<PAGE>
File No. 333-_____
File No. 811-10011
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
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Post-Effective Amendment No. [_]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [_]
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(Check appropriate box or boxes)
SBL VARIABLE ANNUITY ACCOUNT XIV
(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
Name of Agent for Service for Process:
Amy J. Lee, Associate General Counsel
Security Benefit Life Insurance Company
700 Harrison Street
Topeka, KS 66636-0001
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 flexible premium deferred variable annuity contracts.
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.
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________ VARIABLE ANNUITY
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY: MAILING ADDRESS:
SECURITY BENEFIT LIFE SECURITY BENEFIT LIFE
INSURANCE COMPANY INSURANCE COMPANY
700 SW HARRISON STREET P.O. BOX 750497
TOPEKA, KANSAS 66636-0001 TOPEKA, KANSAS 66675-0497
1-800-888-2461
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This Prospectus describes the _____ 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 as a non-tax qualified retirement plan. The Contract is also
available for individuals in connection with a retirement plan qualified under
Section 403(b), 408, or 408A of the Internal Revenue Code. The Contract is
designed to give you flexibility in planning for retirement and other financial
goals.
You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of Security Benefit called the SBL Variable
Annuity Account XIV, or to the Fixed Account. Each Subaccount invests in a
corresponding Series of the SBL Fund. The Subaccounts currently available under
the Contract are:
* Equity (formerly Growth) * Global Total Return
* Large Cap Value * Managed Asset Allocation
(formerly Growth-Income) * Equity Income
* Money Market * High Yield
* Global (formerly Worldwide Equity) * Small Cap Value
* Diversified Income * Social Awareness
(formerly High Grade Income) * Technology
* Large Cap Growth * Mid Cap Value (formerly Value)
* Enhanced Index * Main Street Growth and Income(R)
* International * Small Cap Growth
* Mid Cap Growth (formerly Mid Cap) (formerly Small Cap)
* Global Strategic Income * Select 25
* Capital Growth
Amounts that you allocate to the Subaccounts under a Contract will vary based
on investment performance of the Subaccounts. No minimum amount of Contract
Value is guaranteed.
Amounts allocated to the Fixed Account earn interest at rates that are paid
by Security Benefit as described in "The Fixed Account," page 25. Contract Value
in the Fixed Account is guaranteed by Security Benefit.
When you are ready to receive annuity payments, the Contract provides several
options for annuity payments. See "Annuity Options," page 24.
This Prospectus concisely sets forth information about the Contract and the
Separate Account that you should know before purchasing the Contract. The
"Statement of Additional Information," dated October __, 2000, which has been
filed with the Securities and Exchange Commission ("SEC") contains certain
additional information. 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 38 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.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE SBL FUND.
YOU SHOULD READ THE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
EXPENSES FOR THIS CONTRACT, IF PURCHASED WITH A CREDIT ENHANCEMENT RIDER, MAY
BE HIGHER THAN EXPENSES FOR A CONTRACT WITHOUT A CREDIT ENHANCEMENT. THE AMOUNT
OF CREDIT ENHANCEMENT MAY BE MORE THAN OFFSET BY ANY ADDITIONAL FEES AND
CHARGES.
THE CONTRACT IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE
VALUE OF YOUR CONTRACT CAN GO UP AND DOWN AND YOU COULD LOSE MONEY.
DATE: OCTOBER __, 2000
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<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.............................................................. 4
SUMMARY.................................................................. 4
PURPOSE OF THE CONTRACT................................................ 5
THE SEPARATE ACCOUNT AND SBL FUND...................................... 5
FIXED ACCOUNT.......................................................... 5
PURCHASE PAYMENTS...................................................... 5
CONTRACT BENEFITS...................................................... 5
FREE-LOOK RIGHT........................................................ 5
CHARGES AND DEDUCTIONS................................................. 5
Contingent Deferred Sales Charge..................................... 5
Mortality and Expense Risk Charge.................................... 6
Optional Rider Charge................................................ 6
Administration Charge................................................ 7
Account Administration Charge........................................ 7
Premium Tax Charge................................................... 7
Other Expenses....................................................... 7
CONTACTING SECURITY BENEFIT............................................ 8
EXPENSE TABLE............................................................ 8
CONTRACTUAL EXPENSES................................................... 8
ANNUAL SEPARATE ACCOUNT EXPENSES....................................... 8
OPTIONAL RIDER EXPENSES................................................ 8
ANNUAL MUTUAL FUND EXPENSES............................................ 9
EXAMPLES............................................................... 9
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND... 10
SECURITY BENEFIT LIFE INSURANCE COMPANY................................ 10
PUBLISHED RATINGS...................................................... 10
SEPARATE ACCOUNT....................................................... 11
SBL FUND............................................................... 11
Series A (Equity Series)............................................. 11
Series B (Large Cap Value Series).................................... 11
Series C (Money Market Series)....................................... 11
Series D (Global Series)............................................. 12
Series E ( Diversified Income Series)................................ 12
Series G (Large Cap Growth Series)................................... 12
Series H (Enhanced Index Series)..................................... 12
Series I (International Series)...................................... 12
Series J (Mid Cap Growth Series)..................................... 12
Series K (Global Strategic Income Series)............................ 12
Series L (Capital Growth Series)..................................... 12
Series M (Global Total Return Series)................................ 12
Series N (Managed Asset Allocation Series)........................... 12
Series O (Equity Income Series)...................................... 12
Series P (High Yield Series)......................................... 12
Series Q (Small Cap Value Series).................................... 12
Series S (Social Awareness Series)................................... 12
Series T (Technology Series)......................................... 13
Series V (Mid Cap Value Series)...................................... 13
Series W (Main Street Growth and Income(R)Series).................... 13
Series X (Small Cap Growth Series)................................... 13
Series Y (Select 25 Series).......................................... 13
The Investment Adviser............................................... 13
THE CONTRACT............................................................. 13
GENERAL................................................................ 13
APPLICATION FOR A CONTRACT............................................. 14
PURCHASE PAYMENTS...................................................... 14
ALLOCATION OF PURCHASE PAYMENTS........................................ 14
DOLLAR COST AVERAGING OPTION........................................... 14
ASSET REALLOCATION OPTION.............................................. 15
TRANSFERS OF CONTRACT VALUE............................................ 15
CONTRACT VALUE......................................................... 16
DETERMINATION OF CONTRACT VALUE........................................ 16
FULL AND PARTIAL WITHDRAWALS........................................... 17
SYSTEMATIC WITHDRAWALS................................................. 17
FREE-LOOK RIGHT........................................................ 18
DEATH BENEFIT.......................................................... 18
DISTRIBUTION REQUIREMENTS.............................................. 18
DEATH OF THE ANNUITANT................................................. 19
CHARGES AND DEDUCTIONS................................................... 19
CONTINGENT DEFERRED SALES CHARGE....................................... 19
MORTALITY AND EXPENSE RISK CHARGE...................................... 19
ADMINISTRATION CHARGE.................................................. 20
ACCOUNT ADMINISTRATION CHARGE.......................................... 20
PREMIUM TAX CHARGE..................................................... 20
OTHER CHARGES.......................................................... 20
VARIATIONS IN CHARGES.................................................. 20
GUARANTEE OF CERTAIN CHARGES........................................... 20
SBL FUND EXPENSES...................................................... 20
OPTIONAL RIDER CHARGES................................................... 21
GUARANTEED MINIMUM INCOME BENEFIT...................................... 21
ANNUAL STEPPED UP DEATH BENEFIT........................................ 21
GUARANTEED GROWTH DEATH BENEFIT........................................ 21
COMBINED ANNUAL STEPPED UP AND GUARANTEED GROWTH DEATH BENEFIT......... 22
COMBINED GUARANTEED GROWTH DEATH BENEFIT
AND GUARANTEED MINIMUM INCOME BENEFIT................................ 22
EXTRA CREDIT........................................................... 22
WAIVER OF WITHDRAWAL CHARGE............................................ 23
ASSET ALLOCATION....................................................... 23
ANNUITY PERIOD........................................................... 23
GENERAL................................................................ 23
ANNUITY OPTIONS........................................................ 24
Option 1--Life Income................................................ 24
Option 2--Life Income with Guaranteed
Payment of 5, 10, 15 or 20 Years................................... 24
Option 3--Life with Installment or Unit Refund Option................ 24
Option 4--Joint and Last Survivor.................................... 25
Option 5--Payments for Specified Period.............................. 25
Option 6--Payments of a Specified Amount............................. 25
Option 7--Period Certain............................................. 25
Option 8--Joint and Contingent Survivor Option....................... 25
Value of Variable Annuity Payments: Assumed Interest Rate............ 25
SELECTION OF AN OPTION................................................. 25
THE FIXED ACCOUNT........................................................ 25
INTEREST............................................................... 26
DEATH BENEFIT.......................................................... 26
CONTRACT CHARGES....................................................... 26
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT....................... 26
PAYMENTS FROM THE FIXED ACCOUNT........................................ 27
MORE ABOUT THE CONTRACT.................................................. 27
OWNERSHIP.............................................................. 27
Joint Owners......................................................... 27
DESIGNATION AND CHANGE OF BENEFICIARY.................................. 27
DIVIDENDS.............................................................. 27
PAYMENTS FROM THE SEPARATE ACCOUNT..................................... 28
PROOF OF AGE AND SURVIVAL.............................................. 28
MISSTATEMENTS.......................................................... 28
LOANS.................................................................. 28
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS....................... 29
FEDERAL TAX MATTERS...................................................... 29
INTRODUCTION........................................................... 29
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT................ 30
General.............................................................. 30
Charge for Security Benefit Taxes.................................... 30
Diversification Standards............................................ 30
INCOME TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS........... 30
Surrenders or Withdrawals Prior to the Annuity Start Date............ 31
Surrenders or Withdrawals on or after the Annuity Start Date......... 31
Penalty Tax on Certain Surrenders and Withdrawals.................... 31
ADDITIONAL CONSIDERATIONS.............................................. 31
Distribution-at-Death Rules.......................................... 31
Gift of Annuity Contracts............................................ 32
Contracts Owned by Non-Natural Persons............................... 32
Multiple Contract Rule............................................... 32
Possible Tax Changes................................................. 32
Transfers, Assignments or Exchanges of a Contract.................... 32
QUALIFIED PLANS........................................................ 32
Section 403(b)....................................................... 33
Section 408 and 408A................................................. 33
Rollovers............................................................ 34
Tax Penalties........................................................ 34
Withholding.......................................................... 34
OTHER INFORMATION........................................................ 35
VOTING OF SBL FUND SHARES.............................................. 35
SUBSTITUTION OF INVESTMENTS............................................ 35
CHANGES TO COMPLY WITH LAW AND AMENDMENTS.............................. 36
REPORTS TO OWNERS...................................................... 36
TELEPHONE TRANSFER PRIVILEGES.......................................... 36
LEGAL PROCEEDINGS...................................................... 36
LEGAL MATTERS.......................................................... 36
PERFORMANCE INFORMATION.................................................. 36
ADDITIONAL INFORMATION................................................... 37
REGISTRATION STATEMENT................................................. 37
FINANCIAL STATEMENTS................................................... 37
STATEMENT OF ADDITIONAL INFORMATION...................................... 38
APPENDIX A -- IRA Disclosure Statement
APPENDIX B -- Roth IRA Disclosure Statement
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You may not be able to purchase the Contract in your state. You should not
consider this Prospectus to be an offering if the Contract may not be lawfully
offered in your state. You should only rely upon information contained in this
Prospectus or that we have referred you to. We have not authorized anyone to
provide you with information that is different.
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DEFINITIONS
Various terms commonly used in this Prospectus are defined as follows:
ACCUMULATION UNIT -- A unit of measure used to calculate Contract Value.
ANNUITANT -- The person that you designate on whose life annuity payments may
be determined. If you designate Joint Annuitants, "Annuitant" means both
Annuitants unless otherwise stated.
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 beginning on the Annuity Start Date during which
annuity payments are made.
ANNUITY START DATE -- The date when annuity payments begin as elected by the
Owner.
AUTOMATIC INVESTMENT PROGRAM -- A program pursuant to which purchase payments
are automatically paid from your bank account on a specified day of each month
or a salary reduction agreement.
CONTRACT DATE -- The date the Contract begins as shown in your Contract.
Annual Contract anniversaries are measured from the Contract Date. It is usually
the date that your initial purchase payment is credited to the Contract.
CONTRACT DEBT -- The unpaid loan balance including loan interest.
CONTRACT VALUE -- The total value of your Contract which includes amounts
allocated to the Subaccounts and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
CONTRACT YEAR -- Each twelve-month period measured from the Contract Date.
CREDIT ENHANCEMENT -- An amount added to Contract Value under the Extra
Credit Rider.
DESIGNATED BENEFICIARY -- The person having the right to the death benefit,
if any, payable upon the death of the Owner or the Joint Owner prior to the
Annuity Start Date. 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.
FIXED ACCOUNT -- An account that is part of Security Benefit's General
Account to which you may allocate all or a portion of your Contract Value to be
held for accumulation at fixed rates of interest (which may not be less than 3%)
declared periodically by Security Benefit.
GENERAL ACCOUNT -- All assets of Security Benefit other than those allocated
to the Separate Account or to any other separate account of Security Benefit.
HOME OFFICE -- The Annuity Administration Department of Security Benefit,
P.O. Box 750497, Topeka, Kansas 66675-0497.
OWNER -- The person entitled to the ownership rights under the Contract and
in whose name the Contract is issued.
PARTICIPANT -- A Participant under a Qualified Plan.
PURCHASE PAYMENT -- An amount paid to Security Benefit as consideration for
the Contract.
SBL FUND -- A diversified, open-end management investment company commonly
referred to as a mutual fund.
SEPARATE ACCOUNT -- The Variable Annuity Account XIV, a separate account of
Security Benefit that consists of accounts, referred to as Subaccounts, each of
which invests in a corresponding Series of the SBL Fund.
SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of the SBL Fund. Currently, twenty-two
Subaccounts are available under the Contract.
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 you will receive upon full withdrawal of the
Contract. It is equal to Contract Value less any Contract Debt, any applicable
withdrawal charges, any pro rata account administration charge and any
uncollected premium taxes. If an Extra Credit Rider is in effect, Contract Value
will also be reduced by any Credit Enhancements that have not yet vested.
SUMMARY
This summary provides 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. Unless the context indicates
otherwise, the discussion in this summary and the remainder of the Prospectus
relates to the portion of the Contract involving the Separate Account. The Fixed
Account is briefly described under "The Fixed Account," page 25 and in the
Contract.
PURPOSE OF THE CONTRACT -- The flexible purchase payment deferred variable
annuity contract ("Contract") described in this Prospectus is designed to give
you flexibility in planning for retirement and other financial goals.
You may purchase the Contract as a non-tax qualified retirement plan for an
individual ("Non-Qualified Plan"). You may also purchase the Contract, on an
individual basis, in connection with a retirement plan qualified under Section
403(b), 408, or 408A of the Internal Revenue Code of 1986, as amended
("Qualified Plan").
THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently divided
into twenty-two accounts referred to as Subaccounts. See "Separate Account,"
page 11. Each Subaccount invests exclusively in shares of a corresponding Series
of the SBL Fund. The Series of SBL Fund, each of which has a different
investment objective or objectives, are as follows: Equity Series, Large Cap
Value Series, Money Market Series, Global Series, Diversified Income Series,
Large Cap Growth Series, Enhanced Index Series, International Series, Mid Cap
Growth Series, Global Strategic Income Series, Capital Growth Series, Global
Total Return Series, Managed Asset Allocation Series, Equity Income Series, High
Yield Series, Small Cap Value Series, Social Awareness Series, Technology
Series, Mid Cap Value Series, Main Street Growth and Income(R) Series, Small Cap
Growth Series and Select 25 Series. See "SBL Fund," page 11.
You may allocate all or part of your purchase payments to the Subaccounts.
Amounts that you allocate to the Subaccounts will increase or decrease in dollar
value depending on the investment performance of the Series of SBL Fund in which
such Subaccount invests. You bear the investment risk for amounts allocated to a
Subaccount.
FIXED ACCOUNT -- You may allocate all or part of your purchase payments to the
Fixed Account, which is part of Security Benefit's General Account. Amounts that
you allocate to the Fixed Account earn interest at rates determined at the
discretion of Security Benefit and are guaranteed to be at least an effective
annual rate of 3%. See "The Fixed Account," page 25.
