non-tax qualified Contracts prior to the Annuity Start
Date will trigger tax on the gain on the Contract, with the donee getting a
stepped-up basis for the amount included in the donor's income. The 10 percent
penalty tax and gift tax also may be applicable. This provision does not apply
to transfers between spouses or incident to a divorce.
CONTRACTS OWNED BY NON-NATURAL PERSONS
If the Contract is held by a non-natural person (for example, a corporation)
the income on that Contract (generally the increase in net surrender value less
the purchase payments) is includable in taxable income each year. The rule does
not apply where the Contract is acquired by the estate of a decedent, where the
Contract is held by certain types of retirement plans, where the Contract is a
qualified funding asset for structured settlements, where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and in
the case of an immediate annuity. An annuity contract held by a trust or other
entity as agent for a natural person is considered held by a natural person.
MULTIPLE CONTRACT RULE
For purposes of determining the amount of any distribution under Code Section
72(e) (amounts not received as annuities) that is includable in gross income,
all Non-Qualified annuity contracts issued by the same insurer to the same
Contractowner during any calendar year are to be aggregated and treated as one
contract. Thus, any amount received under any such contract prior to the
contract's Annuity Start Date, such as a partial surrender, dividend, or loan,
will be taxable (and possibly subject to the 10 percent penalty tax) to the
extent of the combined income in all such contracts.
In addition, the Treasury Department has broad regulatory authority in
applying this provision to prevent avoidance of the purposes of this rule. It is
possible that, under this authority, the Treasury Department may apply this rule
to amounts that are paid as annuities (on and after the Annuity Start Date)
under annuity contracts issued by the same company to the same owner during any
calendar year. In this case, annuity payments could be fully taxable (and
possibly subject to the 10 percent penalty tax) to the extent of the combined
income in all such contracts and regardless of whether any amount would
otherwise have been excluded from income because of the "exclusion ratio" under
the contract.
POSSIBLE TAX CHANGES
In recent years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities, and President Clinton's
fiscal-year 1999 Budget proposal includes a provision that, if adopted, would
impose new taxes on owners of variable annuities. Although as of the date of
this Prospectus, it does not appear that Congress is considering any legislation
regarding the taxation of annuities, there is always the possibility that the
tax treatment of annuities could change by legislation or other means (such as
IRS regulations, revenue rulings, and judicial decisions). Moreover, although
unlikely, it is also possible that any legislative change could be retroactive
(that is, effective prior to the date of such change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership of a Contract, the designation of an Annuitant, Payee
or other Beneficiary who is not also the Owner, the selection of certain Annuity
Start Dates or the exchange of a Contract may result in certain tax consequences
to the Owner that are not discussed herein. An Owner contemplating any such
transfer, assignment, selection or exchange should contact a competent tax
adviser with respect to the potential effects of such a transaction.
QUALIFIED PLANS
The Group Contract may be used with Qualified Plans that meet the
requirements of Section 401, 403(b), or 457 of the Code and the Individual
Contract may be used with Qualified Plans that meet the requirements of Section
408 of the Code. The tax rules applicable to participants in such Qualified
Plans vary according to the type of plan and the terms and conditions of the
plan itself. No attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans. These
Qualified Plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if this Contract is assigned
or transferred to any individual as a means to provide benefit payments, unless
the plan complies with all legal requirements applicable to such benefits prior
to transfer of the Contract. Contractowners, Annuitants, and Beneficiaries, are
cautioned that the rights of any person to any benefits under such Qualified
Plans may be subject to the terms and conditions of the plans themselves or
limited by applicable law, regardless of the terms and conditions of the
Contract issued in connection therewith. For example, Security Benefit may
accept beneficiary designations and payment instructions under the terms of the
Contract without regard to any spousal consents that may be required under the
Employee Retirement Income Security Act of 1974 (ERISA). Consequently, a
Contractowner's Beneficiary designation or elected payment option may not be
enforceable.
The amounts that may be contributed to Qualified Plans are subject to
limitations that vary depending on the type of Plan. In addition, early
distributions from most Qualified Plans may be subject to penalty taxes, or in
the case of distributions of amounts contributed under salary reduction
agreements, could cause the Plan to be disqualified. Furthermore, distributions
from most Qualified Plans are subject to certain minimum distribution rules.
Failure to comply with these rules could result in disqualification of the Plan
or subject the Owner or Annuitant to penalty taxes. As a result, the minimum
distribution rules may limit the availability of certain Annuity Options to
certain Annuitants and their beneficiaries. These requirements may not be
incorporated into Security Benefit's Contract administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
The following are brief descriptions of the various types of Qualified Plans
and the use of the Contract therewith:
SECTION 401
Code Section 401 permits employers to establish various types of retirement
plans (e.g., pension, profit sharing and 401(k) plans) for their employees. For
this purpose, self-employed individuals (proprietors or partners operating a
trade or business) are treated as employees and therefore eligible to
participate in such plans. Retirement plans established in accordance with
Section 401 may permit the purchase of Contracts to provide benefits thereunder.
In order for a retirement plan to be "qualified" under Code Section 401, it
must: (i) meet certain minimum standards with respect to participation, coverage
and vesting; (ii) not discriminate in favor of "highly compensated" employees;
(iii) provide contributions or benefits that do not exceed certain limitations;
(iv) prohibit the use of plan assets for purposes other than the exclusive
benefit of the employees and their beneficiaries covered by the plan; (v)
provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.
A retirement plan qualified under Code Section 401 may be funded by employer
contributions, employee contributions or a combination of both. Plan
participants are not subject to tax on employer contributions until such amounts
are actually distributed from the plan. Depending upon the terms of the
particular plan, employee contributions may be made on a pre-tax or after-tax
basis. In addition, plan participants are not taxed on plan earnings derived
from either employer or employee contributions until such earnings are
distributed.
Each employee's interest in a retirement plan qualified under Code Section
401 must generally be distributed or begin to be distributed not later than
April 1 of the calendar year following the later of the calendar year in which
the employee reaches age 70 1/2 or retires ("required beginning date"). Periodic
distributions must not extend beyond the life of the employee or the lives of
the employee and a designated beneficiary (or over a period extending beyond the
life expectancy of the employee or the joint life expectancy of the employee and
a designated beneficiary).
If an employee dies before reaching his or her required beginning date, the
employee's entire interest in the plan must generally be distributed within five
years of the employee's death. However, the five-year rule will be deemed
satisfied, if distributions begin before the close of the calendar year
following the year of the employee's death to a designated beneficiary and are
made over the life of the beneficiary (or over a period not extending beyond the
life expectancy of the beneficiary). If the designated beneficiary is the
employee's surviving spouse, distributions may be delayed until the employee
would have reached age 70 1/2.
If an employee dies after reaching his or her required beginning date, the
employee's interest in the plan must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
employee's death.
Annuity payments distributed from a retirement plan qualified under Code
Section 401 are taxable under Section 72 of the Code. Section 72 provides that
the portion of each payment attributable to contributions that were taxable to
the employee in the year made, if any, is excluded from gross income as a return
of the employee's investment. The portion so excluded is determined by dividing
the employee's investment in the plan by (1) the number of anticipated payments
determined under a table set forth in Section 72 of the Code or (2) in the case
of a contract calling for installment payments, the number of monthly annuity
payments under such contract. The portion of each payment in excess of the
exclusion amount is taxable as ordinary income. Once the employee's investment
has been recovered, the full annuity payment will be taxable. If the employee
should die prior to recovering his or her entire investment, the unrecovered
investment will be allowed as a deduction on the employee's final return. If the
employee made no contributions that were taxable when made, the full amount of
each annuity payment is taxable as ordinary income.
A "lump-sum" distribution from a retirement plan qualified under Code Section
401 is eligible for favorable tax treatment. A "lump-sum" distribution means the
distribution within one taxable year of the balance to the credit of the
employee which becomes payable: (i) on account of the employee's death, (ii)
after the employee attains age 59 1/2, (iii) on account of the employee's
termination of employment (in the case of a common law employee only) or (iv)
after the employee has become disabled (in the case of a self-employed person
only).
As a general rule, a lump-sum distribution is fully taxable as ordinary
income except for an amount equal to the employee's investment, if any, which is
recovered tax-free. However, special five-year averaging may be available,
provided the employee has reached age 59 1/2 and has not previously elected to
use income averaging. (Special five-year averaging has been repealed for
distributions after 1999.) Special ten-year averaging and capital-gains
treatment may be available to an employee who reached age 50 before 1986.
Distributions from a retirement plan qualified under Code Section 401 may be
eligible for a tax-free rollover to either another qualified retirement plan or
to an individual retirement account or annuity (IRA). See "Rollovers" on page
24.
SECTION 403(B)
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations specified in
Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, to exclude the amount of purchase payments from gross
income for tax purposes. The Group Contract may be purchased in connection with
a Section 403(b) annuity program.
Section 403(b) annuities must generally be provided under a plan which meets
certain minimum participation, coverage, and nondiscrimination requirements.
Section 403(b) annuities are generally subject to minimum distribution
requirements similar to those applicable to retirement plans qualified under
Section 401 of the Code. See "Section 401" on page 22.
A Section 403(b) annuity contract may be purchased with employer
contributions, employee contributions or a combination of both. An employee's
rights under a Section 403(b) contract must be nonforfeitable. Numerous
limitations apply to the amount of contributions that may be made to a Section
403(b) annuity contract. The applicable limit will depend upon, among other
things, whether the annuity contract is purchased with employer or employee
contributions.
Amounts used to purchase Section 403(b) annuities generally are excludable
from the taxable income of the employee. As a result, all distributions from
such annuities are normally taxable in full as ordinary income to the employee.
A Section 403(b) annuity contract must prohibit the distribution of employee
contributions (including earnings thereon) until the employee: (i) attains age
59 1/2, (ii) terminates employment; (iii) dies; (iv) becomes disabled; or (v)
incurs a financial hardship (earnings may not be distributed in the event of
hardship).
Distributions from a Section 403(b) annuity contract may be eligible for a
tax-free rollover to either another Section 403(b) annuity contract or to an
individual retirement account or annuity (IRA). See "Rollovers" page 24.
SECTIONS 408
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to establish individual retirement programs through the purchase of
Individual Retirement Annuities. The Individual Contract may be purchased as an
IRA.
IRAs are subject to limitations on the amount that may be contributed, the
persons who may be eligible and on the time when distributions must commence.
Depending upon the circumstances of the individual, contributions to an IRA may
be made on a deductible or non-deductible basis. IRAs may not be transferred,
sold, assigned, discounted or pledged as collateral for a loan or other
obligation. The annual premium for an IRA may not be fixed and may not exceed
$2,000 (except in the case of a rollover contribution). Any refund of premium
must be applied to the payment of future premiums or the purchase of additional
benefits.
Sale of the Individual Contract for use with IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the
Individual Contract for such purposes will be provided with such supplementary
information as may be required by the Internal Revenue Service or other
appropriate agency, and will have the right to revoke the Contract under certain
circumstances. See the IRA Disclosure Statement that accompanies this
Prospectus.
In general, IRAs are subject to minimum distribution requirements similar to
those applicable to retirement plans qualified under Section 401 of the Code;
however, the required beginning date for IRAs is generally the date that the
Contractowner reaches age 70 1/2--the Contractowner's retirement date, if any,
will not affect his or her required beginning date. See "Section 401" on page
22. Distributions from IRAs are generally taxed under Code Section 72. Under
these rules, a portion of each distribution may be excludable from income. The
amount excludable from the individual's income is the amount of the distribution
which bears the same ratio as the individual's nondeductible contributions bears
to the expected return under the IRA.
Distributions from an IRA may be eligible for a tax-free rollover to another
IRA. In certain cases, a distribution from an IRA may be eligible to be rolled
over to a retirement plan qualified under Code Section 401(a) or a Section
403(b) annuity contract. See "Rollovers" on page 24.
SECTION 457
Section 457 of the Code permits employees of state and local governments and
units and agencies of state and local governments as well as tax-exempt
organizations described in Section 501(c)(3) of the Code to defer a portion of
their compensation without paying current taxes if those employees are
participants in an eligible deferred compensation plan. A Section 457 plan may
permit the purchase of the Group Contract to provide benefits thereunder.
Although a participant under a Section 457 plan may be permitted to direct or
choose methods of investment in the case of a tax-exempt employer sponsor, all
amounts deferred under the plan, and any income thereon, remain solely the
property of the employer and subject to the claims of its general creditors,
until paid to the participant. The assets of a Section 457 plan maintained by a
state or local government employer must be held in trust (or custodial account
or an annuity contract) for the exclusive benefit of plan participants, who will
be responsible for taxes upon distribution. A Section 457 plan must not permit
the distribution of a participant's benefits until the participant attains age
70 1/2, terminates employment or incurs an "unforeseeable emergency."
Section 457 plans are generally subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code. See "Section 401" on page 22. Since under a Section 457 plan,
contributions are generally excludable from the taxable income of the employee,
the full amount received will usually be taxable as ordinary income when annuity
payments commence or other distributions are made. Distributions from a Section
457 plan are not eligible for tax-free rollovers.
ROLLOVERS
A "rollover" is the tax-free transfer of a distribution from one Qualified
Plan to another. Distributions which are rolled over are not included in the
employee's gross income until some future time.
If any portion of the balance to the credit of an employee in a Section 401
plan or Section 403(b) plan is paid to the employee in an "eligible rollover
distribution" and the employee transfers any portion of the amount received to
an "eligible retirement plan," then the amount so transferred is not includable
in income. An "eligible rollover distribution" generally means any distribution
that is not one of a series of periodic payments made for the life of the
distributee or for a specified period of at least ten years. In addition, a
required minimum distribution will not qualify as an eligible rollover
distribution. A rollover must be completed within 60 days after receipt of the
distribution.
In the case of a Section 401 plan, an "eligible retirement plan" will be
another retirement plan qualified under Code Section 401 or an individual
retirement account or annuity under Code Section 408. With respect to a Section
403(b) plan, an "eligible retirement plan" will be another Section 403(b) plan
or an individual retirement account or annuity described in Code Section 408.
A Section 401 plan and a Section 403(b) plan must generally provide a
participant receiving an eligible rollover distribution, the option to have the
distribution transferred directly to another eligible retirement plan.
The owner of an IRA may make a tax-free rollover of any portion of the IRA.
The rollover must be completed within 60 days of the distribution and generally
may only be made to another IRA. However, an individual may receive a
distribution from his or her IRA and within 60 days roll it over into a
retirement plan qualified under Code Section 401(a) if all of the funds in the
IRA are attributable to a rollover from a Section 401(a) plan. Similarly, a
distribution from an IRA may be rolled over to a Section 403(b) plan only if all
of the funds in the IRA are attributable to a rollover from a Section 403(b)
annuity.
TAX PENALTIES
PREMATURE DISTRIBUTION TAX. Distributions from a Qualified Plan before the
participant reaches age 59 1/2 are generally subject to an additional tax equal
to 10 percent of the taxable portion of the distribution. The 10 percent penalty
tax does not apply to distributions: (i) made on or after the death of the
employee; (ii) attributable to the employee's disability; (iii) which are part
of a series of substantially equal periodic payments made (at least annually)
for the life (or life expectancy) of the employee or the joint lives (or joint
life expectancies) of the employee and a designated beneficiary and which begin
after the employee terminates employment; (iv) made to an employee after
termination of employment after reaching age 55; (v) made to pay for certain
medical expenses; (vi) that are exempt withdrawals of an excess contribution;
(vii) that is rolled over or transferred in accordance with Code requirements;
or (viii) that is transferred pursuant to a decree of divorce or separate
maintenance or written instrument incident to such a decree.
The exception to the 10 percent penalty tax described in item (iv) above is
not applicable to IRAs. However, distributions from an IRA to unemployed
individuals can be made without application of the 10 percent penalty tax to pay
health insurance premiums in certain cases. In addition, the 10 percent penalty
tax is generally not applicable to distributions from a Section 457 plan.
Starting January 1, 1998, there are two additional exceptions to the 10 percent
penalty tax on withdrawals from IRAs before age 59 1/2: withdrawals made to pay
"qualified" higher education expenses and withdrawals made to pay certain
"eligible first-time home buyer expenses."
MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan is
less than the minimum required distribution for the year, the participant is
subject to a 50 percent tax on the amount that was not properly distributed.
EXCESS DISTRIBUTION/ACCUMULATION TAX. The penalty tax of 15 percent which was
imposed (in addition to any ordinary income tax) on large plan distributions and
the "excess retirement accumulations" of an individual has been repealed,
effective January 1, 1997.
WITHHOLDING
Periodic distributions (e.g., annuities and installment payments) from a
Qualified Plan that will last for a period of ten or more years are generally
subject to voluntary income tax withholding. The amount withheld on such
periodic distributions is determined at the rate applicable to wages. The
recipient of a periodic distribution may generally elect not to have withholding
apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than ten years) from a Qualified Plan (other than IRA and
Section 457 plans) are generally subject to mandatory 20 percent income tax
withholding. However, no withholding is imposed if the distribution is
transferred directly to another eligible Qualified Plan. Nonperiodic
distributions from an IRA are subject to income tax withholding at a flat 10
percent rate. The recipient of such a distribution may elect not to have
withholding apply.
The above description of the federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contract offered by this
Prospectus is only a brief summary and is not intended as tax advice. The rules
governing the provisions of Qualified Plans are extremely complex and often
difficult to comprehend. Anything less than full compliance with the applicable
rules, all of which are subject to change, may have adverse tax consequences. A
prospective Contractowner considering adoption of a Qualified Plan and purchase
of a Contract in connection therewith should first consult a qualified and
competent tax adviser, with regard to the suitability of the Contract as an
investment vehicle for the Qualified Plan.
OTHER INFORMATION
VOTING OF MUTUAL FUND SHARES
Security Benefit is the legal owner of the shares of the Mutual Fund held by
the Subaccounts of the Separate Account. Security Benefit will exercise voting
rights attributable to the shares of each Series of the Mutual Fund held in the
Subaccounts at any regular and special meetings of the shareholders of the
Mutual Fund on matters requiring shareholder voting under the 1940 Act. In
accordance with its view of presently applicable law, Security Benefit will
exercise these voting rights based on instructions received from persons having
the voting interest in corresponding Subaccounts of the Separate Account.
However, if the 1940 Act or any regulations thereunder should be amended, or if
the present interpretation thereof should change, and as a result Security
Benefit determines that it is permitted to vote the shares of the Mutual Fund in
its own right, it may elect to do so.
The person having the voting interest under a Contract is the Owner. Unless
otherwise required by applicable law, the number of shares of a particular
Series as to which voting instructions may be given to Security Benefit is
determined by dividing a Contractowner's Contract Value in a Subaccount on a
particular date by the net asset value per share of that Series as of the same
date. Fractional votes will be counted. The number of votes as to which voting
instructions may be given will be determined as of the date coincident with the
date established by the Mutual Fund for determining shareholders eligible to
vote at the meeting of the Mutual Fund. If required by the SEC, Security Benefit
reserves the right to determine in a different fashion the voting rights
attributable to the shares of the Mutual Fund. Voting instructions may be cast
in person or by proxy.
Voting rights attributable to the Contractowner's Contract Value in a
Subaccount for which no timely voting instructions are received will be voted by
Security Benefit in the same proportion as the voting instructions that are
received in a timely manner for all Contracts participating in that Subaccount.
Security Benefit will also exercise the voting rights from assets in each
Subaccount that are not otherwise attributable to Contractowners, if any, in the
same proportion as the voting instructions that are received in a timely manner
for all Contracts participating in that Subaccount and generally will exercise
voting rights attributable to shares of the Series of the Mutual Fund held in
its General Account, if any, in the same proportion as votes cast with respect
to shares of the Series of the Mutual Fund held by the Separate Account and
other separate accounts of Security Benefit, in the aggregate.
SUBSTITUTION OF INVESTMENTS
Security Benefit reserves the right, subject to compliance with the law as
then in effect, to make additions to, deletions from, substitutions for, or
combinations of the securities that are held by the Separate Account or any
Subaccount or that the Separate Account or any Subaccount may purchase. If
shares of any or all of the Series of the Mutual Fund should no longer be
available for investment, or if, in the judgment of Security Benefit management,
further investment in shares of any or all of the Series of the Mutual Fund
should become inappropriate in view of the purposes of the Contract, Security
Benefit may substitute shares of another Series of the Mutual Fund or of a
different fund for shares already purchased, or to be purchased in the future
under the Contract. Security Benefit may also purchase, through the Subaccount,
other securities for other classes or contracts, or permit a conversion between
classes of contracts on the basis of requests made by Owners.
In connection with a substitution of any shares attributable to an Owner's
interest in a Subaccount or the Separate Account, Security Benefit will, to the
extent required under applicable law, provide notice, seek Owner approval, seek
prior approval of the SEC, and comply with the filing or other procedures
established by applicable state insurance regulators.
Security Benefit also reserves the right to establish additional Subaccounts
of the Separate Account that would invest in a new Series of the Mutual Fund or
in shares of another investment company, a series thereof, or other suitable
investment vehicle. New Subaccounts may be established in the sole discretion of
Security Benefit, and any new Subaccount will be made available to existing
Owners on a basis to be determined by Security Benefit. Security Benefit may
also eliminate or combine one or more Subaccounts if, in its sole discretion,
marketing, tax, or investment conditions so warrant.
Subject to compliance with applicable law, Security Benefit may transfer
assets to the General Account. Security Benefit also reserves the right, subject
to any required regulatory approvals, to transfer assets of any Subaccount of
the Separate Account to another separate account or Subaccount.
In the event of any such substitution or change, Security Benefit may, by
appropriate endorsement, make such changes in these and other contracts as may
be necessary or appropriate to reflect such substitution or change. If deemed by
Security Benefit to be in the best interests of persons having voting rights
under the Contracts, the Separate Account may be operated as a management
investment company under the 1940 Act or any other form permitted by law; it may
be deregistered under that Act in the event such registration is no longer
required; or it may be combined with other separate accounts of Security Benefit
or an affiliate thereof. Subject to compliance with applicable law, Security
Benefit also may combine one or more Subaccounts and may establish a committee,
board, or other group to manage one or more aspects of the operation of the
Separate Account.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS
Security Benefit reserves the right, without the consent of Owners, to
suspend sales of the Contract as presently offered and to make any change to the
provisions of the Contracts to comply with, or give Owners the benefit of, any
federal or state statute, rule, or regulation, including but not limited to
requirements for annuity contracts and retirement plans under the Internal
Revenue Code and regulations thereunder or any state statute or regulation.
Security Benefit also reserves the right to limit the amount and frequency of
subsequent purchase payments.
REPORTS TO OWNERS
A statement will be sent annually to each Contractowner setting forth a
summary of the transactions that occurred during the year, and indicating the
Contract Value as of the end of each year. In addition, the statement will
indicate the allocation of Contract Value among the Subaccounts and any other
information required by law. Confirmations will also be sent out upon purchase
payments, transfers, and full and partial withdrawals. Certain transactions may
be confirmed on a quarterly basis. These transactions include systematic
withdrawals and annuity payments.
Each Contractowner will also receive an annual and semiannual report
containing financial statements for the Mutual Fund, which will include a list
of the portfolio securities of the Mutual Fund, as required by the 1940 Act,
and/or such other reports as may be required by federal securities laws.
TELEPHONE TRANSFER PRIVILEGES
A Contractowner may request a transfer of Contract Value by telephone unless
an election was made in the application to not have Telephone Transfer
privileges ("Telephone Authorization"). Security Benefit has established
procedures to confirm that instructions communicated by telephone are genuine
and will not be liable for any losses due to fraudulent or unauthorized
instructions provided it complies with its procedures. Security Benefit's
procedures require that any person requesting a transfer by telephone provide
the account number and the Owner's tax identification number and such
instructions must be received on a recorded line. Security Benefit reserves the
right to deny any telephone transfer request. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), Contractowners might not be able to request transfers by
telephone and would have to submit written requests.
By authorizing telephone transfers, a Contractowner authorizes Security
Benefit to accept and act upon telephonic instructions for transfers involving
the Contractowner's Contract, and agrees that neither Security Benefit, nor any
of its affiliates, nor the Mutual Fund, will be liable for any loss, damages,
cost, or expense (including attorneys' fees) arising out of any requests
effected in accordance with the Telephone Authorization and believed by Security
Benefit to be genuine, provided that Security Benefit has complied with its
procedures. As a result of this policy on telephone requests, the Contractowner
may bear the risk of loss arising from the telephone transfer privileges.
Security Benefit may discontinue, modify, or suspend the telephone transfer
privilege at any time.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Separate Account is a
party, or which would materially affect the Separate Account.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Contracts
described in this Prospectus, Security Benefit's authority to issue the
Contracts under Kansas law, and the validity of the forms of the Contracts under
Kansas law have been passed upon by Amy J. Lee, Esq., Associate General Counsel,
Security Benefit.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account,
including the yield of the Subaccounts, and the total return of the Subaccounts
may appear in advertisements, reports, and promotional literature to current or
prospective Owners.
Quotations of yield will be based on all investment income per Accumulation
Unit earned during a given 30-day period, less expenses accrued during the
period ("net investment income"), and will be computed by dividing net
investment income by the value of an Accumulation Unit on the last day of the
period. Quotations of average annual total return for any Subaccount will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in a Contract over a period of one, five, and ten years
(or, if less, up to the life of the Subaccount), and will reflect the deduction
of the applicable mortality and expense risk charge and may simultaneously be
shown for other periods.
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donaghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index or other indices measuring
performance of a pertinent group of securities so that investors may compare a
Subaccount's results with those of a group of securities widely regarded by
investors as representative of the securities markets in general or
representative of a particular type of security: (ii) other variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other ratings services, companies, publications, or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Contract.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Contract Value is allocated to a Subaccount
during a particular time period on which the calculations are based. Performance
information should be considered in light of the investment objectives and
policies, characteristics, and quality of the Series in which the Subaccount
invests, and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Subaccounts, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on overall
performance or other criteria, (ii) the effect of tax-deferred compounding on a
Subaccount's investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a comparison, at various
points in time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with the
return on a taxable basis, and (iii) Security Benefit's rating or a rating of
Security Benefit's claim-paying ability as determined by firms that analyze and
rate insurance companies and by nationally recognized statistical rating
organizations.
ADDITIONAL INFORMATION
REGISTRATION STATEMENT
A Registration Statement under the 1933 Act has been filed with the SEC
relating to the offering described in this Prospectus. This Prospectus does not
include all the information included in the Registration Statement, certain
portions of which, including the Statement of Additional Information, have been
omitted pursuant to the rules and regulations of the SEC. The omitted
information may be obtained at the SEC's principal office in Washington, DC,
upon payment of the SEC's prescribed fees and may also be obtained from the
SEC's web site (http://www.sec.gov).
