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VARIABLE ANNUITY IV
1996 ANNUAL REPORT
[SBL LOGO]
Security Benefit Life Insurance Company
A Member of The Security Benefit
Group of Companies
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A LETTER FROM THE PRESIDENT
Security Benefit is one company dedicated to the successful mastery of our
mission: MAINTAINING A STRONG FINANCIAL POSITION AND CONSISTENT GROWTH FOR THE
PROTECTION AND SECURITY OF ALL OF OUR POLICYHOLDERS AND CUSTOMERS. All of us at
Security Benefit renew our commitment to this mission every day. We want to be
the best and do our best for you. As a member of the Security Benefit team, I am
especially proud that mastering successful growth is an achievement we have come
to expect as a team.
It is my pleasure to report that 1996 was again a record year of outstanding
achievements for Security Benefit.
* Sales surpassed 1995 results by 48%
* Profits are up 18% over last year
* Revenues and deposit funds exceeded 1995 results by 28%
* Company assets rose 17% over 1995 figures
These accomplishments would just be facts on paper without the efforts of the
people who work at Security Benefit. They are the heart of our company, and I am
proud to be part of their team.
My wish for 1997 is to have another record year for our company. Last year's
accomplishments will be difficult to top but all of us at Security Benefit have
our sights and goals set high. We are well positioned with new, creative
products designed in response to our customers' changing investment goals and
lifestyle requirements. We know true mastery does not come easily. With
perseverance and attention to constantly improving what we do best, I know we
can do it.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board
President and Chief Executive Officer
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BOARD OF DIRECTORS
HOWARD R. FRICKE
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Security Benefit Life Insurance Company
Topeka, Kansas
THOMAS R. CLEVENGER
Wichita, Kansas
SISTER LORETTO MARIE COLWELL
PRESIDENT
St. Francis Hospital and Medical Center
Topeka, Kansas
JOHN C. DICUS
CHAIRMAN OF THE BOARD
Capitol Federal Savings & Loan Association
Topeka, Kansas
MELANIE S. FANNIN
PRESIDENT
Kansas - Southwestern Bell Telephone
Topeka, Kansas
WILLIAM W. HANNA
PRESIDENT & CHIEF OPERATING OFFICER
Koch Industries
Wichita, Kansas
JOHN E. HAYES, JR.
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Western Resources, Inc.
Topeka, Kansas
LAIRD G. NOLLER
PRESIDENT
Noller Enterprises
Topeka, Kansas
FRANK SABATINI
CHAIRMAN OF THE BOARD AND PRESIDENT
Capital City Bank
Topeka, Kansas
ROBERT C. WHEELER
PRESIDENT
Hill's Pet Nutrition, Inc.
Topeka, Kansas
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 3, 1997 at Security Benefit Life, 700 SW Harrison St., Topeka,
Kansas, at 2:00 p.m. Each policyowner is entitled to vote, either in person or
by proxy, on all matters coming before the meeting. Proxies are available from
the corporate secretary and must be returned at least 30 days prior to the
annual meeting.
This report is submitted only for the general information of Security Benefit
Life Variable Annuity contractowners and participants and is not authorized for
distribution to the public.