PURCHASE PAYMENTS -- Your initial purchase payment must be at least $10,000.
Thereafter, you may choose the amount and frequency of purchase payments, except
that the minimum subsequent purchase payment is $500 ($50 under an Automatic
Investment Program). See "Purchase Payments," page 14.
CONTRACT BENEFITS -- You may transfer Contract Value among the Subaccounts and
to and from the Fixed Account, subject to certain restrictions as described in
"The Contract," page 13 and "The Fixed Account," page 25.
At any time before the Annuity Start Date, you may surrender a Contract for
its Withdrawal Value, and may make partial withdrawals, including systematic
withdrawals, from Contract Value, subject to certain restrictions described in
"The Fixed Account," page 25. See "Full and Partial Withdrawals," page 17 and
"Federal Tax Matters," page 29 for more information about withdrawals, including
the 10% 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 prior
to the Annuity Start Date. See "Death Benefit," page 18 for more information.
The Contract provides for several Annuity Options on either a variable basis, a
fixed basis, or both. Security Benefit guarantees annuity payments under the
fixed Annuity Options. See "Annuity Period," page 23.
FREE-LOOK RIGHT -- You may return the Contract within the Free-Look Period,
which is generally a ten-day period beginning when you receive the Contract. In
this event, Security Benefit will refund to you purchase payments allocated to
the Fixed Account (not including any Credit Enhancements if an Extra Credit
Rider was in effect). Security Benefit will also refund as of the Valuation Date
on which we receive your Contract any Contract Value allocated to the
Subaccounts, plus any charges deducted from such Contract Value, less the
Contract Value attributable to any Credit Enhancements.
Some states' laws require us to refund your purchase payments instead of your
Contract Value. If your Contract is delivered in one of those states and you
return your Contract during the Free-Look Period, Security Benefit will refund
purchase payments allocated to the Subaccounts rather than Contract Value.
CHARGES AND DEDUCTIONS -- Security Benefit does not deduct sales load from
purchase payments before allocating them to your Contract Value. Certain charges
will be deducted in connection with the Contract as described below.
CONTINGENT DEFERRED SALES CHARGE. If you withdraw Contract Value, Security
Benefit may deduct a contingent deferred sales charge (which may also be
referred to as a withdrawal charge). The withdrawal charge will be waived on
withdrawals to the extent that total withdrawals in a Contract Year, including
systematic withdrawals, do not exceed the Free Withdrawal amount defined as
follows.
The Free Withdrawal amount is equal in the first Contract Year, to 10% of
purchase payments made during the year and, in any subsequent Contract Year, to
10% of Contract Value as of the first day of that Contract Year. The withdrawal
charge applies to the portion of any withdrawal consisting of purchase payments
that exceeds the Free Withdrawal amount. The withdrawal charge does not apply to
withdrawals of earnings.
The amount of the charge will depend on how long your purchase payments have
been held under the Contract. Each purchase payment you make is considered to
have a certain "age," depending on the length of time since the purchase payment
was effective. A purchase payment is "age one" in the year beginning on the date
the purchase payment is received by Security Benefit and increases in age each
year thereafter. The withdrawal charge is calculated according to the following
schedule:
--------------------------------------
PURCHASE PAYMENT AGE WITHDRAWAL
(IN YEARS) CHARGE
--------------------------------------
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 and over 0%
--------------------------------------
The amount of the withdrawal charge assessed against your Contract will never
exceed 7% of purchase payments paid under the Contract. In addition, no
withdrawal charge will be assessed upon: (1) payment of death benefit proceeds,
or (2) annuity options that provide for payments for life, or a period of at
least 7 years. See "Contingent Deferred Sales Charge," page 19.
MORTALITY AND EXPENSE RISK CHARGE. Security Benefit deducts a charge for
mortality and expense risks assumed by Security Benefit under the Contract.
Security Benefit deducts a daily minimum charge equal to 0.60%, on an annual
basis, of each Subaccount's average daily net assets. If you are subject to
mortality and expense risk charge above the minimum charge, Security Benefit
deducts it from your Contract Value on a monthly basis. The mortality and
expense risk charge amount is determined each month by reference to the amount
of your Contract Value, as set forth in the table below.
----------------------------------------------------------------
ANNUAL MORTALITY AND
CONTRACT VALUE EXPENSE RISK CHARGE
----------------------------------------------------------------
Less than $25,000 .......................... 0.85%
At least $25,000 but less than $100,000 .... 0.70%
$100,000 or more ........................... 0.60%
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See "Mortality and Expense Risk Charge," page 19.
OPTIONAL RIDER CHARGES. Security Benefit deducts a monthly charge from
Contract Value for certain Riders that may be elected by the Owner. Security
Benefit makes each Rider, except the Extra Credit and Asset Allocation Riders,
available only at issue, and you may not terminate a Rider after issue, unless
otherwise stated. The amount of the charge is equal to a percentage, on an
annual basis, of your Contract Value. Each Rider and its charge are listed
below. Your total Rider charges may not exceed 1.00% of Contract Value.
GUARANTEED MINIMUM INCOME BENEFIT. This Rider makes available a minimum
amount for the purchase of a fixed Annuity ("Minimum Income Benefit"). The
Minimum Income Benefit is equal to Purchase Payments, net of any Premium tax,
less an adjustment for Withdrawals, increased at an annual effective rate of
interest of 3%, 4%, 5% or 6%, as elected in the application. The Minimum Income
Benefit may be applied to purchase a fixed Annuity under Option 2, life income
with a 10-year period certain, or Option 4, joint and last survivor with a
10-year period certain, within 30 days of any Contract Anniversary following the
10th Contract Anniversary. The charge for this Rider is as follows:
--------------------------------
INTEREST RATE RIDER CHARGE
--------------------------------
3% 0.15%
4% 0.20%
5% 0.30%
6% 0.35%
--------------------------------
See "Guaranteed Minimum Income Benefit," page 21.
ANNUAL STEPPED UP DEATH BENEFIT. This Rider makes available an enhanced death
benefit upon the death of the Owner or any Joint Owner prior to the Annuity
Start Date. The death benefit under this Rider will be the greatest of: (1)
purchase payments, less any withdrawals and withdrawal charges; (2) Contract
Value on the date due proof of the Owner's death and instructions regarding
payment are received by Security Benefit; or (3) the Stepped Up Death Benefit.
The Stepped Up Death Benefit is the largest result for the following calculation
as of the date of receipt of instructions regarding payment of the death
benefit:
* The largest of (1) or (2) above on any Contract Anniversary that occurs prior
to the oldest Owner attaining age 81, plus
* Any purchase payments received by Security Benefit since the applicable
Contract Anniversary; less
* An adjustment for any withdrawals and withdrawal charges made since the
applicable anniversary.
The charge for this Rider is 0.20%. See "Annual Stepped Up Death Benefit," page
21.
GUARANTEED GROWTH DEATH BENEFIT. This Rider makes available an enhanced death
benefit upon the death of the Owner or any Joint Owner prior to the Annuity
Start Date. The death benefit under this Rider will be the greatest of: (1)
purchase payments, less any withdrawals and withdrawal charges; (2) Contract
Value on the date due proof of the Owner's death and instructions regarding
payment are received by Security Benefit; or (3) the Guaranteed Growth Death
Benefit. The Guaranteed Growth Death Benefit is an amount equal to purchase
payments, net of any premium tax, less an adjustment for any withdrawals,
increased at an annual effective rate of 3%, 4%, 5% or 6%, as elected in the
application. The charge for this Rider is as follows:
--------------------------------
INTEREST RATE RIDER CHARGE
--------------------------------
3% 0.10%
4% 0.15%
5% 0.20%
6% 0.25%
--------------------------------
See "Guaranteed Growth Death Benefit," page 21.
COMBINED ANNUAL STEPPED UP AND GUARANTEED GROWTH DEATH BENEFIT. This rider
makes available an enhanced death benefit upon the death of the Owner or any
Joint Owner prior to the Annuity Start Date. The death benefit under this Rider
will be the greatest of: (1) purchase payments, less any withdrawals and
withdrawal charges; (2) Contract Value on the date due proof of the Owner's
death and instructions regarding payment are received by Security Benefit; (3)
the Annual Stepped Up Death Benefit (as described above); or (4) the Guaranteed
Growth Death Benefit at 5% (as described above). The charge for this Rider is
0.25%. See "Combined Annual Stepped Up and Guaranteed Growth Death Benefit,"
page 22.
COMBINED GUARANTEED GROWTH DEATH BENEFIT AND GUARANTEED MINIMUM INCOME
BENEFIT. This Rider makes available an enhanced death benefit and a minimum
amount for the purchase of a fixed Annuity as described above. The charge for
this Rider varies based upon the interest rate selected as set forth below:
--------------------------------
INTEREST RATE RIDER CHARGE
--------------------------------
3% 0.25%
4% 0.40%
5% 0.50%
6% 0.60%
--------------------------------
See "Combined Guaranteed Growth Death Benefit and Guaranteed Minimum Income
Benefit Rider," page 22 for more information.
EXTRA CREDIT. This Rider makes available a Credit Enhancement, which is an
amount added to your Contract Value by Security Benefit. You may purchase this
Rider at issue or after the Contract Date. If you purchase at issue, Security
Benefit will add a Credit Enhancement equal to 3%, 4% or 5% of purchase
payments, as elected in the application, for each purchase payment made in the
first Contract Year. If you purchase the Rider after the Contract Date, Security
Benefit will add a ONE-TIME Credit Enhancement to your Contract Value in an
amount equal to 3%, 4% or 5% of Contract Value, as elected in the application.
In the event of a full or partial withdrawal, Security Benefit will recapture
all or part of any Credit Enhancement that has not yet vested. Security Benefit
will deduct the charge for this Rider during the seven-year period beginning on
the date of the Rider's issue and you may not terminate this Rider, nor purchase
another Extra Credit Rider, during that period. The charge for this Rider varies
based upon the interest rate selected as set forth below:
--------------------------------
INTEREST RATE RIDER CHARGE
--------------------------------
3% 0.25%
4% 0.40%
5% 0.50%
--------------------------------
See "Extra Credit," page 22.
WAIVER OF WITHDRAWAL CHARGE. This Rider makes available a waiver of
withdrawal charge in the event of your confinement to a nursing home, terminal
illness, or total and permanent disability prior to age 65. If you have also
purchased an Extra Credit Rider you will forfeit all or part of any Credit
Enhancements applied during the 12 months preceding any withdrawal pursuant to
this Rider. The charge for this Rider is 0.05%. See "Waiver of Withdrawal
Charge," page 23.
ASSET ALLOCATION. This Rider makes available transfers of Contract Value
among the Subaccounts on a monthly, quarterly, semiannual or annual basis to
maintain a set percentage in certain Subaccounts as instructed by the Owner or
an investment adviser. Security Benefit, through its investment advisory
subsidiary, will select the investment adviser. You may cancel this Rider at any
time by written request to Security Benefit. This Rider will terminate
automatically: (1) on the Annuity Start Date; or (2) upon resignation of the
adviser. The charge for this Rider is 0.40%. See "Asset Allocation," page 23.
ADMINISTRATION CHARGE. Security Benefit deducts a daily administration charge
equal to an annual rate of 0.15% of each Subaccount's average daily net assets.
See "Administration Charge," page 20.
ACCOUNT ADMINISTRATION CHARGE. Security Benefit deducts an account charge of
$30.00 at each Contract Anniversary. Security Benefit will waive the charge if
your Contract Value is $50,000 or more on the date the charge is to be deducted.
See "Account Administration Charge," page 20.
PREMIUM TAX CHARGE. Security Benefit assesses a premium tax charge to
reimburse itself for any premium taxes that it incurs with respect to this
Contract. This charge will usually be deducted on the Annuity Start Date or upon
a full or partial withdrawal if a premium tax was incurred 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% to
3.5%. See "Premium Tax Charge," page 20.
OTHER EXPENSES. Security Benefit pays the operating expenses of the Separate
Account. Investment advisory fees and operating expenses of SBL Fund are paid by
the Fund and are reflected in the net asset value of the Fund shares. The Owner
indirectly bears a pro rata portion of such fees and expenses. See the
prospectus for SBL Fund for more information.
CONTACTING SECURITY BENEFIT -- You should direct all written requests, notices,
and forms required by the Contract, and any questions or inquiries 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 you in understanding the various costs
and expenses that you will bear directly and indirectly if you allocate Contract
Value to the Subaccounts. The table reflects any contractual charges, expenses
of the Separate Account, optional Rider charges, and charges and expenses of SBL
Fund. The table does not reflect premium taxes that may be imposed by various
jurisdictions. See "Premium Tax Charge," page 20. The information contained in
the table is not generally applicable to amounts allocated to the Fixed Account.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 19. For a more complete description of the SBL Fund's
costs and expenses, see the SBL Fund prospectus, which accompanies this
Prospectus.
================================================================================
CONTRACTUAL EXPENSES
--------------------------------------------------------------------------------
Sales Load on Purchase Payments ....................................... None
Contingent Deferred Sales Charge (as a percentage of amount withdrawn
attributable to Purchase Payments and Credit Enhancements) .......... 7%(1)
Transfer Fee (per transfer) ........................................... None
Annual Account Administration Charge .................................. $30(2)
================================================================================
================================================================================
ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of each Subaccount's average daily net assets)
--------------------------------------------------------------------------------
Annual Mortality and Expense Risk Charge ............................ 0.85%(3)
Annual Administration Charge ........................................ 0.15%
----
Total Separate Account Annual Expenses .............................. 1.00%
================================================================================
================================================================================
OPTIONAL RIDER EXPENSES
(as a percentage of Contract Value)
--------------------------------------------------------------------------------
INTEREST RIDER
RATE CHARGE
--------------------------------------------------------------------------------
3% 0.15%
Guaranteed Minimum 4% 0.20%
Income Benefit Rider 5% 0.30%
6% 0.35%
--------------------------------------------------------------------------------
Annual Stepped Up Death Benefit Rider --- 0.20%
--------------------------------------------------------------------------------
3% 0.10%
Guaranteed Growth 4% 0.15%
Death Benefit Rider 5% 0.20%
6% 0.25%
--------------------------------------------------------------------------------
Combined Annual Stepped Up and
Guaranteed Growth Death Benefit Rider 5% 0.25%
--------------------------------------------------------------------------------
3% 0.25%
Combined Guaranteed Growth Death Benefit 4% 0.40%
and Guaranteed Minimum Income Benefit Rider 5% 0.50%
6% 0.60%
--------------------------------------------------------------------------------
3% 0.45%
Extra Credit Rider 4% 0.60%
5% 0.75%
--------------------------------------------------------------------------------
Waiver of Withdrawal Charge Rider --- 0.05%
--------------------------------------------------------------------------------
Asset Allocation Rider --- 0.40%
================================================================================
================================================================================
ANNUAL MUTUAL FUND EXPENSES
(as a percentage of each Series' average daily net assets)
--------------------------------------------------------------------------------
ADVISORY OTHER TOTAL MUTUAL
FEE(4) EXPENSES(5) FUND EXPENSES(4)
-------- ----------- ----------------
Equity (Series A)................... 0.75% 0.06% 0.81%
Large Cap Value (Series B).......... 0.75% 0.07% 0.82%
Money Market (Series C)............. 0.50% 0.07% 0.57%
Global (Series D)................... 1.00% 0.21% 1.21%
Diversified Income (Series E)....... 0.75% 0.07% 0.82%
Large Cap Growth (Series G)......... 1.00% 0.36% 1.36%
Enhanced Index (Series H)........... 0.75% 0.29% 1.04%
International (Series I)............ 1.10% 1.15% 2.25%
Mid Cap Growth (Series J)........... 0.75% 0.07% 0.82%
Global Strategic Income (Series K).. 0.75% 0.87% 1.62%
Capital Growth (Series L)........... 1.00% 0.36% 1.36%
Global Total Return (Series M)...... 1.00% 0.36% 1.36%
Managed Asset Allocation (Series N). 1.00% 0.17% 1.17%
Equity Income (Series O)............ 1.00% 0.09% 1.09%
High Yield (Series P)............... 0.75% 0.11% 0.86%
Small Cap Value (Series Q).......... 1.00% 0.36% 1.36%
Social Awareness (Series S)......... 0.75% 0.07% 0.82%
Technology (Series T)............... 1.00% 0.95% 1.95%
Mid Cap Value (Series V)............ 0.75% 0.09% 0.84%
Main Street Growth and Income(R)
(Series W)........................ 1.00% 0.22% 1.22%
Small Cap Growth (Series X)......... 1.00% 0.33% 1.33%
Select 25 (Series Y)................ 0.75% 0.22% 0.97%
--------------------------------------------------------------------------------
1. The amount of the contingent deferred sales charge is determined by
reference to how long your purchase payments have been held under the
Contract. A free withdrawal is available in each Contract Year equal to (1)
10% of purchase payments in the first Contract Year, and (2) 10% of Contract
Value as of the beginning of the Contract Year in each subsequent Contract
Year. See "Full and Partial Withdrawals," page 17 and "Contingent Deferred
Sales Charge," page 19 for more information.