FINANCIAL STATEMENTS
Consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries at December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997, are contained in the Statement of
Additional Information. Financial statements for the Separate Account are not
yet available as it did not begin operations until ____________________, 1998.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to Security Benefit. The Table of Contents of
the Statement of Additional Information is set forth below:
TABLE OF CONTENTS
Page
GENERAL INFORMATION AND HISTORY............................................ 1
DISTRIBUTION OF THE CONTRACT............................................... 1
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS...... 1
EXPERTS.................................................................... 3
PERFORMANCE INFORMATION.................................................... 3
FINANCIAL STATEMENTS....................................................... 4
<PAGE>
PCG VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: ____________________, 1998
INDIVIDUAL AND GROUP FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
ISSUED BY
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON STREET
TOPEKA, KANSAS 66636-0001
1-800-888-2461
MAILING ADDRESS:
SECURITY BENEFIT LIFE INSURANCE COMPANY
P.O. BOX 750497
TOPEKA, KANSAS 66675-0497
1-800-888-2461
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current Prospectus for the PCG Variable Annuity
dated _______________, 1998, as it may be supplemented from time to time. A copy
of the Prospectus may be obtained from Security Benefit by calling
1-800-888-2461 or by writing P.O. Box 750497, Topeka, Kansas 66675-0497.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY............................................ 1
DISTRIBUTION OF THE CONTRACT............................................... 1
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS...... 1
EXPERTS.................................................................... 3
PERFORMANCE INFORMATION.................................................... 3
FINANCIAL STATEMENTS....................................................... 4
<PAGE>
GENERAL INFORMATION AND HISTORY
For a description of the Flexible Purchase Payment Deferred Variable Annuity
Contract (the "Contract"), Security Benefit Life Insurance Company ("Security
Benefit"), and the Variable Annuity Account X (the "Separate Account"), see the
Prospectus. This Statement of Additional Information contains information that
supplements the information in the Prospectus. Defined terms used in this
Statement of Additional Information have the same meaning as terms defined in
the section entitled "Definitions" in the Prospectus.
SAFEKEEPING OF ASSETS
Security Benefit is responsible for the safekeeping of the assets of the
Subaccounts. These assets, which consist of shares of the Series of the Mutual
Fund in non-certificated form, are held separate and apart from the assets of
the Security Benefit's General Account and its other separate accounts.
DISTRIBUTION OF THE CONTRACT
Security Distributors, Inc. ("SDI") is Principal Underwriter of the Contract.
SDI is registered as a broker/dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The offering of the
Contracts is continuous.
Subject to arrangements with Security Benefit, the Contract is sold by
independent broker/dealers who are members of the NASD and who become licensed
to sell variable annuities for SBL, and by certain financial institutions. SDI
acts as principal underwriter on behalf of Security Benefit for the distribution
of the Contract. SDI is not compensated under its Distribution Agreement with
Security Benefit.
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
SECTION 401
The applicable annual limits on purchase payments for a Contract used in
connection with a retirement plan that is qualified under Section 401 of the
Internal Revenue Code depend upon the type of plan. Total purchase payments on
behalf of a participant to all defined contribution plans maintained by an
employer are limited under Section 415(c) of the Internal Revenue Code to the
lesser of (a) $30,000, or (b) 25% of the participant's annual compensation.
Salary reduction contributions to a cash-or-deferred arrangement under a profit
sharing plan are subject to additional annual limits. Contributions to a defined
benefit pension plan are actuarially determined based upon the amount of
benefits the participants will receive under the plan formula. The maximum
annual benefit any individual may receive under an employer's defined benefit
plan is limited under Section 415(b) of the Internal Revenue Code. The limits
determined under Section 415(b) and (c) of the Internal Revenue Code are further
reduced for an individual who participates in a defined contribution plan and a
defined benefit plan maintained by the same employer. Rollover contributions are
not subject to the annual limitations described above.
SECTION 403(B)
Contributions to 403(b) annuities are excludable from an employee's gross
income if they do not exceed the smallest of the limits calculated under
Sections 402(g), 403(b)(2), and 415 of the Code. The applicable limit will
depend upon whether the annuities are purchased with employer or employee
contributions. Rollover contributions are not subject to these annual limits.
Section 402(g) generally limits an employee's salary reduction contributions
to a 403(b) annuity to $10,000 a year. The $10,000 limit will be reduced by
salary reduction contributions to other types of retirement plans. An employee
with at least 15 years of service for a "qualified employer" (i.e., an
educational organization, hospital, home health service agency, health and
welfare service agency, church or convention or association of churches)
generally may exceed the $10,000 limit by $3,000 per year, subject to an
aggregate limit of $15,000 for all years.
Section 403(b)(2) provides an overall limit on employer and employee salary
reduction contributions that may be made to a 403(b) annuity. Section 403(b)(2)
generally provides that the maximum amount of contributions an employee may
exclude from his or her gross income in any taxable year is equal to the excess,
if any, of:
(i) the amount determined by multiplying 20% of the employee's includable
compensation by the number of his or her years of service with the
employer, over
(ii) the total amount contributed to retirement plans sponsored by the
employer, that were excludable from his or her gross income in prior
years.
Section 415(c) also provides an overall limit on the amount of employer and
employee salary reduction contributions to a Section 403(b) annuity that will be
excludable from an employee's gross income in a given year. The Section 415(c)
limit is the lesser of (i) $30,000, or (ii) 25% of the employee's annual
compensation.
SECTION 408
Premiums (other than rollover contributions) paid under a Contract used in
connection with an individual retirement annuity (IRA) that is described in
Section 408 of the Internal Revenue Code are subject to the limits on
contributions to IRA's under Section 219(b) of the Internal Revenue Code. Under
Section 219(b) of the Code, contributions (other than rollover contributions) to
an IRA are limited to the lesser of $2,000 per year or the Owner's annual
compensation. Spousal IRAs allow an owner and his or her spouse to contribute up
to $2,000 to their respective IRAs so long as joint tax return is filed and
joint income is $4,000 or more. The maximum amount the higher compensated spouse
may contribute for the year is the lesser of $2,000 or 100% of that spouse's
compensation. The maximum the lower compensated spouse may contribute is the
lesser of (i) $2,000 or (ii) 100% of that spouse's compensation plus the amount
by which the higher compensated spouse's compensation exceeds the amount the
higher compensated spouse contributes to his or her IRA. The extent to which an
Owner may deduct contributions to an IRA depends on the gross income of the
Owner and his or her spouse for the year and whether either participate in an
employer-sponsored retirement plan.
Premiums under a Contract used in connection with a simplified employee
pension plan described in Section 408 of the Internal Revenue Code are subject
to limits under Section 402(h) of the Internal Revenue Code. Section 402(h)
currently limits employer contributions and salary reduction contributions (if
permitted) under a simplified employee pension plan to the lesser of (a) 15% of
the compensation of the participant in the Plan, or (b) $30,000. Salary
reduction contributions, if any, are subject to additional annual limits.
SECTION 457
Contributions on behalf of an employee to a Section 457 plan generally are
limited to the lesser of (i) $8,000 or (ii) 33 1/3% of the employee's includable
compensation. The $8,000 limit is indexed for inflation (in $500 increments) for
tax years beginning after December 31, 1996; thus the dollar limit is adjusted
only when the sum of the inflation adjustment equals or exceeds $500. If the
employee participates in more than one Section 457 plan, the $8,000 limit
applies to contributions to all such programs. The $8,000 limit is reduced by
the amount of any salary reduction contribution the employee makes to a 403(b)
annuity, an IRA or a retirement plan qualified under Section 401. The Section
457 limit may be increased during the last three years ending before the
employee reaches his or her normal retirement age. In each of these last three
years, the plan may permit a "catch-up" amount in addition to the regular amount
to be deferred. The maximum combined amount which may be deferred in each of
these three years is $15,000 reduced by any amount excluded from the employee's
income for the taxable year as a contribution to another plan.
EXPERTS
The consolidated financial statements for Security Benefit Life Insurance
Company and Subsidiaries at December 31, 1997, and 1996 and for each of the
three years in the period ended December 31, 1997, appearing in this Statement
of Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing on page 5 herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing. Financial statements for the Separate
Account are not yet available as it did not begin operations until
_______________, 1998.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account,
including the yield and total return of all Subaccounts, may appear in
advertisements, reports, and promotional literature provided to current or
prospective Owners.
Quotations of yield for the Subaccounts will be based on all investment
income per Accumulation Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of the Accumulation Unit
on the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6 - 1]
---
cd
where a = net investment income earned during the period by the Series
attributable to shares owned by the Subaccount,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of Accumulation Units outstanding during
the period that were entitled to receive dividends, and
d = the maximum offering price per Accumulation Unit on the last day of
the period.
Quotations of average annual total return for any Subaccount will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a Contract over a period of one, five and ten years
(or, if less, up to the life of the Subaccount), calculated pursuant to the
following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of
$1,000, T = the average annual total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). Quotations of total return may simultaneously be shown
for other periods and may include total return for periods beginning prior to
availability of the Contract. Such total return figures are based upon the
performance of the respective Series of the Mutual Fund, adjusted to reflect the
charges imposed under the Contract.
Average annual total return figures reflect the deduction of the applicable
mortality and expense risk charge.
Quotations of total return for any Subaccount of the Separate Account will be
based on a hypothetical investment in an Account over a certain period and will
be computed by subtracting the initial value of the investment from the ending
value and dividing the remainder by the initial value of the investment. Such
quotations of total return will reflect the deduction of all applicable charges
to the contract and the separate account (on an annual basis).
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index or other indices that measure
performance of a pertinent group of securities so that investors may compare a
Subaccount's results with those of a group of securities widely regarded by
investors as representative of the securities markets in general or
representative of a particular type of security; (ii) other variable annuity
separate accounts, insurance products funds, or other investment products
tracked by Lipper Analytical Services, a widely used independent research firm
which ranks mutual funds and other investment companies by overall performance,
investment objectives, and assets, or tracked by The Variable Annuity Research
and Data Service ("VARDS"), an independent service which monitors and ranks the
performance of variable annuity issues by investment objectives on an
industry-wide basis or tracked by other services, companies, publications or
persons who rank such investment companies on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which an Owner's Contract Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Series of the Mutual
Fund in which the Subaccount invests, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts, insurance products funds, or other investment
products tracked by Lipper Analytical Services or by other rating services,
companies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (ii) the
effect of a tax-deferred compounding on a Subaccount's investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable basis.
FINANCIAL STATEMENTS
Security Benefit Life Insurance Company's consolidated balance sheets as of
December 31, 1997, and 1996 and the related consolidated statements of income,
changes in equity, and cash flows for each of the three years in the period
ended December 31, 1997, are set forth starting on page 5.
The consolidated financial statements of Security Benefit Life Insurance
Company, which are included in this Statement of Additional Information, should
be considered only as bearing on the ability of the Company to meet its
obligations under the Contracts. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 1997, 1996 and 1995
CONTENTS
PAGE
Report of Independent Auditors........................................... 6
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................ 7
Consolidated Statements of Income...................................... 8
Consolidated Statements of Changes in Equity........................... 9
Consolidated Statements of Cash Flows.................................. 10
Notes to Consolidated Financial Statements............................. 12
<PAGE>
Report of Independent Auditors
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security Benefit
Life Insurance Company and Subsidiaries (the Company) as of December 31, 1997
and 1996, and the related consolidated statements of income, changes in equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
February 6, 1998
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
DECEMBER 31
1997 1996
--------------------------
(IN THOUSANDS)
ASSETS
Investments:
Securities available-for-sale:
Fixed maturities............................... $1,650,324 $1,805,066
Equity securities.............................. 120,508 89,188
Fixed maturities held-to-maturity................ 452,411 528,045
Mortgage loans................................... 64,251 66,611
Real estate...................................... 3,056 4,000
Policy loans..................................... 85,758 106,822
Cash and cash equivalents........................ 30,896 8,310
Other invested assets............................ 42,395 40,531
--------------------------
Total investments.................................. 2,449,599 2,648,573
Accrued investment income.......................... 30,034 32,161
Accounts receivable................................ 6,278 4,256
Reinsurance recoverable............................ 408,096 92,197
Property and equipment, net........................ 19,669 18,592
Deferred policy acquisition costs.................. 159,441 216,918
Other assets....................................... 20,909 24,939
Separate account assets............................ 3,716,639 2,802,927
--------------------------
$6,810,665 $5,840,563
==========================
LIABILITIES AND EQUITY
Liabilities:
Policy reserves and annuity account values....... $2,439,713 $2,497,998
Policy and contract claims....................... 10,955 10,607
Other policyholder funds......................... 21,582 24,073
Accounts payable and accrued expenses............ 23,576 18,003
Income taxes payable:
Current........................................ 10,960 6,686
Deferred....................................... 58,261 54,847
Long-term debt and other borrowings.............. 65,000 65,000
Other liabilities................................ 29,098 11,990
Separate account liabilities..................... 3,716,639 2,793,911
--------------------------
Total liabilities.................................. 6,375,784 5,483,115
Equity:
Retained earnings................................ 409,432 357,927
Unrealized gain (loss) on securities
available-for-sale, net........................ 25,449 (479)
--------------------------
Total equity....................................... 434,881 357,448
==========================
$6,810,665 $5,840,563
==========================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Income
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
Revenues:
Insurance premiums and other
considerations.................. $ 24,640 $ 28,848 $ 49,608
Net investment income............. 184,975 194,783 182,012
Asset based fees.................. 72,025 55,977 40,652
Other product charges............. 9,163 10,470 10,412
Realized gains (losses) on
investments..................... 4,929 (244) 3,876
Other revenues.................... 21,389 24,391 22,164
-----------------------------------------
Total revenues...................... 317,121 314,225 308,724
Benefits and expenses:
Annuity and interest sensitive
life benefits:
Interest credited to account
balances.................... 102,640 108,705 113,700
Benefit claims in excess of
account balances............ 4,985 7,541 6,808
Traditional life insurance
benefits........................ 3,966 6,474 7,460
Supplementary contract payments... 9,660 11,121 11,508
Increase in traditional life
reserves........................ 7,050 8,580 13,212
Dividends to policyholders........ 1,608 2,374 2,499
Other benefits.................... 19,699 20,790 22,379
-----------------------------------------
Total benefits...................... 149,608 165,585 177,566
Commissions and other operating
expenses.......................... 56,933 52,044 48,305
Amortization of deferred policy
acquisition costs................. 26,179 25,930 26,628
Interest expense.................... 5,305 4,285 7
Restructuring expenses.............. 2,643 --- ---
Other expenses...................... 3,381 1,667 1,099
-----------------------------------------
Total benefits and expenses......... 244,049 249,511 253,605
-----------------------------------------
Income before income taxes.......... 73,072 64,714 55,119
Income taxes........................ 21,567 20,871 17,927
-----------------------------------------
Net income.......................... $ 51,505 $ 43,843 $ 37,192
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Equity
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
Retained earnings:
Beginning of year................. $357,927 $314,084 $276,892
Net income........................ 51,505 43,843 37,192
-----------------------------------------
End of year....................... 409,432 357,927 314,084
Unrealized gain (loss) on securities
available-for-sale, net:
Beginning of year............... (479) 11,607 (48,466)
Change in unrealized gain
(loss) on securities
available-for-sale, net....... 25,928 (12,086) 60,073
-----------------------------------------
End of year..................... 25,449 (479) 11,607
-----------------------------------------
Total equity........................ $434,881 $357,448 $325,691
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income.......................... $ 51,505 $ 43,843 $ 37,192
Adjustments to reconcile net income
to net cash provided by operating
activities:
Annuity and interest sensitive
life products:
Interest credited to account
balances.................. 102,640 108,705 113,700
Charges for mortality and
administration............ (10,582) (13,115) (16,585)
(Decrease) increase in traditional
life policy reserves............ (3,101) 10,697 2,142
Decrease (increase) in accrued
investment income............... 2,127 (1,538) (4,573)
Policy acquisition costs deferred. (37,999) (36,865) (33,021)
Policy acquisition costs amortized 26,179 25,930 26,628
Accrual of discounts on
investments..................... (2,818) (3,905) (3,421)
Amortization of premiums on
investments..................... 9,138 11,284 9,782
Depreciation and amortization..... 3,959 3,748 3,750
Other............................. (8,444) (3,379) (4,225)
-----------------------------------------
Net cash provided by operating
activities........................ 132,604 145,405 131,369
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities
available-for-sale............ 368,901 870,240 517,480
Fixed maturities
held-to-maturity.............. 124,013 58,874 59,873
Equity securities
available-for-sale............ 48,495 3,643 10,242
Mortgage loans.................. 3,739 12,545 23,248
Real estate..................... 946 2,935 3,173
Short-term investments.......... --- 20,069 229,871
Separate account assets......... 9,180 5,214 -
Other invested assets........... 7,865 6,224 22,839
-----------------------------------------
563,139 979,744 866,726
Acquisition of investments:
Fixed maturities
available-for-sale.............. (219,736) (936,376) (591,121)
Fixed maturities held-to-maturity. (1,188) (52,422) (125,276)
Equity securities
available-for-sale.............. (67,004) (68,222) (7,500)
Mortgage loans.................... (1,447) (4,538) (4,179)
Real estate....................... (712) (2,637) (1,511)
Short-term investments............ --- (19,070) (180,259)
Separate account assets........... --- --- (12,000)
Other invested assets............. (7,518) (3,712) (31,861)
Purchase of property and equipment (4,144) (1,879) (2,036)
Net increase in policy loans...... (8,654) (6,370) (8,058)
Net cash transferred per
coinsurance agreement........... (218,043) --- (16,295)
-----------------------------------------
Net cash provided by (used in)
investing activities.............. 34,693 (115,482) (113,370)
FINANCING ACTIVITIES
Issuance of long-term debt.......... --- 65,000 ---
Annuity and interest sensitive
life products:
Deposits credited to account
balances...................... 167,517 202,129 234,321
Withdrawals from account
balances...................... (312,228) (305,530) (251,647)
-----------------------------------------
Net cash used in financing
activities........................ (144,711) (38,401) (17,326)
-----------------------------------------
Increase (decrease) in cash and cash
equivalents....................... 22,586 (8,478) 673
Cash and cash equivalents at
beginning of year................. 8,310 16,788 16,115
=========================================
Cash and cash equivalents at end of
year.............................. $ 30,896 $ 8,310 $ 16,788
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest.......................... $ 5,307 $ 2,966 $ 120
=========================================
Income taxes...................... $ 27,920 $ 16,213 $ 11,551
=========================================
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of mortgage loans to real
estate owned...................... $ --- $ 844 $ ---
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Benefit Life Insurance Company (SBL or the Company) is a
Kansas-domiciled mutual life insurance company whose insurance operations are
licensed to sell insurance products in 50 states. The Company offers a
diversified portfolio comprised primarily of individual and group annuities and
mutual fund products through multiple distribution channels. In recent years,
the Company's new business activities have increasingly been concentrated in the
individual flexible premium variable annuity markets.
The Company intends to modify its organizational structure by forming a
Kansas mutual holding company to be named Security Benefit Mutual Holding
Company. The Company will convert to a stock life insurance company and continue
to operate under its current name. All capital stock shares of the reorganized
stock life insurance company will be issued to and owned by a newly created
intermediate stock holding company Security Benefit Corporation. Initially,
Security Benefit Mutual Holding Company will own all of the voting stock of
Security Benefit Corporation. Kansas law requires that Security Benefit Mutual
Holding Company hold at least 51% of the outstanding voting stock of the stock
life insurance company (except to the extent qualifying shares are required by
the Kansas Insurance Code to be held by directors of an insurance company
admitted and authorized to do business in Kansas). The conversion plan is
subject to approval of the Kansas Insurance Department and the policyholders of
the Company.
BASIS OF PRESENTATION
The consolidated financial statements include the operations and accounts of
Security Benefit Life Insurance Company and its wholly-owned subsidiaries,
including Security Benefit Group, Inc., First Security Benefit Life Insurance
and Annuity Company of New York, Security Management Company, LLC, Security
Distributors, Inc., Security Benefit Academy, Inc. and Creative Impressions,
Inc. Significant intercompany transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of consolidated financial statements requires management to
make estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
INVESTMENTS
Fixed maturities are classified as either held-to-maturity or
available-for-sale. Fixed maturities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accrual of discounts. Such amortization and accrual
on these securities are included in investment income. Fixed maturities not
classified as held-to-maturity are classified as available-for-sale.
Available-for-sale fixed maturities are stated at fair value with any unrealized
gain or loss, net of deferred policy acquisition costs (DPAC) and deferred
income taxes, reported as a separate component of equity. The DPAC offsets to
the unrealized gain or loss represent valuation adjustments or restatements of
DPAC that would have been required as a charge or credit to operations had such
unrealized amounts been realized. The amortized cost of fixed maturities
classified as available-for-sale is adjusted for amortization of premiums and
accrual of discounts. Premiums and discounts are recognized over the estimated
lives of the assets adjusted for prepayment activity.
Equity securities consisting of common stocks, mutual funds and nonredeemable
preferred stock are classified as available-for-sale and stated at fair value.
Mortgage loans and short-term investments are reported at amortized cost. Real
estate investments are carried at the lower of depreciated cost or estimated
realizable value. Policy loans are reported at unpaid principal. Investments
accounted for by the equity method include investments in, and advances to,
various joint ventures and partnerships. Realized gains and losses on sales of
investments are recognized in revenues on the specific identification method.
The operations of the Company are subject to risk resulting from interest
rate fluctuations to the extent that there is a difference between the amount of
the Company's interest-earning assets and the amount of interest-bearing
liabilities that are prepaid/withdrawn, mature or reprice in specified periods.
The principal objective of the Company's asset/liability management activities
is to provide maximum levels of net investment income while maintaining
acceptable levels of interest rate and liquidity risk and facilitating the
funding needs of the Company. The Company periodically may use derivative
financial instruments to modify its interest sensitivity to levels deemed to be
appropriate based on the Company's current economic outlook.
Such derivative financial instruments are for purposes other than trading and
classified as available-for-sale in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Accordingly, these instruments are stated at fair value
with the change in fair value reported as a separate component of equity.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits,
commissions and other policy-issue, underwriting and marketing costs that are
primarily related to the acquisition or renewal of traditional life insurance,
interest sensitive life and deferred annuity business have been deferred.
Traditional life insurance deferred policy acquisition costs are being
amortized in proportion to premium revenues over the premium-paying period of
the related policies using assumptions consistent with those used in computing
policy benefit reserves.
For interest sensitive life and deferred annuity business, deferred policy
acquisition costs are amortized in proportion to the present value (discounted
at the crediting rate) of expected gross profits from investment, mortality and
expense margins. That amortization is adjusted retrospectively when estimates of
current or future gross profits to be realized from a group of products are
revised.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers
certificates of deposits with original maturities of 90 days or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment, including home office real estate, furniture and
fixtures, and data processing hardware and related systems, are recorded at
cost, less accumulated depreciation. The provision for depreciation of property
and equipment is computed using the straight-line method over the estimated
lives of the related assets.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
balance sheets represent funds that are separately administered for the benefit
of contractholders who bear the investment risk. The separate account assets and
liabilities are carried at fair value. Revenues and expenses related to separate
account assets and liabilities, to the extent of benefits paid or provided to
the separate account contractholders, are excluded from the amounts reported in
the consolidated statements of income. Investment income and gains or losses
arising from separate accounts accrue directly to the contractholders and are,
therefore, not included in investment earnings in the accompanying statements of
income. Revenues to the Company from the separate accounts consist principally
of contract maintenance charges, administrative fees, and mortality and expense
risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES
Liabilities for future policy benefits for traditional life and reinsurance
products are computed using a net level premium method, including assumptions as
to investment yields, mortality and withdrawals, and other assumptions that
approximate expected experience.
Liabilities for future policy benefits for interest sensitive life and
deferred annuity products represent accumulated contract values without
reduction for potential surrender charges and deferred front-end contract
charges that are amortized over the life of the policy. Interest on accumulated
contract values is credited to contracts as earned. Crediting rates ranged from
3.8% to 7.25% during 1997, 3.5% to 7.25% during 1996 and 4% to 7.75% during
1995.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under that method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and income tax bases of assets and liabilities and are measured using
the enacted tax rates and laws. Deferred income tax expenses or credits
reflected in the Company's statements of income are based on the changes in
deferred tax assets or liabilities from period to period (excluding unrealized
gains and losses on securities available-for-sale).
RECOGNITION OF REVENUES
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these traditional products are
recognized as revenues when due. Revenues from interest sensitive life insurance
products and deferred annuities consist of policy charges for the cost of
insurance, policy administration charges and surrender charges assessed against
contractholder account balances during the period.
RESTRUCTURING EXPENSES
Restructuring expenses include costs relating to the mutual holding company
conversion and termination benefits provided to certain associates under an
early retirement program.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturities are based on quoted
market prices, if available. For fixed maturities not actively traded, fair
values are estimated using values obtained from independent pricing services or
estimated by discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments. The
fair values for equity securities are based on quoted market prices.
Mortgage loans and policy loans: Fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses based on market interest
rates for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for purposes of the calculations.
Investment-type contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming company
would realize from the business is calculated. Those amounts are then discounted
at a rate of return commensurate with the rate presently offered by the Company
on similar contracts.
Long-term debt: Fair values for long-term debt are estimated using discounted
cash flow analyses based on current borrowing rates for similar types of
borrowing arrangements.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses, and
fair values of the Company's portfolio of fixed maturities and equity securities
at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-------------------------------------------------------
AVAILABLE-FOR-SALE (IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies........ $ 214,088 $ 3,313 $ --- $ 217,401
Obligations of states and political subdivisions... 23,753 1,320 8 25,065
Special revenue and assessment..................... 255 45 --- 300
Corporate securities............................... 742,123 27,986 1,674 768,435
Mortgage-backed securities......................... 510,991 11,429 2,137 520,283
Asset-backed securities............................ 117,907 1,030 97 118,840
-------------------------------------------------------
Totals............................................. $1,609,117 $45,123 $ 3,916 $1,650,324
=======================================================
Equity securities.................................. $ 109,763 $11,220 $ 475 $ 120,508
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions... $ 74,802 $ 2,094 $ 30 $ 76,866
Corporate securities............................... 108,609 5,295 201 113,703
Mortgage-backed securities......................... 227,131 2,725 364 229,492
Asset-backed securities............................ 41,869 297 1 42,165
-------------------------------------------------------
Totals............................................. $ 452,411 $10,411 $ 596 $ 462,226
=======================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-------------------------------------------------------
AVAILABLE-FOR-SALE (IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies........ $ 173,884 $ 414 $ 1,431 $ 172,867
Obligations of states and political subdivisions... 23,244 361 705 22,900
Special revenue and assessment..................... 330 --- --- 330
Corporate securities............................... 863,124 13,758 18,651 858,231
Mortgage-backed securities......................... 627,875 9,091 9,308 627,658
Asset-backed securities............................ 122,523 832 275 123,080
-------------------------------------------------------
Totals............................................. $1,810,980 $24,456 $30,370 $1,805,066
=======================================================
Equity securities.................................. $ 86,991 $ 2,422 $ 225 $ 89,188
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions... $ 81,791 $ 463 $ 1,036 $ 81,218
Special revenue and assessment..................... 420 --- --- 420
Corporate securities............................... 128,487 2,003 1,830 128,660
Mortgage-backed securities......................... 264,155 2,121 1,347 264,929
Asset-backed securities............................ 53,192 382 97 53,477
-------------------------------------------------------
Totals............................................. $ 528,045 $ 4,969 $ 4,310 $ 528,704
=======================================================
</TABLE>
The change in the Company's unrealized gain (loss) on fixed maturities was
$56,277,000, $(51,773,000) and $220,048,000 during 1997, 1996 and 1995,
respectively; the corresponding amounts for equity securities were $8,588,000,
$1,595,000 and $1,034,000 during 1997, 1996 and 1995, respectively.