For More Information Call
1-800-888-2461
www.securitybenefit.com
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REPORT OF INDEPENDENT AUDITORS
The Contractowners of SBL Variable Annuity Account IV and
The Board of Directors of Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of SBL Variable Annuity Account
IV (the Company) as of December 31, 1996, and the related statement of
operations and changes in net assets for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SBL Variable Annuity Account IV
at December 31, 1996, and the results of its operations and changes in its net
assets for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 7, 1997
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SBL Variable Annuity Account IV
BALANCE SHEET
December 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 3,380,078 shares at net asset value
of $24.31 per share (cost, $64,203)........................... $ 82,170
Series B (Growth-Income Series) - 1,302,394 shares at net asset
value of $35.40 per share (cost, $38,279)..................... 46,105
Series C (Money Market Series) - 1,557,739 shares at net asset
value of $12.56 per share (cost, $19,451)..................... 19,565
Series D (Worldwide Equity Series) - 1,258,676 shares at net
asset value of $6.14 per share (cost, $6,581)................. 7,728
Series E (High Grade Income Series) - 414,893 shares at net
asset value of $12.00 per share (cost, $5,050)................ 4,979
Series J (Emerging Growth Series) - 467,582 shares at net asset
value of $18.25 per share (cost, $7,924)...................... 8,533
Series K (Global Aggressive Bond Series) - 59,329 shares at net
asset value of $10.72 per share (cost, $623).................. 636
Series M (Specialized Asset Allocation Series) - 26,458 shares
at net asset value of $12.05 per share (cost, $285)........... 319
Series N (Managed Asset Allocation Series) - 125,395 shares at
net asset value of $12.02 per share (cost, $1,262)............ 1,507
Series O (Equity Income Series) - 27,757 shares at net asset
value of $14.01 per share (cost, $355)........................ 389
Series S (Social Awareness Series) - 43,574 shares at net asset
value of $19.08 per share (cost, $703)........................ 831
Mortality guarantee receivable....................................... 18
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Total assets......................................................... $172,780
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See accompanying notes.
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NET ASSETS
Net assets are represented by (Note 3):
NUMBER OF UNIT
UNITS VALUE AMOUNT
--------- ----- ------
Growth Series:
Accumulation units............. 1,112,722 $73.45 $ 81,734
Annuity reserves............... 5,951 73.45 437 $ 82,171
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Growth-Income Series:
Accumulation units............. 647,530 70.14 45,420
Annuity reserves............... 10,003 70.14 702 46,122
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Money Market Series:
Accumulation units............. 706,256 26.93 19,020
Annuity reserves............... 20,245 26.93 545 19,565
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Worldwide Equity Series:
Accumulation units............. 451,281 16.96 7,655
Annuity reserves............... 4,333 16.96 73 7,728
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High Grade Income Series:
Accumulation units............. 197,277 24.96 4,924
Annuity reserves............... 2,187 24.96 55 4,979
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Emerging Growth Series:
Accumulation units............. 444,300 18.97 8,429
Annuity reserves............... 5,505 18.97 104 8,533
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Global Aggressive Bond Series:
Accumulation units............. 51,986 12.23 636
Specialized Asset Allocation Series:
Accumulation units............. 26,059 12.23 319
Managed Asset Allocation Series:
Accumulation units............. 124,533 12.10 1,507
Equity Income Series:
Accumulation units............. 27,691 14.04 389
Social Awareness Series:
Accumulation units............. 40,742 20.05 817
Annuity reserves............... 726 20.05 14 831
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Total net assets................... $172,780
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SBL Variable Annuity Account IV
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH
GROWTH- MONEY WORLDWIDE GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
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<S> <C> <C> <C> <C> <C> <C>
Dividend distributions.......................... $641 $929 $456 $230 $298 $21
Expenses (Note 2):
Mortality and expense risk fee............... (438) (567) (364) (8) (91) (4)
Administrative fee........................... (41) (42) (19) (1) (5) (1)
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Net investment income .......................... 162 320 73 221 202 16
Capital gains distributions..................... 3,971 4,491 - 217 - 496
Realized gain (loss) on investments............. 3,716 2,796 100 643 (84) 1,766
Unrealized appreciation (depreciation) on