2. A pro rata account administration charge is deducted (1) upon full
withdrawal of Contract Value; (2) upon the Annuity Start Date if one of
Annuity Options 1 through 4, 7 or 8 is elected; and (3) upon payment of a
death benefit. The account administration charge will be waived if your
Contract Value is $50,000 or more upon the date it is to be deducted.
3. The mortality and expense risk charge is reduced for larger Contracts, as
set forth in the table below.
4. During the fiscal year ended December 31, 1999, the Investment adviser
waived the advisory fees of Series P and Series X. There can be no assurance
that the Investment Adviser will continue to waive the Series advisory fees
after December 31, 1999. Expense information for Series P and X has been
restated to reflect the fees that would have been applicable had there been
no fee waiver.
5. Other Expenses for Series G, Series H, Series I, Series L, Series Q, Series
T, Series W and Series Y are based on estimated amounts for the current
fiscal year.
================================================================================
EXAMPLES -- The examples presented below assume the maximum separate account and
optional rider charges of 2.00%. The examples show the expenses that you would
pay at the end of one, three, five or ten years (except for the Large Cap
Growth, Enhanced Index, International, Capital Growth, Small Cap Value,
Technology, Main Street Growth & Income(R) and Select 25 Subaccounts which show
expenses for only the one and three year periods). The information presented
applies if, at the end of those time periods, the Contract is (1) surrendered,
or (2) annuitized or otherwise not surrendered. The examples show expenses based
upon an allocation of $1,000 to each of the Subaccounts and a hypothetical
return of 5%. For those Contracts that do not elect the maximum amount of
Riders, or with Contract Value in excess of $25,000, the expenses would be
reduced.
YOU SHOULD NOT CONSIDER THE EXAMPLES BELOW A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE 5%
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.
Example -- You would pay the expenses shown below assuming full withdrawal of
the Contract at the end of the applicable time period:
--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount............................. $103 $175 $240 $415
Large Cap Value Subaccount.................... 103 176 240 416
Money Market Subaccount....................... 100 169 229 395
Global Subaccount............................. 107 186 258 449
Diversified Income Subaccount................. 103 176 240 416
Large Cap Growth Subaccount................... 108 190 --- ---
Enhanced Index Subaccount..................... 105 182 --- ---
International Subaccount...................... 117 214 --- ---
Mid Cap Growth Subaccount..................... 103 176 240 416
Global Strategic Income Subaccount............ 111 197 276 481
Capital Growth Subaccount..................... 108 190 --- ---
Global Total Return Subaccount................ 108 190 264 461
Managed Asset Allocation Subaccount........... 106 185 256 445
Equity Income Subaccount...................... 105 183 252 439
High Yield Subaccount......................... 103 177 242 420
Small Cap Value Subaccount.................... 108 190 --- ---
Social Awareness Subaccount................... 103 176 240 416
Technology Subaccount......................... 114 206 --- ---
Mid Cap Value Subaccount...................... 103 176 241 418
Main Street Growth and Income(R) Subaccount... 107 187 --- ---
Small Cap Growth Subaccount................... 108 190 263 458
Select 25 Subaccount.......................... 104 180 --- ---
--------------------------------------------------------------------------------
Example -- You would pay the expenses shown below assuming no withdrawals:
--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount............................. $40 $120 $202 $415
Large Cap Value Subaccount.................... 40 120 203 416
Money Market Subaccount....................... 37 113 191 395
Global Subaccount............................. 44 132 221 449
Diversified Income Subaccount................. 40 120 203 416
Large Cap Growth Subaccount................... 45 136 --- ---
Enhanced Index Subaccount..................... 42 127 --- ---
International Subaccount...................... 54 161 --- ---
Mid Cap Growth Subaccount..................... 40 120 203 416
Global Strategic Income Subaccount............ 48 143 239 481
Capital Growth Subaccount..................... 45 136 --- ---
Global Total Return Subaccount................ 45 136 228 461
Managed Asset Allocation Subaccount........... 43 130 219 445
Equity Income Subaccount...................... 42 128 215 439
High Yield Subaccount......................... 40 122 205 420
Small Cap Value Subaccount.................... 45 136 --- ---
Social Awareness Subaccount................... 40 120 203 416
Technology Subaccount......................... 51 152 --- ---
Mid Cap Value Subaccount...................... 40 121 204 418
Main Street Growth and Income(R) Subaccount... 44 132 --- ---
Small Cap Growth Subaccount................... 45 135 226 458
Select 25 Subaccount.......................... 41 125 ---- ---
--------------------------------------------------------------------------------
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND
SECURITY BENEFIT LIFE INSURANCE COMPANY -- Security Benefit is a 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. It became a mutual life insurance company under its present name on
January 2, 1950.
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. Membership
interests of persons who were Owners as of July 31, 1998 became membership
interests in Security Benefit Mutual Holding Company as of that date, and
persons who acquire policies from Security Benefit after that date automatically
become members in the mutual holding company.
Security Benefit offers life insurance policies and 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 the end of 1999,
Security Benefit had total assets of approximately $8.3 billion. Together with
its subsidiaries, Security Benefit has total funds under management of
approximately $9.9 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.
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 Security Benefit 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 -- Security Benefit established the Separate Account under
Kansas law on June 26, 2000. The Contract provides that the income, gains, or
losses of the Separate Account, whether or not realized, are credited to or
charged against the assets of the Separate Account without regard to other
income, gains, or losses of Security Benefit. Kansas law provides that assets in
a separate account attributable to the reserves and other liabilities under a
contract may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent the contract so
provides. 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
Contract. 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 twenty-two Subaccounts. The
Contract provides that the income, gains and losses, whether or not realized,
are 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 SBL Fund. Security
Benefit may in the future establish additional Subaccounts of the Separate
Account, which may invest in other Series of the SBL 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.
SBL FUND -- SBL Fund is an open-end management investment company of the series
type. It 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 Fund. SBL Fund currently has twenty-two separate portfolios ("Series"), each
of which pursues different investment objectives and policies.
Shares of the Fund currently are offered only for purchase by separate
accounts of Security Benefit to serve as an investment medium for variable life
insurance policies and variable annuity contracts issued by Security Benefit.
Thus, SBL Fund serves as an investment medium for both variable life insurance
policies and variable annuity contracts. This is called "mixed funding." Shares
of SBL Fund also may 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 Owners 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 SBL Fund
serves as an investment medium might at some time be in conflict. However,
Security Benefit, the Fund's Board of Directors, and any other insurance
companies that participate in SBL Fund in the future are required to monitor
events in order to identify any material conflicts that arise from the use of
the Fund for mixed and/or shared funding. SBL Fund's Board of Directors is
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 SBL
Fund. This might force the Fund to sell securities at disadvantageous prices.
A summary of the investment objective of each Series of SBL Fund is set forth
below. We cannot assure that any Series will achieve its objective. More
detailed information is contained in the accompanying prospectus of SBL Fund,
including information on the risks associated with the investments and
investment techniques of each Series.
SBL FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
SERIES A (EQUITY SERIES) -- Amounts that you allocate to the Equity Subaccount
are invested in Series A. The investment objective of Series A is to seek
long-term capital growth by investing in a broadly diversified portfolio of
common stocks, securities convertible into common stocks, preferred stocks,
bonds and other debt securities.
SERIES B (LARGE CAP VALUE SERIES) -- Amounts that you allocate to the Large Cap
Value Subaccount are invested in Series B. Series B seeks long-term growth of
capital with secondary emphasis on income by investing in various types of
securities, including common stocks, convertible securities, preferred stocks
and debt securities. Series B's investments in debt securities may include
securities rated below investment grade. Series B may also temporarily invest in
government bonds or commercial paper.
SERIES C (MONEY MARKET SERIES) -- Amounts that you allocate to the Money Market
Subaccount are invested in Series C. The investment objective of Series C is to
provide as high a level of current income as is consistent with preserving
capital. It invests in high quality money market instruments with maturities of
not longer than thirteen months.
SERIES D (GLOBAL SERIES) -- Amounts that you allocate to the Global Subaccount
are invested in Series D. The investment objective of Series D is to seek
long-term growth of capital primarily through investment in common stocks and
equivalents of companies domiciled in foreign countries and the United States.
SERIES E (DIVERSIFIED INCOME SERIES) -- Amounts that you allocate to the
Diversified Income Subaccount are invested in Series E. The investment objective
of Series E is to provide current income with security of principal. Series E
seeks to achieve this investment objective by investing primarily in a
diversified portfolio of investment grade debt securities. The debt securities
in which Series E invests will primarily be domestic securities, but may also
include dollar denominated foreign securities.
SERIES G (LARGE CAP GROWTH SERIES) -- Amounts that you allocate to the Large Cap
Growth Subaccount are invested in Series G. The investment objective of Series G
is to seek long-term capital growth by investing primarily in equity securities
of large capitalization companies (defined as companies whose total market value
is at least $5 billion at the time of purchase).
SERIES H (ENHANCED INDEX SERIES) -- Amounts that you allocate to the Enhanced
Index Subaccount are invested in Series H. The investment objective of Series H
is to seek to outperform the S&P 500 Index through stock selection resulting in
different weightings of common stocks relative to the index.
SERIES I (INTERNATIONAL SERIES) -- Amounts that you allocate to the
International Subaccount are invested in Series I. The investment objective of
Series I is to seek long-term capital appreciation by investing primarily in
non-U.S. equity securities and other securities with equity characteristics.
SERIES J (MID CAP GROWTH SERIES) -- Amounts that you allocate to the Mid Cap
Growth Subaccount are invested in Series J. The investment objective of Series J
is to seek capital appreciation through investment in a broadly diversified
portfolio of securities which may include common stocks, preferred stocks, debt
securities and securities convertible into common stocks.
SERIES K (GLOBAL STRATEGIC INCOME SERIES) -- Amounts that you allocate to the
Global Strategic Income Subaccount are invested in Series K. The investment
objective of Series K is to seek high current income and, as a secondary
objective, capital appreciation by investing in a combination of foreign and
domestic high-yield, lower rated debt securities (commonly known as "junk
bonds").
SERIES L (CAPITAL GROWTH SERIES) -- Amounts that you allocate to the Capital
Growth Series are invested in Series L. The investment objective of Series L is
to seek growth of capital by pursuing aggressive investment policies primarily
in equity securities of U. S. companies.
SERIES M (GLOBAL TOTAL RETURN SERIES) -- Amounts that you allocate to the Global
Total Return Subaccount are invested in Series M. The investment objective of
Series M is to seek high total return consisting of capital appreciation and
current income. Series M seeks this objective through asset allocation and
security selection by investing in a diversified portfolio of global equity and
bond securities.
SERIES N (MANAGED ASSET ALLOCATION SERIES) -- Amounts that you allocate to the
Managed Asset Allocation Subaccount are invested in Series N. The investment
objective of Series N is to seek a high level of total return by investing
primarily in a diversified portfolio of debt and equity securities.
SERIES O (EQUITY INCOME SERIES) -- Amounts that you allocate to the Equity
Income Subaccount are invested in Series O. The investment objective of Series O
is to seek to provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of established
companies.
SERIES P (HIGH YIELD SERIES) -- Amounts that you allocate to the High Yield
Subaccount are invested in Series P. The investment objective of Series P is to
seek high current income. Capital appreciation is a secondary objective. Series
P seeks its objectives by investing primarily in higher yielding, higher risk
debt securities (commonly referred to as "junk bonds").
SERIES Q (SMALL CAP VALUE SERIES) -- Amounts that you allocate to the Small Cap
Value Series are invested in Series Q. The investment objective of Series Q is
to seek capital growth by investing in securities of small capitalization
companies (defined as companies with a market capitalization substantially
similar to that of companies in the Russell 2500(TM) Index at the time of
investment).
SERIES S (SOCIAL AWARENESS SERIES) -- Amounts that you allocate to the Social
Awareness Subaccount are invested in Series S. The investment objective of
Series S is to seek capital appreciation by investing in various types of
securities which meet certain social criteria established for the Series. The
Series also may invest in companies that are included in the Domini 400 Social
IndexSM, which companies will be deemed to comply with the Series' social
criteria. Series S will invest in a diversified portfolio of common stocks,
convertible securities, preferred stocks and debt securities. Series S may
temporarily invest in government bonds or commercial paper.
SERIES T (TECHNOLOGY SERIES) -- Amounts that you allocate to the Technology
Subaccount are invested in Series T. The investment objective of Series T is to
seek long-term capital appreciation by investing in the equity securities of
technology companies.
SERIES V (MID CAP VALUE SERIES) -- Amounts that you allocate to the Mid Cap
Value Subaccount are invested in Series V. The investment objective of Series V
is to seek long-term growth of capital by investing in a diversified portfolio
consisting primarily of common stocks. The Series will invest in stocks that the
Investment Adviser believes are undervalued relative to assets, earnings, growth
potential or cash flow.
SERIES W (MAIN STREET GROWTH AND INCOME(R) SERIES) -- Amounts that you allocate
to the Main Street Growth and Income(R) Subaccount are invested in Series W. The
investment objective of Series W is to seek high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities.
SERIES X (SMALL CAP GROWTH SERIES) -- Amounts that you allocate to the Small Cap
Growth Subaccount are invested in Series X. The investment objective of Series X
is to seek long-term growth of capital by investing primarily in domestic and
foreign equity securities of small capitalization companies (defined as
companies with a market capitalization substantially similar to that of
companies in the Russell 2000(TM) Index at the time of investment).
SERIES Y (SELECT 25 SERIES) -- Amounts that you allocate to the Select 25
Subaccount are invested in Series Y. The investment objective of Series Y is to
seek long-term growth of capital by concentrating its investments in a core
position of 20-30 common stocks of growth companies which have exhibited
consistent above average earnings or revenue growth.
THE INVESTMENT ADVISER -- Security Management Company, LLC, 700 SW Harrison
Street, Topeka, Kansas 66636, serves as Investment Adviser to each Series of SBL
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 the Series except
Global, Enhanced Index, International, Global Strategic Income, Capital Growth,
Global Total Return, Managed Asset Allocation, Equity Income, Small Cap Value,
Technology, Main Street Growth and Income(R), and Small Cap Growth Series. See
the accompanying SBL Fund prospectus for details. The Investment Adviser has
engaged OppenheimerFunds, Inc., Two World Trade Center, New York, New York
10048-0203, to provide investment advisory services to Global Series and Main
Street Growth and Income(R) Series; Bankers Trust Company, 130 Liberty Street,
New York, New York 10006, to provide investment advisory services to Enhanced
Index Series and International Series; T. Rowe Price Associates, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202, to provide investment advisory services
to Managed Asset Allocation Series and Equity Income Series; Wellington
Management Company LLP, 75 State Street, Boston, MA 02109, to provide investment
advisory services to Global Strategic Income Series, Global Total Return Series
and Technology Series; Strong Capital Management Corporation, 100 Heritage
Reserve, Menomonee, Wisconsin 53051, to provide investment advisory services to
Small Cap Value Series and Small Cap Growth Series; and Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York 10105 to
provide investment advisory services to Capital Growth Series.
THE CONTRACT
GENERAL -- Security Benefit issues the Contract offered by this Prospectus. It
is a flexible purchase payment deferred variable annuity. To the extent that you
allocate all or a portion of your purchase payments to the Subaccounts, 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. When you are ready to begin receiving annuity
payments, the Contract provides several Annuity Options under which Security
Benefit will pay periodic annuity payments on a variable basis, a fixed basis or
both, 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 you have allocated purchase payments and the amount of interest credited
on Contract Value that you have allocated to the Fixed Account.