The amortized cost and fair value of fixed maturities at December 31, 1997,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------------------------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less................. $ 33,328 $ 33,578 $ --- $ ---
Due after one year through five years... 202,757 206,870 6,821 6,947
Due after five years through 10 years... 455,242 466,263 37,726 38,995
Due after 10 years...................... 288,892 304,490 138,864 144,627
Mortgage-backed securities.............. 510,991 520,283 227,131 229,492
Asset-backed securities................. 117,907 118,840 41,869 42,165
------------------------------------------------------
$1,609,117 $1,650,324 $452,411 $462,226
======================================================
</TABLE>
Major categories of net investment income for the years ended December 31,
1997, 1996 and 1995 are summarized as follows:
1997 1996 1995
-----------------------------------
(IN THOUSANDS)
Interest on fixed maturities.............. $167,646 $174,592 $165,684
Dividends on equity securities............ 7,358 5,817 1,309
Interest on mortgage loans ............... 6,017 6,680 7,876
Interest on policy loans.................. 6,282 6,372 5,927
Interest on short-term investments........ 2,221 1,487 2,625
Other..................................... (166) 4,199 2,740
-----------------------------------
Total investment income................... 189,358 199,147 186,161
Investment expenses....................... 4,383 4,364 4,149
-----------------------------------
Net investment income..................... $184,975 $194,783 $182,012
===================================
Proceeds from sales of fixed maturities and equity securities and related
realized gains and losses, including valuation adjustments, for the years ended
December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
----------------------------------
(IN THOUSANDS)
Proceeds from sales....................... $333,498 $393,189 $310,590
Gross realized gains...................... 11,889 9,407 5,901
Gross realized losses..................... 6,640 9,723 3,361
Net realized gains (losses) for the years ended December 31, 1997, 1996 and
1995 consist of the following:
1997 1996 1995
-------------------------------
(IN THOUSANDS)
Fixed maturities.............................. $ 861 $(1,329) $1,805
Equity securities............................. 4,388 1,013 735
Other......................................... (320) 72 1,336
-------------------------------
Total realized gains (losses)................. $4,929 $ (244) $3,876
===============================
There were no deferred losses at December 31, 1997, and $2.2 million at
December 31, 1996, resulting from terminated and expired futures contracts.
These are included in fixed maturities and amortized as an adjustment to net
investment income. There were no outstanding agreements to sell securities at
December 31, 1997 or 1996.
The composition of the Company's portfolio of fixed maturities by quality
rating at December 31, 1997 is as follows:
QUALITY RATING CARRYING AMOUNT %
------------------- --------------- -------
(IN THOUSANDS)
AAA $1,024,624 48.73%
AA 161,469 7.68
A 396,387 18.85
BBB 329,371 15.66
Noninvestment grade 190,884 9.08
---------- -------
$2,102,735 100.00%
========== =======
The Company has a diversified portfolio of commercial and residential
mortgage loans outstanding in 14 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1997 being in the states of Kansas (31%),
Iowa (16%) and Texas (14%).
3. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified,
noncontributory defined benefit pension plan sponsored by the Company and
certain of its affiliates. Benefits are based on years of service and an
employee's highest average compensation over a period of five consecutive years
during the last 10 years of service. The Company's policy has been to contribute
funds to the plan in amounts required to maintain sufficient plan assets to
provide for accrued benefits. In applying this general policy, the Company
considers, among other factors, the recommendations of its independent
consulting actuaries, the requirements of federal pension law and the
limitations on deductibility imposed by federal income tax law. The Company
records pension cost in accordance with the provisions of SFAS No. 87,
"Employers' Accounting for Pensions."
Pension cost for the plan for the years ended December 31, 1997, 1996 and
1995 is summarized below and includes termination benefit costs, a significant
portion of which were reflected as a reduction of the gain recognized upon the
sale of the block of life insurance business described in Note 4.
1997 1996 1995
----------------------------------
(IN THOUSANDS)
Service cost............................... $ 641 $ 670 $ 528
Interest cost.............................. 721 587 508
Actual return on plan assets............... (1,892) (1,064) (1,568)
Net amortization and deferral.............. 990 284 900
Termination benefits....................... 1,539 --- ---
----------------------------------
Net pension cost........................... $ 1,999 $ 477 $ 368
==================================
The funded status of the plan as of December 31, 1997 and 1996 was as
follows:
DECEMBER 31
1997 1996
----------------------
(IN THOUSANDS)
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (8,191) $(6,059)
Non-vested benefit obligation........................ (865) (202)
----------------------
Accumulated benefit obligation....................... (9,056) (6,261)
Excess of projected benefit obligation over
accumulated benefit obligation..................... (3,431) (2,961)
----------------------
Projected benefit obligation......................... (12,487) (9,222)
Plan assets, at fair market value...................... 11,279 10,085
----------------------
Plan assets greater than (less than) projected
benefit obligation................................... (1,208) 863
Unrecognized net loss.................................. 1,819 1,007
Unrecognized prior service cost........................ 642 700
Unrecognized net asset established at the date
of initial application............................... (1,657) (1,841)
----------------------
Net (accrued) prepaid pension cost..................... $ (404) $ 729
======================
Assumptions were as follows:
1997 1996 1995
--------------------
Weighted average discount rate........................... 7.25% 7.75% 7.5%
Weighted average rate of increase in compensation for
participants age 45 and older.......................... 4.5 4.5 4.5
Weighted average expected long-term return on plan assets 9.0 9.0 9.0
Compensation rates that vary by age for participants under age 45 were used
in determining the actuarial present value of the projected benefit obligation
in 1997. Plan assets are invested in a diversified portfolio of affiliated
mutual funds that invest in equity and debt securities.
In addition to the Company's defined benefit pension plan, the Company
provides certain medical and life insurance benefits to full-time employees who
have retired after the age of 55 with five years of service. The plan is
contributory, with retiree contributions adjusted annually and contains other
cost-sharing features such as deductibles and coinsurance. Contributions vary
based on the employee's years of service earned after age 40. The Company's
portion of the costs is frozen after 1996 with all future cost increases passed
on to the retirees. Retirees in the plan prior to July 1, 1993 are covered 100%
by the Company.
Retiree medical care and life insurance cost for the total plan for the years
ended December 31, 1997, 1996 and 1995 is summarized below and includes
termination benefit costs, a significant portion of which were reflected as a
reduction of the gain recognized upon the sale of the block of life insurance
business described in NOTE 4.
1997 1996 1995
-----------------------
(IN THOUSANDS)
Service cost.......................................... $155 $157 $151
Interest cost......................................... 291 280 305
Net amortization...................................... (32) --- ---
Termination benefits.................................. 372 --- ---
-----------------------
$786 $437 $456
=======================
The funded status of the plan as of December 31, 1997 and 1996 was as
follows:
1997 1996
---------------------
(IN THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees.............................................. $(2,595) $(2,498)
Active participants:
Retirement eligible................................... (666) (568)
Others................................................ (1,100) (1,023)
---------------------
(4,361) (4,089)
Unrecognized net gain................................... (692) (348)
---------------------
Accrued postretirement benefit cost..................... $(5,053) $(4,437)
=====================
The annual assumed rate of increase in the per capita cost of covered
benefits is 9% for 1997 and is assumed to decrease gradually to 5% for 2001 and
remain at that level thereafter. The health care cost trend rate has a
significant effect on the amount reported. For example, increasing the assumed
health care cost trend rates by one percentage point each year would increase
the accumulated postretirement benefit obligation as of December 31, 1997 by
$201,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1997 by $55,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25%, 7.75% and 7.5% at December 31, 1997, 1996 and 1995,
respectively.
The Company has a profit-sharing and savings plan for which substantially all
employees are eligible after one year of employment with the Company.
Contributions for profit sharing are based on a formula established by the Board
of Directors with pro rata allocation among employees based on salaries. The
savings plan is a tax-deferred, 401(k) retirement plan. Employees may contribute
up to 10% of their eligible compensation. The Company matches 50% of the first
6% of the employee contributions. Employee contributions are fully vested, and
Company contributions are vested over a five-year period. Company contributions
to the profit-sharing and savings plan charged to operations were $1,857,000,
$1,783,000 and $1,567,000 for 1997, 1996 and 1995, respectively.
4. REINSURANCE
The Company assumes and cedes reinsurance with other companies to provide for
greater diversification of business, allow management to control exposure to
potential losses arising from large risks, and provide additional capacity for
growth. The Company's maximum retention on any one life is $500,000. The Company
does not use financial or surplus relief reinsurance. Life insurance in force
ceded at December 31, 1997 and 1996 was $7.4 billion and $4 billion,
respectively.
Principal reinsurance transactions for the years ended December 31, 1997,
1996 and 1995 are summarized as follows:
1997 1996 1995
------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid................................ $33,872 $25,442 $5,305
==============================
Commissions received......................... $ 4,636 $ 4,669 $ 230
==============================
Claim recoveries............................. $14,581 $ 5,235 $3,089
==============================
In the accompanying financial statements, premiums, benefits, settlement
expenses and deferred policy acquisition costs are reported net of reinsurance
ceded; policy liabilities and accruals are reported gross of reinsurance ceded.
The Company remains liable to policyholders if the reinsurers are unable to meet
their contractual obligations under the applicable reinsurance agreements. To
minimize its exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of reinsurers. At December 31, 1997 and
1996, the Company had established a receivable totaling $408,096,000 and
$92,197,000 for reserve credits, reinsurance claims and other receivables from
its reinsurers. Substantially all of these receivables are collateralized by
assets of the reinsurers held in trust. The amount of reinsurance assumed is not
significant.
In 1997, the Company transferred, though a 100% coinsurance agreement, $318
million in policy reserves and claim liabilities reduced by a ceding commission
of $63 million and other related items. The agreement related to a block of
universal life and traditional life insurance business. The Company recorded a
pretax gain of $14,625,000 which is deferred in other liabilities and amortized
to income over the estimated life of the business transferred.
In prior years, the Company was involved in litigation arising out of its
participation from 1986 to 1990 in a reinsurance pool. The litigation related to
the pool manager and a reinsurance intermediary placing major medical business
in the pool without authorization. During 1993, the Company settled the major
medical portion of the pool's activity with no significant adverse effect on the
Company. The nonmajor medical business placed in the pool has experienced
significant losses. At December 31, 1997, the Company believes adequate
provision has been made for such losses.
5. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return. The
provision for income taxes includes current federal income tax expense or
benefit and deferred income tax expense or benefit due to temporary differences
between the financial reporting and income tax bases of assets and liabilities.
Such differences relate principally to liabilities for future policy benefits
and accumulated contract values, deferred compensation, deferred policy
acquisition costs, postretirement benefits, deferred selling commissions,
depreciation expense and unrealized gains (losses) on securities
available-for-sale.
Income tax expense consists of the following for the years ended December 31,
1997, 1996 and 1995:
1997 1996 1995
---------------------------------
(IN THOUSANDS)
Current..................................... $ 32,194 $12,528 $15,200
Deferred.................................... (10,627) 8,343 2,727
---------------------------------
$ 21,567 $20,871 $17,927
=================================
The provision for income taxes differs from the amount computed at the
statutory federal income tax rate due primarily to dividends received deductions
and tax credits.
Net deferred tax assets or liabilities consist of the following:
DECEMBER 31
1997 1996
-------------------
(IN THOUSANDS)
Deferred tax assets:
Future policy benefits.................................. $ 9,869 $20,487
Net unrealized depreciation on securities
available-for-sale.................................... --- 1,409
Guaranty fund assessments............................... 1,250 1,400
Employee benefits....................................... 6,487 4,852
Deferred gain on coinsurance agreement.................. 4,970 ---
Other................................................... 7,497 4,620
-------------------
Total deferred tax assets................................. 30,073 32,768
Deferred tax liabilities:
Deferred policy acquisition costs....................... 53,173 69,647
Net unrealized appreciation on securities
available-for-sale.................................... 18,115 ---
Deferred gain on investments............................ 8,378 10,446
Depreciation............................................ 1,935 2,061
Other................................................... 6,733 5,461
-------------------
Total deferred tax liabilities............................ 88,334 87,615
-------------------
Net deferred tax liabilities.............................. $58,261 $54,847
===================
6. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether recognized or not recognized in a company's balance sheet, for which it
is practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under all
insurance contracts are taken into consideration in the Company's overall
management of interest rate risk that minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings in excess of interest credited) to
be earned in the future on investment-type products or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Investments:
Mortgage loans................... $ 64,251 $ 66,454 $ 66,611 $ 69,004
Policy loans..................... 85,758 85,993 106,822 108,685
Liabilities:
Supplementary contracts
without life contingencies..... 29,890 30,189 33,225 33,803
Individual and group annuities... 1,894,605 1,713,509 1,942,697 1,767,692
Long-term debt................... 65,000 71,793 65,000 67,683
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment under several operating lease
agreements. Total expense for all operating leases amounted to $1,018,000,
$1,108,000 and $802,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company has aggregate future lease commitments at December 31,
1997 of $3,906,000 for noncancelable operating leases consisting of $1,158,000
in 1998, $1,026,000 in 1999, $940,000 in 2000, $782,000 in 2001. There are no
noncancelable lease commitments beyond 2001.
In 2001, under the terms of one of the operating leases, the Company has the
option to renew the lease for another five years, purchase the asset for
approximately $4.7 million, or return the asset to the lessor and pay a
termination charge of approximately $3.7 million.
In connection with its investments in low income housing partnerships, the
Company is committed to invest additional capital of $4,008,000 and $9,190,000
in 1998 and 1999, respectively.
Guaranty fund assessments are levied on the Company by life and health
guaranty associations in most states in which it is licensed to cover losses of
policyholders of insolvent or rehabilitated insurers. In some states, these
assessments can be partially recovered through a reduction in future premium
taxes. The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based on information from the
National Organization of Life and Health Guaranty Association and information
from the various state guaranty associations, the Company believes that it is
probable that these insolvencies will result in future assessments. The Company
regularly evaluates its reserve for these insolvencies and updates its reserve
based on the Company's interpretation of information recently received. The
associated costs for a particular insurance company can vary significantly based
on its premium volume by line of business in a particular state and its
potential for premium tax offset. The Company accrued no additional reserves for
these insolvencies in 1997. Additional accruals in the amount of $1,574,000 and
$2,302,000 were recorded during 1996 and 1995, respectively. At December 31,
1997, the Company has reserved $3,573,000 to cover current and estimated future
assessments, net of related premium tax credits.
8. LONG-TERM DEBT AND OTHER BORROWINGS
The Company has a $61.5 million line of credit facility from the Federal Home
Loan Bank of Topeka. Any borrowings in connection with this facility bear
interest at .1% over the Federal Funds rate. No amounts were outstanding at
December 31, 1997 and 1996.
In February 1996, the Company negotiated three separate $5 million advances
with the Federal Home Loan Bank of Topeka. The advances are due February 27,
1998, February 26, 1999 and February 28, 2001 and carry interest rates of 5.59%,
5.76% and 6.04%, respectively.
In May 1996, the Company issued $50 million of 8.75% surplus notes maturing
on May 15, 2016. The surplus notes were issued pursuant to Rule 144A under the
Securities Act of 1933. The surplus notes have repayment conditions and
restrictions whereby each payment of interest on or principal of the surplus
notes may be made only with the prior approval of the Kansas Insurance
Commissioner and only out of surplus funds that the Kansas Insurance
Commissioner determines to be available for such payment under the Kansas
Insurance Code.
9. RELATED PARTY TRANSACTIONS
The Company owns shares of mutual funds managed by Security Management
Company, LLC with net asset values totaling $85,950,000 and $60,559,000 at
December 31, 1997 and 1996, respectively.
10. ASSETS HELD IN SEPARATE ACCOUNTS
Separate account assets were as follows:
DECEMBER 31,
1997 1996
-------------------------
(IN THOUSANDS)
Premium and annuity considerations for the variable
annuity products and variable universal life
product for which the contractholder, rather
than the Company, bears the investment risk....... $3,716,639 $2,793,911
Assets of the separate accounts owned by the
Company, at fair value............................ --- 9,016
-------------------------
$3,716,639 $2,802,927
=========================
11. STATUTORY INFORMATION
The Company and its insurance subsidiary prepare statutory-basis financial
statements in accordance with accounting practices prescribed or permitted by
the Kansas and New York Insurance regulatory authorities, respectively.
Accounting practices used to prepare statutory-basis financial statements for
regulatory filings of life insurance companies differ in certain instances from
generally accepted accounting principles (GAAP). Prescribed statutory accounting
practices include a variety of publications of the National Association of
Insurance Commissioners, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed; such practices may differ from state to
state, may differ from company to company within a state and may change in the
future. Statutory capital and surplus of the insurance operations are
$382,005,000 and $286,689,000 at December 31, 1997 and 1996, respectively.
12. IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer systems were written using two digits rather
than four to define the applicable year. As a result, those computer systems
will not recognize the year 2000 which, if not corrected, could cause
disruptions of operations, including, among other things, an inability to
process transactions or engage in similar normal business activities.
The Company has completed an assessment of its systems which will need to be
modified or replaced to function properly in the year 2000. Based on this
assessment, the Company does not believe that the costs to complete such system
modifications or replacements will be material to the Company's financial
statements. The Company has been in the process of converting existing products
to a new administration system during the past few years, and all new products
during this conversion period have been placed on the new system.
The modification or replacement of the Company's computer systems not
currently year 2000 ready is estimated to be completed not later than March 31,
1999, which is prior to any anticipated impact on its operating systems. The
Company believes that with modifications to existing software and conversions to
new software, the year 2000 issue will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made or are not completed timely, the year 2000 issue could have a material
impact on the operations of the Company.
The Company has initiated formal communications with significant third
parties which provide the Company with information to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to solve their own year 2000 issues. There is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems.
However, third-party vendors of the Company's primary administrative systems
have represented to the Company that the systems are or will be year 2000 ready.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources and other factors. However, there
can be no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to convert
to year 2000 ready systems and similar uncertainties.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Certified Resolution of the Board of Directors of Security
Benefit Life Insurance Company ("SBL") authorizing
establishment of the Separate Account(a)
(2) Not Applicable
(3) (a) Service Facilities Agreement(a)
(b) Variable Annuity Sales Agreement
(c) Marketing Organization Agreement
(4) (a) Individual Contract (V6026 7-98)
(b) Individual Contract - Unisex (V6026 7-98U)
(c) Group Contract (GV6026 7-98)
(d) Individual Retirement Annuity Endorsement (V6842A 1-97)
(5) Form of Application (V7584 7-98)
(6) (a) Composite of Articles of Incorporation of SBL
(b) Bylaws of SBL
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Powers of Attorney of Howard R. Fricke, Thomas R.
Clevenger, Sister Loretto Marie Colwell, John C. Dicus,
Steven J. Douglass, John E. Hayes, Jr., Laird G. Noller,
Frank C. Sabatini and Robert C. Wheeler
(a) Incorporated herein by reference to the exhibits filed with the
Registrant's Initial Registration Statement No. 333-52491 (May 12, 1998).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal
Business Address Positions and Offices with Depositor
------------------ ------------------------------------
Howard R. Fricke* Chairman of the Board, Chief
Executive Officer and Director
Thomas R. Clevenger Director
P.O. Box 8514
Wichita, Kansas 67208
Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66044
John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603
Steven J. Douglass Director
3231 East 6th Street
Topeka, KS 66607
William W. Hanna Director
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes, Jr. Director
818 Kansas Avenue
Topeka, Kansas 66612
Laird G. Noller Director
2245 Topeka Boulevard
Topeka, Kansas 66611
Frank C. Sabatini Director
120 SW 6th Street
Topeka, Kansas 66603
Robert C. Wheeler Director
P.O. Box 148
Topeka, Kansas 66601
Kris A. Robbins* President and Chief Operating Officer
Donald J. Schepker* Senior Vice President, Chief
Financial Officer and Treasurer
Roger K. Viola* Senior Vice President, General
Counsel and Secretary
T. Gerald Lee* Senior Vice President and Chief
Administrative Officer
Malcolm E. Robinson* Senior Vice President and Assistant
to the President
Donald E. Caum* Senior Vice President and Chief
Marketing Officer
Richard K Ryan* Senior Vice President
Amy J. Lee* Associate General Counsel, Vice
President and Assistant Secretary
Venette K. Davis* Senior Vice President - Market
Implementation
James R. Schmank* Senior Vice President
J. Craig Anderson* Senior Vice President
*Located at 700 Harrison Street, Topeka, Kansas 66636.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor, Security Benefit Life Insurance Company ("SBL"), is
controlled by Security Benefit Corp. through the ownership of 700,000
of SBL's 700,010 issued and outstanding shares of common stock. One
share each of SBL's issued and outstanding common stock is owned by
each director of SBL, in accordance with the requirements of Kansas
law. Security Benefit Corp. is wholly-owned by Security Benefit Mutual
Holding Company ("SBHMC"), which in turn is controlled by SBL
policyholders. No one person holds more than approximately 0.0004% of
the voting power of SBL.
The Registrant is a segregated asset account of SBL.
The following chart indicates the persons controlled by or under
common control with SBL Variable Annuity Account X or SBL:
<TABLE>
<CAPTION>
Percent of Voting
Jurisdiction of Securities Owned or
Name Incorporation Controlled By SBL
---- --------------- -------------------
<S> <C> <C>
Security Benefit Mutual Holding Company Kansas ---
(Holding Company)
Security Benefit Corp. (Holding Company) Kansas ---
Security Benefit Life Insurance Company Kansas ---
(Mutual Life Insurance Company)
Security Benefit Group, Inc. Kansas 100%
(Holding Company)
Security Management Company, LLC Kansas 100%
(Mutual Funds Management Company)
Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal
Underwriter of Mutual Funds)
Security Benefit Academy, Inc. Kansas 100%
(Daycare Company)
Creative Impressions, Inc. Kansas 100%
(Advertising Agency)
Security Benefit Clinic and Hospital Kansas 100%
(Nonprofit provider of hospital
benevolences for fraternal certificate
holders)
First Advantage Insurance Kansas 100%
Agency, Inc. (Insurance Agency)
First Security Benefit Life Insurance New York 100%
and Annuity Company of New York
</TABLE>
SBL is also the depositor of the following separate accounts: SBL
Variable Annuity Accounts I, III, IV, and Variflex, SBL Variable
Annuity Account VIII (Variflex LS and Variflex Signature), SBL
Variable Life Insurance Account Varilife, Security Varilife Separate
Account, Parkstone Variable Annuity Separate Account and T. Rowe Price
Variable Annuity Account.
Through the above-referenced separate accounts, SBL might be deemed to
control the open-end management investment companies listed below. The
approximate percentage of ownership by the separate accounts for each
company is as follows:
Security Growth and Income Fund 40.2%
Security Ultra Fund 34.0%
SBL Fund 100.0%
Security Equity Fund 14.0%
Security Income Fund 16.2%
ITEM 27. NUMBER OF CONTRACT OWNERS
As of August 1, 1998, there were 0 owners of SBL Variable Annuity
Account X Contracts.
ITEM 28. INDEMNIFICATION
The bylaws of Security Benefit Life Insurance Company provide that the
Company shall, to the extent authorized by the laws of the State of
Kansas, indemnify officers and directors for certain liabilities
threatened or incurred in connection with such person's capacity as
director or officer.
The Articles of Incorporation include the following provision:
(a) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
his or her fiduciary duty as a director, PROVIDED that nothing
contained in this Article shall eliminate or limit the liability of
a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under the provisions of K.S.A. 17-6424 and
amendments thereto, or (d) for any transaction from which the
director derived an improper personal benefit. If the General
Corporation Code of the State of Kansas is amended after the filing
of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the General Corporation Code of the State of Kansas, as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Insofar as indemnification for a liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Depositor has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
Securities being registered, the Depositor will, unless in the opinion
of its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Security Distributors, Inc. ("SDI"), a subsidiary of SBL, acts as
distributor of the SBL Variable Annuity Account X contracts. SDI
receives no compensation for its distribution function. SDI
performs similar functions for SBL Variable Annuity Accounts I,
III and IV, Variflex Separate Account (Variflex and Variflex ES),
Variable Annuity Account VIII (Variflex LS and Variflex
Signature), SBL Variable Life Insurance Account Varilife,
Security Varilife Separate Account and Parkstone Variable Annuity
Separate Account. SDI also acts as principal underwriter for the
following management investment companies for which Security
Management Company, LLC, an affiliate of SBL, acts as investment
adviser: Security Equity Fund, Security Income Fund, Security
Growth and Income Fund, Security Municipal Bond Fund and Security
Ultra Fund.
(b) Name and Principal
Business Address* Position and Offices with Underwriter
------------------ -------------------------------------
Richard K Ryan President and Director
John D. Cleland Vice President and Director
James R. Schmank Vice President and Director
Mark E. Young Vice President and Director
Amy J. Lee Secretary
Brenda M. Harwood Treasurer
William G. Mancuso Regional Vice President
Susan L. Tully Regional Vice President
Donald E. Caum Director
*700 Harrison, Topeka, Kansas 66636-0001
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by SBL at its
administrative offices--700 Harrison Street, Topeka, Kansas
66636-0001.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective
amendment to this Registration Statement as frequently as
necessary to ensure that the audited financial statements in the
Registration Statement are never more than sixteen (16) months
old for so long as payments under the Variable Annuity contracts
may be accepted.
(b) Registrant undertakes that it will include as part of the
contract application a space that an applicant can check to
request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral request
to SBL at the address or phone number listed in the prospectus.
(d) Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the Registrant hereby undertakes
to file with the Securities and Exchange Commission such
supplementary and periodic information, documents, and reports as
may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority
conferred in that Section.
(e) SBL, sponsor of the unit investment trust, SBL Variable Annuity
Account X, hereby represents that it is relying upon American
Council of Life Insurance, SEC No-Action Letter, [1988-1989
Transfer Binder] Fed. Sec. L. Rep. (CCH) paragraph 78,904 (Nov.
28, 1988), and that it has complied with the provisions of
paragraphs (1)-(4) of such no-action letter which are
incorporated herein by reference.