investments.................................. 7,647 (617) 366 241 (272) (122)
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Net realized and unrealized gain (loss) on
investments.................................. 15,334 6,670 466 1,101 (356) 2,140
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Net increase (decrease) in net assets resulting
from operations.............................. 15,496 6,990 539 1,322 (154) 2,156
Net assets at beginning of year................. 71,976 43,886 20,968 8,284 5,895 4,224
Variable annuity deposits (Notes 2 and 3)....... 10,510 3,725 18,958 1,703 994 12,037
Terminations and withdrawals (Notes 2 and 3).... (15,683) (8,440) (20,661) (3,529) (1,746) (9,709)
Annuity payments (Notes 2 and 3)................ (132) (64) (240) (52) (10) (175)
Net mortality guarantee transfer................ 4 25 1 - - -
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Net assets at end of year....................... $82,171 $46,122 $19,565 $7,728 $4,949 $8,533
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</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
SPECIALIZED MANAGED
GLOBAL ASSET ASSET EQUITY SOCIAL
AGGRESSIVE ALLOCATION ALLOCATION INCOME AWARENESS
BOND SERIES SERIES SERIES SERIES SERIES
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<S> <C> <C> <C> <C> <C>
Dividend distributions.......................... $43 $3 $8 $1 $3
Expenses (Note 2):
Mortality and expense risk fee............... (21) (1) (2) (2) -
Administrative fee........................... - - - - -
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Net investment income (loss).................... 22 2 6 (1) 3
Capital gains distributions..................... 7 1 1 - 17
Realized gain on investments.................... 29 58 1 73 93
Unrealized appreciation (depreciation) on
investments.................................. 2 (5) 160 (13) 11
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Net realized and unrealized gain on
investments.................................. 38 54 162 60 121
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Net increase in net assets resulting from
operations................................... 60 56 168 59 124
Net assets at beginning of year................. 526 744 1,281 377 734
Variable annuity deposits (Notes 2 and 3)....... 365 105 61 462 358
Terminations and withdrawals (Notes 2 and 3).... (315) (586) (3) (509) (385)
Annuity payments (Notes 2 and 3)................ - - - - -
Net mortality guarantee transfer................ - - - - -
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Net assets at end of year....................... $636 $319 $1,507 $389 $831
==========================================================
</TABLE>
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SBL Variable Annuity Account IV
Notes to Financial Statements
December 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - SBL Variable Annuity Account IV (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended. Deposits received by the Account are invested in the SBL Fund, a
mutual fund not otherwise available to the public. As directed by the owners,
amounts deposited may be invested in shares of Series A (Growth Series -
emphasis on capital appreciation), Series B (Growth-Income Series - emphasis on
capital appreciation with secondary emphasis on income), Series C (Money Market
Series - emphasis on capital preservation while generating interest income),
Series D (Worldwide Equity Series - emphasis on long-term capital growth through
investment in foreign and domestic common stocks and equivalents), Series E
(High Grade Income Series - emphasis on current income with security of
principal), Series J (Emerging Growth Series - emphasis on capital
appreciation), Series K (Global Aggressive Bond Series - emphasis on high
current income with secondary emphasis on capital appreciation), Series M
(Specialized Asset Allocation Series - emphasis on high total return consisting
of capital appreciation and current income), Series N (Managed Asset Allocation
Series - emphasis on high level of total return), Series O (Equity Income Series
- - emphasis on substantial dividend income and capital appreciation) and Series S
(Social Awareness Series - emphasis on high total return).
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company, LLC (SMC),
which is owned 50% by SBL and 50% by Security Benefit Group, Inc. (SBG), a
wholly-owned subsidiary of SBL. SMC has engaged Lexington Management Corporation
to provide sub-advisory services for the Worldwide Equity Series and Global
Aggressive Bond Series and has engaged T. Rowe Price Associates, Inc. to provide
sub-advisory services for the Managed Asset Allocation Series and the Equity
Income Series. SMC has also entered into agreements with Templeton Quantitative
Advisors, Inc. and Meridian Investment Management Corporation to provide certain
quantitative research services with respect to the Specialized Asset Allocation
Series.
INVESTMENT VALUATION - Investments in mutual fund shares are carried in the
balance sheet at market value (net asset value of the underlying mutual fund).
The first-in, first-out cost method is used to determine gains and losses.
Security transactions are accounted for on the trade date.