The Contract is available for purchase by an individual as a non-tax
qualified retirement plan ("Non-Qualified Plan"). The Contract is also eligible
for purchase in connection with certain tax qualified retirement plans that meet
the requirements of Section 403(b), 408, or 408A of the Internal Revenue Code
("Qualified Plan"). Certain federal tax advantages are currently available to
retirement plans that qualify as (1) annuity purchase plans of public school
systems and certain tax-exempt organizations under Section 403(b), or (2)
individual retirement accounts or annuities, including those established by an
employer as a simplified employee pension plan, under Section 408. Joint Owners
are permitted only on a Contract issued pursuant to a Non-Qualified Plan.
APPLICATION FOR A CONTRACT -- If you wish to purchase a Contract, you 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 age 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 $10,000. Thereafter, you may choose the amount and frequency of
purchase payments, except that the minimum subsequent purchase payment is $500.
The minimum subsequent purchase payment if you elect an Automatic Investment
Program is $50. Security Benefit may reduce the minimum purchase payment
requirement under certain circumstances. Purchase payments exceeding $1 million
will not be accepted without prior approval of Security Benefit.
Security Benefit will apply the initial purchase payment not later than the
end of the second Valuation Date after the Valuation Date it is received by
Security Benefit; provided that the purchase payment is preceded or accompanied
by an application that contains sufficient information 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, Security Benefit will notify you that it does not have the
necessary information to issue a Contract. If you do not provide the necessary
information 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 you unless you consent to
Security Benefit retaining the purchase payment until the application is made
complete.
Security Benefit will credit subsequent purchase payments 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. Subsequent purchase payments may be
paid under an Automatic Investment Program. The initial purchase payment
required must be paid before the Automatic Investment Program will be accepted
by Security Benefit.
ALLOCATION OF PURCHASE PAYMENTS -- In an application for a Contract, you select
the Subaccounts or the Fixed Account to which purchase payments will be
allocated. Purchase payments will be allocated according to your 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 $25.00 per payment being allocated to any one Subaccount or the Fixed
Account. The allocations may be a whole dollar amount or a whole percentage.
Available allocation alternatives include the twenty-two Subaccounts and the
Fixed Account.
You 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 you submit a change in
instructions to Security Benefit. You may make changes in your purchase payment
allocation and changes to an existing Dollar Cost Averaging or Asset
Reallocation Option 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. You may, however, transfer Contract Value among the Subaccounts and the
Fixed Account in the manner described in "Transfers of Contract Value," page 15.
DOLLAR COST AVERAGING OPTION -- Prior to the Annuity Start Date, you may dollar
cost average your Contract Value by authorizing Security Benefit to make
periodic transfers of Contract Value from any one Subaccount to one or more of
the other Subaccounts. Dollar cost averaging is a systematic method of investing
in which securities are purchased at regular intervals in fixed dollar amounts
so that the cost of the securities gets averaged over time and possibly over
various market cycles. The option will result in the transfer of Contract Value
from one Subaccount to one or more of the other Subaccounts. Amounts transferred
under this option will be credited at the price of the Subaccount as of the end
of the Valuation Dates on which the transfers are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts transferred to a
Subaccount will result in the crediting of a greater number of units when the
price is low and a lesser number of units when the price is high. Similarly, the
amounts transferred from a Subaccount will result in a debiting of a greater
number of units when the price is low and a lesser number of units when the
price is high. Dollar cost averaging does not guarantee profits, nor does it
assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
you must designate whether Contract Value is to be transferred on the basis of a
specific dollar amount, a fixed period or earnings only, the Subaccount or
Subaccounts to and from which the transfers will be made, the desired frequency
of the transfers, which may be on a monthly or quarterly basis, and the length
of time during which the transfers shall continue or the total amount to be
transferred over time.
After Security Benefit has received a Dollar Cost Averaging Request in proper
form at its Home Office, Security Benefit will transfer Contract Value in the
amounts you designate from the Subaccount from which transfers are to be made to
the Subaccount or Subaccounts you have chosen. Security Benefit will effect each
transfer on the date you specify or if no date is specified, on the monthly or
quarterly anniversary, whichever corresponds to the period selected, of the date
of receipt at the Home Office of a Dollar Cost Averaging Request in proper form.
Transfers will be made until the total amount elected has been transferred, or
until Contract Value in the Subaccount from which transfers are made has been
depleted. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," page 15.
You may instruct Security Benefit at any time to terminate the option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccount from which transfers were being made that has not been
transferred will remain in that Subaccount unless you instruct us otherwise. If
you wish to continue transferring on a dollar cost averaging basis after the
expiration of the applicable period, the total amount elected has been
transferred, or the Subaccount has been depleted, or after the Dollar Cost
Averaging Option has been canceled, a new Dollar Cost Averaging Request must be
completed and sent to the Home Office. Security Benefit requires that you wait
at least a month (or a quarter if transfers were made on a quarterly basis)
before reinstating Dollar Cost Averaging after it has been terminated for any
reason. Security Benefit may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time.
You may also dollar cost average Contract Value to or from the Fixed Account,
subject to certain restrictions described under "The Fixed Account," page 25.
ASSET REALLOCATION OPTION -- Prior to the Annuity Start Date, you may authorize
Security Benefit to automatically transfer Contract Value on a quarterly,
semiannual or annual basis to maintain a particular percentage allocation among
the Subaccounts. The Contract Value allocated to each Subaccount will grow or
decline in value at different rates during the selected period, and Asset
Reallocation automatically reallocates the Contract Value in the Subaccounts to
the allocation you selected on a quarterly, semiannual or annual basis, as you
select. Asset Reallocation is intended to transfer Contract Value from those
Subaccounts that have increased in value to those Subaccounts that have declined
in value. Over time, this method of investing may help you buy low and sell
high. This investment method does not guarantee profits, nor does it assure that
you will not have losses.
To elect this option an Asset Reallocation Request in proper form must be
received by Security Benefit at its Home Office. An Asset Reallocation Request
form is available upon request. On the form, you must indicate the applicable
Subaccounts, the applicable time period and the percentage of Contract Value to
be allocated to each Subaccount.
Upon receipt of the Asset Reallocation Request, Security Benefit will effect
a transfer or, in the case of a new Contract, will allocate the initial purchase
payment, among the Subaccounts based upon the percentages that you selected.
Thereafter, Security Benefit will transfer Contract Value to maintain that
allocation on each quarterly, semiannual or annual anniversary, as applicable,
of the date of Security Benefit's receipt of the Asset Reallocation Request in
proper form. The amounts transferred will be credited at the price of the
Subaccount as of the end of the Valuation Date on which the transfer is
effected. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," page 15.
You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccounts that has not been transferred will remain in those
Subaccounts regardless of the percentage allocation unless you instruct us
otherwise. If you wish to continue Asset Reallocation after it has been
canceled, a new Asset Reallocation Request form must be completed and sent to
Security Benefit's Home Office. Security Benefit may discontinue, modify, or
suspend, and reserves the right to charge a fee for the Asset Reallocation
Option at any time.
Contract Value allocated to the Fixed Account may be included in the Asset
Reallocation option, subject to certain restrictions described in "Transfers and
Withdrawals from the Fixed Account," page 26.
TRANSFERS OF CONTRACT VALUE -- You may transfer Contract Value among the
Subaccounts upon proper written request to Security Benefit's Home Office. You
may make transfers (other than transfers pursuant to the Dollar Cost Averaging
and Asset Reallocation Options) by telephone if the Telephone Transfer section
of the application or an Authorization for Telephone Requests form has been
properly completed, signed and filed at Security Benefit's Home Office. The
minimum transfer amount is $500, or the amount remaining in a given Subaccount.
The minimum transfer amount does not apply to transfers under the Dollar Cost
Averaging or Asset Reallocation Options.
Security Benefit effects transfers between Subaccounts at their respective
accumulation unit values as of the close of the Valuation Period during which
the transfer request is received.
You may also transfer Contract Value to the Fixed Account; however, transfers
from the Fixed Account to the Subaccounts are restricted as described in "The
Fixed Account," page 25.
Security Benefit generally does not limit the frequency of transfers,
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 and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
On each Valuation Date, the amount of 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. You bear the entire investment risk relating to
the investment performance of Contract Value allocated to the Subaccounts.
DETERMINATION OF CONTRACT VALUE -- Your Contract Value will vary to a degree
that depends upon several factors, including
* Investment performance of the Subaccounts to which you have allocated
Contract Value,
* Payment of purchase payments,
* The amount of any outstanding Contract Debt,
* Full and partial withdrawals, and
* Charges assessed in connection with the Contract, including charges for any
optional Riders selected.
The amounts allocated to the Subaccounts will be invested in shares of the
corresponding Series of SBL 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 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 Owner's interest in
a Subaccount. When you allocate purchase payments to a Subaccount, your Contract
is credited with Accumulation Units. The number of Accumulation Units to be
credited is determined by dividing the dollar amount, including any Credit
Enhancements, allocated to the particular Subaccount by the price for the
Subaccount's Accumulation Units as of the end of the Valuation Period in which
the purchase payment is credited. In addition, other transactions including
loans, 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 price of the Accumulation Unit of the affected Subaccount. The price 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 price of each Subaccount's units initially was $10. The price of a
Subaccount on any Valuation Date takes into account the following: (1) the
investment performance of the Subaccount, which is based upon the investment
performance of the corresponding Series of SBL 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, (4) the minimum mortality and expense risk charge under the
Contract of 0.60%, and (5) the administration charge under the Contract.
The minimum mortality and expense risk charge of 0.60% and the administration
charge of 0.15% are factored into the accumulation unit value or "price" of each
Subaccount on each Valuation Date. Security Benefit deducts any mortality and
expense risk charge above the minimum charge and the charge for any optional
Riders (the "Excess Charge") on a monthly basis. Each Subaccount declares a
monthly dividend and Security Benefit deducts the Excess Charge from this
monthly dividend upon its reinvestment in the Subaccount. The Excess Charge is a
percentage of your Contract Value allocated to the Subaccount as of the
reinvestment date. The monthly dividend is paid only for the purpose of
collecting the Excess Charge. Assuming that you owe a charge above the minimum
mortality and expense risk charge and the administration charge, your Contract
Value will be reduced in the amount of your Excess Charge upon reinvestment of
the Subaccount's monthly dividend. Security Benefit reserves the right to
compute and deduct the Excess Charge from each Subaccount on each Valuation
Date. See the Statement of Additional Information for a more detailed discussion
of how the Excess Charge is deducted.
FULL AND PARTIAL WITHDRAWALS -- An Owner may make a partial withdrawal of
Contract Value, or surrender the Contract for its Withdrawal Value. A full or
partial withdrawal, including a systematic withdrawal, may be taken from
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, less any outstanding Contract Debt, any
applicable withdrawal charges, any pro rata account charge and any uncollected
premium taxes. If an Extra Credit Rider is in effect, Contract Value will also
be reduced by any Credit Enhancements that have not yet vested.
Security Benefit requires the signature of all Owners on any request for
withdrawal, and a guarantee of all such signatures to effect the transfer or
exchange of all or part of the Contract for another investment. The signature
guarantee must be provided by an eligible guarantor, such as a bank, broker,
credit union, national securities exchange or savings association. Security
Benefit further requires that any request to transfer or exchange all or part of
the Contract for another investment be made upon a transfer form provided by
Security Benefit which is available upon request.
A partial withdrawal may be requested for a specified percentage or dollar
amount of Contract Value. Each partial withdrawal must be at least $500 except
systematic withdrawals discussed below. A request for a partial withdrawal will
result in a payment by Security Benefit of the amount specified in the partial
withdrawal request provided there is sufficient Contract Value to meet the
request. Upon payment, the Contract Value will be reduced by an amount equal to
the payment and any applicable withdrawal charge and premium tax. Contract Value
will also be reduced by a percentage of any Credit Enhancements that have not
yet vested. See "Extra Credit," page 22. If a partial withdrawal is requested
after the first Contract Year that would leave the Withdrawal Value in the
Contract less than $2,000, Security Benefit reserves the right to treat the
partial withdrawal as a request for a full withdrawal.
Security Benefit will deduct the amount of a partial withdrawal from the
Contract Value in the Subaccounts and the Fixed Account, according to the
Owner's instructions to Security Benefit. If you do not specify the allocation,
Security Benefit will deduct the withdrawal in the same proportion that Contract
Value is allocated among the Subaccounts and the Fixed Account.
A full or partial withdrawal, including a systematic withdrawal, may be
subject to a withdrawal charge if a withdrawal is made from purchase payments
that have been held in the contract for less than seven years and 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
"Contingent Deferred Sales Charge," page 19, and "Premium Tax Charge," page 20.
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% penalty tax. In the case of
Contracts issued in connection with retirement plans that meet the requirements
of Section 403(b) or 408 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," page 29. The tax consequences of a withdrawal
under the Contract should be carefully considered. See "Federal Tax Matters,"
page 29.
SYSTEMATIC WITHDRAWALS -- Security Benefit currently offers a feature under
which you may select systematic withdrawals. Under this feature, an Owner may
elect to receive systematic withdrawals while the Owner is living and 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. An Owner may designate the systematic withdrawal amount as a percentage of
Contract Value allocated to the Subaccounts and/or Fixed Account, as a fixed
period, as level payments, as a specified dollar amount, as all earnings in the
Contract, or based upon the life expectancy of the Owner or the Owner and a
Beneficiary. An Owner also may designate the desired frequency of the systematic
withdrawals, which may be monthly, quarterly, semiannually or annually. The
Owner may stop or modify systematic withdrawals upon proper written request
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, your Contract
Value will be reduced by an amount equal to the payment proceeds plus any
applicable withdrawal charge and premium tax. Contract Value will also be
reduced by a percentage of any Credit Enhancements that have not yet vested. See
"Extra Credit," page 22. 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.
Security Benefit will effect each systematic withdrawal as of the end of the
Valuation Period during which the withdrawal is scheduled. The deduction caused
by the systematic withdrawal, including any applicable withdrawal charge, will
be allocated to your Contract Value in the Subaccounts and the Fixed Account, as
you have directed. If you do not specify the allocation, Security Benefit will
deduct the systematic withdrawal in the same proportion that Contract Value is
allocated among the Subaccounts and the Fixed Account.
Security Benefit may, at any time, discontinue, modify, suspend or charge a
fee for systematic withdrawals. You should consider carefully the tax
consequences of a systematic withdrawal, including the 10% penalty tax which may
be imposed on withdrawals made prior to the Owner attaining age 59 1/2. See
"Federal Tax Matters," page 29.
FREE-LOOK RIGHT -- You may return a Contract within the Free-Look Period, which
is generally a ten-day period beginning when you receive the Contract. In this
event, Security Benefit will then deem void the returned Contract and will
refund to you purchase payments allocated to the Fixed Account (not including
any Credit Enhancements if an Extra Credit Rider was in effect). Security
Benefit will also refund as of the Valuation Date on which we receive your
Contract any Contract Value allocated to the Subaccounts, plus any charges
deducted from such Contract Value, less the Contract Value attributable to any
Credit Enhancements.
Some states' laws require us to refund your purchase payments instead of your
Contract Value. If your Contract is delivered in one of those states and you
return your Contract during the Free-Look Period, Security Benefit will refund
purchase payments allocated to the Subaccounts rather than Contract Value.
DEATH BENEFIT -- If the Owner dies prior to the Annuity Start Date while this
Contract is in force, 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 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" below. 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 prior to the Annuity Start Date and instructions
regarding payment. If the death of the Owner occurs on or after the Annuity
Start Date, any death benefit will be determined according to the terms of the
Annuity Option. See "Annuity Options," page 24.
The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt, any pro rata account charge and any uncollected
premium tax. If an Owner dies prior to the Annuity Start Date while this
Contract is in force, the amount of the death benefit will be the greater of:
1. The sum of all purchase payments (not including any Credit Enhancements if
an Extra Credit Rider was in effect), less any reductions caused by previous
withdrawals, including withdrawal charges, or
2. The Contract Value on the date due proof of death and instructions regarding
payment are received by Security Benefit (less any Credit Enhancements
applied during the 12 months prior to the date of the Owner's death).