(f) Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by the Depositor.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Topeka, and State of Kansas on this 7th day of August,
1998.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman of (The Depositor)
the Board, and Chief
Executive Officer
By: ROGER K. VIOLA
Thomas R. Clevenger --------------------------------------------
Director Roger K. Viola, Senior Vice President,
General Counsel and Secretary as
Attorney-In-Fact for the Officers and
Sister Loretto Marie Colwell Directors Whose Names Appear Opposite
Director
SBL VARIABLE ANNUITY ACCOUNT X
John C. Dicus (The Registrant)
Director
By: SECURITY BENEFIT LIFE INSURANCE COMPANY
(The Depositor)
Steven J. Douglass
Director
By: HOWARD R. FRICKE
--------------------------------------------
William W. Hanna Howard R. Fricke, Chairman of the Board
Director and Chief Executive Officer
John E. Hayes, Jr. By: DONALD J. SCHEPKER
Director --------------------------------------------
Donald J. Schepker, Senior Vice President,
Chief Financial Officer and Treasurer
Laird G. Noller
Director
(ATTEST): ROGER K. VIOLA
--------------------------------------
Frank C. Sabatini Roger K. Viola, Senior Vice President,
Director General Counsel and Secretary
Robert C. Wheeler Date: August 7, 1998
Director
<PAGE>
EXHIBIT INDEX
(1) None
(2) None
(3) (a) None
(b) Variable Annuity Sales Agreement
(c) Marketing Organization Agreement
(4) (a) Individual Contract (V6026 7-98)
(b) Individual Contract - Unisex (V6026 7-98U)
(c) Group Contract (GV6026 7-98)
(d) Individual Retirement Annuity Endorsement (V6842A 1-97)
(5) Form of Application (V7584 7-98)
(6) (a) Articles of Incorporation
(b) Bylaws
(7) None
(8) None
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) None
(12) None
(13) None
(14) None
(15) Powers of Attorney
<PAGE>
[SBL LOGO]
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
(785) 431-3000
SBL VARIABLE PRODUCTS
BROKER/DEALER
SALES AGREEMENT
BROKER/DEALER:
EFFECTIVE DATE:
1. Security Benefit Life Insurance Company, of Topeka, Kansas, and its
affiliated company, Security Distributors, Inc., hereinafter jointly called
"SBL", hereby authorize the above-designated Broker/Dealer to solicit and
service (1) variable annuities issued under Security Benefit Life Insurance
Company's several Variable Annuity Accounts and (2) variable life insurance
policies issued under Security Benefit Life Insurance Company's variable
life accounts, each of which has been registered as securities under the
Securities Act of 1933 with Security Distributors, Inc. (a member of the
National Association of Securities Dealers, Inc.) having been designated
Principal Underwriter thereof. Said variable annuity contracts and variable
life insurance policies are referred to herein as "Variable products."
2. Broker/Dealer hereby accepts such authorization to solicit and service such
SBL variable products and confirms that it is properly licensed to solicit
and service such variable products for SBL and is a member in good standing
of the National Association of Securities Dealers, Inc., hereinafter called
"NASD", and further agrees to notify SBL if it ceases to be a member of
NASD.
3. Broker/Dealer shall have the authority to recruit, train and supervise
registered representatives for the sale of variable products of SBL.
Appointment of any registered representative shall be subject to prior
approval of SBL. SBL reserves the right to require termination of any
registered representative's right to sell SBL variable products.
Broker/Dealer shall be responsible for any registered representative
appointed hereunder complying with the terms, conditions and limitations as
set forth in this Agreement. All registered representatives recruited by
Broker/Dealer to sell SBL's variable products shall be duly licensed as
annuity producers and/or insurance producers pursuant to applicable state
laws and regulations. Broker/Dealer shall be responsible for any registered
representative becoming so licensed.
4. Commissions on stipulated payments or premiums accepted by SBL on behalf of
an annuitant, participant, or policyholder of a variable product covered by
this Agreement will be in accordance with the Schedule of Commissions made
part of this Agreement, and are in full consideration of all services
rendered and expenses incurred hereunder by the Broker/Dealer or its
representatives. First year commissions are payable when an individual
variable annuity contract, group variable annuity certificate or variable
life insurance policy is issued and paid for upon an application submitted
through Broker/Dealer and accepted by the applicant thereof. Broker/Dealer
is not authorized to deduct commissions prior to forwarding any remittance
received to SBL. All checks or drafts received by the Broker/Dealer in
regards to any variable product shall be made payable to Security Benefit
Life Insurance Company. All compensation payable hereunder shall be subject
to a first lien and may be reduced or set off as to any indebtedness owed
by the Broker/Dealer to SBL. Any commissions paid to a third party at the
request of the Broker/Dealer shall be deducted from the commissions payable
hereunder.
5. Broker/Dealer agrees to be bound by the terms, conditions and limitations
set forth in this Agreement and the rules and practices of SBL that are now
and hereafter in force. Broker/Dealer agrees not to solicit or submit
applications for variable products to SBL unless it and its registered
representatives are properly licensed, and further agrees that it will
conform to all applicable state, federal and local laws and regulations in
conducting business under this Agreement. Both parties hereby agree to
abide by the applicable Rules of Fair Practice of the NASD which Rules are
incorporated herein as if set forth in full. The signing of this Agreement
and the purchase of variable products pursuant thereto is a representation
of SBL that Broker/Dealer is a properly registered Broker/Dealer under the
Securities and Exchange Act of 1934.
6. Neither the Broker/Dealer nor its representatives are authorized to make
any representations concerning the variable products, its sponsor (SBL),
the principal underwriter (Security Distributors, Inc.) or the underlying
mutual funds except those contained in the applicable current prospectuses
and in the printed information furnished by SBL. Broker/Dealer agrees not
to use any other advertising or sales material relating to the variable
products unless specifically approved in writing by SBL.
VA6972 (R3-87)
<PAGE>
7. Broker/Dealer is not authorized and has no authority (a) to make, alter or
discharge any contract for or on behalf of SBL, (b) endorse any check or
draft payable to SBL, (c) to accept any variable product consideration
after the initial remittance, (d) to waive or modify any prospectus,
contract, policy or application provision, condition or obligation, and (e)
to extend the time for payment of any variable product consideration or
accept payment of any past due variable product consideration.
8. This Agreement shall not create or be construed as creating an
Employer-Employee or Master-Servant relationship between Broker/Dealer and
SBL.
9. Broker/Dealer agrees to keep accurate records on all business written and
moneys received under this Agreement. Such records may be examined by SBL
or its representatives at any reasonable time. All moneys and documents
belonging to SBL in possession of Broker/Dealer shall be held in trust and
shall not be used or commingled with funds or property belonging to
Broker/Dealer and shall be promptly remitted to SBL. Broker/Dealer agrees
to be responsible for any county or municipal occupational or privilege
fee, tax or license which may be required of Broker/Dealer or its
representatives as a result of business submitted under this Agreement.
10. Neither this Agreement nor the compensation payable hereunder shall be
assigned or pledged without the written consent of SBL. SBL reserves the
right to reject any assignment or pledge.
11. No consent or change in this agreement shall be binding upon SBL unless in
writing and signed by the president, a vice president, secretary or an
assistant secretary of SBL. Any failure of SBL to insist upon strict
compliance with the provisions of this Agreement shall not constitute or be
construed as a waiver thereof.
12. SBL shall have the right to decline or modify any application or to refund
any variable product consideration or any portion thereof, and
Broker/Dealer shall refund immediately upon request any commissions
received in connection therewith. All applications for variable products
are subject to acceptance by SBL and become effective only upon
confirmation by SBL. Broker/Dealer agrees to return to SBL without delay
any commissions received on a variable product, contract or policy if such
contract or policy is tendered for redemption within seven (7) business
days after acceptance of the application by SBL.
13. Variable products, contracts and policies will be offered to the public at
the price as outlined in the applicable variable product's current
prospectus. All cash surrenders require the written request and consent of
the contract or policy owner and such surrenders will conform to the
provisions set forth in the applicable contract or policy.
14. SBL has been and is designated Administrative Agent of Security
Distributors, Inc. to perform duties, including recordkeeping and payment
of commissions, necessary under this Agreement in connection with the
solicitation, sales and servicing of variable annuity contracts sold and
solicited hereunder.
15. SBL reserves the right to amend or terminate this Agreement at any time. In
the event Broker/Dealer ceases to be a member in good standing of the NASD,
this Agreement shall terminate automatically without notice. After
termination Broker/Dealer upon request, shall without delay pay in full any
indebtedness owed to SBL and return all SBL property to their home office.
In the event Broker/Dealer ceases doing business in such manner that
servicing would be impossible, SBL reserves the right to reassign the
business and service fees to another Broker/Dealer. Should Broker/Dealer
fail to comply with any of the terms of this Agreement, SBL reserves the
right to terminate this Agreement and terminate vesting as to all
commissions payable thereunder.
16. This Agreement is effective as of the Effective Date set forth above and
replaces any previous agreement between the parties relating to variable
products of SBL except as to any commissions payable thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date set forth above.
SECURITY DISTRIBUTORS, INC. BROKER/DEALER
By RICHARD K RYAN
----------------------------------- ------------------------------------
Title: President (Signature of Principal)
------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY (Name of Principal)
By RICHARD K RYAN
----------------------------------- ------------------------------------
Title: Senior Vice President Title:
|_| Individual |_| Corporation
|_| Partnership
Tax Identification No.
-------------
<PAGE>
[SBL LOGO]
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
(785) 431-3000
SBL VARIABLE PRODUCTS
COMMISSION SCHEDULE
PCG VARIABLE ANNUITY
Broker/Dealer:____________________________
Effective Date of Commission Schedule:
This Commission Schedule is hereby made part of and amends the SBL Variable
Products Agreement (the "Agreement") with Security Benefit Life Insurance
Company and Security Distributors, Inc. (hereinafter jointly called "SBL").
Except as otherwise defined herein, all capitalized terms will have the meaning
set forth in the Agreement and the PCG Variable Annuity Contract.
NONCOMMISSIONABLE
No commissions or other form of compensation shall be paid by SBL to
Broker/Dealer on sales of the PCG Variable Annuity Contract.
CHANGE OF COMMISSION SCHEDULE: SBL reserves the right at any time, with or
without notice, to change, modify or discontinue this Commission Schedule.
CHANGE OF DEALER: A Contractowner shall have the right to designate a new
broker/dealer, or to terminate a broker/dealer without designating a
replacement, by sending written notice of such designation or termination to
SBL.
THIS COMMISSION SCHEDULE replaces any previous Commission Schedule for the
Variable Annuity Contract listed above as of the Effective Date set forth above.
SECURITY DISTRIBUTORS, INC. SECURITY BENEFIT LIFE INSURANCE COMPANY
By: By:
----------------------------- ---------------------------------
Title: Title:
----------------------------- --------------------------------
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
785-431-3000
MARKETING ORGANIZATION AGREEMENT
SECURITY BENEFIT LIFE INSURANCE COMPANY
SECURITY DISTRIBUTORS, INC.
PRODUCT AUTHORIZATION
Fixed Products |_|
Variable Products |_|
MARKETING ORGANIZATION: ________________________________________________
This Agreement is entered into between Security Benefit Life Insurance Company,
a Kansas mutual life insurance company, Security Distributors, Inc. (solely in
its capacity as underwriter of the Variable Products), collectively referred to
herein as "SBL," and the undersigned, referred to herein as the "Marketing
Organization."
I. APPOINTMENTS AND DUTIES
A. APPOINTMENT. Subject to the terms and conditions of this contract,
Marketing Organization is appointed to solicit, and to recommend for
appointment Agents/Representatives and Marketing Organizations
(referred to herein as "Marketer(s)") to solicit applications for the
fixed annuity and fixed life insurance contracts ("Fixed Products")
and/or variable annuity and variable life insurance contracts
("Variable Products") more specifically described in the Commission
Schedule(s) attached hereto from time to time and incorporated by
reference (collectively referred to as the "Products"), to deliver the
contracts, to collect the initial premiums thereon, and to service the
business.
Marketing Organization hereby accepts such appointment and confirms
that it will abide by the terms and conditions of this Agreement and
any sales manuals and/or rules and practices of SBL. Marketing
Organization will endeavor to promote SBL's interests and those mutual
interests of Marketing Organization and SBL as contemplated by this
Agreement and shall at all times conduct itself, and insure that its
employees and Marketers conduct themselves so as not to adversely
affect the business reputation or good standing of either the
Marketing Organization or SBL.
B. SALES FORCE. Marketing organization shall have the authority to
recruit, train and supervise Marketers for the sale of the Products.
Appointment of any Marketer shall be subject to prior approval of SBL.
SBL reserves the right to require termination of any Marketer's right
to sell any of the Products and to cancel the appointment of any
Marketer. Marketing Organization shall be responsible for any Marketer
appointed hereunder complying with the terms, conditions, and
limitations as set forth in this Agreement and any sales manuals
and/or rules and practices of SBL.
With respect to sales of Fixed Products, unless otherwise agreed in
writing by the parties, any and all agreements with Marketers shall be
made directly with SBL in writing on SBL's form and shall not become
effective until they are approved and executed by SBL and the Marketer
is licensed in accordance with Section III of this Agreement.
Marketing Organization shall not have authority to modify or amend any
such agreements. With respect to sales of Variable Products, any and
all agreements with Marketers shall be made between the Marketing
Organization and its Marketers, provided however, that SBL reserves
the right to require any Marketer to sign an agreement acknowledging
that no compensation is payable by SBL to the Marketer. SBL may, at
SBL's option, refuse to contract with any proposed Marketer and may at
any time terminate any agreement with any Marketer.
C. INDEPENDENT CONTRACTOR. Marketing Organization will be an independent
contractor and nothing contained herein shall be construed as creating
the relationship of employer-employee between SBL and Marketing
Organization. Marketing Organization will be acting as an independent
contractor only, and not as a partner, associate, or affiliate of SBL.
Marketing Organization will be free to exercise its own judgment as to
the time and manner of performing the services authorized by this
Agreement subject to such rules and regulations as may be adopted from
time to time by SBL.
D. LIMITATIONS OF AUTHORITY. Marketing Organization's authority shall
extend no further than as is stated in this Agreement. Marketing
Organization shall not (1) make, alter, modify, waive or change any
question, statement or answer on any application for insurance, the
terms of any receipt given thereon, or the terms of any policy or
contract; (2) extend or waive any provision of any policy or contract
or the time for payment of premiums; (3) guarantee dividends; (4)
deliver any policy unless the applicant is at the time in good health
and insurable condition; (5) incur any debts or liability for or
against SBL; or (6) receive any money for SBL except as herein stated.
9482 (R7-97) 32-94821-00
<PAGE>
E. COLLECTION OF MONEY. Marketing Organization is not authorized to
accept any premium for SBL except initial policy premiums, unless SBL
provides otherwise in writing. All customer checks should be made
payable directly to SBL. Receipts for premiums must be on the forms
furnished by SBL for that purpose. Marketing Organization shall
immediately remit to SBL all money received or collected on SBL's
behalf, and such money shall be considered as SBL's funds held in
trust by Marketing Organization. SBL will not accept premium payments
in the form of checks drawn on Marketing Organization or Marketer
accounts.
F. RECORDS. Marketing Organization agrees to maintain proper records and
accounts of business transacted under this contract, including but not
limited to, records of all written sales proposals made, applications
taken, money collected, policies issued and delivered, and all service
to policy owners on SBL's behalf. All such records shall be made
available to SBL or SBL's representatives, with or without prior
notice, during business hours.
II. COMPENSATION
A. COMPENSATION TO MARKETING ORGANIZATION. As full compensation, SBL will
pay Marketing Organization or its affiliated insurance agency (if
applicable) commissions as described in the attached Commission
Schedule(s) for policies sold by Marketers assigned to Marketing
Organization. There shall be no additional compensation or
reimbursement to Marketing Organization for services performed or
expenses incurred. Marketing Organization shall be responsible for and
shall pay all expenses Marketing Organization incurs in the
performance of this Agreement. Further, SBL may amend any Commission
Schedule at any time by giving Marketing Organization written notice
of such change. Any changes SBL may make to the Commission Schedule
will apply only to those policies issued on or after the effective
date of the changes.
The rate of commissions or right to receive compensation on any policy
or contract (1) not listed in this Agreement, (2) requiring special
underwriting, or (3) obtained through a lead furnished by SBL, shall
be governed by SBL's rules and practices in effect at that time and
shall eventually be covered by a separate agreement between Marketing
Organization and SBL, by written amendment to this Agreement, or by
written notice to Marketing Organization.
B. COMPENSATION TO MARKETERS. This Agreement is not intended to benefit
in any manner whatsoever the Marketers or any other entity as a
third-party beneficiary. With respect to sales of Fixed Products,
payment of compensation by SBL to Marketers will be made only pursuant
to the terms of a separate written Agreement between SBL and Marketer.
With respect to the sales of Variable Products, SBL will pay no
compensation to Marketers; payment of compensation to Marketers, if
any, will be made only pursuant to the terms of a separate written
Agreement between the Marketing Organization and Marketer.
C. PROVISIONS RELATING TO COMPENSATION. Neither Marketing Organization
nor any Marketer assigned to Marketing Organization shall withhold
compensation from any premiums or contributions submitted to SBL. No
commissions will be payable on premiums or contributions which shall
be refunded for any reason, and Marketing Organization shall refund to
SBL any commission paid to Marketing Organization on any such premiums
or contributions. SBL shall not, under any circumstances whatsoever,
pay or allow any rebate of commissions in any manner, directly or
indirectly.
III. COMPLIANCE
A. GENERAL REQUIREMENTS. Marketing Organization agrees to abide by all
applicable local, state and federal laws and regulations as well as
the rules and regulations of the National Association of Securities
Dealers, Inc. (NASD) and the Securities and Exchange Commission in
conducting business under this Agreement. Marketing Organization shall
insure that all of its Marketers comply with all such rules, laws, and
regulations.
B. LICENSING. Marketing Organization agrees that neither it nor its
Marketers will solicit or submit applications for any of the Products
unless Marketing Organization, its affiliated insurance agency (if
applicable), and its Marketers are properly licensed under all
applicable state insurance laws. Marketing Organization shall be
responsible for each Marketer becoming so licensed and shall notify
SBL if any Marketer ceases to be so licensed.
WITH RESPECT TO SALES OF VARIABLE PRODUCTS: (1) Marketing Organization
hereby confirms that it is a member in good standing of the National
Association of Securities Dealers, Inc., hereinafter called "NASD,"
and further agrees to notify SBL if it ceases to be a member of the
NASD, (2) Marketing Organization agrees to abide by the applicable
Rules of Fair Practice of the NASD which rules are incorporated herein
as if set forth in full, (3) Marketing Organization represents that
the signing of this agreement is a representation to SBL that
Marketing Organization is a properly registered Broker/Dealer under
the Securities Exchange Act of 1934, and (4) Marketing Organization
shall insure that all Marketers recruited by Marketing Organization to
sell the Variable Products shall be duly registered pursuant to
applicable state and federal securities laws and regulations and shall
notify SBL if any Marketer ceases to be so registered.
Marketing Organization will be responsible to secure and provide to
SBL adequate proof of any licenses, securities registration, bonds or
other requirements or qualifications as may be required by SBL or the
state or states where Marketing Organization and its affiliated
insurance agency (if applicable) is authorized to solicit insurance
and securities.
C. PRINTED MATTER. SBL will furnish Marketing Organization all
prospectuses, reports, applications and other printed matter necessary
to conduct the business anticipated hereunder with respect to SBL's
Products. Advertising material of any nature not supplied by SBL shall
be used by Marketing Organization only after Marketing Organization
has received SBL's written approval. Likewise, Marketing Organization
may use SBL's name and trademark, or those of any affiliated
companies, only with SBL's written approval.
IV. SBL'S RIGHT OF ACTION
A. CHANGES. SBL may at any time and from time to time (1) change or
modify this Agreement, (2) modify or amend any prospectus, policy
form, or contract, (3) change sales charges, (4) modify or alter the
conditions or terms under which any Product may be sold or regulate
its sale in any way, (5) discontinue or withdraw any Product from any
state, without prejudice to continue such Product elsewhere or (6)
cease doing business in any state.
<PAGE>
B. RIGHTS OF REJECTION AND SETTLEMENT. SBL reserves the right to reject
any application or refund any money submitted by Marketers assigned to
Marketing Organization. In the event of such rejection or refund,
Marketing Organization's commission on such shall be refunded as
described previously by being charged against Marketing Organization's
earnings or, upon demand, by payment directly to SBL. It is the
intention of the parties to this Agreement that Marketing Organization
shall be entitled to receive commissions only upon premiums or
contributions received in cash and retained by SBL.
C. RIGHT OF OFFSET OF INDEBTEDNESS. Any advance, loan, annualization of
compensation, or extension of credit from SBL to Marketing
Organization and to Marketers appointed by or assigned to Marketing
Organization, or any loss or liability incurred by SBL as a result of
the actions of Marketing Organization or its affiliated insurance
agency (if applicable) shall constitute a general indebtedness of
Marketing Organization to SBL. The entire indebtedness, as shown in
SBL's ledger accounts, may be deemed due and payable at any time and
SBL may exercise any rights or remedies to collect such indebtedness,
including but not limited to, charging to Marketing Organization all
attorney's fees or other collection expenses, as permitted by law.
SBL may deduct any amounts Marketing Organization owes SBL now or in
the future, as a result of this or any other contract with the
Company, from any compensation due Marketing Organization. Marketing
Organization hereby assigns, transfers and sets over to SBL any monies
that from time to time may become due to Marketing Organization from
SBL under this contract or otherwise to secure any debt to SBL.
V. TERMINATION
A. VOLUNTARY TERMINATION. Either of the parties hereto may terminate this
Agreement, without stating any cause, by mailing to the other party at
their last known address a notice of termination which shall be
effective fifteen days from mailing.
B. AUTOMATIC TERMINATION. This Agreement terminates automatically (1) if
Marketing Organization is an individual, upon Marketing Organization's
death, (2) if a partnership, upon the death of any partner or change
in the partners composing the firm, or dissolution of the partnership
for any reason, (3) if a corporation, upon Marketing Organization's
dissolution or disqualification to perform the duties anticipated
hereunder, (4) upon revocation, termination, suspension or nonrenewal
of Marketing Organization's securities registration or insurance
licenses by any state in which Marketing Organization is required by
law to maintain such a license in order to perform its duties under
this Agreement, (5) with respect to the Variable Products, upon
Marketing Organization's ceasing to be an NASD registered
broker/dealer in good standing (this includes any suspension of
Marketing Organization's membership), or (5) upon Marketing
Organization's filing a petition for bankruptcy or one being filed for
Marketing Organization, upon Marketing Organization being adjudged
bankrupt, or upon Marketing Organization's executing a general
assignment for the benefit of creditors.
C. TERMINATION FOR CAUSE. Marketing Organization's rights under this
contract, including the right to any further payment of any type of
compensation, either during or after the termination of this contract,
shall automatically and completely cease if any of the following occur
at any time: (1) Marketing Organization violates any of the terms
hereof, (2) Marketing Organization violates any law or regulation
relating to the activities anticipated hereunder, (3) Marketing
Organization induces or attempts to induce any Marketer and/or person
under contract with SBL to terminate the contractual relationship or
cease doing business or producing for SBL, (4) Marketing Organization
initiates or induces any misappropriation or commingling of Marketing
Organization's and SBL's funds, or (5) Marketing Organization engages
in any fraudulent act or misrepresentation. In determining cause for
termination, SBL shall use its sole discretion and shall notify
Marketing Organization in writing of SBL's decision.
D. RETURN OF SBL PROPERTY. Upon termination of this contract, Marketing
Organization agrees to return any equipment, supplies, printed
materials or other property, including, but not limited to,
policyholder lists and policyholder records SBL has furnished
Marketing Organization. Marketing Organization acknowledges that any
policyholder lists or records in Marketing Organization's possession
are SBL's property, and that the Company has a continuing proprietary
interest in the lists and records relating to its policyholders.
VI. THIRD PARTY COMPLAINTS AND LITIGATION
A. NOTIFICATION AND COOPERATION. SBL and Marketing Organization will
promptly notify the other if either of them becomes aware of any
arbitration, litigation, judicial proceeding, insurance department or
other governmental agency inquiry or complaint, regulatory or
administrative investigation or proceeding, or customer complaint or
demand, which directly or indirectly involves the rights and
obligations of the parties under this Agreement. SBL and Marketing
Organization each agree to cooperate fully with the other with respect
to any matter referred to in this Section VI.
B. DEFENSE OF ACTIONS. If any legal action is brought by a third party
against SBL or Marketing Organization, or both, which is based in
whole or in part on any alleged act, fault or failure of Marketing
Organization in connection with this Agreement, SBL may require
Marketing Organization to defend SBL in such action, or, SBL may
defend any such action and expend such sums, including attorneys'
fees, to be reimbursed by Marketing Organization in accordance with
Section VI.E. below.
C. SERVICE OF PROCESS. Marketing Organization shall transmit to the
attention of SBL's Legal Counsel at 700 Harrison, Topeka, Kansas
66636, by certified mail within 24 hours after receipt, any paper
served upon Marketing Organization in connection with any proceeding,
hearing or action, whether legal or otherwise, by or against SBL. Any
failure on Marketing Organization's part to comply with this provision
which causes additional loss or expense to SBL shall be reimbursed by
Marketing Organization to SBL.
D. SETTLEMENT. SBL has the right to settle any claim against SBL, and any
claim made against SBL and Marketing Organization jointly, arising out
of this Agreement or any other agreement between SBL and Marketing
Organization now or hereafter existing, and SBL's determination as to
any such matter will be final and binding. In any action brought
jointly against SBL and Marketing Organization which is based in whole
or in part on any alleged act, fault or failure of Marketing
Organization, Marketing Organization shall not settle such action or
any portion thereof except with the express, written consent of SBL.
<PAGE>
E. INDEMNIFICATION. Marketing Organization shall indemnify and hold SBL
harmless from any liability, loss, cost, claim or damaged caused by
the negligence or misconduct of Marketing Organization, its affiliated
insurance agency (if applicable), Marketers and/or either of their
officers, directors and employees. Marketing Organization shall
reimburse SBL for any legal or other expenses reasonably incurred by
SBL in connection with its investigation and defense of any such loss,
cost, claim, damage or liability, or of any proceeding or action
resulting from those matters.
VII. GENERAL PROVISIONS
A. CONFIDENTIALITY. Marketing Organization will treat all matters
relating to SBL's business as confidential information, and not
divulge any information in any way to other entities during or after
the term of this contract.
B. WAIVER. SBL's forbearance or failure to exercise any rights hereunder
or insist upon strict compliance herewith shall not constitute a
waiver of any right, condition, or obligation of Marketing
Organization under this Agreement.
C. PRIOR AGREEMENTS. This Agreement shall supersede any and all prior
agreement(s) between Marketing Organization and SBL in relation to
sales of Products after this Agreement becomes effective; it being
understood, however, that all obligations to SBL previously incurred
or assumed by SBL and liens created in connection therewith still
exist and shall attach hereto.
D. ASSIGNMENT. Neither this Agreement nor any of the benefits to accrue
hereunder shall be assigned or transferred, either in whole or in
part, without SBL's prior written consent. Any assignments shall be
subject to a first lien to SBL for any indebtedness owed to SBL.
E. NOTICES. All notices required or permitted to be given under this
contract shall be in writing and shall be delivered personally or
mailed to an officer of the party receiving such notice at its home
office at the address set forth above.
F. GOVERNING LAW. This contract shall be construed to be in accordance
with the laws of the State of Kansas.
H. ENTIRE AGREEMENT. The foregoing provisions, the attached Commission
Schedules and any rate books, manuals, or bulletins issued by SBL in
connection with this Agreement constitute the entire agreement between
the parties and SBL shall not be bound by any other promise,
agreement, understanding or representation unless it is made by an
instrument in writing, signed by all of the parties or is in the form
of a written notice from SBL to Marketing Organization which expresses
by its terms an intention to modify this Agreement.