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of investments purchased and proceeds from investments sold during 1996
were as follows (In Thousands):
COST OF PROCEEDS FROM
PURCHASES SALES
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Growth Series............................... $15,714 $16,887
Growth-Income Series........................ 9,333 9,372
Money Market Series......................... 19,502 21,376
Worldwide Equity Series..................... 2,199 3,640
High Grade Income Series.................... 1,310 1,869
Emerging Growth Series...................... 12,596 9,931
Global Aggressive Bond Series............... 415 336
Specialized Asset Allocation Series......... 109 588
Managed Asset Allocation Series............. 71 6
Equity Income Series........................ 481 529
Social Awareness Series..................... 383 390
SBG's investment in the subaccounts represented the following number of units
and contract value of SBL Variable Annuity Account IV contracts owned at
December 31, 1996 (DOLLARS IN THOUSANDS):
NUMBER OF UNITS CONTRACT VALUE
--------------------------------
Global Aggressive Bond Series 47,195 $ 577
Managed Asset Allocation Series 115,000 1,391
ANNUITY RESERVES - Annuity reserves relate to contracts that have matured and
are in the payout stage. Such reserves are computed on the basis of published
mortality tables, using assumed interest rates that will provide reserves as
prescribed by law. In cases where the payout option selected is life contingent,
SBL periodically recalculates the required annuity reserves, and any resulting
adjustment is either charged or credited to SBL and not to the Account.
REINVESTMENT OF DIVIDENDS - Dividend and capital gains distributions paid by the
mutual fund to the Account are reinvested in additional shares of each
respective Series. Dividend income and capital gains distributions are recorded
as income on the ex-dividend date.
FEDERAL INCOME TAXES - Under current law, no federal income taxes are payable
with respect to the Account.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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SBL Variable Annuity Account IV
Notes to Financial Statements
December 31, 1996
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts an administrative fee of $30 per year for each contract except for
certain contracts based on a minimum account value and the period of time the
contract has been in force. Mortality and expense risks assumed by SBL are
compensated for by a fee equivalent to an annual rate ranging from 0.85% to 1.1%
of the asset value of each contract, of which 0.7% is for assuming mortality
risks and the remainder is for assuming expense risks.
When applicable, an amount for state premium taxes is deducted as provided by
pertinent state law, either from purchase payments or from the amount applied to
effect an annuity at the time annuity payments commence.
A contingent deferred sales charge is assessed by SBL against certain
withdrawals during the first 10 years of the contract, declining from 9% in the
first year to 1% in the tenth year. Such surrender charges and other contract
charges were insignificant during 1996.
3. SUMMARY OF UNIT TRANSACTIONS (IN THOUSANDS)
UNITS
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Growth Series:
Variable annuity deposits............................................ 162
Terminations, withdrawals, annuity payments and expense charges...... 245
Growth-Income Series:
Variable annuity deposits............................................ 59
Terminations, withdrawals, annuity payments and expense charges...... 142
Money Market Series:
Variable annuity deposits............................................ 721
Terminations, withdrawals, annuity payments and expense charges...... 813
Worldwide Equity Series:
Variable annuity deposits............................................ 110
Terminations, withdrawals, annuity payments and expense charges...... 228
High Grade Income Series:
Variable annuity deposits............................................ 41
Terminations, withdrawals, annuity payments and expense charges...... 76
Emerging Growth Series:
Variable annuity deposits............................................ 727
Terminations, withdrawals, annuity payments and expense charges...... 540
Global Aggressive Bond Series:
Variable annuity deposits............................................ 32
Terminations, withdrawals, annuity payments and expense charges...... 29
Specialized Asset Allocation Series:
Variable annuity deposits............................................ 9
Terminations, withdrawals, annuity payments and expense charges...... 53
Managed Asset Allocation Series:
Variable annuity deposits............................................ 6
Terminations, withdrawals, annuity payments and expense charges...... -
Equity Income Series:
Variable annuity deposits............................................ 37
Terminations, withdrawals, annuity payments and expense charges...... 41
Social Awareness Series:
Variable annuity deposits............................................ 19
Terminations, withdrawals, annuity payments and expense charges...... 21
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[SBG LOGO] BULK RATE
The Security Benefit Group of Companies U.S. POSTAGE PAID
700 SW Harrison St., TOPEKA, KS
Topeka, Kansas 66636-0001 PERMIT NO. 428