If an Owner dies prior to the Annuity Start Date and due proof of death 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 as set forth in item 2 above.
The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as elected by the Designated
Beneficiary. If the Designated Beneficiary is to receive annuity payments under
an Annuity Option, 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," page 29 and "Distribution
Requirements," below for a discussion of the tax consequences in the event of
death.
DISTRIBUTION REQUIREMENTS -- For Contracts issued in connection with a
Non-Qualified Plan, 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 a Qualified Plan, 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
CONTINGENT DEFERRED SALES CHARGE -- Security Benefit does not deduct sales
charges from purchase payments before allocating them to Contract Value.
However, except as set forth below, Security Benefit may assess a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on
a full or partial withdrawal, including systematic withdrawals, depending on how
long your purchase payments have been held under the Contract.
Security Benefit will waive the withdrawal charge on withdrawals to the
extent that total withdrawals in a Contract Year, including systematic
withdrawals, do not exceed the Free Withdrawal amount. The Free Withdrawal
amount is equal in the first Contract Year, to 10% of purchase payments made
during the year and for any subsequent Contract Year, to 10% of Contract Value
as of the first day of that Contract Year.
The withdrawal charge applies to the portion of any withdrawal, consisting of
purchase payments, that exceeds the Free Withdrawal amount. The withdrawal
charge does not apply to withdrawals of earnings. For the purpose of determining
any withdrawal charge, Security Benefit deems any withdrawals that are subject
to the withdrawal charge to be made first from purchase payments, then from
earnings. Free withdrawal amounts do not reduce purchase payments for the
purpose of determining future withdrawal charges.
The amount of the charge will depend on how long your purchase payments have
been held under the Contract. Each purchase payment you make is considered to
have a certain "age," depending on the length of time since the purchase payment
was effective. A purchase payment is "age one" in the year beginning on the date
the purchase payment is received by Security Benefit and increases in age each
year thereafter. The withdrawal charge is calculated according to the following
schedule:
----------------------------------------
PURCHASE PAYMENT AGE WITHDRAWAL
(IN YEARS) CHARGE
----------------------------------------
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 and over 0%
----------------------------------------
In no event will the amount of any withdrawal charge, when added to such
charge previously assessed against any amount withdrawn from the Contract,
exceed 7% of purchase payments paid under the Contract. In addition, no
withdrawal charge will be imposed upon: (1) payment of death benefit proceeds;
or (2) annuity options that provide for payments for life, or a period of at
least 7 years. Security Benefit will assess the withdrawal charge against the
Subaccounts and the Fixed Account in the same proportion as the withdrawal
proceeds are allocated.
Security Benefit pays sales commissions to broker-dealers and other expenses
associated with the promotion and sales of the Contracts. The withdrawal charge
is designed to reimburse Security Benefit for these costs, although it is
expected that actual expenses will be greater than the amount of the charge. To
the extent that all sales expenses are not recovered from the charge, such
expenses may be recovered from other charges, including amounts derived
indirectly from the charge for mortality and expense risk. Broker-dealers may
receive aggregate commissions of up to 6.5% of aggregate purchase payments.
Security Benefit also may pay override payments, expense allowances, bonuses,
wholesaler fees and training allowances. Registered representatives earn
commissions from the broker-dealers with which they are affiliated and such
arrangements will vary.
MORTALITY AND EXPENSE RISK CHARGE -- Security Benefit deducts a charge for
mortality and expense risks assumed by Security Benefit under the Contract.
Security Benefit deducts a daily minimum charge equal to 0.60%, on an annual
basis, of each Subaccount's average daily net assets. If you are subject to
mortality and expense risk charge above the minimum charge, Security Benefit
deducts it from your Contract Value on a monthly basis. The mortality and
expense risk charge amount is determined each month by reference to the amount
of your Contract Value, as set forth in the table below.
----------------------------------------------------------------
ANNUAL MORTALITY AND
CONTRACT VALUE EXPENSE RISK CHARGE
----------------------------------------------------------------
Less than $25,000 .......................... 0.85%
At least $25,000 but less than $100,000 .... 0.70%
$100,000 or more ........................... 0.60%
----------------------------------------------------------------
This charge 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 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 Options in the Contract. Security Benefit also assumes a
mortality risk in connection with the death benefit under the 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. See "Determination of Contract Value,"
page 16, for more information about how Security Benefit deducts the mortality
and expense risk charge.
ADMINISTRATION CHARGE -- Security Benefit deducts a daily administration charge
equal to an annual rate of 0.15% of each Subaccount's average daily net assets.
The purpose of this charge is to compensate Security Benefit for the expenses
associated with administration of the Contracts and operation of the
Subaccounts.
ACCOUNT ADMINISTRATION CHARGE -- Security Benefit deducts an account
administration charge of $30.00 at each Contract Anniversary. Security Benefit
will waive the charge if your Contract Value is $50,000 or more on the date the
charge is to be deducted. Security Benefit will deduct a pro rata account
administration charge (1) upon a full withdrawal; (2) upon the Annuity Start
Date if one of the Annuity Options 1 through 4, 7 or 8 is chosen; and (3) upon
payment of a death benefit. The purpose of the charge is to compensate Security
Benefit for the expenses associated with administration of the Contracts.
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. Security Benefit deducts this charge when due,
typically upon the Annuity Start Date or payment of a purchase payment. Security
Benefit may deduct premium tax upon a full or partial withdrawal if a premium
tax has been 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% to 3.5%, 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 Contract, 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."
VARIATIONS IN CHARGES -- Security Benefit may reduce or waive the amount of the
contingent deferred sales charge and certain other charges for a Contract where
the expenses associated with the sale of the Contract or the administrative and
maintenance costs associated with the Contract are reduced for reasons such as
the amount of the initial purchase payment or projected purchase payments or the
Contract is sold in connection with a group or sponsored arrangement.
GUARANTEE OF CERTAIN CHARGES -- Security Benefit guarantees that: (1) the charge
for mortality and expense risks will not exceed an annual rate of 0.85% of each
Subaccount's average daily net assets; (2) the administration charge will not
exceed an annual rate of 0.15% of each Subaccount's average daily net assets;
and (3) the account administration charge will not exceed $30 per year. Security
Benefit also guarantees that the charge for any Rider will not exceed the annual
rate in effect when the Rider is issued.
SBL FUND EXPENSES -- Each Subaccount of the Separate Account purchases shares at
the net asset value of the corresponding Series of SBL 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 SBL Fund's prospectus, are not specified or fixed under the terms
of the Contract.
OPTIONAL RIDER CHARGES
In addition to the charges and deductions discussed above, you may purchase
certain optional Riders under the Contract. Security Benefit makes each Rider,
except the Extra Credit and Asset Allocation Riders, available only at issue,
and you may not terminate a Rider after issue, unless otherwise stated. Security
Benefit deducts a monthly charge from Contract Value for any Riders elected by
the Owner. The amount of the charge is equal to a percentage, on an annual
basis, of your Contract Value. Each Rider and its charge are listed below. Your
total Rider charges may not exceed 1.00% of Contract Value.
GUARANTEED MINIMUM INCOME BENEFIT -- This Rider makes available a minimum amount
for the purchase of a fixed Annuity ("Minimum Income Benefit"). The Minimum
Income Benefit is equal to Purchase Payments and any Credit Enhancements, net of
any premium tax, less an adjustment for Withdrawals, increased at an annual
effective rate of interest of 3%, 4%, 5% or 6%, as elected in the application.
(Security Benefit will credit a maximum rate of 4% for amounts allocated to the
Money Market Subaccount or the Fixed Account.)
In crediting interest, Security Benefit takes into account the timing of when
each purchase payment and withdrawal occurred and accrues such interest until
the earlier of: (1) the Annuity Start Date, or (2) the Contract Anniversary
following the oldest Annuitant's 80th birthday. In the event of a withdrawal,
the Minimum Income Benefit is reduced as of the date of the withdrawal by a
percentage found by dividing the withdrawal amount, including any withdrawal
charges, by Contract Value immediately prior to the withdrawal.
You may apply the Minimum Income Benefit, less any applicable Premium tax and
pro rata account administration charge, to purchase a fixed Annuity within 30
days of any Contract Anniversary following the 10th Contract Anniversary. You
may apply the Minimum Income Benefit to purchase only a fixed Annuity under
Option 2, life income with a 10-year period certain, or Option 4, joint and last
survivor with a 10-year period certain. See the discussion of Options 2 and 4
under "Annuity Options," page 24. The Annuity rates are based upon the 1983(a)
mortality table with mortality improvement under projection scale G and an
interest rate of 2 1/2%. The charge for this Rider varies based upon the
interest rate selected as set forth below:
-------------------------------
INTEREST RATE RIDER CHARGE
-------------------------------
3% 0.15%
4% 0.20%
5% 0.30%
6% 0.35%
-------------------------------
ANNUAL STEPPED UP DEATH BENEFIT -- This Rider makes available an enhanced death
benefit upon the death of the Owner or any Joint Owner prior to the Annuity
Start Date. The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt, any pro rata account administration charge and any
uncollected premium tax. If an Extra Credit Rider was in effect, the death
benefit also will be reduced by any Credit Enhancements applied during the 12
months preceding the Owner's date of death; provided that the death benefit
defined in 1 below will not be so reduced. If an Owner dies prior to the Annuity
Start Date, the amount of the death benefit under this Rider will be the
greatest of:
1. The sum of all purchase payments (not including any Credit), less any
withdrawals and withdrawal charges;
2. The Contract Value on the date due proof of death and instructions regarding
payment for each Designated Beneficiary are received by Security Benefit; or
3. The Stepped Up Death Benefit.
The Stepped Up Death Benefit is the largest result for the following calculation
as of the date of receipt of instructions regarding payment of the death
benefit:
* The largest or 1 or 2 above on any Contract Anniversary that occurs prior to
the oldest Owner attaining age 81, plus
* Any purchase payments received by Security Benefit since the applicable
Contract Anniversary; less
* An adjustment for any withdrawals and withdrawal charges made since the
applicable anniversary. In the event of a withdrawal, the Stepped Up Death
Benefit is reduced as of the date of the withdrawal by a percentage found by
dividing the withdrawal amount, including any withdrawal charges, by Contract
Value immediately prior to the withdrawal.
If an Owner dies prior to the Annuity Start Date, but due proof of death 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 as set forth in item 2 above.
The charge for this Rider is 0.20%.
GUARANTEED GROWTH DEATH BENEFIT -- This Rider makes available an enhanced death
benefit upon the death of the Owner or any Joint Owner prior to the Annuity
Start Date. The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt, any pro rata account administration charge and any
uncollected premium tax. If an Extra Credit Rider was in effect, the death
benefit also will be reduced by any Credit Enhancements applied during the 12
months preceding the Owner's date of death; provided that the death benefit
defined in 1 below will not be so reduced. If an Owner dies prior to the Annuity
Start Date, the amount of the death benefit under this Rider will be the
greatest of:
1. The sum of all purchase payments (not including any Credit Enhancements),
less any withdrawals and withdrawal charges;
2. The Contract Value on the date due proof of death and instructions regarding
payment for each Designated Beneficiary are received by Security Benefit; or
3. The Guaranteed Growth Death Benefit.
The Guaranteed Growth Death Benefit is an amount equal to purchase payments and
any Credit Enhancements, net of any Premium tax, less an adjustment for
withdrawals, increased at an annual effective rate of interest of 3%, 4%, 5% or
6%, as elected in the application. (Security Benefit will credit a maximum rate
of 4% for amounts allocated to the Money Market Subaccount or the Fixed
Account.) In crediting interest, Security Benefit takes into account the timing
of when each purchase payment and withdrawal occurred. Security Benefit accrues
such interest until the earliest of: (1) the Annuity Start Date; (2) the
Contract Anniversary following the oldest Owner's 80th birthday; (3) the date
due proof of the Owner's death and instructions regarding payment are received;
or (4) the six-month anniversary of the Owner's date of death. In the event of a
withdrawal, the Guaranteed Growth Death Benefit is reduced as of the date of the
withdrawal by a percentage found by dividing the withdrawal amount, including
any withdrawal charges, by Contract Value immediately prior to the withdrawal.
The amount of the Guaranteed Growth Death Benefit shall not exceed an amount
equal to 200% of purchase payments (not including any Credit Enhancements), net
of premium tax and any withdrawals, including withdrawal charges.
The charge for this Rider varies based upon the interest rate selected as set
forth below:
-------------------------------
INTEREST RATE RIDER CHARGE
-------------------------------
3% 0.10%
4% 0.15%
5% 0.20%
6% 0.25%
-------------------------------
COMBINED ANNUAL STEPPED UP AND GUARANTEED GROWTH DEATH BENEFIT -- This Rider
makes available an enhanced death benefit upon the death of the Owner or any
Joint Owner prior to the Annuity Start Date. If an Owner dies prior to the
Annuity Start Date, the amount of the death benefit under this Rider will be the
greatest of:
1. The sum of all purchase payments (not including any Credit Enhancements),
less any withdrawals and withdrawal charges;
2. The Contract Value on the date due proof of death and instructions regarding
payment for each Designated Beneficiary are received by Security Benefit;
3. The Annual Stepped Up Death Benefit (as described above); or
4. The Guaranteed Growth Death Benefit at 5% (as described above).
The charge for this Rider is 0.25%.
COMBINED GUARANTEED GROWTH DEATH BENEFIT AND GUARANTEED MINIMUM INCOME BENEFIT
-- This Rider makes available an enhanced death benefit and a minimum amount for
the purchase of an Annuity as described above. The charge for this Rider varies
based upon the interest rate selected as set forth below:
-------------------------------
INTEREST RATE RIDER CHARGE
-------------------------------
3% 0.25%
4% 0.40%
5% 0.50%
6% 0.60%
-------------------------------
EXTRA CREDIT -- This Rider makes available a Credit Enhancement, which is an
amount added to your Contract Value by Security Benefit. You may purchase this
Rider at issue or after the Contract Date. If you purchase at issue, a Credit
Enhancement of 3%, 4% or 5% of purchase payments, as elected in the application,
will be added to Contract Value for each purchase payment made in the first
Contract Year. If you purchase the Rider after the Contract Date, Security
Benefit will add a ONE-TIME Credit Enhancement to your Contract Value in an
amount of 3%, 4% or 5% of Contract Value, as elected in the application. Any
Credit Enhancement will be allocated among the Subaccounts in the same
proportion as your purchase payment or Contract Value, as applicable.
In the event of a full or partial withdrawal, Security Benefit will recapture
all or part of any Credit Enhancement that has not yet vested. An amount equal
to 1/7 of the Credit Enhancement will vest as of each anniversary of the Rider's
date of issue and the Credit Enhancement will be fully vested at the end of
seven years from that date. The amount to be forfeited in the event of a
withdrawal is equal to a percentage of the Credit Enhancement that has not yet
vested. The percentage is determined for each withdrawal as of the date of the
withdrawal by dividing:
1. The amount of the withdrawal, including any withdrawal charges, by
2. Contract Value immediately prior to the withdrawal.
The charge for this Rider will be deducted for a period of seven years from
its date of issue. The charge varies based upon the interest rate selected as
set forth below:
-------------------------------
INTEREST RATE RIDER CHARGE
-------------------------------
3% 0.45%
4% 0.60%
5% 0.75%
-------------------------------
You may not at any time have more than one Extra Credit Rider in effect on your
Contract.
Security Benefit may recapture Credit Enhancements in the event of a full or
partial withdrawal as discussed above. If you exercise your right to return the
Contract during the Free-Look period, your Contract Value will be reduced by the
value of any Credit Enhancements applied. See "Free-Look Right," page 18. In the
event of a withdrawal under the terms of the Waiver of Withdrawal Charge Rider,
you will forfeit all or part of any Credit Enhancements applied during the 12
months preceding such a withdrawal. See "Waiver of Withdrawal Charge," below.
Death benefit proceeds may exclude all or part of any Credit Enhancements. See
"Death Benefit," page 18.
WAIVER OF WITHDRAWAL CHARGE -- This Rider makes available a waiver of withdrawal
charge in the event of your confinement to a nursing home, terminal illness, or
total and permanent disability prior to age 65.