I. SEVERABILITY. If it should appear that any term of this contract is in
conflict with any rule of law, statute, or regulation in effect in any
state where Marketing Organization writes or solicits business for
SBL, then any such term shall be deemed inoperative and null and void
insofar as it may be in conflict therewith and shall be deemed
modified to conform to such rule of law, statute or regulation. The
existence of any such apparent conflict shall not invalidate the
remaining provisions of this contract.
J. EFFECTIVE DATE. This Agreement shall take effect shown below, if
Marketing Organization has been duly licensed in the appropriate
jurisdiction(s) to perform the functions anticipated herein.
MARKETING ORGANIZATION SECURITY BENEFIT LIFE INSURANCE COMPANY
______________________________________ By ____________________________________
Print Name of Marketing Organization
|_| Individual |_| Partnership
|_| Corporation Title _________________________________
______________________________________ Date __________________________________
Print Name of Principal Officer
if a Partnership or Corporation
SECURITY DISTRIBUTORS, INC.
By ___________________________________
Signature of Individual
or Principal Officer By ____________________________________
Date _________________________________ Title _________________________________
APPROVED BY: Date __________________________________
______________________________________
Print Name of Sponsoring Marketing
Organization (if applicable)
By ___________________________________
Signature of Principal Officer
Effective Date of Agreement __________
32-94821-00
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
785-431-3000
MARKETING ORGANIZATION AGREEMENT
COMMSSION SCHEDULE
PCG VARIABLE ANNUITY
Marketing Organization:________________________________
(Licensed Broker/Dealers Only)
Effective Date of Commission Schedule:
This Commission Schedule is hereby made part of and amends the Marketing
Organization Selling Agreement (the "Agreement") with Security Benefit Life
Insurance Company and Security Distributors, Inc. (hereinafter jointly called
"SBL"). Except as otherwise defined herein, all capitalized terms will have the
meaning set forth in the Agreement and the PCG Variable Annuity Contract.
NONCOMMISSIONABLE
No commissions or other form of compensation shall be paid by SBL to Marketing
Organization on sales of the PCG Variable Annuity Contract.
CHANGE OF COMMISSION SCHEDULE: SBL reserves the right at any time, with or
without notice, to change, modify or discontinue this Commission Schedule.
CHANGE OF DEALER: A Contractowner shall have the right to designate a new
broker/dealer, or to terminate a Marketing Organization without designating a
replacement, by sending written notice of such designation or termination to
SBL.
THIS COMMISSION SCHEDULE replaces any previous Commission Schedule for the
Variable Annuity Contract listed above as of the Effective Date set forth above.
SECURITY DISTRIBUTORS, INC. SECURITY BENEFIT LIFE INSURANCE COMPANY
By: By:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FOUNDED IN 1892/TOPEKA, KS
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration for the Purchase Payments and the attached application,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, HE OR SHE MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND SEPARATE
ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED BY THE
COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Start Date or
termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Start Date according to the
Contract provisions.
* Annuity Payments begin on the Annuity Start Date using the method specified in
this Contract.
* This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750497, Topeka, KS 66675-0497
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
Form V6026 (7-98) BP 602611
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
CONTRACT SPECIFICATIONS................................................ 3
DEFINITIONS............................................................ 4-6
GENERAL PROVISIONS..................................................... 6-8
The Contract......................................................... 6
Compliance........................................................... 6
Misstatement of Age and Sex.......................................... 7
Evidence of Survival................................................. 7
Incontestability..................................................... 7
Assignment........................................................... 7
Transfers...................... ..................................... 7
Claims of Creditors.................................................. 7
Nonforfeiture Values................................................. 7
Participation........................................................ 7
Statements........................................................... 8
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS........................ 8
Ownership............................................................ 8
Joint Ownership...................................................... 8
Annuitant............................................................ 8
Primary and Secondary Beneficiaries.................................. 8
Ownership and Beneficiary Changes.................................... 8
PURCHASE PAYMENT PROVISIONS............................................ 9
Flexible Purchase Payments........................................... 9
Purchase Payment Limitations......................................... 9
Purchase Payment Allocation.......................................... 9
Place of Payment..................................................... 9
CONTRACT VALUE AND EXPENSE PROVISIONS.................................. 9-11
Contract Value....................................................... 9
Separate Account Contract Value...................................... 9
Accumulation Unit Value.............................................. 9
Net Investment Factor................................................ 10
Determining Accumulation Units....................................... 10
Mortality and Expense Risk Charge.................................... 10
Premium Tax Expense.................................................. 10
Mutual Fund Expenses................................................. 11
WITHDRAWAL PROVISIONS.................................................. 11, 12
Withdrawals.......................................................... 11
Withdrawal Value..................................................... 11
Systematic Withdrawals............................................... 11
Date of Request...................................................... 11
Payment of Withdrawal Benefits....................................... 12
DEATH BENEFIT PROVISIONS............................................... 12-14
Death Benefit........................................................ 12, 13
Proof of Death....................................................... 13
Distribution Rules................................................... 13, 14
ANNUITY PAYMENT PROVISIONS............................................. 14-17
Annuity Start Date................................................... 14
Change of Annuity Start Date......................................... 14
Annuity Start Amount................................................. 14
Annuity Table........................................................ 14
Annuity Payments..................................................... 15
Change of Annuity Option............................................. 15
Variable Annuity Payments............................................ 15
Annuity Units........................................................ 15
Net Investment Factor................................................ 15, 16
Alternate Annuity Option Rates....................................... 16
Annuity Options...................................................... 16
ANNUITY TABLE.......................................................... 17
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 602611
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John A. Doe CONTRACT NUMBER: Specimen
OWNER DATE OF BIRTH: 10-30-1953 CONTRACT DATE: 6-30-1997
JOINT OWNER NAME: Mary K. Doe ISSUE DATE: 6-30-1997
JOINT OWNER DATE OF BIRTH: 7-18-1981 ANNUITY START DATE: 7-1-2025*
ANNUITANT NAME: Betty M. Doe PLAN: Non-Qualified
ANNUITANT DATE OF BIRTH: 5-13-1987 ASSIGNMENT: This policy may be assigned.
See Assignment Provision of your Policy.
ANNUITANT'S SEX: Female
PRIMARY BENEFICIARY NAME:
Linda L. Doe
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT............... $100,000
MINIMUM SUBSEQUENT PURCHASE PAYMENTS... $0
MINIMUM SYSTEMATIC WITHDRAWAL.......... $100
MORTALITY AND EXPENSE RISK CHARGE...... .65% Annually
ANNUITY OPTION......................... 10-Year Fixed Period Option*
SUBACCOUNTS:
PCG Aggressive Growth Subaccount
PCG Growth Subaccount
SIM Growth
SIM Conservative Growth
METHOD FOR DEDUCTIONS:
Deductions for Premium Taxes, will be made sequentially from the Contract
Value in descending order of the Subaccounts listed above. The value of each
account will be depleted before the next is charged.
* The Owner may select the Annuity Start Date and the Annuity Option. If no
Annuity Start Date or Annuity Option is selected by the Owner, they will be
assigned automatically.
V6026 A (7-98) -3- SBL200
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Subaccounts.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Start Date. It is also
used to compute the Variable Annuity Payments for Annuity Options 2 and 3.
ANNUITANT
The Annuitant is the person named by the Owner on whose life the Annuity
Payments depend for Annuity Option 1. The Annuitant receives Annuity Payments
under this Contract. Please see "Annuitant" provisions on page 8.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Start Date.
Please see "Annuity Options" on page 16.
ANNUITY START DATE
The Annuity Start Date is the date on which Annuity Payments are scheduled to
begin. This date may be changed by the Owner. The Annuity Start Date is shown
on Page 3. Please see "Annuity Start Date" on page 14.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Option 1.
COMPANY
The Company is Security Benefit Life Insurance Company, P.O. Box 750497,
Topeka, Kansas 66675-0497.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins. The Contract Date is shown
on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
DESIGNATED BENEFICIARY
Upon the death of the Owner or Joint Owner, the Designated Beneficiary will
be the first person on the following list who is alive on the date of death:
1. Owner;
2. Joint Owner;
3. Primary Beneficiary;
4. Secondary Beneficiary;
5. Annuitant; and
6. the Owner's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Owner prior to the Annuity Start Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 8 and "Death Benefit Provisions" on pages 12
and 13.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, P.O. Box 750497, Topeka, Kansas 66675-0497.
ISSUE DATE
The Issue Date is the date the Company uses to determine the date the
Contract becomes incontestable. The Issue Date is shown on Page 3. Please see
"Incontestability" on page 7.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in the entire Contract
with the Owner. The Joint Owner, if any, is named on page 3. Please see
"Joint Ownership" provisions on page 8.
V6026B (7-98) -4- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Owner is the person who possesses all rights under the Contract. The
Owner is named on page 3. Please see "Ownership" provisions on page 8.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and applied to the
Contract.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, P.O. Box 750497, Topeka, Kansas 66675-0497.
SEPARATE ACCOUNT
Variable Annuity Account X (the "Separate Account") is a separate account
established and maintained by the Company under Kansas law. The Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a Unit Investment Trust. It was established
by the Company to support variable annuity contracts. The Company owns the
assets of the Separate Account and maintains them apart from the assets of
its general account and its other separate accounts. The assets held in the
Separate Account equal to the reserves and other Contract liabilities with
respect to the Separate Account may not be charged with liabilities arising
from any other business the Company may conduct.
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Subaccounts shown on page 3. Income and realized and unrealized gains and
losses from assets in each Subaccount are credited to, or charged against,
the Subaccount without regard to income, gains or losses in the other
Subaccounts. The Company has the right to transfer to its general account any
assets of the Separate Account that are in excess of the reserves and other
Contract liabilities with respect to the Separate Account. The value of the
assets in the Separate Account on each Valuation Date are determined at the
end of each Valuation Date.
SUBACCOUNT NET ASSET VALUE
The Subaccount Net Asset Value is equal to: (1) the net asset value of all
shares of the underlying mutual fund held by the Subaccount; plus (2) any
cash or other assets; less (3) all liabilities of the Subaccount.
SUBACCOUNTS
The Separate Account is divided into Subaccounts which invest in shares of
mutual funds. Each Subaccount may invest its assets in a separate class or
series of a designated mutual fund or funds. The Subaccounts are shown on
page 3. Subject to the regulatory requirements then in force, the Company
reserves the right to:
-5- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
SUBACCOUNTS (CONTINUED)
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Subaccounts;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Subaccount;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Subaccount.
If any of these changes result in a material change to the Separate Account
or a Subaccount, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Subaccount in any material
respect without complying with the filing and other procedures of the
insurance regulators of the state of issue.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the attached Application, and any Amendments, Endorsements or
Riders to the Contract. All statements made in the Application will, in the
absence of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Annuitant to void this Contract unless it is
in the written Application. Any change in the Contract can be made only with
the written consent of the President, a Vice President, or the Secretary of
the Company.
The Purchase Payment(s) and the Application must be acceptable to the Company
under its rules and practices. If they are not, the Company's liability shall
be limited to a return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the provisions of this
Contract to comply with or give the Owner the benefit of any federal or state
statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered.
V6026B (7-98) -6- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE AND SEX
If the age or sex of the Annuitant has been misstated, payments shall be
adjusted, when allowed by law, to the amount which would have been provided
for the correct age or sex. Proof of the age of an Annuitant may be required
at any time, in a form suitable to the Company. If payments have already
commenced and the misstatement has caused an underpayment, the full amount
due will be paid with the next scheduled payment. If the misstatement has
caused an overpayment, the amount due will be deducted from one or more
future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in force for two years
from the Issue Date during the life of the Owner.
ASSIGNMENT
Please refer to page 3 to see if the Contract may be assigned. If it may be
assigned, no Assignment under this Contract is binding unless Received by the
Company in writing. The Company assumes no responsibility for the validity,
legality, or tax status of any Assignment. The Assignment will be subject to
any payment made or other action taken by the Company before the Assignment
is Received by the Company. Once filed, the rights of the Owner, Annuitant
and Beneficiary are subject to the Assignment. Any claim is subject to proof
of interest of the assignee.
TRANSFERS
The Owner may Transfer Contract Value among Subaccounts subject to the
following.
Transfers are not allowed within 30 days of the Annuity Start Date. The
Company reserves the right to: (1) limit the amount that may be subject to
Transfer to $1,000,000 per Transfer without Home Office approval; (2) limit
the number of Transfers allowed each Contract Year to 14; and (3) suspend
Transfers.
The Company will effect a Transfer to or from a Subaccount on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined at the end of the
Valuation Period in which the Transfer is effected.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Owner to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Contract is Participating, however, the Company does not expect dividends
to become payable on this Contract. At the end of each Contract Year the
Company will determine the Contract's dividend, if any. The Owner may choose
to have it: (1) added to the Contract Value; or (2) paid in cash. If no
choice is made, any dividend will be added to the Contract Value.
-7- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
STATEMENTS
At least once each Contract Year the Owner shall be sent a statement
including the current Contract Value and any other information required by
law. The Owner may send a written request for a statement at other intervals.
The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
During the Owner's lifetime, all rights and privileges under the Contract may
be exercised only by the Owner. If the purchaser names someone other than
himself or herself as Owner, the purchaser has no rights in the Contract. No
Owner may be older than age 90 on the Contract Date.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the Owner and Joint Owner
share an undivided interest in the entire Contract as joint tenants with
rights of survivorship. When an Owner and Joint Owner have been named, the
Company will honor only requests for changes and the exercise of other
Ownership rights made by both the Owner and Joint Owner. When a Joint Owner
is named, all references to "Owner" throughout this Contract should be
construed to mean both the Owner and Joint Owner, except for the "Statements"
provision on page 8 and the "Death Benefit Provisions" on pages 12 and 13.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Start Date. The request for this change must be made in writing
and Received by the Company at least 30 days prior to the Annuity Start Date.
No Annuitant may be named who is more than 95 years old on the Contract Date.
When the Annuitant dies prior to the Annuity Start Date, the Owner must name
a new Annuitant within 30 days or, if sooner, by the Annuity Start Date,
except where the Owner is a Nonnatural Person. If a new Annuitant is not
named, the Owner becomes the Annuitant.
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named on page 3. The Owner may change any
Beneficiary as described in "Ownership and Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Owner, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Owner directs otherwise, when
there are two or more Primary Beneficiaries, they will receive equal shares.
OWNERSHIP AND BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Owner may name a new
Owner, a new Primary Beneficiary or a new Secondary Beneficiary. Any new
choice of Owner, Primary Beneficiary or Secondary Beneficiary will revoke any
prior choice. Any change must be made in writing and recorded at the Home
Office. The change will become effective as of the date the written request
is signed, whether or not the Owner is living at the time the change is
recorded. A new choice of Primary Beneficiary or Secondary Beneficiary will
not apply to any payment made or action taken by the Company prior to the
time it was recorded. The Company may require the Contract be returned so
these changes may be made.
V6026B (7-98) -8- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Contract becomes in force when the initial Purchase Payment is applied.
The Owner is not required to continue Purchase Payments in the amount or
frequency originally planned. The Owner may: (1) increase or decrease the
amount of Purchase Payments, subject to any Contract limits; or (2) change
the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request.
PURCHASE PAYMENT LIMITATIONS
Cumulative Purchase Payments under the Contract in excess of $5,000,000 will
not be accepted without prior approval by the Company.
PURCHASE PAYMENT ALLOCATION
Purchase Payments will be allocated among the Subaccounts according to the
Owner's instructions in the Application or more recent instructions, if any.
The allocations must be whole percentage amounts and must total 100%. The
Owner may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is equal to the Separate Account
Contract Value. At any time after the first Contract Year and before the
Annuity Start Date, the Company reserves the right to pay to the Owner the
Contract Value as a lump sum if it is below $5,000.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Subaccount for
this Contract.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Subaccount was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
times (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
-9- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the
Subaccount, found at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Subaccount's underlying mutual fund that is not included
in the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of premiums or acquisition costs under
the Contract.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as of the end of the prior Valuation Period.
3. is a daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Subaccount are credited to or charged against the
Subaccounts without regard to the gains or losses in the Company or other
Subaccounts.
The Accumulation Unit Value may increase or decrease from one Valuation
Period to the next.
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to a Subaccount under this
Contract is found by dividing: (1) the amount allocated to the Subaccount; by
(2) the Accumulation Unit Value for the Subaccount at the end of the
Valuation Period during which the amount is applied under the Contract. The
number of Accumulation Units allocated to a Subaccount under the Contract
will not change as a result of investment experience. Events that change the
number of Accumulation Units are:
1. Purchase Payments that are applied to the Subaccount;
2. Contract Value that is Transferred into or out of the Subaccount;
3. Withdrawals that are deducted from the Subaccount; and
4. Premium Taxes that are deducted from the Subaccount.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Subaccount on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Values on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be allocated as described on
page 3.
V6026B (7-98) -10- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
MUTUAL FUND EXPENSES
Each Subaccount invests in shares of a mutual fund. The net asset value per
share of each underlying fund reflects the deduction of any investment
advisory and administration fees and other expenses of the fund. These fees
and expenses are not deducted from the assets of a Subaccount, but are paid
by the underlying funds. The Owner indirectly bears a pro rata share of such
fees and expenses. An underlying fund's fees and expenses are not specified
or fixed under the terms of this Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full Withdrawal of the Withdrawal Value or partial Withdrawal of Separate
Account Contract Value is allowed at any time. This provision is subject to
any federal or state Withdrawal restrictions. Upon the Owner's request for a
full Withdrawal, the Company will pay the Withdrawal Value in a lump sum.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company.
2. The Owner must apply: (a) while this Contract is in force; and (b) prior
to the Annuity Start Date of Option 1.
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account.
WITHDRAWAL VALUE
The Withdrawal Value at any time will be: (1) the Contract Value; less (2)
any Premium Taxes due or paid by the Company.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic distributions from the Contract
in substantially equal amounts prior to the Annuity Start Date. In order to
start Systematic Withdrawals, the Owner must make the request in writing. The
Minimum Systematic Withdrawal is shown on page 3. The Owner must choose the
type of payment and its frequency. The Systematic Withdrawal request must
state the allocations for deducting the Withdrawals from each Account. The
payment type may be: (1) a percentage of Contract Value; (2) a specified
dollar amount; (3) all earnings in the Contract; (4) over a fixed period of
time; or (5) based upon the life expectancy of the Owner or the Owner and a
Beneficiary. The payment frequency may be: (1) monthly; (2) quarterly; (3)
semiannually; or (4) annually. Systematic Withdrawals may be stopped or
changed by the Owner upon proper written request Received by the Company at
least 30 days in advance. The Company reserves the right to stop, modify,
suspend or charge a fee for Systematic Withdrawals at any time.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined at the end of the Valuation
Period in which all the required information is Received by the Company.
-11- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Owner dies prior to the Annuity Start Date, a Death Benefit will be
paid to the Designated Beneficiary when due Proof of Death and instructions
regarding payment are Received by the Company. If an Owner is a Nonnatural
Person, then the Death Benefit will be paid in the event of the death of the
Annuitant or any joint Owner that is a natural person prior to the Annuity
Start Date. Further, if an Owner is a Nonnatural Person, the amount of the
death benefit is based on the age of the Annuitant or any joint Owner that is
a natural person on the Issue Date. The death benefit proceeds will be the
Death Benefit described herein reduced by any uncollected Premium Taxes.
If the age of each Owner was 75 or younger on the Issue Date, the Death
Benefit will be the greatest of: (1) the Contract Value on the date due Proof
of Death and instructions regarding payment are Received by the Company, less
any Premium Taxes due or paid by the Company; or (2) the Guaranteed Death
Benefit described below.
The Guaranteed Death Benefit is the sum of all Purchase Payments paid under
the Contract reduced, as described below, for each partial withdrawal. The
Guaranteed Death Benefit after each partial withdrawal is calculated
according to the following formula:
A x B/C = D
where A is equal to the Guaranteed Death Benefit immediately prior to the
partial withdrawal, B is equal to the Contract Value immediately after the
partial withdrawal, and C is equal to the Contract Value immediately prior to
the partial withdrawal.
V6026B (7-98) -12- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
DEATH BENEFIT (Continued)
If the age of any Owner on the Issue Date was 76 or older, or if due proof of
death (regardless of the age of any Owner on the Issue Date) and instructions
regarding payment are not Received by the Company within six months of the
date of the Owner's death, the Death Benefit will be: (1) the Contract Value
on the date due Proof of Death and instructions regarding payment are
Received by the Company; less (2) any Premium Taxes due or paid by the
Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased Owner; or
4. any proof accepted by the Company.
DISTRIBUTION RULES
The entire Death Benefit with any interest shall be paid within 5 years after
the death of any Owner, except as provided below. In the event that the
Designated Beneficiary elects an Annuity Option, the length of time for the
payment period may be longer than 5 years if: (1) the Designated Beneficiary
is a natural person; (2) the Death Benefit is paid out under Annuity Options
1 through 3; (3) payments are made over a period that does not exceed the
life or life expectancy of the Designated Beneficiary; and (4) Annuity
Payments begin within one year of the death of the Owner. If the deceased
Owner's spouse is the sole Designated Beneficiary, the spouse shall become
the sole Owner of the Contract. He or she may elect to: (1) keep the Contract
in force until the sooner of their own death or the Annuity Start Date; or
(2) receive the Death Benefit.
If any Owner dies after the Annuity Start Date, Annuity Payments shall
continue to be paid at least as rapidly as under the method of payment being
used as of the date of the Owner's death.
If the Owner is a Nonnatural Person, the distribution rules set forth above
apply in the event of the death of, or a change in, the Annuitant. This
Contract is deemed to incorporate any provision of Section 72(s) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision. This Contract is also deemed to incorporate any other provision of
the Code deemed necessary by the Company, in its sole judgment, to qualify
this Contract as an annuity. The application of the distribution rules will
be made in accordance with Code section 72(s), or any successor provision, as
interpreted by the Company in its sole judgment.
-13- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DISTRIBUTION RULES (Continued)
The foregoing distribution rules do not apply to a Contract which is: (1)
provided under a plan described in Code Section 401(a); (2) described in Code
section 403(b); (3) an individual retirement annuity or provided under an
individual retirement account or annuity; or (4) otherwise exempt from the
Code section 72(s) distribution rules.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY START DATE
The Owner may choose the Annuity Start Date at the time of application. If no
Annuity Start Date is chosen, the Company will use the oldest Annuitant's
ninety-fifth birthday. The Annuity Start Date may not be deferred beyond the
oldest Annuitant's ninety-fifth birthday.
The Annuity Start Date is the date the first payment will be made to the
Annuitant under any of the Annuity Options.
CHANGE OF ANNUITY START DATE
The Owner may change the Annuity Start Date. A request for the change must be
made in writing. The written request must be Received by the Company at least
30 days prior to the new Annuity Start Date as well as 30 days prior to the
previous Annuity Start Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one or more of the Annuity Options
listed on page 16. The Annuity Start Amount is: (1) the Contract Value on the
Annuity Start Date; less (2) any Premium Taxes due or paid by the Company.
ANNUITY TABLE
Annuity Table A shows the guaranteed minimum amount of monthly Annuity
Payment per $1,000 of Annuity Start Amount for Annuity Option 1 that applies
to the first Variable Annuity Payment. The amount of each Annuity Payment for
Annuity Option 1 depends on the Annuitant's sex and age on the Annuity Start
Date.
Table A assumes 1900 as the year of birth of the annuitant. To use Table A
for an Annuitant born after 1900, the actual age is reduced by 0.1
(one-tenth) of a year for each year the year of birth exceeds 1900. For an
annuitant with a birth year prior to 1900, the actual age is increased in a
like manner. The actual age (in completed months) reduced or increased
becomes the "adjusted age of the Annuitant". The guaranteed payout rate is
then found by interpolating the Annuitant's adjusted age between the ages
shown. Table A is based on the 1983 Table "A" mortality table and an interest
rate of 3.5% per year. On request the Company will furnish the amount of
monthly Annuity Payment per $1,000 applied for any ages not shown.
Annuity Payments for Options 2 through 4 are computed without reference to
the Annuity Tables.
V6026B (7-98) -14- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose any Annuity
Option provided by this Contract or any other Annuity Option to which the
Company agrees. The Owner may choose an Annuity Option by written request.
This request must be Received by the Company at least 30 days prior to the
Annuity Start Date. Several Annuity Options are listed on page 16. No Annuity
Option can be selected that requires the Company to make periodic payments of
less than $100.00. If no Annuity Option is chosen prior to the Annuity Start
Date, the Company will use the 10-Year Fixed Period Option. Each Annuity
Option allows for making Annuity Payments annually, semiannually, quarterly
or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Start Date, the Owner may change the Annuity Option
chosen. The Owner must request the change in writing. This request must be
Received by the Company at least 30 days prior to the Annuity Start Date.
VARIABLE ANNUITY PAYMENTS
All Annuity Options provided under this Contract are Variable and either the
payment amount or payment length, depending on the option chosen, will
fluctuate with the performance of the underlying investments. The amount
shown on the Tables is the guaranteed minimum first Annuity Payment, based on
the assumed interest rate of 3.5% for Annuity Option 1. The amount of each
Annuity Payment after the first for this option is computed by means of
Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Subaccount on the Annuity Start Date.
The number of Annuity Units for the Subaccount then remains constant, unless
a Transfer of Annuity Units is made. After the first Annuity Payment, the
dollar amount of each subsequent Annuity Payment is equal to the number of
Annuity Units times the Annuity Unit Value for the Subaccount on the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was first set at $1.00. The
Annuity Unit Value for any subsequent Valuation Date is equal to (a) times
(b) times (c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount at the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the
Subaccount, found at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Subaccount's underlying mutual fund that is not included
in the net asset value per share; plus or minus
-15- BP 602621
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR (Continued)
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Subaccount.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as found at the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Subaccount are credited or charged against the Subaccount
without regard to the gains or losses in the Company or other Subaccounts.
ALTERNATE ANNUITY OPTIONS AND RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
Other Annuity Options may be available upon request at the discretion of the
Company.
ANNUITY OPTIONS
OPTION 1
LIFE WITH 25 YEARS CERTAIN: This option provides payments for the life of the
Annuitant with 25 years certain. Payments will be made to the end of this
period certain even if the Annuitant dies prior to the end of the period. If
the Annuitant dies before receiving all the payments during the fixed period.
If the Annuitant dies before receiving all the payments during the fixed
period, the remaining payments will be made to the Designated Beneficiary.
Table A shows some of the guaranteed rates for this option.
OPTION 2
FIXED PERIOD OPTION: This option provides payments for a fixed number of
years between 5 and 20. The amount of the payments will vary as a result of
the investment performance of the Subaccounts chosen. If all the Annuitants
die before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary.
OPTION 3
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied is paid. The number of payments will
vary as a result of the investment performance of the Subaccounts chosen. If
all the Annuitants die before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 4
AGE RECALCULATION OPTION: This option for payments based upon the Annuitant's
life expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the Annuitant's
beneficiary's attained or adjusted age, if applicable) each year. The
payments are computed by reference to actuarial tables prescribed by the
Treasury Secretary. Payments are made until the amount applied is exhausted.
The number of payments will vary as a result of the investment performance of
the Subaccounts chosen. If all the Annuitants die before receiving the
remaining payments, such payments will be made to the Designated Beneficiary.
V6026B (7-98) -16- BP 602621
<PAGE>
ANNUITY TABLE
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTION ONE
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF AMOUNT APPLIED
Adjusted Option One
Age Year Fixed Period Ends
of Annuitant 25
----------------------------------------
MALE
55 4.47
56 4.51
57 4.55
58 4.60
59 4.63
60 4.67
61 4.71
62 4.74
63 4.77
64 4.80
65 4.82
66 4.85
67 4.87
68 4.88
69 4.90
70 4.91
71 4.92
72 4.93
73 4.94
74 4.95
75 4.95
FEMALE
55 4.28
56 4.33
57 4.38
58 4.42
59 4.47
60 4.52
61 4.57
62 4.61
63 4.65
64 4.69
65 4.73
66 4.77
67 4.80
68 4.83
69 4.85
70 4.87
71 4.89
72 4.91
73 4.92
74 4.93
75 4.94
Values not shown will be provided upon request. Annual, semiannual, or
quarterly installments can be determined by multiplying the monthly installments
by 11.812853, 5.9572227, and 2.9914196 respectively.
-17- BP 602621
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Start Date
or termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Start Date according to
the Contract provisions.
* Annuity Payments begin on the Annuity Start Date using the method as
specified in this Contract.
* This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750497, Topeka, KS 66675-0497
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 602614
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FOUNDED IN 1892/TOPEKA, KS
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration for the Purchase Payments and the attached application,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, HE OR SHE MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND SEPARATE
ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED BY THE
COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Start Date or
termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Start Date according to the
Contract provisions.
* Annuity Payments begin on the Annuity Start Date using the method specified in
this Contract.
* This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750497, Topeka, KS 66675-0497
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
Form V6026 (7-98)U BP 602651
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
CONTRACT SPECIFICATIONS................................................ 3
DEFINITIONS............................................................ 4-6
GENERAL PROVISIONS..................................................... 6-8
The Contract......................................................... 6
Compliance........................................................... 6
Misstatement of Age.................................................. 7
Evidence of Survival................................................. 7
Incontestability..................................................... 7
Assignment........................................................... 7
Transfers...................... ..................................... 7
Claims of Creditors.................................................. 7
Nonforfeiture Values................................................. 7
Participation........................................................ 7
Statements........................................................... 8
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS........................ 8
Ownership............................................................ 8
Joint Ownership...................................................... 8
Annuitant............................................................ 8
Primary and Secondary Beneficiaries.................................. 8
Ownership and Beneficiary Changes.................................... 8
PURCHASE PAYMENT PROVISIONS............................................ 9
Flexible Purchase Payments........................................... 9
Purchase Payment Limitations......................................... 9
Purchase Payment Allocation.......................................... 9
Place of Payment..................................................... 9
CONTRACT VALUE AND EXPENSE PROVISIONS.................................. 9-11
Contract Value....................................................... 9
Separate Account Contract Value...................................... 9
Accumulation Unit Value.............................................. 9
Net Investment Factor................................................ 10
Determining Accumulation Units....................................... 10
Mortality and Expense Risk Charge.................................... 10
Premium Tax Expense.................................................. 10
Mutual Fund Expenses................................................. 11
WITHDRAWAL PROVISIONS.................................................. 11, 12
Withdrawals.......................................................... 11
Withdrawal Value..................................................... 11
Systematic Withdrawals............................................... 11
Date of Request...................................................... 11
Payment of Withdrawal Benefits....................................... 12
DEATH BENEFIT PROVISIONS............................................... 12-14
Death Benefit........................................................ 12, 13
Proof of Death....................................................... 13
Distribution Rules................................................... 13, 14
ANNUITY PAYMENT PROVISIONS............................................. 14-17
Annuity Start Date................................................... 14
Change of Annuity Start Date......................................... 14
Annuity Start Amount................................................. 14
Annuity Table........................................................ 14
Annuity Payments..................................................... 15
Change of Annuity Option............................................. 15
Variable Annuity Payments............................................ 15
Annuity Units........................................................ 15
Net Investment Factor................................................ 15, 16
Alternate Annuity Option Rates....................................... 16
Annuity Options...................................................... 16
ANNUITY TABLE.......................................................... 17
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 602651
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John A. Doe CONTRACT NUMBER: Specimen
OWNER DATE OF BIRTH: 10-30-1953 CONTRACT DATE: 6-30-1997
JOINT OWNER NAME: Mary K. Doe ISSUE DATE: 6-30-1997
JOINT OWNER DATE OF BIRTH: 7-18-1981 ANNUITY START DATE: 7-1-2025*
ANNUITANT NAME: Betty M. Doe PLAN: Non-Qualified
ANNUITANT DATE OF BIRTH: 5-13-1987 ASSIGNMENT: This policy may be assigned.
See Assignment Provision of your Policy.
ANNUITANT'S SEX: Female
PRIMARY BENEFICIARY NAME:
Linda L. Doe
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT............... $100,000
MINIMUM SUBSEQUENT PURCHASE PAYMENTS... $0
MINIMUM SYSTEMATIC WITHDRAWAL.......... $100
MORTALITY AND EXPENSE RISK CHARGE...... .65% Annually
ANNUITY OPTION......................... 10-Year Fixed Period Option*
SUBACCOUNTS:
PCG Aggressive Growth Subaccount
PCG Growth Subaccount
SIM Growth
SIM Conservative Growth
METHOD FOR DEDUCTIONS:
Deductions for Premium Taxes, will be made sequentially from the Contract
Value in descending order of the Subaccounts listed above. The value of each
account will be depleted before the next is charged.
* The Owner may select the Annuity Start Date and the Annuity Option. If no
Annuity Start Date or Annuity Option is selected by the Owner, they will be
assigned automatically.
V6026 A (7-98) -3- SBL200
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Subaccounts.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Start Date. It is also
used to compute the Variable Annuity Payments for Annuity Options 2 and 3.
ANNUITANT
The Annuitant is the person named by the Owner on whose life the Annuity
Payments depend for Annuity Option 1. The Annuitant receives Annuity Payments
under this Contract. Please see "Annuitant" provisions on page 8.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Start Date.
Please see "Annuity Options" on page 16.
ANNUITY START DATE
The Annuity Start Date is the date on which Annuity Payments are scheduled to
begin. This date may be changed by the Owner. The Annuity Start Date is shown
on Page 3. Please see "Annuity Start Date" on page 14.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Option 1.
COMPANY
The Company is Security Benefit Life Insurance Company, P.O. Box 750497,
Topeka, Kansas 66675-0497.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins. The Contract Date is shown
on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
DESIGNATED BENEFICIARY
Upon the death of the Owner or Joint Owner, the Designated Beneficiary will
be the first person on the following list who is alive on the date of death:
1. Owner;
2. Joint Owner;
3. Primary Beneficiary;
4. Secondary Beneficiary;
5. Annuitant; and
6. the Owner's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Owner prior to the Annuity Start Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 8 and "Death Benefit Provisions" on pages 12
and 13.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, P.O. Box 750497, Topeka, Kansas 66675-0497.
ISSUE DATE
The Issue Date is the date the Company uses to determine the date the
Contract becomes incontestable. The Issue Date is shown on Page 3. Please see
"Incontestability" on page 7.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in the entire Contract
with the Owner. The Joint Owner, if any, is named on page 3. Please see
"Joint Ownership" provisions on page 8.
V6026B (7-98)U -4- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Owner is the person who possesses all rights under the Contract. The
Owner is named on page 3. Please see "Ownership" provisions on page 8.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and applied to the
Contract.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, P.O. Box 750497, Topeka, Kansas 66675-0497.
SEPARATE ACCOUNT
Variable Annuity Account X (the "Separate Account") is a separate account
established and maintained by the Company under Kansas law. The Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a Unit Investment Trust. It was established
by the Company to support variable annuity contracts. The Company owns the
assets of the Separate Account and maintains them apart from the assets of
its general account and its other separate accounts. The assets held in the
Separate Account equal to the reserves and other Contract liabilities with
respect to the Separate Account may not be charged with liabilities arising
from any other business the Company may conduct.
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Subaccounts shown on page 3. Income and realized and unrealized gains and
losses from assets in each Subaccount are credited to, or charged against,
the Subaccount without regard to income, gains or losses in the other
Subaccounts. The Company has the right to transfer to its general account any
assets of the Separate Account that are in excess of the reserves and other
Contract liabilities with respect to the Separate Account. The value of the
assets in the Separate Account on each Valuation Date are determined at the
end of each Valuation Date.
SUBACCOUNT NET ASSET VALUE
The Subaccount Net Asset Value is equal to: (1) the net asset value of all
shares of the underlying mutual fund held by the Subaccount; plus (2) any
cash or other assets; less (3) all liabilities of the Subaccount.
SUBACCOUNTS
The Separate Account is divided into Subaccounts which invest in shares of
mutual funds. Each Subaccount may invest its assets in a separate class or
series of a designated mutual fund or funds. The Subaccounts are shown on
page 3. Subject to the regulatory requirements then in force, the Company
reserves the right to:
-5- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
SUBACCOUNTS (CONTINUED)
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Subaccounts;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Subaccount;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Subaccount.
If any of these changes result in a material change to the Separate Account
or a Subaccount, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Subaccount in any material
respect without complying with the filing and other procedures of the
insurance regulators of the state of issue.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the attached Application, and any Amendments, Endorsements or
Riders to the Contract. All statements made in the Application will, in the
absence of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Annuitant to void this Contract unless it is
in the written Application. Any change in the Contract can be made only with
the written consent of the President, a Vice President, or the Secretary of
the Company.
The Purchase Payment(s) and the Application must be acceptable to the Company
under its rules and practices. If they are not, the Company's liability shall
be limited to a return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the provisions of this
Contract to comply with or give the Owner the benefit of any federal or state
statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered.
V6026B (7-98)U -6- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, payments shall be adjusted,
when allowed by law, to the amount which would have been provided for the
correct age. Proof of the age of an Annuitant may be required at any time, in
a form suitable to the Company. If payments have already commenced and the
misstatement has caused an underpayment, the full amount due will be paid
with the next scheduled payment. If the misstatement has caused an
overpayment, the amount due will be deducted from one or more future
payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in force for two years
from the Issue Date during the life of the Owner.
ASSIGNMENT
Please refer to page 3 to see if the Contract may be assigned. If it may be
assigned, no Assignment under this Contract is binding unless Received by the
Company in writing. The Company assumes no responsibility for the validity,
legality, or tax status of any Assignment. The Assignment will be subject to
any payment made or other action taken by the Company before the Assignment
is Received by the Company. Once filed, the rights of the Owner, Annuitant
and Beneficiary are subject to the Assignment. Any claim is subject to proof
of interest of the assignee.
TRANSFERS
The Owner may Transfer Contract Value among Subaccounts subject to the
following.
Transfers are not allowed within 30 days of the Annuity Start Date. The
Company reserves the right to: (1) limit the amount that may be subject to
Transfer to $1,000,000 per Transfer without Home Office approval; (2) limit
the number of Transfers allowed each Contract Year to 14; and (3) suspend
Transfers.
The Company will effect a Transfer to or from a Subaccount on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined at the end of the
Valuation Period in which the Transfer is effected.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Owner to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Contract is Participating, however, the Company does not expect dividends
to become payable on this Contract. At the end of each Contract Year the
Company will determine the Contract's dividend, if any. The Owner may choose
to have it: (1) added to the Contract Value; or (2) paid in cash. If no
choice is made, any dividend will be added to the Contract Value.
-7- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
STATEMENTS
At least once each Contract Year the Owner shall be sent a statement
including the current Contract Value and any other information required by
law. The Owner may send a written request for a statement at other intervals.
The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
During the Owner's lifetime, all rights and privileges under the Contract may
be exercised only by the Owner. If the purchaser names someone other than
himself or herself as Owner, the purchaser has no rights in the Contract. No
Owner may be older than age 90 on the Contract Date.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the Owner and Joint Owner
share an undivided interest in the entire Contract as joint tenants with
rights of survivorship. When an Owner and Joint Owner have been named, the
Company will honor only requests for changes and the exercise of other
Ownership rights made by both the Owner and Joint Owner. When a Joint Owner
is named, all references to "Owner" throughout this Contract should be
construed to mean both the Owner and Joint Owner, except for the "Statements"
provision on page 8 and the "Death Benefit Provisions" on pages 12 and 13.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Start Date. The request for this change must be made in writing
and Received by the Company at least 30 days prior to the Annuity Start Date.
No Annuitant may be named who is more than 95 years old on the Contract Date.
When the Annuitant dies prior to the Annuity Start Date, the Owner must name
a new Annuitant within 30 days or, if sooner, by the Annuity Start Date,
except where the Owner is a Nonnatural Person. If a new Annuitant is not
named, the Owner becomes the Annuitant.
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named on page 3. The Owner may change any
Beneficiary as described in "Ownership and Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Owner, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Owner directs otherwise, when
there are two or more Primary Beneficiaries, they will receive equal shares.
OWNERSHIP AND BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Owner may name a new
Owner, a new Primary Beneficiary or a new Secondary Beneficiary. Any new
choice of Owner, Primary Beneficiary or Secondary Beneficiary will revoke any
prior choice. Any change must be made in writing and recorded at the Home
Office. The change will become effective as of the date the written request
is signed, whether or not the Owner is living at the time the change is
recorded. A new choice of Primary Beneficiary or Secondary Beneficiary will
not apply to any payment made or action taken by the Company prior to the
time it was recorded. The Company may require the Contract be returned so
these changes may be made.
V6026B (7-98)U -8- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Contract becomes in force when the initial Purchase Payment is applied.
The Owner is not required to continue Purchase Payments in the amount or
frequency originally planned. The Owner may: (1) increase or decrease the
amount of Purchase Payments, subject to any Contract limits; or (2) change
the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request.
PURCHASE PAYMENT LIMITATIONS
Cumulative Purchase Payments under the Contract in excess of $5,000,000 will
not be accepted without prior approval by the Company.
PURCHASE PAYMENT ALLOCATION
Purchase Payments will be allocated among the Subaccounts according to the
Owner's instructions in the Application or more recent instructions, if any.
The allocations must be whole percentage amounts and must total 100%. The
Owner may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is equal to the Separate Account
Contract Value. At any time after the first Contract Year and before the
Annuity Start Date, the Company reserves the right to pay to the Owner the
Contract Value as a lump sum if it is below $5,000.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Subaccount for
this Contract.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Subaccount was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
times (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
-9- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the
Subaccount, found at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Subaccount's underlying mutual fund that is not included
in the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of premiums or acquisition costs under
the Contract.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as of the end of the prior Valuation Period.
3. is a daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Subaccount are credited to or charged against the
Subaccounts without regard to the gains or losses in the Company or other
Subaccounts.
The Accumulation Unit Value may increase or decrease from one Valuation
Period to the next.
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to a Subaccount under this
Contract is found by dividing: (1) the amount allocated to the Subaccount; by
(2) the Accumulation Unit Value for the Subaccount at the end of the
Valuation Period during which the amount is applied under the Contract. The
number of Accumulation Units allocated to a Subaccount under the Contract
will not change as a result of investment experience. Events that change the
number of Accumulation Units are:
1. Purchase Payments that are applied to the Subaccount;
2. Contract Value that is Transferred into or out of the Subaccount;
3. Withdrawals that are deducted from the Subaccount; and
4. Premium Taxes that are deducted from the Subaccount.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Subaccount on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Values on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be allocated as described on
page 3.
V6026B (7-98)U -10- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
MUTUAL FUND EXPENSES
Each Subaccount invests in shares of a mutual fund. The net asset value per
share of each underlying fund reflects the deduction of any investment
advisory and administration fees and other expenses of the fund. These fees
and expenses are not deducted from the assets of a Subaccount, but are paid
by the underlying funds. The Owner indirectly bears a pro rata share of such
fees and expenses. An underlying fund's fees and expenses are not specified
or fixed under the terms of this Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full Withdrawal of the Withdrawal Value or partial Withdrawal of Separate
Account Contract Value is allowed at any time. This provision is subject to
any federal or state Withdrawal restrictions. Upon the Owner's request for a
full Withdrawal, the Company will pay the Withdrawal Value in a lump sum.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company.
2. The Owner must apply: (a) while this Contract is in force; and (b) prior
to the Annuity Start Date of Option 1.
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account.
WITHDRAWAL VALUE
The Withdrawal Value at any time will be: (1) the Contract Value; less (2)
any Premium Taxes due or paid by the Company.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic distributions from the Contract
in substantially equal amounts prior to the Annuity Start Date. In order to
start Systematic Withdrawals, the Owner must make the request in writing. The
Minimum Systematic Withdrawal is shown on page 3. The Owner must choose the
type of payment and its frequency. The Systematic Withdrawal request must
state the allocations for deducting the Withdrawals from each Account. The
payment type may be: (1) a percentage of Contract Value; (2) a specified
dollar amount; (3) all earnings in the Contract; (4) over a fixed period of
time; or (5) based upon the life expectancy of the Owner or the Owner and a
Beneficiary. The payment frequency may be: (1) monthly; (2) quarterly; (3)
semiannually; or (4) annually. Systematic Withdrawals may be stopped or
changed by the Owner upon proper written request Received by the Company at
least 30 days in advance. The Company reserves the right to stop, modify,
suspend or charge a fee for Systematic Withdrawals at any time.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined at the end of the Valuation
Period in which all the required information is Received by the Company.
-11- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Owner dies prior to the Annuity Start Date, a Death Benefit will be
paid to the Designated Beneficiary when due Proof of Death and instructions
regarding payment are Received by the Company. If an Owner is a Nonnatural
Person, then the Death Benefit will be paid in the event of the death of the
Annuitant or any joint Owner that is a natural person prior to the Annuity
Start Date. Further, if an Owner is a Nonnatural Person, the amount of the
death benefit is based on the age of the Annuitant or any joint Owner that is
a natural person on the Issue Date. The death benefit proceeds will be the
Death Benefit described herein reduced by any uncollected Premium Taxes.
If the age of each Owner was 75 or younger on the Issue Date, the Death
Benefit will be the greatest of: (1) the Contract Value on the date due Proof
of Death and instructions regarding payment are Received by the Company, less
any Premium Taxes due or paid by the Company; or (2) the Guaranteed Death
Benefit described below.
The Guaranteed Death Benefit is the sum of all Purchase Payments paid under
the Contract reduced, as described below, for each partial withdrawal. The
Guaranteed Death Benefit after each partial withdrawal is calculated
according to the following formula:
A x B/C = D
where A is equal to the Guaranteed Death Benefit immediately prior to the
partial withdrawal, B is equal to the Contract Value immediately after the
partial withdrawal, and C is equal to the Contract Value immediately prior to
the partial withdrawal.
V6026B (7-98)U -12- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
DEATH BENEFIT (Continued)
If the age of any Owner on the Issue Date was 76 or older, or if due proof of
death (regardless of the age of any Owner on the Issue Date) and instructions
regarding payment are not Received by the Company within six months of the
date of the Owner's death, the Death Benefit will be: (1) the Contract Value
on the date due Proof of Death and instructions regarding payment are
Received by the Company; less (2) any Premium Taxes due or paid by the
Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased Owner; or
4. any proof accepted by the Company.
DISTRIBUTION RULES
The entire Death Benefit with any interest shall be paid within 5 years after
the death of any Owner, except as provided below. In the event that the
Designated Beneficiary elects an Annuity Option, the length of time for the
payment period may be longer than 5 years if: (1) the Designated Beneficiary
is a natural person; (2) the Death Benefit is paid out under Annuity Options
1 through 3; (3) payments are made over a period that does not exceed the
life or life expectancy of the Designated Beneficiary; and (4) Annuity
Payments begin within one year of the death of the Owner. If the deceased
Owner's spouse is the sole Designated Beneficiary, the spouse shall become
the sole Owner of the Contract. He or she may elect to: (1) keep the Contract
in force until the sooner of their own death or the Annuity Start Date; or
(2) receive the Death Benefit.
If any Owner dies after the Annuity Start Date, Annuity Payments shall
continue to be paid at least as rapidly as under the method of payment being
used as of the date of the Owner's death.
If the Owner is a Nonnatural Person, the distribution rules set forth above
apply in the event of the death of, or a change in, the Annuitant. This
Contract is deemed to incorporate any provision of Section 72(s) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision. This Contract is also deemed to incorporate any other provision of
the Code deemed necessary by the Company, in its sole judgment, to qualify
this Contract as an annuity. The application of the distribution rules will
be made in accordance with Code section 72(s), or any successor provision, as
interpreted by the Company in its sole judgment.
-13- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DISTRIBUTION RULES (Continued)
The foregoing distribution rules do not apply to a Contract which is: (1)
provided under a plan described in Code Section 401(a); (2) described in Code
section 403(b); (3) an individual retirement annuity or provided under an
individual retirement account or annuity; or (4) otherwise exempt from the
Code section 72(s) distribution rules.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY START DATE
The Owner may choose the Annuity Start Date at the time of application. If no
Annuity Start Date is chosen, the Company will use the oldest Annuitant's
ninety-fifth birthday. The Annuity Start Date may not be deferred beyond the
oldest Annuitant's ninety-fifth birthday.
The Annuity Start Date is the date the first payment will be made to the
Annuitant under any of the Annuity Options.
CHANGE OF ANNUITY START DATE
The Owner may change the Annuity Start Date. A request for the change must be
made in writing. The written request must be Received by the Company at least
30 days prior to the new Annuity Start Date as well as 30 days prior to the
previous Annuity Start Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one or more of the Annuity Options
listed on page 16. The Annuity Start Amount is: (1) the Contract Value on the
Annuity Start Date; less (2) any Premium Taxes due or paid by the Company.
ANNUITY TABLE
Annuity Table A shows the guaranteed minimum amount of monthly Annuity
Payment per $1,000 of Annuity Start Amount for Annuity Option 1 that applies
to the first Variable Annuity Payment. The amount of each Annuity Payment for
Annuity Option 1 depends on the Annuitant's age on the Annuity Start Date.
Table A assumes 1900 as the year of birth of the annuitant. To use Table A
for an Annuitant born after 1900, the actual age is reduced by 0.1
(one-tenth) of a year for each year the year of birth exceeds 1900. For an
annuitant with a birth year prior to 1900, the actual age is increased in a
like manner. The actual age (in completed months) reduced or increased
becomes the "adjusted age of the Annuitant". The guaranteed payout rate is
then found by interpolating the Annuitant's adjusted age between the ages
shown. Table A is based on the 1983 Table "A" mortality table and an interest
rate of 3.5% per year. On request the Company will furnish the amount of
monthly Annuity Payment per $1,000 applied for any ages not shown.
Annuity Payments for Options 2 through 4 are computed without reference to
the Annuity Tables.
V6026B (7-98)U -14- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose any Annuity
Option provided by this Contract or any other Annuity Option to which the
Company agrees. The Owner may choose an Annuity Option by written request.
This request must be Received by the Company at least 30 days prior to the
Annuity Start Date. Several Annuity Options are listed on page 16. No Annuity
Option can be selected that requires the Company to make periodic payments of
less than $100.00. If no Annuity Option is chosen prior to the Annuity Start
Date, the Company will use the 10-Year Fixed Period Option. Each Annuity
Option allows for making Annuity Payments annually, semiannually, quarterly
or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Start Date, the Owner may change the Annuity Option
chosen. The Owner must request the change in writing. This request must be
Received by the Company at least 30 days prior to the Annuity Start Date.
VARIABLE ANNUITY PAYMENTS
All Annuity Options provided under this Contract are Variable and either the
payment amount or payment length, depending on the option chosen, will
fluctuate with the performance of the underlying investments. The amount
shown on the Tables is the guaranteed minimum first Annuity Payment, based on
the assumed interest rate of 3.5% for Annuity Option 1. The amount of each
Annuity Payment after the first for this option is computed by means of
Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Subaccount on the Annuity Start Date.
The number of Annuity Units for the Subaccount then remains constant, unless
a Transfer of Annuity Units is made. After the first Annuity Payment, the
dollar amount of each subsequent Annuity Payment is equal to the number of
Annuity Units times the Annuity Unit Value for the Subaccount on the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was first set at $1.00. The
Annuity Unit Value for any subsequent Valuation Date is equal to (a) times
(b) times (c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount at the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the
Subaccount, found at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Subaccount's underlying mutual fund that is not included
in the net asset value per share; plus or minus
-15- BP 602661
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR (Continued)
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Subaccount.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as found at the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Subaccount are credited or charged against the Subaccount
without regard to the gains or losses in the Company or other Subaccounts.
ALTERNATE ANNUITY OPTIONS AND RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
Other Annuity Options may be available upon request at the discretion of the
Company.
ANNUITY OPTIONS
OPTION 1
LIFE WITH 25 YEARS CERTAIN: This option provides payments for the life of the
Annuitant with 25 years certain. Payments will be made to the end of this
period certain even if the Annuitant dies prior to the end of the period. If
the Annuitant dies before receiving all the payments during the fixed period.
If the Annuitant dies before receiving all the payments during the fixed
period, the remaining payments will be made to the Designated Beneficiary.
Table A shows some of the guaranteed rates for this option.
OPTION 2
FIXED PERIOD OPTION: This option provides payments for a fixed number of
years between 5 and 20. The amount of the payments will vary as a result of
the investment performance of the Subaccounts chosen. If all the Annuitants
die before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary.
OPTION 3
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied is paid. The number of payments will
vary as a result of the investment performance of the Subaccounts chosen. If
all the Annuitants die before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 4
AGE RECALCULATION OPTION: This option for payments based upon the Annuitant's
life expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the Annuitant's
beneficiary's attained or adjusted age, if applicable) each year. The
payments are computed by reference to actuarial tables prescribed by the
Treasury Secretary. Payments are made until the amount applied is exhausted.
The number of payments will vary as a result of the investment performance of
the Subaccounts chosen. If all the Annuitants die before receiving the
remaining payments, such payments will be made to the Designated Beneficiary.
V6026B (7-98)U -16- BP 602661
<PAGE>
ANNUITY TABLE
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTION ONE
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF AMOUNT APPLIED
Adjusted Option One
Age Year Fixed Period Ends
of Annuitant 25
----------------------------------------
UNISEX
55 4.28
56 4.33
57 4.38
58 4.42
59 4.47
60 4.52
61 4.57
62 4.61
63 4.65
64 4.69
65 4.73
66 4.77
67 4.80
68 4.83
69 4.85
70 4.87
71 4.89
72 4.91
73 4.92
74 4.93
75 4.94
Values not shown will be provided upon request. Annual, semiannual, or
quarterly installments can be determined by multiplying the monthly installments
by 11.812853, 5.9572227, and 2.9914196 respectively.
-17- BP 602661
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Start Date
or termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Start Date according to
the Contract provisions.
* Annuity Payments begin on the Annuity Start Date using the method as
specified in this Contract.