The Rider defines confinement to a hospital or nursing facility, as follows:
(1) you have been confined to a "hospital" or "qualified skilled nursing
facility" for at least 90 consecutive days prior to the date of the withdrawal;
and (2) you are so confined when Security Benefit receives the waiver request
and became so confined after the Contract Date.
Security Benefit defines terminal illness as follows: (1) the Owner has been
diagnosed by a licensed physician with a "terminal illness"; and (2) such
illness was first diagnosed after the Contract was issued.
Security Benefit defines disability as follows: (1) the Owner is unable,
because of physical or mental impairment, to perform the material and
substantial duties of any occupation for which the Owner is suited by means of
education, training or experience; (2) the impairment has been in existence for
more than 180 days and began before the Owner attained age 65 and after the
Contract Date; and (3) the impairment is expected to result in death or be
long-standing and indefinite.
Prior to making a withdrawal pursuant to this Rider, you must submit to
Security Benefit a properly completed claim form and a written physician's
statement acceptable to SBL. SBL will also accept as proof of disability a
certified Social Security finding of disability.
Security Benefit reserves the right to have a physician of its choice examine
the Owner to determine if the Owner is eligible for a waiver. The charge for
this Rider is 0.05%.
If you have also purchased an Extra Credit Rider, you will forfeit all or
part of any Credit Enhancements applied during the 12 months preceding any
withdrawal pursuant to this Rider. The amount of Credit Enhancements to be
forfeited is a percentage determined by dividing the amount of the withdrawal by
the total purchase payments made in the 12 months preceding the withdrawal if
the Extra Credit Rider was purchased at issue. The percentage is determined by
dividing the amount of the withdrawal by Contract Value on the date of the
Rider's issue if the Extra Credit Rider was purchased after the Contract Date.
The maximum percentage that may be forfeited is 100% of Credit Enhancements
earned during the 12 months preceding the withdrawal.
ASSET ALLOCATION -- This Rider makes available automatic transfers of Contract
Value among the Subaccounts on a monthly, quarterly, semiannual or annual basis
to maintain a set percentage of Contract Value in certain Subaccounts as
instructed by the Owner or an investment adviser. Security Benefit, through its
investment advisory subsidiary, will select the investment adviser.
When purchasing this Rider, you must select the Subaccounts, the applicable
percentage to be allocated to each Subaccount and the frequency of reallocation.
You must also authorize the investment adviser to change the allocation of
Contract Value among the Subaccounts. Security Benefit will transfer Contract
Value among the Subaccounts on a monthly, quarterly, semiannual or annual basis,
as you elect, to maintain the selected percentages. Security Benefit will make
the transfers on each monthly, quarterly, semiannual or annual anniversary, as
applicable, of the date of our receipt of your written request to purchase the
Rider ("Allocation Date"). Security Benefit will effect the transfers between
Subaccounts at their respective accumulation unit values as of the close of the
Valuation Period during which the Allocation Date occurs.
You or the investment adviser may change the percentage of Contract Value to
be allocated to the Subaccounts, and Security Benefit will make this change upon
receipt of your or the adviser's instructions. In this event, Security Benefit
will reallocate Contract Value according to the most recent instructions on the
next Allocation Date.
You may cancel this Rider at any time by written request to Security Benefit.
This Rider will terminate automatically: (1) on the Annuity Start Date; or (2)
upon resignation of the adviser. The charge for this Rider is 0.40%.
ANNUITY PERIOD
GENERAL -- You select the Annuity Start Date at the time of application. The
Annuity Start Date may not be prior to the third annual Contract anniversary and
may not be deferred beyond the Annuitant's 90th birthday, although the terms of
a Qualified Plan and the laws of certain states may require that you start
annuity payments at an earlier age. If you do not select an Annuity Start Date,
the Annuity Start Date will be the later of the Annuitant's 70th birthday or the
tenth annual Contract Anniversary. See "Selection of an Option," page 25. If
there are Joint Annuitants, the birthdate of the older Annuitant will be used to
determine the latest Annuity Start Date.
On the Annuity Start Date, the proceeds under the Contract will be applied to
provide an Annuity under one of the options described below. Each option is
available in two forms--either as a variable Annuity for use with the
Subaccounts or as a fixed Annuity for use with the Fixed Account. A combination
variable and fixed Annuity is also available. Variable annuity payments will
fluctuate with the investment performance of the applicable Subaccounts while
fixed annuity payments will not. Unless you direct otherwise, proceeds derived
from Contract Value allocated to the Subaccounts will be applied to purchase a
variable Annuity and proceeds derived from Contract Value allocated to the Fixed
Account will be applied to purchase a fixed Annuity. The proceeds under the
Contract will be equal to your Contract Value in the Subaccounts and the Fixed
Account as of the Annuity Start Date, reduced by any applicable premium taxes,
any outstanding Contract Debt and, for Options 1 through 4, 7 and 8, a pro rata
account administration charge, if applicable.
The Contract provides for eight Annuity Options. Security Benefit may make
other Annuity Options available upon request. Annuity payments under Annuity
Options 1 through 4, 7 and 8 are based upon annuity rates that vary with the
Annuity Option selected. In the case of Options 1 through 4 and 8, 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 reflect your life
expectancy based upon your age as of the Annuity Start Date and your gender,
unless unisex rates apply. The annuity rates are based upon the 1983(a)
mortality table with mortality improvement under projection scale G and are
adjusted to reflect an assumed interest rate of 3.5%, compounded annually. In
the case of Options 5 and 6 as described below, annuity payments are based upon
Contract Value without regard to annuity rates.
Annuity Options 1 through 4 and 8 provide for payments to be made during the
lifetime of the Annuitant. Annuity payments under such options cease in the
event of the Annuitant's death, unless the option provides for a guaranteed
minimum number of payments, for example a life income with guaranteed payments
of 5, 10, 15 or 20 years. The level of annuity payments will be greater for
shorter guaranteed periods and less for longer guaranteed periods. Similarly,
payments will be greater for life annuities than for joint and survivor
annuities, because payments for life annuities are expected to be made for a
shorter period.
You may elect to receive annuity payments 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.
You may designate or change an Annuity Start Date, Annuity Option, or
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 under Annuity Options 1 through 4 and 8,
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. Under Annuity
Options 5 through 7, full or partial withdrawals may be made after the Annuity
Start Date, subject to any applicable withdrawal charge. The Contract specifies
annuity tables for Annuity Options 1 through 4, 7 and 8, described below. The
tables contain the guaranteed minimum dollar amount (per $1,000 applied) of the
FIRST annuity payment for a variable Annuity and each annuity payment for a
fixed Annuity.
ANNUITY OPTIONS --
OPTION 1 -- LIFE INCOME. Periodic annuity payments will be made during the
lifetime of the Annuitant. It is possible under this Option for any Annuitant to
receive only one annuity payment if the Annuitant's death occurred prior to the
due date of the second annuity payment, two if death occurred prior to the due
date of the third annuity payment, etc. THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS WILL CEASE UPON THE DEATH OF THE
ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 2 -- LIFE INCOME WITH GUARANTEED PAYMENTS OF 5, 10, 15 OR 20 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 a stated period, which may be five, ten, fifteen or twenty years, as
elected by the Owner, annuity payments will be continued during the remainder of
such period to the Designated Beneficiary. Upon the Annuitant's death after the
period certain, no further annuity payments will be made.
OPTION 3 -- LIFE WITH INSTALLMENT OR UNIT REFUND OPTION. Periodic annuity
payments will be made during the lifetime of the Annuitant with the promise
that, if at the death of the Annuitant, the number of payments that has been
made is less than the number determined by dividing the amount applied under
this Option by the amount of the first payment, annuity payments will be
continued to the Designated Beneficiary until that number of payments has been
made.
OPTION 4 -- JOINT AND LAST SURVIVOR. Annuity payments will be made as long as
either Annuitant is living. Upon the death of one Annuitant, Annuity Payments
continue to the surviving Annuitant at the same or a reduced level of 75%, 66
2/3% or 50% of Annuity Payments as elected by the Owner at the time the Annuity
Option is selected. With respect to Fixed Annuity Payments, the amount of the
Annuity Payment, and with respect to Variable Annuity Payments, the number of
Annuity Units used to determine the Annuity Payment, is reduced as of the first
Annuity Payment following the Annuitant's death. It is possible under this
Option for only one annuity payment to be made if both Annuitants died prior to
the second annuity payment due date, two if both died prior to the third annuity
payment due date, etc. AS IN THE CASE OF OPTION 1, THERE IS NO MINIMUM NUMBER OF
PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT, REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 5 -- PAYMENTS FOR SPECIFIED PERIOD. Periodic annuity payments will be
made for a fixed period, which may be from 5 to 20 years, as elected by the
Owner. 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 6 -- PAYMENTS OF A SPECIFIED AMOUNT. Periodic annuity payments of the
amount elected by the Owner will be made until Contract Value is 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 7 -- PERIOD CERTAIN. Periodic annuity payments will be made for a
stated period which may be 5, 10, 15 or 20 years, as elected by the Owner. If
the Annuitant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary.
OPTION 8 -- JOINT AND CONTINGENT SURVIVOR OPTION. Periodic annuity payments
will be made during the life of the primary Annuitant. Upon the death of the
primary Annuitant, payments will be made to the contingent Annuitant during his
or her life. If the contingent Annuitant is not living upon the death of the
primary Annuitant, no payments will be made to the contingent Annuitant. It is
possible under this Option for only one annuity payment to be made if both
Annuitants died prior to the second annuity payment due date, two if both died
prior to the third annuity payment due date, etc. AS IN THE CASE OF OPTIONS 1
AND 4, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT, REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
VALUE OF VARIABLE ANNUITY PAYMENTS: ASSUMED INTEREST RATE. The annuity tables
in the Contract which are used to calculate variable annuity payments for
Annuity Options 1 through 4, 7 and 8 are based on an "assumed interest rate" of
3 1/2%, compounded annually. Variable annuity payments generally increase or
decrease from one annuity payment date to the next based upon the performance of
the applicable Subaccounts during the interim period adjusted for the assumed
interest rate. If the performance of the Subaccount selected is equal to the
assumed interest rate, the annuity payments will remain constant. If the
performance of the Subaccounts is greater than the assumed interest rate, the
annuity payments will increase and if it is less than the assumed interest rate,
the annuity payments will decline. A higher assumed interest rate would mean a
higher initial annuity payment but the amount of the annuity payment would
increase more slowly in a rising market (or the amount of the annuity payment
would decline more rapidly in a declining market). A lower assumption would have
the opposite effect.
SELECTION OF AN OPTION -- You should carefully review the Annuity Options with
your financial or tax advisers. 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 a Qualified Plan, the period elected for receipt of annuity
payments under Annuity Options (other than Life Income) 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 a Non-Qualified Plan, SBL does
not allow annuity payments to be deferred beyond the Annuitant's 95th birthday.
THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments and transfer
Contract Value to the Fixed Account. Amounts allocated to the Fixed Account
become part of Security Benefit's General Account, which supports Security
Benefit's insurance and annuity obligations. The General Account is subject to
regulation and supervision by the Kansas Department of Insurance and is also
subject to the insurance laws and regulations of other jurisdictions in which
the Contract is distributed. In reliance on certain exemptive and exclusionary
provisions, interests in the Fixed Account have not been registered as
securities under the Securities Act of 1933 (the "1933 Act") and the Fixed
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, neither the Fixed Account nor
any interests therein are generally subject to the provisions of the 1933 Act or
the 1940 Act. This disclosure, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in the Prospectus. This Prospectus is
generally intended to serve as a disclosure document only for aspects of a
Contract involving the Separate Account and contains only selected information
regarding the Fixed Account. For more information regarding the Fixed Account,
see "The Contract," page 13.
Amounts allocated to the Fixed Account become part of the General Account of
Security Benefit, which consists of all assets owned by Security Benefit other
than those in the Separate Account and other separate accounts of Security
Benefit. Subject to applicable law, Security Benefit has sole discretion over
investment of the assets of its General Account.
INTEREST -- Contract Value allocated to the Fixed Account earns interest at a
fixed rate or rates that are paid by Security Benefit. The Contract Value in the
Fixed Account earns interest at an interest rate that is guaranteed to be at
least an annual effective rate of 3% which will accrue daily ("Guaranteed
Rate"). Such interest will be paid regardless of the actual investment
experience of the Fixed Account. In addition, Security Benefit may in its
discretion pay interest at a rate ("Current Rate") that exceeds the Guaranteed
Rate. Security Benefit will determine the Current Rate, if any, from time to
time.
Contract Value allocated or transferred to the Fixed Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Contract Value is allocated or transferred to the Fixed Account. The Current
Rate paid on any such portion of Contract Value allocated or transferred to the
Fixed Account will be guaranteed for rolling periods of one or more years (each
a "Guarantee Period"). Security Benefit currently offers only Guarantee Periods
of one year. Upon expiration of any Guarantee Period, a new Guarantee Period of
the same duration begins with respect to that portion of Contract Value which
will earn interest at the Current Rate, if any, declared on the first day of the
new Guarantee Period.
Contract Value allocated or transferred to the Fixed Account at one point in
time may be credited with a different Current Rate than amounts allocated or
transferred to the Fixed Account at another point in time. For example, amounts
allocated to the Fixed Account in June may be credited with a different current
rate than amounts allocated to the Fixed Account in July. In addition, if
Guarantee Periods of different durations are offered, Contract Value allocated
or transferred to the Fixed Account for a Guarantee Period of one duration may
be credited with a different Current Rate than amounts allocated or transferred
to the Fixed Account for a Guarantee Period of a different duration. Therefore,
at any time, various portions of your Contract Value in the Fixed Account may be
earning interest at different Current Rates depending upon the point in time
such portions were allocated or transferred to the Fixed Account and the
duration of the Guarantee Period. Security Benefit bears the investment risk for
the Contract Value allocated to the Fixed Account and for paying interest at the
Guaranteed Rate on amounts allocated to the Fixed Account.
For purposes of determining the interest rates to be credited on Contract
Value in the Fixed Account, transfers from the Fixed Account pursuant to the
Dollar Cost Averaging or Asset Reallocation Options will be deemed to be taken
in the following order: (1) from any portion of Contract Value allocated to the
Fixed Account for which the Guarantee Period expires during the calendar month
in which the withdrawal, loan, or transfer is effected; (2) then in the order
beginning with that portion of such Contract Value which has the longest amount
of time remaining before the end of its Guarantee Period and (3) ending with
that portion which has the least amount of time remaining before the end of its
Guarantee Period. For more information about transfers and withdrawals from the
Fixed Account, see "Transfers and Withdrawals From the Fixed Account," below.
DEATH BENEFIT -- The death benefit under the Contract will be determined in the
same fashion for a Contract that has Contract Value in the Fixed Account as for
a Contract that has Contract Value allocated to the Subaccounts. See "Death
Benefit," page 18.
CONTRACT CHARGES -- Premium taxes and the account administration, optional Rider
and withdrawal charges will be the same for Owners who allocate purchase
payments or transfer Contract Value to the Fixed Account as for those who
allocate purchase payments or transfer Contract Value to the Subaccounts.
Optional Rider charges are deducted from Current Interest. The charges for
mortality and expense risks and the administration charge will not be assessed
against the Fixed Account, and any amounts that Security Benefit pays for income
taxes allocable to the Subaccounts will not be charged against the Fixed
Account. In addition, you will not pay directly or indirectly the investment
advisory fees and operating expenses of the SBL Fund to the extent Contract
Value is allocated to the Fixed Account; however, you also will not participate
in the investment experience of the Subaccounts.
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT -- You may transfer amounts
from the Subaccounts to the Fixed Account and from the Fixed Account to the
Subaccounts, subject to the following limitations. Transfers from the Fixed
Account are allowed only (1) during the calendar month in which the applicable
Guarantee Period expires, (2) pursuant to the Dollar Cost Averaging Option,
provided that such transfers are scheduled to be made over a period of not less
than one year, and (3) pursuant to the Asset Reallocation Option, provided that,
upon receipt of the Asset Reallocation Request, Contract Value is allocated
among the Fixed Account and the Subaccounts in the percentages selected by the
Owner without violating the restrictions on transfers from the Fixed Account set
forth in (1) above. Accordingly, if you desire to implement the Asset
Reallocation Option, you should do so at a time when Contract Value may be
transferred from the Fixed Account to the Subaccounts without violating the
restrictions on transfers from the Fixed Account. Once you implement an Asset
Reallocation Option, the restrictions on transfers will not apply to transfers
made pursuant to the Option.