* This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750497, Topeka, KS 66675-0497
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 602654
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FOUNDED IN 1892/TOPEKA, KS
FLEXIBLE PREMIUM DEFERRED GROUP UNALLOCATED
VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration for the Purchase Payments and the attached application,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, THE OWNER MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND SEPARATE
ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED BY THE
COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED GROUP UNALLOCATED VARIABLE ANNUITY CONTRACT.
*Purchase Payments may be made until termination of the Contract.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
Form GV6026 (7-98) BP 602631
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
CONTRACT SPECIFICATIONS ................................................ 3
DEFINITIONS ............................................................ 4-7
GENERAL PROVISIONS ..................................................... 7, 8
The Contract ......................................................... 7
Compliance ........................................................... 7
Incontestability ..................................................... 7
Assignment ........................................................... 7
Transfers ............................................................ 7, 8
Claims of Creditors .................................................. 8
Nonforfeiture Values ................................................. 8
Participation ........................................................ 8
Statements ........................................................... 8
OWNERSHIP PROVISIONS ................................................... 8, 9
Ownership ............................................................ 8
Joint Ownership ...................................................... 9
Ownership Changes .................................................... 9
PURCHASE PAYMENT PROVISIONS ............................................ 9
Flexible Purchase Payments ........................................... 9
Purchase Payment Limitations ......................................... 9
Purchase Payment Allocation .......................................... 9
Place of Payment ..................................................... 9
CONTRACT VALUE AND EXPENSE PROVISIONS .................................. 10, 11
Contract Value ....................................................... 10
Separate Account Contract Value ...................................... 10
Accumulation Unit Value .............................................. 10
Net Investment Factor ................................................ 11
Determining Accumulation Units ....................................... 11
Mortality and Expense Risk Charge .................................... 11
Premium Tax Expense .................................................. 11
Administration Charge ................................................ 11
Mutual Fund Expenses ................................................. 11
WITHDRAWAL PROVISIONS .................................................. 12, 13
Withdrawals .......................................................... 12
Withdrawal Value ..................................................... 12
Systematic Withdrawals ............................................... 13
Date of Request ...................................................... 13
Payment of Withdrawal Benefits ....................................... 13
ANNUITY BENEFIT PROVISIONS ............................................. 14, 15
Purchase of Annuity Benefit Provisions ............................... 14
Annuity Tables ....................................................... 14
Variable Annuity Payments ............................................ 14
Alternate Annuity Option Rates ....................................... 14
Annuity Options ...................................................... 15
ANNUITY TABLES ......................................................... 16
AMENDMENTS OR ENDORSEMENTS, IF ANY
-2- BP 602631
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John A Doe CONTRACT NUMBER: Specimen
JOINT OWNER NAME: Mary K. Doe CONTRACT DATE: 6-30-1997
PLAN: Qualified ISSUE DATE: 6-30-1997
ASSIGNEMENT: This policy may not be assigned.
See Assignment Provision of Your
Policy.
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT............... $100,000
MINIMUM SUBSEQUENT PURCHASE PAYMENTS... $0
MINIMUM SYSTEMATIC WITHDRAWAL.......... $100
MORTALITY AND EXPENSE RISK CHARGE...... .95% Annually
SUBACCOUNTS:
PCG Aggressive Growth Subaccount
PCG Growth Subaccount
SIM Conservative Growth
SIM Growth
METHOD FOR DEDUCTIONS:
Deductions for Premium Taxes, will be made sequentially from the Contract Value
in descending order of the Subaccounts listed above. The value of each Account
will be depleted before the next is charged.
GV6026 A (7-98) -3- SBL204
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Subaccounts.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value.
ANNUITANT
When Contract Value is distributed to a Participant and used to purchase an
annuity, the Annuitant is the person named by the Participant on whose life
the Annuity Payments depend for Annuity Option 1. The Annuitant receives
Annuity Payments under the Participant's Contract. Please see "Annuity
Benefit Provisions" on page 14.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. Please see "Annuity Options" on page 15.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison
Street, Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins. The Contract Date is shown
on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
ISSUE DATE
The Issue Date is the date the Company uses to determine the date the
Contract becomes incontestable. The Issue Date is shown on Page 3. Please see
"Incontestability" on page 7.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in the entire Contract
with the Owner. The Joint Owner, if any, is named on page 3. Please see
"Joint Ownership" provisions on page 9.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Owner is the person, group or entity that possesses all rights under the
Contract. The Owner is named on page 3. Please see "Ownership" provisions on
page 9.
PARTICIPANT
A Participant under the Plan.
PARTICIPANT'S CONTRACT
A Contract purchased with a Participant's distribution from the Plan.
PLAN
The employer-sponsored retirement plan, annuity purchase arrangement or
deferred compensation program for which the Contract is issued.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and applied to the
Contract.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
GV6026B (7-98) -4- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT
Variable Annuity Account X (the "Separate Account") is a separate account
established and maintained by the Company under Kansas law. The Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a Unit Investment Trust. It was established
by the Company to support variable annuity contracts. The Company owns the
assets of the Separate Account and maintains them apart from the assets of
its general account and its other separate accounts. The assets held in the
Separate Account equal to the reserves and other Contract liabilities with
respect to the Separate Account may not be charged with liabilities arising
from any other business the Company may conduct.
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Subaccounts shown on page 3. Income and realized and unrealized gains and
losses from assets in each Subaccount are credited to, or charged against,
the Subaccount without regard to income, gains or losses in the other
Subaccounts. The Company has the right to transfer to its general account any
assets of the Separate Account that are in excess of the reserves and other
Contract liabilities with respect to the Separate Account. The value of the
assets in the Separate Account on each Valuation Date is determined at the
end of each Valuation Date.
SUBACCOUNT NET ASSET VALUE
The Subaccount Net Asset Value is equal to: (1) the net asset value of all
shares of the underlying mutual fund held by the Subaccount; plus (2) any
cash or other assets; less (3) all liabilities of the Subaccount.
SUBACCOUNTS
The Separate Account is divided into Subaccounts which invest in shares of
mutual funds. Each Subaccount may invest its assets in a separate class or
series of a designated mutual fund or funds. The Subaccounts are shown on
page 3. Subject to the regulatory requirements then in force, the Company
reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Subaccounts;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Subaccount;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Subaccount.
If any of these changes result in a material change to the Separate Account
or a Subaccount, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Subaccount in any material
respect without complying with the filing and other procedures of the
insurance regulators of the state of issue.
-5- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the attached Application, and any Amendments, Endorsements or
Riders to the Contract. All statements made in the Application will, in the
absence of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner to void this Contract unless it is in the written
Application. Any change in the Contract can be made only with the written
consent of the President, a Vice President, or the Secretary of the Company.
The Purchase Payment(s) and the Application must be acceptable to the Company
under its rules and practices. If they are not, the Company's liability shall
be limited to a return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the provisions of this
Contract to comply with or give the Owner the benefit of any federal or state
statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered.
INCONTESTABILITY
This Contract will not be contested after it has been in force for two years
from the Issue Date.
ASSIGNMENT
Please refer to page 3 to see if this Contract may be assigned. If it may be
assigned, no Assignment under this Contract is binding unless Received by the
Company in writing. The Company assumes no responsibility for the validity,
legality, or tax status of any Assignment. The Assignment will be subject to
any payment made or other action taken by the Company before the Assignment
is Received by the Company. Once filed, the rights of the Owner are subject
to the Assignment. Any claim is subject to proof of interest of the assignee.
TRANSFERS
The Owner may Transfer Contract Value among the Subaccounts subject to the
following.
The Company reserves the right to: (1) limit the amount that may be subject
to Transfer to $1,000,000 per Transfer without Home Office approval; (2)
limit the number of Transfers allowed each Contract Year to 14; and (3)
suspend Transfers.
GV6026B (7-98) -6- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS (Continued)
The Company will effect a Transfer to or from a Subaccount on the basis of
Accumulation Unit Value determined at the end of the Valuation Period in
which the Transfer is effected.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Owner to the extent allowed by law.
NONFORFEITURE VALUES
The Withdrawal Values will at least equal the minimum required by law.
PARTICIPATION
The Contract is participating, however, the Company does not expect dividends
to become payable on this Contract. At the end of each Contract Year the
Company will determine the Contract's dividend, if any. The Owner may choose
to have it: (1) added to the Contract Value; or (2) paid in cash. If no
choice is made, any dividend will be added to the Contract Value.
STATEMENTS
At least once each Contract Year the Owner shall be sent a statement
including the current Contract Value and any other information required by
law. The Owner may send a written request for a statement at other intervals.
The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
All rights and privileges under the Contract may be exercised only by the
Owner. If the purchaser names someone other than himself or herself as Owner,
the purchaser has no rights in the Contract.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the Owner and Joint Owner
share an undivided interest in the entire Contract as joint tenants with
rights of survivorship. When an Owner and Joint Owner have been named, the
Company will honor only requests for changes and the exercise of other
Ownership rights made by both the Owner and Joint Owner. When a Joint Owner
is named, all references to "Owner" throughout this Contract should be
construed to mean both the Owner and Joint Owner, except for the "Statements"
provision on page 8.
OWNERSHIP CHANGES
Subject to the terms of any existing Assignment, the Owner may name a new
Owner. Any new choice of Owner will revoke any prior choice. Any change must
be made in writing and recorded at the Home Office. The change will become
effective as of the date the written request is signed. The Company may
require the Contract be returned so these changes may be made.
-7- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Contract becomes in force when the initial Purchase Payment is applied.
The Owner is not required to continue Purchase Payments in the amount or
frequency originally planned. The Owner may: (1) increase or decrease the
amount of Purchase Payments, subject to any Contract limits; or (2) change
the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request.
PURCHASE PAYMENT ALLOCATION
Purchase Payments will be allocated among the Subaccounts according to the
Owner's instructions in the Application or more recent instructions, if any.
The allocations must be whole percentage amounts and must total 100%. The
Owner may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is equal to the Separate Account
Contract Value. At any time after the first Contract Year, the Company
reserves the right to pay to the Owner the Contract Value as a lump sum if it
is below $5,000.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Subaccount for
this Contract.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Subaccount was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
times (2) where:
1. is Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
Accumulation Unit Value is being determined;
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the
Subaccount, found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Subaccount's underlying mutual fund that is not included
in the net asset value per share; plus or minus
GV6026B (7-98) -8- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of premiums or acquisition costs under
the Contract.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as of the end of the prior Valuation Period.
3. is a daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Subaccount are credited to or charged against the
Subaccounts without regard to the gains or losses in the Company or other
Subaccounts.
The Accumulation Unit Value may increase or decrease from one Valuation
Period to the next.
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to a Subaccount under this
Contract is found by dividing: (1) the amount allocated to the Subaccount; by
(2) the Accumulation Unit Value for the Subaccount as of the end of the
Valuation Period during which the amount is applied under the Contract. The
number of Accumulation Units allocated to a Subaccount under the Contract
will not change as a result of investment experience. Events that change the
number of Accumulation Units are:
1. Purchase Payments that are applied to the Subaccount.
2. Contract Value that is Transferred into or out of the Subaccount.
3. Withdrawals that are deducted from the Subaccount; and
4. Premium Taxes that are deducted from the Subaccount.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Subaccount on each
Valuation Date. This charge is factored into the Accumulation Unit Values on
each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be allocated as described on
page 3.
MUTUAL FUND EXPENSES
Each Subaccount invests in shares of a mutual fund. The net asset value per
share of each underlying fund reflects the deduction of any investment
advisory and administration fees and other expenses of the fund. These fees
and expenses are not deducted from the assets of a Subaccount, but are paid
by the underlying funds. The Owner indirectly bears a pro rata share of such
fees and expenses. An underlying fund's fees and expenses are not specified
or fixed under the terms of this Contract.
-9- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time. This
provision is subject to any federal or state Withdrawal restrictions.
Upon the Owner's request for a full Withdrawal, the Company will pay the
Withdrawal Value in a lump sum, and the Contract will terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Owner must apply while this Contract is in force.
WITHDRAWAL VALUE
The Withdrawal Value as of any Valuation Date will be: (1) the Contract Value
on that date; less (2) any Premium Taxes due or paid by the Company;
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract
in substantially equal amounts. In order to start Systematic Withdrawals, the
Owner must make the request in writing. The Minimum Systematic Withdrawal is
shown on page 3. The Owner must choose the type of payment and its frequency.
The Systematic Withdrawal request must state the allocations for deducting
the Withdrawals from each Account. The payment type may be: (1) a percentage
of Contract Value; (2) a specified dollar amount; (3) all earnings in the
Contract; (4) over a fixed period of time. The payment frequency may be: (1)
monthly; (2) quarterly; (3) semiannually; or (4) annually. Systematic
Withdrawals may be stopped or changed by the Owner upon proper written
request Received by the Company at least 30 days in advance of the requested
date of termination or change. The Company reserves the right to stop,
modify, suspend or charge a fee for Systematic Withdrawals at any time.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined as of the end of the
Valuation Period in which all the required information is Received by the
Company. The Company will effect Systematic Withdrawals of Separate Account
Contract Value on the basis of Accumulation Unit Value determined as of the
end of the Valuation Period in which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchang is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securitie and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
GV6026B (7-98) -10- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
PURCHASE OF ANNUITY BENEFIT PROVISIONS
The Company agrees to make available to any Participant under the Owner's
Plan who receives an eligible rollover distribution (or in the case of a Plan
described in Section 457 of the Internal Revenue Code, any distribution) from
the Plan, an annuity contract for purchase with such distribution. The
Annuity Contract will offer the annuity options and rates set forth below. A
Participant's purchase payment and application for such annuity contract must
be acceptable to the Company under its rules and practices and the provisions
of the contract applied for.
ANNUITY TABLES
Annuity Table A shows the guaranteed minimum amount of monthly Annuity
Payment per $1,000 applied, which for Annuity Option 1 determines the amount
of the first Variable Annuity Payment. The amount of each Annuity Payment for
Annuity Option 1 will depend on the Annuitant's sex and age.
Table A assumes 1900 as the year of birth of the Annuitant. To use Table A
for an Annuitant born after 1900, the actual age is reduced by 0.1
(one-tenth) of a year for each year the year of birth exceeds 1900. For an
Annuitant with a birth year prior to 1900, the actual age is increased in a
like manner. The actual age (in completed months) reduced or increased
becomes the "adjusted age of the Annuitant." The guaranteed payout rate is
then found by interpolating the Annuitant's adjusted age between the ages
shown in Table A. Table A is based on the 1983 Table "A" mortality table and
an interest rate of 3.5% per year. On request the Company will furnish the
amount of monthly Annuity Payment per $1,000 applied for any ages not shown.
For Annuity Options 2 and 3, annuity rates based on age are not used to
calculate annuity payments. Annuity Payments for Options 2 and 3 are computed
without reference to the Annuity Tables.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the amounts shown on the Tables
are the guaranteed minimum first Annuity Payment, based on the assumed
interest rate of 3.5% for Annuity Option 1. The amount of each Annuity
Payment after the first for these options is computed by means of Annuity
Units.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
-11- BP 602641
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE WITH 25 YEARS CERTAIN: This option provides payments for the life of the
Annuitant with 25 years certain. Payments will be made to the end of this
period certain even if the Annuitant dies prior to the end of the period. If
the Annuitant dies before receiving all the payments during the fixed period.
If the Annuitant dies before receiving all the payments during the fixed
period, the remaining payments will be made to the Designated Beneficiary.
Table A shows some of the guaranteed rates for this option.
OPTION 2
FIXED PERIOD OPTION: This option provides payments for a fixed number of
years between 5 and 20. The amount of the payments will vary as a result of
the investment performance of the Subaccounts chosen. If all the Annuitants
die before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary.
OPTION 3
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied is paid. The number of payments will
vary as a result of the investment performance of the Subaccounts chosen. If
all the Annuitants die before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 4
AGE RECALCULATION OPTION: This option for payments based upon the Annuitant's
life expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the Annuitant's
beneficiary's attained or adjusted age, if applicable) each year. The
payments are computed by reference to actuarial tables prescribed by the
Treasury Secretary. Payments are made until the amount applied is exhausted.
The number of payments will vary as a result of the investment performance of
the Subaccounts chosen. If all the Annuitants die before receiving the
remaining payments, such payments will be made to the Designated Beneficiary.
GV6026B (7-98) -12- BP 602641
<PAGE>
ANNUITY TABLE
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTION ONE
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF AMOUNT APPLIED
Option One
Adjusted Life With 25 Years Certain
Age 5 10 15 20
of Annuitant Years Years Years Years
----------------------------------------------------
UNISEX
55 4.53 4.51 4.46 4.38
56 4.61 4.58 4.53 4.44
57 4.70 4.66 4.60 4.51
58 4.79 4.75 4.68 4.57
59 4.88 4.84 4.76 4.64
60 4.99 4.93 4.84 4.70
61 5.09 5.03 4.93 4.77
62 5.21 5.14 5.02 4.84
63 5.33 5.25 5.12 4.91
64 5.46 5.37 5.21 4.98
65 5.60 5.50 5.31 5.05
66 5.75 5.63 5.42 5.12
67 5.91 5.77 5.53 5.19
68 6.08 5.91 5.63 5.25
69 6.26 6.07 5.74 5.32
70 6.46 6.23 5.86 5.37
71 6.67 6.40 5.97 5.43
72 6.89 6.58 6.08 5.48
73 7.13 6.76 6.18 5.52
74 7.39 6.95 6.29 5.57
75 7.67 7.14 6.39 5.60
Values not shown will be provided upon request. Annual, semiannual, or
quarterly installments can be determined by multiplying the monthly installments
by 11.812853, 5.9572227, and 2.9914196 respectively.
-13- BP 602641
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED GROUP UNALLOCATED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until termination of the Contract.
* This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, ARE BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP602634
<PAGE>
ENDORSEMENT
- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Contract is established as an Individual Retirement Annuity ("IRA") as
defined in Section 408 of the Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision pursuant to the Owner's request in the
Application. Accordingly, this endorsement is attached to and made part of
the Contract as of its Issue Date or, if later, the date shown below.
Notwithstanding any other provisions of the Contract to the contrary, the
following provisions shall apply.
RESTRICTIONS ON INDIVIDUAL RETIREMENT ANNUITY
To ensure treatment as an IRA, this Contract will be subject to the
requirements of Code Section 408, which are briefly summarized below:
1. The Contract is established for the exclusive benefit of the Owner or
his or her beneficiaries. The Owner shall be the Annuitant.
2. The Contract shall be nontransferable and the entire interest of the
Owner in the Contract is nonforfeitable.
3. Notwithstanding any provision of the Contract to the contrary, the
distribution of the Owner's interest shall be made in accordance with
the minimum distribution requirements of Section 401(a)(9) of the
Internal Revenue Code and the regulations thereunder, including the
incidental death benefit provisions of Section 1.401(a)(9)-2 of the
proposed regulations, all of which are herein incorporated by reference.
The Owner's entire interest in the Contract must be distributed, or
begin to be distributed, by the Owner's required beginning date, which
is the April 1 following the calendar year in which the Owner reaches
age 70 1/2. For each succeeding year, a distribution must be made on or
before December 31. By the required beginning date, the Owner may elect
to have the balance in the account distributed in one of the following
forms:
1) A single lump sum payment;
2) Equal or substantially equal monthly, quarterly, or annual payments
over the life of the Owner or over the joint and last survivor lives
of the Owner and his or her Designated Beneficiary; or
3) Equal or substantially equal annual payments over a specified period
that may not be longer than the Owner's life expectancy or the joint
and last survivor life expectancy of the Owner and his or her
Designated Beneficiary.
An Annuity Option may not be elected with a Fixed Period that will guarantee
Annuity Payments beyond the life expectancy of the Annuitant and Beneficiary
and Annuity Payments must be made at least annually and in equal amounts.
4. If the Owner dies before his or her entire interest is distributed, the
entire remaining interest will be distributed as follows:
a. If the Owner dies on or after distributions have begun under Section
3, the entire remaining interest must be distributed at least as
rapidly as provided under Section 3.
V6842A (1-97) SP 684221
<PAGE>
- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ANNUITY PROVISIONS (Continued)
- --------------------------------------------------------------------------------
RESTRICTIONS ON INDIVIDUAL RETIREMENT ANNUITY (Continued)
b. If the Owner dies before distributions have begun under Section 3,
the entire remaining interest must be distributed as elected by the
Owner or, if the Owner has not so elected, as elected by the
Designated Beneficiary or Beneficiaries as follows:
1) by December 31 of the year containing the fifth anniversary of
the Owner's death; or
2) in equal or substantially equal payments over the life or life
expectancy of the Designated Beneficiary or Beneficiaries
starting by December 31 of the year following the year of the
Owner's death. If, however, the Designated Beneficiary is the
Owner's surviving spouse, then this Distribution is not required
to begin until December 31 of the later of: (1) the calendar
year immediately following the calendar year in which the Owner
died; or (2) the calendar year in which the Owner would have
attained age 70 1/2.
5. An individual may satisfy the minimum distribution requirements under
Section 401(a)(9) of the Code by receiving a distribution from one IRA
that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the Owner of two or
more IRAs may use the "alternative method" described in Notice 88-38,
1988-1 C.B. 524, to satisfy the minimum distribution requirements
described above.
6. Any refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the calendar year
following the year of the refund toward the payment of future premiums
or the purchase of additional benefits.
7. The annual premium shall not exceed the lesser of $2,000 or 100 percent
of compensation ($4,000 or 100 percent of compensation for Spousal IRAs
however, no more than $2,000 can be contributed to either spouse's IRA),
except for plans defined in Section 408(k) of the Code, for which annual
premiums shall not exceed $30,000.
8. Rollover contributions from other qualified plans permitted by the
Internal Revenue Code Sections 402(c), 403(a)(4), 403(b)(8), and
408(d)(3), are excluded from the limit set forth in Section 8.
9. Notwithstanding any Contract provisions to the contrary, no amount may
be borrowed under the Contract and no portion may be used as security
for a loan.
10. Annuity Payments may not begin before the Annuitant attains the age of
59 1/2 without incurring a penalty tax except in the situations
described in Section 72(t) of the Code.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
SP 684221
<PAGE>
[SBL LOGO]
Security Benefit Life Insurance Company
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
VARIABLE ANNUITY APPLICTION
- --------------------------------------------------------------------------------
1. OWNER (APPLICANT)
Name________________________________________________________________________
Address_____________________________________________________________________
____________________________________________________________________________
Sex M |_| F |_| Date of Birth ___________________________
Tax I.D. or SSN ____________________________________________________________
Annuity Start Date__________________________________________________________
- --------------------------------------------------------------------------------
2. JOINT OWNER
Name________________________________________________________________________
Address_____________________________________________________________________
____________________________________________________________________________
Sex M |_| F |_| Date of Birth ___________________________
Tax I.D. or SSN ____________________________________________________________
Relationship to Owner ______________________________________________________
- --------------------------------------------------------------------------------
3. INITIAL PURCHASE PAYMENT (min. $100,000)
_____________________________________________
- --------------------------------------------------------------------------------
4. ALLOCATION OF PURCHASE PAYMENTS
PCG Aggressive Growth Subaccount* _____%
PCG Growth Subaccount* _____%
SIM Growth Subaccount* _____%
SIM Conservative Grwoth Subaccount* _____%
100%
- --------------------------------------------------------------------------------
Note: Complete items 1, 3, 4, 8 and 9 when applying for a Group Contract.
- --------------------------------------------------------------------------------
5. ANNUITANT (if different from owner)
Name________________________________________________________________________
Address_____________________________________________________________________
____________________________________________________________________________
Sex M |_| F |_| Date of Birth ___________________________
Tax I.D. or SSN ____________________________________________________________
- --------------------------------------------------------------------------------
6. PRIMARY BENEFICIARY
Name________________________________________________________________________
Address_____________________________________________________________________
____________________________________________________________________________
Relationship to Owner_______________________________________________________
Date of Birth_______________________________________________________________
SSN_________________________________________________________________________
(UPON THE DEATH OF ANY OWNER, THE PRIMARY BENEFICIARY WILL RECEIVE ANY DEATH
BENEFIT WHICH IS PAYABLE, ONLY IF THERE IS NO SURVIVING JOINT OWNER. SEE
PROSPECTUS FOR DETAILS.)
- --------------------------------------------------------------------------------
7. SECONDARY BENEFICIARY
Name________________________________________________________________________
Address_____________________________________________________________________
____________________________________________________________________________
Relationship to Owner_______________________________________________________
Date of Birth_______________________________________________________________
SSN_________________________________________________________________________
- --------------------------------------------------------------------------------
8. TYPE OF ANNUITY CONTRACT
|_| Individual |_| Group
|_| Non Qualified |_| 401(a) (Qual. Pen./Prof. Sharing)
|_| 408 (IRA) |_| 401(k) (Qual. Sav. Plan)
|_| 403(b) (TSA)
|_| 457 (Def. Comp.)
Type of Plan:
________________________________________________
________________________________________________
- --------------------------------------------------------------------------------
9. Will this annuity replace or change any other insurance or annuity?
|_| Yes |_| No
If yes, state company(ies) and contract number(s)___________________________
Type of contract____________________________________________________________
If 1035 exchange or other transfer of assets, attach: (1) exchange form(s)
or letter(s); and (2) replacement form(s), if applicable.
- --------------------------------------------------------------------------------
10. Special Instructions________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
- --------------------------------------------------------------------------------
V7584 (7-98)
<PAGE>
- --------------------------------------------------------------------------------
11. TELEPHONE TRANSFER PRIVILEGE
SBL will make transfers among accounts and change the allocation of future
purchase payments based on telephone instructions.
If you DO NOT wish to use the telephone privileges, you must check the
box |_|
- --------------------------------------------------------------------------------
I have been given an effective prospectus that describes the contract for which
I am applying. I have been given an effective prospectus for the fund underlying
each Subaccount above. If my annuity contract qualifies under Section 403(b), I
declare that I know: (1) the limits on redemption imposed by Section 403(b)(11)
of the IRS Code; and (2) the investment choices available under my employer's
Section 403(b) arrangement to which I may elect to transfer my account balance.
*I KNOW THAT ANNUITY PAYMENTS AND WITHDRAWAL VALUES, IF ANY, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT OF SBL ARE VARIABLE AND DOLLAR
AMOUNTS ARE NOT GUARANTEED. The amount paid and the application must be
acceptable to SBL under its rules and practices. If they are, the contract
applied for will be effective on its Contract Date. If they are not, SBL's
liability will be limited to a return of amount paid.
- --------------------------------------------------------------------------------
TAX IDENFICIATION NUMBER CERTIFICATION**
UNDER PENALTIES OF PERJURY I CERTIFY THAT:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me); and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
- --------------------------------------------------------------------------------
REPRESENTATIVE'S STATEMENT - To the best of my knowledge, this application is
not involved in replacement of life insurance or annuities, as defined in
applicable Insurance Department Regulations, except as stated in question 9
above. I have complied with the requirements for disclosure and/or replacement.
Dated at _________________________ ___________________________________________
Representative Signature and Number
this ____ day of ___________19____
___________________________________________
__________________________________ Print Representative's Full Name and
Owner/Applicant Signature Phone Number
__________________________________ ___________________________________________
Joint Owner Signature Broker/Dealer Name and Number
- --------------------------------------------------------------------------------
**CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you have
been notified by IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. For
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
- --------------------------------------------------------------------------------
|_| Check this box if you would like a Statement of Additional Information.