The minimum amount that you may transfer from the Fixed Account to the
Subaccounts is the lesser of (i) $500 or (ii) the amount of Contract Value for
which the Guarantee Period expires in the calendar month that the transfer is
effected. Transfers of Contract Value pursuant to the Dollar Cost Averaging and
Asset Reallocation Options are not currently subject to any minimums. The
Company reserves the right to limit the number of transfers permitted each
Contract Year to 14 transfers, to suspend transfers and to limit the amount that
may be subject to transfers.
If purchase payments are allocated (except purchase payments made pursuant to
an Automatic Investment Program), or Contract Value is transferred, to the Fixed
Account, any transfers from the Fixed Account in connection with the Dollar Cost
Averaging or Asset Reallocation Options will automatically terminate as of the
date of such purchase payment or transfer. You may reestablish Dollar Cost
Averaging or Asset Reallocation by submitting a written request to Security
Benefit. However, if for any reason a Dollar Cost Averaging Option is canceled,
you may only reestablish the option after the expiration of the next monthly or
quarterly anniversary that corresponds to the period selected in establishing
the option.
You may also make full or partial withdrawals to the same extent as if you
had allocated Contract Value to the Subaccounts. However, no partial withdrawal
request will be processed which would result in the withdrawal of Contract Value
from the Loan Account. See "Full and Partial Withdrawals," page 17 and
"Systematic Withdrawals," page 17. In addition, to the same extent as Owners
with Contract Value in the Subaccounts, the Owner of a Contract used in
connection with a Qualified Plan may obtain a loan if so permitted under the
terms of the Qualified Plan. See "Loans," page 28.
PAYMENTS FROM THE FIXED ACCOUNT -- Full and partial withdrawals, loans, and
transfers from the Fixed Account may be delayed for up to six months after a
written request in proper form is received by Security Benefit at its Home
Office. During the period of deferral, interest at the applicable interest rate
or rates will continue to be credited to the amounts allocated to the Fixed
Account.
MORE ABOUT THE CONTRACT
OWNERSHIP -- The Owner is the person named as such in the application or in any
later change shown in Security Benefit's records. While living, the Owner 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 29.
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 prior to the Annuity Start Date. 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 prior to the Annuity Start Date. 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 Owner 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.
DIVIDENDS -- The Contract does not share in the surplus earnings of Security
Benefit, and no 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 or
from a Subaccount to the Fixed Account 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:
* During which the New York Stock Exchange is closed other than customary
weekend and holiday closings,
* During which trading on the New York Stock Exchange is restricted as
determined by the SEC,
* 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
* 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 you misstate the age or sex of an Annuitant or age of an
Owner, 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).
LOANS -- If you own a Contract issued in connection with a retirement plan that
is qualified under Section 403(b) of the Internal Revenue Code, you may borrow
money under your Contract using the Contract Value as the only security for the
loan. You may obtain a loan by submitting a proper written request to Security
Benefit. A loan must be taken prior to the Annuity Start Date. The minimum loan
that may be taken is $1,000. The maximum loan that can be taken is generally
equal to the lesser of: (1) $50,000 reduced by the excess of: (a) the highest
outstanding loan balance within the preceding 12-month period ending on the day
before the date the loan is made; over (b) the outstanding loan balance on the
date the loan is made; or (2) 50% of the Contract Value or $10,000, whichever is
greater. The Internal Revenue Code requires aggregation of all loans made to an
individual employee under a single employer plan. However, since Security
Benefit has no information concerning outstanding loans with other providers, we
will only use information available under annuity contracts issued by us.
Reference should be made to the terms of your particular Qualified Plan for any
additional loan restrictions.
When an eligible Owner takes a loan, Contract Value in an amount equal to the
loan amount is transferred from the Subaccounts and/or the Fixed Account into an
account called the "Loan Account." Amounts allocated to the Loan Account earn
3%, the minimum rate of interest guaranteed under the Fixed Account. In
addition, 10% of the loaned amount will be held in the Fixed Account as security
for the loan and will earn the Current Rate.
Interest will be charged for the loan and will accrue on the loan balance
from the effective date of any loan. The loan interest rate will be 5.5%.
Because the Contract Value maintained in the Loan Account (which will earn 3%)
will always be equal in amount to the outstanding loan balance, the net cost of
a loan is 2.5%.
Loans must be repaid within five years, unless Security Benefit determines
that the loan is to be used to acquire your principal residence, in which case
the loan must be repaid within 30 years. You must make loan repayments on at
least a quarterly basis, and you may prepay your loan at any time. Upon receipt
of a loan payment, Security Benefit will transfer Contract Value from the Loan
Account to the Fixed Account and/or the Subaccounts according to your current
instructions with respect to purchase payments in an amount equal to the amount
by which the payment reduces the amount of the loan outstanding.
If you do not make any required loan payment within 30 days of the due date
for loans with a monthly repayment schedule or within 90 days of the due date
for loans with a quarterly repayment schedule, your total outstanding loan
balance will be deemed to be in default for tax reporting purposes. The entire
loan balance, with any accrued interest, will be reported as income to the
Internal Revenue Service ("IRS"). Once a loan has gone into default, regularly
scheduled payments will not be accepted. No new loans will be allowed while a
loan is in default. Interest will continue to accrue on a loan in default and if
such interest is not paid by December 31 of each year, it will be added to the
outstanding balance of the loan and will be reported to the IRS. Contract Value
equal to the amount of the accrued interest will be transferred to the Loan
Account. If a loan continues to be in default, the total outstanding balance
will be deducted from Contract Value upon the Owner's attaining age 59 1/2. The
Contract will be automatically terminated if the outstanding loan balance on a
loan in default equals or exceeds the Withdrawal Value. The proceeds from the
Contract will be used to repay the debt and any applicable withdrawal charge.
Because of the adverse tax consequences associated with defaulting on a loan,
you should carefully consider your ability to repay the loan and should consult
with a tax advisor before requesting a loan.
While the amount to secure the loan is held in the Loan Account, you forego
the investment experience of the Subaccounts and the Current Rate of interest on
the Fixed Account. Outstanding Contract Debt will reduce the amount of proceeds
paid upon full withdrawal, upon payment of the death benefit, and upon
annuitization. In addition, no partial withdrawal will be processed which would
result in the withdrawal of Contract Value from the Loan Account.
You should consult with your tax adviser on the effect of a loan.
Loans are not available in certain states pending department of insurance
approval. If loans are later approved by the insurance department of a state,
Security Benefit intends to make loans available to all Owners of 403(b)
contracts in that state at that time, but there can be no assurance that loans
will be approved. Prospective Owners should contact their agent concerning
availability of loans in their state.
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS -- Generally, a Qualified Plan
may not provide for the distribution or withdrawal of amounts accumulated under
the 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, if you own a Contract
purchased in connection with a Qualified Plan, you 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, you should refer
to the terms of your particular Qualified Plan, the Internal Revenue Code and
other applicable law for any limitation or restriction on distributions and
withdrawals, including the 10% 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," page 34.
Section 403(b) imposes restrictions on certain distributions from
tax-sheltered annuity contracts meeting the requirements of Section 403(b). The
restrictions 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 (i) reaches age
59 1/2, (ii) separates from service, (iii) dies, (iv) becomes disabled, or (v)
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 the
distribution.
If you own a Contract purchased as a tax-sheltered Section 403(b) annuity
contract, you 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 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, you should carefully consider the tax consequences of a distribution
or withdrawal under a Contract and you should consult a competent tax adviser.
See "Federal Tax Matters," below.
FEDERAL TAX MATTERS
INTRODUCTION -- The Contract described in this Prospectus is designed for use by
individuals in retirements plans which may or may not be Qualified Plans under
the provisions of the Internal Revenue Code ("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
CONTRACT.
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 SBL 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% of
the total assets of a Series may be represented by any one investment, no more
than 70% may be represented by any two investments, no more than 80% may be
represented by any three investments, and no more than 90% 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 contract owner),
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 Owner has additional flexibility in allocating purchase payments
and Contract Values. These differences could result in an Owner 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 an Owner 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 SBL 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 contract owner 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 32 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% 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 Designated 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% 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 contract owner 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%
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% 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 taxation on owners of variable 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 Contract may be used with Qualified Plans that meet the
requirements of Section 403(b), 408 or 408A 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.
Owners, 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, an Owner'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 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 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.
Each employee's interest in a retirement plan qualified under Code Section
403(b) 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.
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 34.
SECTIONS 408 AND 408A. INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the
Code permits eligible individuals to establish individual retirement programs
through the purchase of Individual Retirement Annuities ("traditional IRAs").
The Contract may be purchased as an IRA. The IRAs described in this paragraph
are called "traditional IRAs" to distinguish them from the new "Roth IRAs" which
became available in 1998. (Roth IRAs are described below.)
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 a
traditional 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 Contract for use with IRAs may be subject to special requirements
imposed by the Internal Revenue Service. Purchasers of the 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, traditional IRAs are subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 403(b)
of the Code; however, the required beginning date for traditional IRAs is
generally the date that the contract owner reaches age 70 1/2--the contract
owner's retirement date, if any, will not affect his or her required beginning
date. See "Section 403(b)," page 33. 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 that bears the same ratio as the individual's
nondeductible contributions bears to the expected return under the IRA.
Distributions from a traditional IRA may be eligible for a tax-free rollover
to another traditional IRA. In certain cases, a distribution from a traditional
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 34.
ROTH IRAS. Section 408A of the Code permits eligible individuals to establish
a Roth IRA, a new type of IRA which became available in 1998. The Contract may
be purchased as a Roth IRA. Contributions to a Roth IRA are not deductible, but
withdrawals that meet certain requirements are not subject to federal income
tax. Sale of the contract for use with Roth IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the 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 requirements. Unlike a
traditional IRA, Roth IRAs are not subject to minimum required distribution
rules during the contract owner's lifetime. Generally, however, the amount in a
remaining Roth IRA must be distributed by the end of the fifth year after the
death of the contract owner.
The Internal Revenue Service has not reviewed the Contract for qualification
as a Roth IRA and has not addressed in a ruling of general applicability whether
a death benefit provision such as the provision in the Contract comports with
Roth IRA qualification requirements.
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
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 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 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% of the taxable portion of the distribution. The 10%
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% 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% penalty tax to pay health insurance
premiums in certain cases. Starting January 1, 1998, there are two additional
exceptions to the 10% 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% tax on the amount that was not properly distributed.
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 IRAs) are
generally subject to mandatory 20% 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% 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 Owner 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 SBL FUND SHARES -- Security Benefit is the legal owner of the shares
of SBL Fund held by the Subaccounts. Security Benefit will exercise voting
rights attributable to the shares of each Series of the Fund held in the
Subaccounts at any regular and special meetings of the shareholders of the Fund
on matters requiring shareholder voting under the 1940 Act. In accordance with
its view of presently applicable law, Security Benefit will exercise its voting
rights based on instructions received from persons having the voting interest in
corresponding Subaccounts. 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 SBL 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 your Contract Value in the corresponding Subaccount on a
particular date by the net asset value per share of the 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 same date established by
SBL Fund for determining shareholders eligible to vote at the meeting of the
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 SBL Fund.
Voting instructions may be cast in person or by proxy.
Voting rights attributable to your 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 Owners, if any, in the same proportion as the voting
instructions that are received in a timely manner for all Contracts
participating in that Subaccount. Security Benefit generally will exercise
voting rights attributable to shares of the Series of SBL Fund held in its
General Account, if any, in the same proportion as votes cast with respect to
shares of the Series of the 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 SBL Fund
should no longer be available for investment, or if Security Benefit management
believes further investment in shares of any or all of the Series of SBL Fund
should become inappropriate in view of the purposes of the Contract, Security
Benefit may substitute shares of another Series of SBL 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 SBL Fund or in
shares of another investment company, a series thereof, or other suitable
investment vehicle. Security Benefit may establish new Subaccounts in its sole
discretion, and will determine whether to make any new Subaccount available to
existing Owners. 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 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 Security
Benefit believes it 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. The
Separate Account 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.
REPORTS TO OWNERS -- Security Benefit will send you annually a statement 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 Fixed Account
and the Subaccounts and any other information required by law. Security Benefit
will also send confirmations upon purchase payments, transfers, loans, loan
repayments, and full and partial withdrawals. Security Benefit may confirm
certain transactions on a quarterly basis. These transactions include purchases
under an Automatic Investment Program, transfers under the Dollar Cost Averaging
and Asset Reallocation Options, systematic withdrawals and annuity payments.
You will also receive an annual and semiannual report containing financial
statements for SBL Fund, which will include a list of the portfolio securities
of each Series, as required by the 1940 Act, and/or such other reports as may be
required by federal securities laws.
TELEPHONE TRANSFER PRIVILEGES -- You may request a transfer of Contract Value
and may make changes to an existing Dollar Cost Averaging or Asset Reallocation
option by telephone if the Telephone Transfer section of the application or an
Authorization for Telephone Requests form ("Telephone Authorization") has been
completed, signed, and filed at Security Benefit's Home Office. 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), you may not be able to request transfers by telephone and would
have to submit written requests.
By authorizing telephone transfers, you authorize Security Benefit to accept
and act upon telephonic instructions for transfers involving your Contract. You
agree that neither Security Benefit, any of its affiliates, nor SBL Fund, will
be liable for any loss, damages, cost, or expense (including attorneys' fees)
arising out of any telephone requests; provided that Security Benefit effects
such request in accordance with its procedures. As a result of this policy on
telephone requests, you bear the risk of loss arising from the telephone
transfer privilege. 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 -- Amy J. Lee, Esq., Associate General Counsel, Security Benefit,
has passed upon 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.
PERFORMANCE INFORMATION
Performance information for the Subaccounts, including the yield and
effective yield of the Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts may appear in
advertisements, reports, and promotional literature to current or prospective
Owners.
Current yield for the Money Market Subaccount will be based on income
received by a hypothetical investment over a given 7-day period (less expenses
accrued during the period), and then "annualized" (i.e., assuming that the 7-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Money Market Subaccount is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings.
For the remaining Subaccounts, 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
any credit enhancement and the deduction of the account administration charge,
administration charge, mortality and expense risk charge and contingent deferred
sales charge and may simultaneously be shown for other periods.
Quotations of yield and effective yield do not reflect deduction of the
contingent deferred sales charge, and total return figures may be quoted that do
not reflect deduction of the charge. If reflected, the performance figures
quoted would be lower. Such performance information will be accompanied by total
return figures that reflect deduction of the contingent deferred sales charge
that would be imposed if Contract Value were withdrawn at the end of the period
for which total return is quoted.
Although the Contracts were not available for purchase until October __,
2000, the underlying investment vehicle of the Separate Account, SBL Fund, has
been in existence since May 26, 1977. Performance information for the
Subaccounts may also include quotations of total return for periods beginning
prior to the availability of the Contracts that incorporate the performance of
SBL Fund.
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, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, are contained in
the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to Security Benefit Life Insurance Company and
Subsidiaries. The Table of Contents of the Statement of Additional Information
is set forth below:
TABLE OF CONTENTS --
Page
GENERAL INFORMATION AND HISTORY............................................ 3
Safekeeping of Assets................................................... 3
DISTRIBUTION OF THE CONTRACT............................................... 3
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS...... 3
Section 403(b).......................................................... 3
Section 408............................................................. 3
EXPERTS.................................................................... 4
PERFORMANCE INFORMATION.................................................... 4
FINANCIAL STATEMENTS....................................................... 6
<PAGE>
VARIABLE ANNUITY ACCOUNT XIV
STATEMENT OF ADDITIONAL INFORMATION
DATE: OCTOBER __, 2000
INDIVIDUAL 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 Variable Annuity Account XIV
dated October __, 2000, 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.......................................... 3
Safekeeping of Assets.................................................. 3
DISTRIBUTION OF THE CONTRACT............................................. 3
METHOD OF DEDUCTING THE EXCESS CHARGE ................................... 3
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS.... 4
Section 403(b)......................................................... 4
Section 408............................................................ 4
PERFORMANCE INFORMATION.................................................. 4
FINANCIAL STATEMENTS..................................................... 6
<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 SBL Variable Annuity Account XIV (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 SBL Fund in non-certificated form, are held separate and apart from
the assets of 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.
The compensation payable by SDI under these arrangements may vary, but is not
expected to exceed in the aggregate 6.5% of purchase payments and 1% of contract
value on an annualized basis.
METHOD OF DEDUCTING THE EXCESS CHARGE
The minimum mortality and expense risk charge of 0.60%, and the administration
charge of 0.15%, on an annual basis, of each Subaccount's average daily net
assets, are factored into the accumulation unit value or "price" of each
Subaccount on each Valuation Date. Security Benefit deducts any mortality and
expense risk charge above the minimum charge and the charge for any optional
Riders (the "Excess Charge") on a monthly basis.
Each Subaccount declares a monthly dividend and Security Benefit deducts the
Excess Charge from this monthly dividend upon its reinvestment in the
Subaccount. The Excess Charge is a percentage of your Contract Value allocated
to the Subaccount as of the reinvestment date. The monthly dividend is paid only
for the purpose of collecting the Excess Charge. Assuming that you owe a charge
above the minimum mortality and expense risk charge and the administration
charge, your Contract Value will be reduced in the amount of your Excess Charge
upon reinvestment of the Subaccount's monthly dividend. Security Benefit
reserves the right to compute and deduct the Excess Charge from each Subaccount
on each Valuation Date.
Security Benefit will declare a dividend for each Subaccount on one Valuation
Date of each calendar month ("Record Date"). Security Benefit will pay the
dividend on a subsequent Valuation Date ("Reinvestment Date") within five
Valuation Dates of the Record Date. Such dividend will be declared as a dollar
amount per Accumulation Unit.
For each Subaccount, any Owner as of the Record Date will receive on the
Reinvestment Date a net dividend equal to:
1. the amount of dividend per Accumulation Unit; times
2. the number of Accumulation Units allocated to the Subaccount as of the
Record Date; less
3. the amount of the Excess Charge for that Subaccount; provided that Security
Benefit will not deduct any Excess Charge from the first dividend following
the Contract Date.
The net dividend will be reinvested on the Reinvestment Date at the Accumulation
Unit Value determined as of the close of that date in Accumulation Units of the
Subaccount.
An example of this process is as follows. Assuming Contract Value of $50,000
allocated to the Equity Subaccount and no Riders, the Excess Charge would be
computed as follows:
------------------------------------------------------
Mortality and Expense Risk Charge........... 0.70%
Plus: Optional Rider Charge................ + N/A
Less: Minimum Charge....................... - 0.60%
-----
Excess Charge on an Annual Basis............ 0.10%
------------------------------------------------------
Further assuming 5,000 Accumulation Units with an Accumulation Unit Value of $10
per unit on December 30 and a gross dividend of $0.25 per unit declared on
December 31 (Record Date), the net dividend amount would be as follows:
--------------------------------------------------------------------------------
Accumulation Unit Value as of Valuation Date before Record Date... $10.00
Accumulation Unit Value as of Reinvestment Date................... $ 9.75
-----
Gross Dividend Per Unit........................................... $ 0.25
Less: Excess Charge Per Unit..................................... - $ 0.00085
--------
Net Dividend Per Unit............................................. $ 0.24915
Times: Number of Accumulation Units.............................. x 5,000
--------
Net Dividend Amount............................................... $1,245.75
--------------------------------------------------------------------------------
The net dividend amount would be reinvested on the Reinvestment Date in
Accumulation Units of the Equity Subaccount, as follows: $0.24915 (net dividend
per unit) divided by $9.75 (Accumulation Unit value as of the Reinvestment Date)
times 5,000 Units equals 127.769 Accumulation Units. On the Reinvestment Date,
127.769 Accumulation Units are added to Contract Value for a total of 5,127.769
Accumulation Units after the dividend reinvestment. Contract Value on the
Reinvestment Date is equal to 5,127.769 Accumulation Units times $9.75
(Accumulation Unit Value as of the Reinvestment Date) for a Contract Value of
$49,995.75 after the dividend reinvestment.
After the Annuity Start Date, Security Benefit will deduct a mortality and
expense risk charge of 1.25% under Annuity Options 1 through 4, 7 and 8. This
charge is factored into the annuity unit values on each Valuation Date. Monthly
dividends are payable after the Annuity Start Date only with respect to Annuity
Options 5 and 6.
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
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 $10,500 a year. The $10,500 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 $10,500 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.
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 Money Market Subaccount will be based on the change
in the value, exclusive of capital changes and income other than investment
income, of a hypothetical investment in a Contract over a particular seven day
period, less a hypothetical charge reflecting deductions from the Contract
during the period (the "base period") and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest one hundredth of one percent. Any
quotations of effective yield for the Money Market Subaccount assume that all
dividends received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the yield
calculation, which is then annualized to reflect weekly compounding pursuant to
the following formula:
Effective Yield = [(Base Period Return + 1)^365/7] - 1
For the seven-day period ended December 31, 1999, the yield for the Money Market
Subaccount was 4.16% and the effective yield for the Money Market Subaccount was
4.24%.
Quotations of yield for the Subaccounts, other than the Money Market Subaccount,
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 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 will 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
SBL Fund, adjusted to reflect the maximum charges imposed under the Contract.
Average annual total return figures reflect the deduction of the maximum
mortality and expense risk and optional Rider charges of 1.85%, the
administration charges, the account administration charge and the contingent
deferred sales charge. Total return figures may be quoted that do not reflect
deduction of the contingent deferred sales charge and reflect mortality and
expense and optional Rider charges of 1.05%. The contingent deferred sales
charge and maximum mortality and expense and optional Rider charges if reflected
would lower the level of return quoted. Total return figures that do not reflect
deduction of all charges will be accompanied by total return figures that
reflect such charges.
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) except the
applicable contingent deferred sales charge.
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
The consolidated balance sheets of Security Benefit Life Insurance Company and
Subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of income, changes in stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1999, are set forth herein,
starting on page 7.
The consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries, which are included in this Statement of Additional
Information, should be considered only as bearing on the ability of Security
Benefit 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>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
To be filed by amendment.
b. Exhibits
(1) Resolution of the Board of Directors of Security Benefit
Life Insurance Company authorizing establishment of the
Separate Account
(2) Not Applicable
(3) (a) Service Facilities Agreement(a)
(b) Marketing Organization Agreement(b)
(c) SBL Variable Products Broker/Dealer Sales Agreement(c)
(d) SBL Variable Product Sales Agreement (3-Way Agreement)
(e) SBL Variable Products Schedule of Commissions
(to be filed by amendment)
(4) (a) Individual Contract (Form V6029 8-00)
(b) Individual Contract-Unisex (Form V6029U 8-00)
(c) Tax-Sheltered Annuity Endorsement (Form 6832A R9-96)(d)
(d) Withdrawal Charge Waiver Endorsement
(Form V6051 3-96)(d)
(e) Waiver of Withdrawal Charge for Terminal Illness
Endorsement (Form V6051 TI 2-97)(d)
(f) Individual Retirement Annuity Endorsement
(Form V6849A 1-97)(e)
(g) Annuity Loan Provisions Endorsement
(Form V6846-1 7-97)(a)
(h) Roth IRA Endorsement (Form V6851 10-97)(e)
(i) Section 457 Endorsement (Form V6054 1-98)(e)
(j) 403a Endorsement (Form V6057 10-98)(f)
(k) Annual Stepped Up Death Benefit Rider (Form V6063 8-00)
(l) Guaranteed Growth Death Benefit Rider
(Form V6063-1 8-00)
(m) Annual Stepped Up and Guaranteed Growth Death Benefit
Rider (Form V6063-2 8-00)
(n) Disability Rider (Form V6064 8-00)
(o) Guaranteed Income Benefit Rider (Form V6065 8-00)
(p) Credit Enhancement Rider (Form V6067 8-00)
(q) Asset Allocation Rider (Form V6068 8-00)
(5) (a) Application (Form V9493 8-00)
(b) Application - Unisex (Form V9493U 8-00)
(6) (a) Composite of Articles of Incorporation of SBL(g)
(b) Bylaws of SBL(g)
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Powers of Attorney of Howard R. Fricke, Kris A. Robbins,
Sister Loretto Marie Colwell, John C. Dicus, Steven J.
Douglass, William W. Hanna, John E. Hayes, Jr., Frank C.
Sabatini, and Robert C. Wheeler
(a) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature 's Post-Effective Amendment No. 1 under the Securities Act of
1933 and Amendment No. 2 under the Investment Company Act of 1940 to
Registration Statement No. 333-23723 (filed October 15, 1997).
(b) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature's Post-Effective Amendment No. 23 under the Securities Act of
1933 and Amendment No. 22 under the Investment Company Act of 1940 to the
Registration Statement 2-89328 (filed May 1, 2000).
(c) Incorporated herein by reference to Exhibits filed with the Variflex
Separate Account Post-Effective Amendment No. 22 under the Securities Act
of 1933 and Amendment No. 21 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (filed April 29, 1999).
(d) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature Initial Registration Statement No. 333-23723 (filed March 16,
1997).
(e) Incorporated herein by reference to the Exhibits filed with Variflex
Signature's Post-Effective Amendment No. 2 under the Securities Act of 1933
and Amendment No. 3 under the Investment Company Act of 1940 to
Registration Statement 333-23723 (filed April 30, 1998).
(f) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature's Post-Effective Amendment No. 4 under the Securities Act of 1933
and Amendment No. 5 under the Investment Company Act of 1940 to the
Registration Statement 333-23723 (filed April 30, 1999).
(g) Incorporated herein by reference to the Exhibits filed with the Variflex
Separate Account's Post-Effective Amendment No. 20 under the Securities Act
of 1933 and Amendment No. 19 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (Filed August 17, 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
Kris A. Robbins* President, Chief Operating Officer
and Director
Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66606
John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603
Steven J. Douglass Director
3231 East 6th Street
Topeka, Kansas 66607
William W. Hanna Director
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes, Jr. Director
200 Gulf Blvd.
Belleair, Florida 33786
Frank C. Sabatini Director
120 SW 6th Street
Topeka, Kansas 66603
Robert C. Wheeler Director
P.O. Box 148
Topeka, Kansas 66601
Pat A. Loconto Director
1633 Broadway, 35th Fl.
New York, NY 10019-6754
Donald J. Schepker* Senior Vice President,
Chief Financial Officer and Treasurer
Roger K. Viola* Senior Vice President,
General Counsel and Secretary
Malcolm E. Robinson* Senior Vice President and
Assistant to the Chairman and CEO
John D. Cleland* Senior Vice President
Terry A. Milberger* Senior Vice President
Venette K. Davis* Senior Vice President
J. Craig Anderson* Senior Vice President
Gregory J. Garvin* Senior Vice President
James R. Schmank* Senior Vice President
Kalman Bakk, Jr.* Senior Vice President
Amy J. Lee* Associate General Counsel, Vice
President and Assistant Secretary
Thomas A. Swank* Senior Vice President and
Chief Investment Officer
*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" or "the
Company"), is owned by Security Benefit Corp. through the ownership of
700,000 of SBL's 700,010 issued and outstanding shares of common
stock. One share 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 ("SBMHC"), which in turn is controlled by SBL
policyholders. As of December 31, 1999 no one person holds more than
approximately 0.0004% of the voting power of SBMHC. 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 XIV or SBL:
<TABLE>
<CAPTION>
PERCENT OF VOTING
JURISDICTION OF SECURITIES OWNED BY SBMHC
NAME INCORPORATION (DIRECTLY OR INDIRECTLY)
---- --------------- -------------------------
<S> <C> <C>
Security Benefit Mutual Holding Company Kansas ---
(Holding Company)
Security Benefit Corp. Kansas 100%
(Holding Company)
Security Benefit Life Insurance Company Kansas 100%
(Stock Life Insurance Company)
Security Benefit Group, Inc. Kansas 100%
(Holding Company)
Security Management Company, LLC Kansas 100%
(Investment Adviser)
Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal
Underwriter of Mutual Funds)
First Advantage Insurance Agency, Inc. Kansas 100%
(Insurance Agency)
Security Benefit Academy, Inc. Kansas 100%
(Daycare Company)
Security Financial Resources, Inc. Kansas 100%
(Financial Services)
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 X, SBL Variable Life
Insurance Account Varilife, Security Varilife Separate Account, SBL
Variable Annuity Account VIII (Variflex LS), SBL Variable Annuity
Account VIII (Variflex Signature), SBL Variable Annuity Account VIII
(Extra Credit), Variable Annuity Account XI, Variflex Separate
Account, T. Rowe Price Variable Annuity Account, and Parkstone
Variable Annuity Separate Account.
Through the above-referenced separate accounts, SBL might be deemed to
control the open-end management investment companies listed below. As
of December 31, 1999 the approximate percentage of ownership by the
separate accounts for each company is as follows:
Security Growth and Income Fund.... 40.0%
SBL Fund........................... 100.0%
Security Ultra Fund................ 42.0%
Advisor's Fund..................... 100.0%
ITEM 27. NUMBER OF CONTRACTOWNERS
As of June 1, 2000, there were no owners of the contract issued under
SBL Variable Annuity Account XIV.
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 by the Depositor of expenses
incurred or paid by a director, officer or controlling person of the
Depositor 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 Contract issued under SBL Variable Annuity
Account XIV. SDI performs similar functions for SBL Variable
Annuity Accounts I, III, IV and X, SBL Variable Life Insurance
Account Varilife, Security Varilife Separate Account, SBL
Variable Annuity Account VIII (Variflex LS, Variflex Signature,
and Extra Credit), Variable Annuity Account XI, 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, SBL Fund and Security Ultra Fund.
(b) NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
Gregory J. Garvin President and Director
John D. Cleland Vice President and Director
James R. Schmank Director
Mark E. Young Director
Amy J. Lee Secretary
Brenda M. Harwood Treasurer and 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 thereunder are maintained by SBL at its
administrative offices--700 SW Harrison, 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
Variable Annuity 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) 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.
(f) SBL, sponsor of the unit investment trust, SBL Variable Annuity
Account XIV, 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.
<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, State of Kansas on this 20th day of June, 2000.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman (The Depositor)
of the Board, and
Chief Executive Officer By: HOWARD R. FRICKE
--------------------------------------------
Kris A. Robbins Howard R. Fricke, Chairman of the Board
Director, President and and Chief Executive Officer as Attorney-
Chief Operating Officer In-Fact for the Officers and Directors Whose
Names Appear Opposite
Sister Loretto Marie Colwell
Director
VARIABLE ANNUITY ACCOUNT XIV
John C. Dicus (The Registrant)
Director
By: SECURITY BENEFIT LIFE INSURANCE COMPANY
William W. Hanna (The Depositor)
Director
By: HOWARD R. FRICKE
John E. Hayes, Jr. --------------------------------------------
Director Howard R. Fricke, Chairman of the Board
and Chief Executive Officer
Frank C. Sabatini
Director
By: DOUGLAS D. NELSON
Robert C. Wheeler --------------------------------------------
Director Douglas D. Nelson, Vice President
Steven J. Douglass
Director (ATTEST): ROGER K. VIOLA
--------------------------------------
Roger K. Viola, Senior Vice President,
General Counsel and Secretary
Date: June 20, 2000
<PAGE>
EXHIBIT INDEX
(1) Resolution
(2) None
(3) (a) SBL Variable Product Sales Agreement (3-Way Agreement)
(b) SBL Variable Products Schedule of Commissions
(to be filed by amendment)
(4) (a) Individual Contract (Form V6029 8-00)
(b) Individual Contract - Unisex (Form V6029U 8-00)
(c) Annual Stepped Up Death Benefit Rider (Form V6063 8-00)
(d) Guaranteed Growth Death Benefit Rider (Form V6063-1 8-00)
(e) Annual Stepped Up and Guaranteed Growth Death Benefit Rider
(Form V6063-2 8-00)
(f) Disability Rider (Form V6064 8-00)
(g) Guaranteed Income Benefit Rider (Form V6065 8-00)
(h) Credit Enhancement Rider (Form V6067 8-00)
(i) Asset Allocation Rider (Form V6068 8-00)
(5) (a) Application (Form V9493 8-00)
(b) Application - Unisex (Form V9493U 8-00)
(6) (a) None
(b) None
(7) None
(8) None
(9) Opinion of Counsel
(10) None
(11) None
(12) None
(13) None
(14) Powers of Attorney