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
(The Corporation was originally incorporated under the name of "The
National Council of The Knights and Ladies of Security" which was
later changed to "The Security Benefit Association." Its original
Articles of Incorporation were filed with the Kansas Secretary of
State on February 22, 1892. At a meeting of the Board of Directors of
the Corporation, held on March 3, 1998, having been first duly noticed
and called, the following amended and restated Articles of
Incorporation were duly approved. The amended and restated Articles of
Incorporation were also approved by the policyholders of the
Corporation at a special meeting held on May 4, 1998)
FIRST.
The name of this Corporation shall be SECURITY BENEFIT LIFE INSURANCE COMPANY.
SECOND.
The purposes of the Corporation are:
(a) To engage in the business of an insurer pursuant to the Kansas
Insurance Code as authorized by its Certificate of Authority, including without
limitation, to make insurance upon the lives of persons and every insurance
appertaining thereto or connected therewith, and to grant, purchase or dispose
of annuities; to make insurance on the health of individuals, against accidental
personal injury, disablement or death, and against loss, liability or expense on
account thereof; and to provide benefits for its policy holders in the case of
illness or injury; and
(b) To engage in any lawful act or activity for which corporations may be
organized under the Kansas General Corporation Code.
THIRD.
The address of its registered office in the State of Kansas is 700 SW Harrison
Street, Topeka, Shawnee County, Kansas, 66636; and the name of its resident
agent at such address is Security Benefit Life Insurance Company.
FOURTH.
The Corporation is authorized to issue 1,000,000 shares of common stock with a
par value of $10.00 per share.
FIFTH
(a) No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director, PROVIDED that nothing contained in this Article shall eliminate or
limit the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under the provisions of K.S.A. 17-6424 and amendments thereto, or (d)
for any transaction from which the director derived an improper personal
benefit. If the General Corporation Code of the State of Kansas is amended after
the filing of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Code of the State of Kansas,
as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SIXTH.
The Board of Directors of the Corporation may adopt, amend and repeal the
Bylaws of the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name at Topeka, Kansas,
on this 7th day of July, 1998.
HOWARD R. FRICKE
------------------------------
Howard R. Fricke
Chief Executive Officer
ATTEST:
ROGER K. VIOLA
- ------------------------------
Roger K. Viola, Secretary
<PAGE>
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
The foregoing instrument was acknowledged before me this 7th day of July,
1998, by Howard R. Fricke and Roger K. Viola, chief executive officer and
secretary, respectively, of Security Benefit Life Insurance Company, a Kansas
corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal at Topeka, Kansas, on this 7th day of July, 1998.
ANNETTE E. CRIPPS
------------------------------
Notary Public
My Appointment Expires: July 8, 2001
Approved for filing.
KATHLEEN SEBELIUS
- ------------------------------
Kathleen Sebelius
Commissioner of Insurance
Date: July 16, 1998
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
KNIGHTS & LADIES OF SECURITY - FEBRUARY 22, 1892
SECURITY BENEFIT ASSOCIATION - SEPTEMBER 24, 1919
SECURITY BENEFIT LIFE INSURANCE COMPANY - JANUARY 2, 1950
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
ARTICLE I - OFFICES
1. The home office and principal place of business of the Corporation shall be
700 SW Harrison, Topeka, Shawnee County, Kansas, 66636. The Corporation may
also establish branch offices at such other places as the board of
directors may from time to time determine.
ARTICLE II - MEETINGS OF STOCKHOLDERS
1. PLACE OF MEETINGS. All meetings of stockholders shall be held at either the
home office of the Corporation or any other place within or without the
State of Kansas designated by the board of directors pursuant to authority
hereinafter granted to said board.
2. ANNUAL MEETINGS. The annual meetings of stockholders shall be held at such
date and time as are designated by the board of directors.
3. NOTICE OF MEETINGS. Notice of all meetings of stockholders, whether annual
or special, shall be given in writing to the stockholders entitled to vote.
The notice shall be given by the secretary, assistant secretary, or other
persons charged with that duty. If there is no such officer, or if he or
she neglects or refuses this duty, notice may be given by any director.
Notice of any meeting of stockholders shall be given to each stockholder
entitled to notice not less than ten (10) nor more than sixty (60) days
before a meeting. Notice of any meeting of stockholders shall specify the
place, the day, and the hour of the meeting and the general nature of the
business to be transacted. A notice may be given to a stockholder either
personally, or by mail, or other means of written communication, charges
prepaid, addressed to the stockholder at his or her address appearing on
the books of the Corporation or given by the stockholder to the Corporation
for the purpose of notice.
4. SPECIAL MEETINGS. Special meetings of stockholders, for any purpose or
purposes whatsoever, may be called at any time by the Chief Executive
Officer or by the board of directors or by stockholders holding a majority
of the voting power of the corporation.
5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to
time by the vote of a majority of the stockholders who are either present
in person or represented by proxy thereat, but in the absence of a quorum
no other business may be transacted at any such meeting.
When any stockholders' meeting, either annual or special, is adjourned for
forty-five (45) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall
not be necessary to give any notice of the time and place of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which such adjournment is taken.
6. CONSENT TO STOCKHOLDERS' MEETINGS. The transactions of any meeting of
stockholders, however called and noticed, shall be valid as though had at a
meeting duly held after regular call and notice if a quorum be present
either in person or by proxy, and if, either before or after the meeting,
each of the stockholders entitled to vote, not present in person or by
proxy, sign a written waiver of notice, or a consent to the holding of such
a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the Corporation records or made a
part of the minutes of the meeting.
Any action which may be taken at a meeting of the stockholders, may be
taken without a meeting if authorized by a writing signed by all of the
holders of shares who would be entitled to vote at a meeting for such
purpose, and filed with the secretary of the Corporation.
7. VOTING RIGHTS; CUMULATIVE VOTING. Only persons in whose names shares
entitled to vote stand on the stock records of the Corporation on the day
of any meeting of stockholders, unless some other day be fixed by the board
of directors for the determination of stockholders of record, then on such
other day, shall be entitled to vote at such meeting.
Every stockholder shall have one vote for each share of stock owned, except
that, with respect to the election of directors, each stockholder shall
have the right to cast as many votes in the aggregate as shall equal the
number of shares of stock held by such stockholder, multiplied by the
number of directors to be elected, and each stockholder may cast the whole
number of votes for one candidate or may divide his votes among two or more
candidates.
8. QUORUM. The presence in person or by proxy of the holders of a majority of
the shares entitled to vote at any meeting shall constitute a quorum for
the transaction of business.
9. PROXIES. Every stockholder entitled to vote or execute consents shall have
the right to do so either in person or by an agent or agents authorized by
a written proxy executed by such stockholder or his or her duly authorized
agent and filed with the secretary of the Corporation; provided that no
such proxy shall be valid after the expiration of three years from the date
of its execution unless the stockholder executing it specifies therein the
length of time for which such proxy is to continue in force. Any proxy duly
executed is not revoked, and continues in full force and effect, until an
instrument revoking it, or a duly executed proxy bearing a later date, is
filed with the secretary.
10. CONDUCT OF MEETING. The Chairman of the Board shall preside as Chairman at
all meetings of the stockholders. The Chairman shall conduct each such
meeting in a businesslike and fair manner, but shall not be obligated to
follow any technical, formal or parliamentary rules or principles of
procedure. The Chairman's rulings on procedural matters shall be conclusive
and binding on all stockholders. Without limiting the generality of the
foregoing, the Chairman shall have all the powers usually vested in the
Chairman of a meeting of stockholders.
ARTICLE III - BOARD OF DIRECTORS
1. Subject to the limitations of the Articles of Incorporation and of these
bylaws, and of any statutory provisions as to action to be authorized or
approved by stockholders, the management of all the affairs, property and
business of the Corporation shall be vested in and exercised by, or under
the direction of, the board of directors. The number of directors shall be
fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the entire board, but shall consist of not less than 5
directors nor more than 15 directors. The board of directors may from time
to time appoint an executive committee and other committees with such
powers as it may see fit, subject to such conditions as may be prescribed
by the board. All committees so appointed shall report their acts and
doings to the board of directors at its next meeting. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member.
2. The directors now in office shall continue to hold office for the remainder
of the terms for which they were severally elected.
3. At each annual meeting of stockholders there shall be elected not less than
one-fifth nor more than one-third of the members of the board of directors
to serve for not more than five years nor more than three years
respectively.
4. The board of directors shall, prior to any annual meeting, nominate
candidates for each vacancy in the board to be filled at such annual
meeting.
5. Should the board of directors fail to nominate candidates for vacancies in
the board of directors to be filled at the annual meeting as provided in
Section 4 hereof, then and in such case, vacancies to be filled at the
annual meeting may be filled by the stockholders.
6. Any vacancy in the board occurring in the interim between annual meetings
of stockholders shall be filled by the remaining members thereof until the
next annual meeting of stockholders, at which time a successor shall be
elected to fill the unexpired term.
7. The annual meeting of the board of directors for the purpose of electing
officers and for the transaction of such other business as may come before
the meeting shall be held as soon as possible following adjournment of the
annual meeting of the stockholders at the place of such annual meeting of
the stockholders. Notice of such annual meeting of the board of directors
need not be given. The board of directors from time to time may by
resolution provide for the holding of regular meetings and fix the place
(which may be within or without the State of Kansas) and the date and hour
of such meetings. Notice of regular meetings need not be given, provided,
however, that if the board of directors shall fix or change the time or
place of any regular meeting, notice of such action shall be mailed
promptly, or sent by telephone, including a voice messaging system or other
system or technology designed to record and communicate messages,
telegraph, facsimile, electronic mail or other electronic means to each
director who shall not have been present at the meeting at which such
action was taken, addressed to him or her at his or her usual place of
business, or shall be delivered to him or her personally. Notice of such
action need not be given to any director who attends the first regular
meeting after such action is taken without protesting the lack of notice to
him or her, prior to or at the commencement of such meeting, or to any
director who submits a signed waiver of notice, whether before or after
such meeting.
8. Regular and special meetings of the board of directors may be held at such
place or places within or without the state of Kansas as the board of
directors may from time to time designate. Special meetings of the board of
directors may be called at any time by the president or by any three
directors. The Secretary shall give notice of each special meeting by
mailing the same at least two days before the meeting or by telegraphing
the same at least one day before the meeting to each director, but such
notice may be waived by any director. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special
meeting. The number of directors necessary to constitute a quorum shall be
not less than five; except that if the board of directors consists of nine
members or less, a majority may constitute a quorum.
9. The fee to be paid to the directors for their services shall be fixed by
resolution of the board.
10. Any director may be removed at any time upon the affirmative vote of the
holders of a majority of the combined voting power of the then outstanding
stock of the Corporation entitled to vote generally in the election of
directors. Any vacancy in the board of directors caused by any such removal
may be filled at such meeting by the stockholders entitled to vote for the
election of the director so removed.
ARTICLE IV - OFFICERS
1. The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Treasurer, a Secretary, an
Actuary, and such other officers as may be appointed by the board of
directors. Any two or more offices may be held by the same person, except
the offices of President and Secretary. All officers of the Corporation,
except appointed officers, shall be elected annually by the board of
directors at the first meeting of the board of directors held after each
annual meeting of the stockholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Vacancies may be filled or new offices filled at any
meeting of the board of directors. Each officer shall hold office until his
successor shall have been duly elected or appointed and shall have
qualified, or until his death, or until he shall have resigned or shall
have been removed in the manner hereinafter provided.
Any officer elected or appointed by the board of directors may be removed
by the board of directors whenever in its judgment the best interest of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
2. The Chairman of the Board shall preside at all meetings of stockholders or
directors and shall perform such other duties as shall be assigned to him
by the board of directors. In the absence of the Chairman of the Board, the
President shall preside over meetings of stockholders or directors.
3. The President shall be Chief Executive Officer of the Corporation, unless
the Chairman of the Board is so designated, and he shall perform such other
duties as are incident to the office of the President or are properly
assigned to him by the board of directors.
4. The Vice Presidents shall have such powers and discharge such duties as may
be assigned to them from time to time by the board of directors.
5. The Treasurer shall have charge and custody of and be responsible for all
funds and securities of the Corporation; shall disburse the funds of the
Corporation in payments of just demands against it or as may be ordered by
the board of directors, and in general perform all the duties incident to
the office of treasurer and such other duties as may from time to time be
assigned to him by the board of directors. The Assistant Treasurer, if any,
may sign in place of the Treasurer with the same force and effect as the
Treasurer is authorized to sign.
6. The Secretary shall keep the minutes of meetings of the stockholders and of
the board of directors, see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; shall be
custodian of the corporate records and seal of the Corporation, and in
general perform all duties incident to the office of secretary and such
other duties as may from time to time be assigned to him by the board of
directors. The Assistant Secretary, if any, may sign and attest documents
with the same force and effect as the Secretary is authorized to sign and
attest.
7. The Actuary shall have general supervision over all computations relating
to premium rates, policy dividends, reserves and surrender values,
preparation of the annual statement of the Corporation, perform such other
duties as are incident to his office and such other duties as may from time
to time be assigned to him by the board of directors. In absence or
inability of the Actuary, his duties may be performed by an Associate
Actuary or by an Assistant Actuary.
8. The salaries of the officers shall be fixed from time to time by the board
of directors, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the Corporation.
9. The Corporation shall indemnify every person, his heirs, executors or
administrators, who is or was a director, officer, or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer or employee of another business entity, to the full
extent permitted or authorized by the laws of the state of Kansas, as now
in effect and as hereafter amended, against any liability, judgment, fine,
amount paid in settlement, cost or expense (including attorney's fees)
asserted or threatened against and incurred by such person in his capacity
as or arising out of his status as a director, officer, or employee of the
Corporation or, if serving at the request of the Corporation as a director,
officer or employee of another business entity. The indemnification
provided by this bylaw provision shall not be exclusive of any other rights
to which those indemnified may be entitled under any other bylaw or under
any agreement, vote of stockholders or disinterested directors or
otherwise, and shall not limit in any way any right which the Corporation
may have to make different or further indemnifications with respect to the
same or different persons or classes of persons.
ARTICLE V - SEAL
1. The corporate seal of the Corporation shall consist of two concentric
circles between which shall be the name of the Corporation and in the
center of which shall be inscribed the year of its incorporation.
ARTICLE VI - FRATERNAL CERTIFICATES
1. The gross premium payable with respect to each fraternal certificate issued
by the Corporation shall be the sum designated prior to transformation of
the Corporation from a fraternal benefit society to a mutual life insurance
company as home office premium plus a collection charge equal to the sum
paid prior to such transformation as subordinate council dues or collection
fee. Provided, however, that the annual collection charge payable with
respect to each fraternal certificate shall not in any case exceed $2.40.
2. The gross premium for each fraternal certificate shall become due and
payable, without notice, on the first day of the calendar month following
the period for which prior payment has been made. The first calendar month
following the period for which payment has been made shall be allowed as a
grace period during which the certificate shall remain in full force and
effect. If the gross premium for any certificate is not paid when due or
within the grace period, such certificate shall be in default and all
rights and benefits thereunder shall be forfeited, without notice, except
as may otherwise be provided by the terms of such certificate.
3. Every fraternal certificate which shall become in default on account of
nonpayment of gross premiums may be reinstated at any time within sixty
days after the date of such default by payment in full of the gross
premiums in arrears, provided the insured under such certificate is in
sound mental and physical condition on the date of such payment. Any
payment of gross premiums made for the purpose of effecting reinstatement
under the provisions of this section shall constitute a representation by
the insured making such payment that he or she is in sound mental and
physical condition; and the receipt and retention of such payment shall not
effect reinstatement of the certificate if the insured is not in sound
mental and physical condition.
4. Every fraternal certificate which shall become in default on account of
nonpayment of gross premiums, and which shall not have been reinstated
within sixty days after the date of such default, may be reinstated only in
accordance with and as permitted by the rules and regulations for
reinstatement prescribed by the board of directors.
5. Any person or corporation may be appointed as a beneficiary in a fraternal
certificate, except as eligibility with respect to beneficiaries may be
restricted by the laws of the state in which the certificate was first
delivered to the insured.
6. The owner of a fraternal certificate in force may at any time change the
beneficiary by filing a satisfactory written notice therefor with the
Corporation at its home office. The fraternal certificate need not be
presented for endorsement except upon written request of the Corporation. A
change of beneficiary shall not be effective until it has been recorded by
the Corporation at its home office. After such recordation, the change
shall relate back to and take effect as of the date the owner signed said
written request, whether or not the insured be living at the time of such
recordation, but without prejudice to the Corporation on account of any
payment made by it before receipt of such written request at its home
office. If there be more than one beneficiary the interest of any deceased
beneficiary shall pass to the survivor or survivors, unless otherwise
directed by the owner and recorded at the home office. If no designated
beneficiary survives the insured, the amount payable under the certificate
shall be paid in a lump sum to the executors or administrators of the
insured.
7. Whenever the age of an insured in a fraternal certificate has been
understated in his or her application for insurance, and the correct age
was within the age limits of the Corporation, the amount of the death
benefit payable under such certificate shall be such as the premiums paid
would have purchased at the correct age according to the Corporation's
premium rates in force on the issue date of the certificate. If the correct
age of the insured was not within the age limits of the Corporation, the
liability of the Corporation under his or her certificate shall be the
premiums paid thereon. If the age has been overstated in the application,
no additional amount of insurance or other values shall be granted on
account of any excess premium paid, but such excess premium shall be
returned without interest.
8. That part of the gross premium designated prior to transformation of the
Corporation from a fraternal benefit insurer to a mutual insurer as home
office premium shall, with respect to fraternal certificates issued on the
pure assessment plan, be payable in accordance with the following premium
table:
<PAGE>
PREMIUMS PER $1,000 OF INSURANCE
AGE NEAREST AGE NEAREST
BIRTHDAY MONTHLY ANNUAL BIRTHDAY MONTHLY ANNUAL
16 $1.15 $13.25 49 $3.25 $ 37.45
17 1.20 13.50 50 3.40 39.25
18 1.20 13.80 51 3.60 41.10
19 1.20 14.10 52 3.75 43.10
20 1.25 14.40 53 3.95 45.30
21 1.30 14.75 54 4.15 47.55
22 1.30 15.10 55 4.35 50.00
23 1.35 15.45 56 4.60 52.65
24 1.40 15.80 57 4.85 55.45
25 1.40 16.20 58 5.10 58.45
26 1.45 16.65 59 5.40 61.65
27 1.50 17.10 60 5.70 65.05
28 1.50 17.55 61 6.00 67.25
29 1.55 18.05 62 6.40 71.10
30 1.60 18.55 63 6.80 75.30
31 1.65 19.10 64 7.20 79.85
32 1.70 19.70 65 7.65 84.70
33 1.75 20.30 66 8.15 89.95
34 1.80 20.95 67 8.65 95.60
35 1.90 21.65 68 9.25 101.70
36 1.95 22.40 69 9.85 108.30
37 2.00 23.15 70 10.55 115.45
38 2.10 24.00 71 11.30 123.15
39 2.15 24.85 72 12.15 131.55
40 2.25 25.80 73 13.00 140.60
41 2.30 26.80 74 14.00 150.50
42 2.40 27.85 75 15.10 161.20
43 2.50 28.95 76 16.25 172.85
44 2.60 30.15 77 17.55 185.55
45 2.70 31.45 78 19.00 199.35
46 2.85 32.80 79 20.60 214.45
47 2.95 34.25 80 and over 22.35 230.90
48 3.10 35.90
<PAGE>
The premium rates as stated in said table shall be based upon the attained
age nearest birthday of the insured as of July 1, 1935. Each insured under
a pure assessment fraternal certificate shall, after premiums in accordance
with the above table have been paid for three full years, be entitled to
the nonforfeiture options of extended term insurance, paid up insurance or
certificate loans to the extent of the tabular reserve to the credit of
such certificate.
9. Any insured under a pure assessment fraternal certificate may, in lieu of
making premium payments in accordance with the premium table specified in
the preceding section, elect to continue to make monthly payments upon his
certificate at the rate paid for the month of January, 1935. In the event
of such election, the certificate upon which such payment is made shall
automatically be reduced to such face amount of whole life insurance (with
the reserve thereon computed according to the American Experience Table of
Mortality with an interest assumption of 4%) as the payment actually made
would purchase at the rates specified in said premium table for the
attained age nearest birthday of the insured as of July 1, 1935. The
payment by any insured for the month of July, 1935, and subsequent months
at the rate paid by such insured for the month of January, 1935, shall be
considered an election by such insured to reduce the amount of his
certificate and continue the same in force for such reduced face amount.
Each insured who elects to continue to make monthly payments upon his
certificate at the rate paid for the month of January, 1935, shall, after
such payments have been made for three full years, be entitled to the
nonforfeiture options of extended term insurance, paid up insurance or
certificate loans to the extent of the tabular reserve to the credit of
such certificate.
10. Every fraternal certificate issued prior to January 1, 1938, which contains
nonforfeiture provisions is, with respect to such provisions, hereby
amended as follows:
In the event the owner does not within sixty days after the due
date of any premium in default elect in writing any of the other
available nonforfeiture options, the insurance will be
automatically continued in force as nonparticipating extended
term insurance in accordance with the extended term insurance
provision of the certificate: Provided, however, that the
insurance under a certificate which does not contain an extended
term insurance provision will be automatically continued in force
as nonparticipating paid up insurance in accordance with the paid
up insurance provision of the certificate.
11. The owner of each fraternal certificate in good standing prior to the
transformation of the corporation from a fraternal benefit society to a
mutual life insurance company or at the time of conversion from a mutual
life insurance company to a stock life insurance company shall have the
right after such transformation or conversion to transfer the insurance
evidenced by such certificate to the stock life plan in the manner provided
by law. The Corporation shall not have the right to levy an assessment
against the owner of such transferred insurance or impose a lien against
the reserve standing to the credit thereof.
12. The right and power heretofore existing in the Corporation to levy an
assessment in addition to the gross premiums payable with respect to each
fraternal certificate is hereby irrevocably waived.
13. The term "fraternal certificate," wherever the same appears in these
bylaws, shall mean and apply to all beneficiary certificates issued by the
Corporation prior to its transformation from a fraternal benefit society to
a mutual life insurance company.
ARTICLE VII - AMENDMENTS
1. These bylaws may be amended, changed or repealed by a majority of the board
of directors at any regular or special meeting of the board. They may also
be amended, changed or repealed at any annual or special meeting of the
stockholders by a majority vote of the stockholders.
<PAGE>
[SBG LOGO]
- --------------------------------------------------------------------------------
Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
August 14, 1998
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66636-0001
Dear Sir/Madam:
This letter is with reference to the Registration Statement of SBL Variable
Annuity Account X of which Security Benefit Life Insurance Company (hereinafter
"SBL") is the Depositor. Said Registration Statement is being filed with the
Securities and Exchange Commission for the purpose of registering the variable
annuity contracts issued by SBL and the interests in the SBL Variable Annuity
Account X under such variable annuity contracts which will be sold pursuant to
an indefinite registration.
I have examined the Articles of Incorporation and Bylaws of SBL, minutes of the
meetings of the Board of Directors and other records, and pertinent provisions
of the Kansas insurance laws, together with applicable certificates of public
officials and other documents which I have deemed relevant. Based on the
foregoing, it is my opinion that:
1. SBL is duly organized and validly existing as a stock life insurance company
under the laws of the State of Kansas.
2. SBL Variable Annuity Account X has been validly created as a Separate
Account in accordance with the pertinent provisions of the insurance laws of
Kansas.
3. SBL has the power, and has validly and legally exercised it, to create and
issue the variable annuity contracts which are administered within and by
means of the SBL Variable Annuity Account X.
4. The amount of variable annuity contracts to be sold pursuant to the
indefinite registration, when issued, will represent binding obligations of
SBL in accordance with their terms providing said contracts were issued for
the considerations set forth therein and evidenced by appropriate policies
and certificates.
I hereby consent to the inclusion in the Registration Statement of my foregoing
opinion.
Respectfully submitted,
AMY J. LEE
Amy J. Lee
Associate General Counsel and Vice President
Security Benefit Life Insurance Company
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 6, 1998, with respect to the consolidated
financial statements of Security Benefit Life Insurance Company and Subsidiaries
included in Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4 No. 333-52491 and the related Statement of Additional Information
accompanying the Prospectus of PCG Variable Annuity.
Ernst & Young LLP
Kansas City, Missouri
August 14, 1998
<PAGE>
Item 24.b Exhibit (15)
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Thomas R. Clevenger, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
THOMAS R. CLEVENGER
------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
JANA R. SELLEY
------------------------------
Notary Public
My Commission Expires:
June 14, 2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Sister Loretto Marie Colwell, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by SECURITY BENEFIT LIFE INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
SISTER LORETTO MARIE COLWELL
------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
JULIA A. SMRHA
------------------------------
Notary Public
My Commission Expires:
7-8-2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John C. Dicus, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of March, 1998.
JOHN C. DICUS
------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 24th day of March, 1998.
MARY R. FALTER
------------------------------
Notary Public
My Commission Expires:
1-30-2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Steven J. Douglass, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
STEVEN J. DOUGLASS
------------------------------
Steven J. Douglass
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
JANA R. SELLEY
------------------------------
Notary Public
My Commission Expires:
June 14, 2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint James R. Schmank and
Roger K. Viola, and each of them, my true and lawful attorneys, each with full
power and authority for me and in my name and behalf to sign Registration
Statements, any amendments thereto and any applications for exemptive relief
filed pursuant to the Investment Company Act of 1940 or the Securities Act of
1933, as amended, and any instrument or document filed as part thereof, or in
connection therewith or in any way related thereto, in connection with Variable
Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE INSURANCE
COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though said
Registration Statements and other documents had been signed and filed personally
by me in the capacity aforesaid. Each of the aforesaid attorneys acting alone
shall have all the powers of all of said attorneys. I hereby ratify and confirm
all that the said attorneys, or any of them, may do or cause to be done by
virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of March, 1998.
HOWARD R. FRICKE
------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 20th day of March, 1998.
JANA R. SELLEY
------------------------------
Notary Public
My Commission Expires:
June 14, 2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
JOHN E. HAYES, JR.
------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
JANA R. SELLEY
------------------------------
Notary Public
My Commission Expires:
June 14, 2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Laird G. Noller, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
LAIRD G. NOLLER
------------------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
LINDA L. GRIFFIN
------------------------------
Notary Public
My Commission Expires:
3/7/00
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Frank C. Sabatini, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
FRANK C. SABATINI
------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
PATRICIA A. CLARK
------------------------------
Notary Public
My Commission Expires:
3/5/2002
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Robert C. Wheeler, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIABLE ANNUITY ACCOUNT X with like effect as though
said Registration Statements and other documents had been signed and filed
personally by me in the capacity aforesaid. Each of the aforesaid attorneys
acting alone shall have all the powers of all of said attorneys. I hereby ratify
and confirm all that the said attorneys, or any of them, may do or cause to be
done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of March, 1998.
ROBERT C. WHEELER
------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 23rd day of March, 1998.
NANCY G. DEBACKER
------------------------------
Notary Public
My Commission Expires:
December 15, 1999
- ------------------------------
