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File No. 2-89328
File No. 811-3957
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Post-Effective Amendment No. 17 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 16 |X|
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(Check appropriate box or boxes)
VARIFLEX
(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:
(913) 295-3000
Copies to:
Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group Dechert, Price & Rhoads
700 Harrison Street 1500 K Street, N.W.
Topeka, KS 66636-0001 Washington, DC 20005
(Name and address of Agent for Service)
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on July 1, 1996 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of Rule 485
|_| on July 1, 1996, pursuant to paragraph (a)(i) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
|_| on July 1, 1996, pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Pursuant to Regulation 270.24f-2 of the Investment Company Act of 1940, the
Registrant has elected to register an indefinite number of securities. The
Registrant filed the Notice required by 24f-2 on February 28, 1996.
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Cross Reference Sheet
Pursuant to Rule 495(a)
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
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PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
1. Cover Page............................. Cover Page
2. Definitions............................ Glossary of Terms
3. Synopsis............................... Summary of the Contract; Summary
of Expenses
4. Condensed Financial Information
(a) Accumulated Unit Values........... Condensed Financial Information
(b) Performance Data.................. Performance Information
(c) Additional Financial Information.. Financial Statements
5. General Description of Registrant,
Depositor, and Portfolio Companies
(a) Depositor......................... Security Benefit Life Insurance
Company
(b) Registrant........................ Variflex
(c) Portfolio Company................. SBL Fund
(d) Fund Prospectus................... SBL Fund
(e) Voting Rights..................... Voting Rights
(f) Administrators.................... N/A
6. Deductions and Expenses................ Charges and Deductions
(a) General........................... Other Charges; Administrative
Fees; Actuarial Risk Fee; State
Premium Taxes; Charges for Taxes
(b) Sales Load %...................... Contingent Deferred Sales Charge
(c) Special Purchase Plan............. Variations in Charges
(d) Commissions....................... Contingent Deferred Sales Charge
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PART A (Continued)
ITEM OF FORM N-4 PROSPECTUS CAPTION
(e) Fund Expenses..................... SBL Fund; Summary of Expenses
(f) Organization Expenses............. N/A
7. General Description of Contracts
(a) Persons with Rights............... Variflex Contracts; Distributions
Under the Contract; Voting
Rights; The General Account;
Types of Variflex Contracts
(b) (i) Allocation of Purchase
Payments..................... Allocation of Purchase Payments
(ii) Transfers.................... Transfer of Contract Value
(iii) Exchanges.................... N/A
(c) Changes........................... Purpose of the Contracts;
Substituted Securities
(d) Inquiries......................... Contractowner Inquiries
8. Annuity Period......................... Annuity Period; Annuity
Provisions; Election of Annuity
Commencement Date and Form of
Annuity; Non-Qualified Contracts;
Qualified Contracts; Allocation
of Benefits
9. Death Benefit.......................... Death Benefit During Accumulation
Period; Optional Annuity Forms
10. Purchases and Contract Value
(a) Purchases......................... Contract Application and Purchase
Payments; Crediting of
Accumulation Units
(b) Valuation......................... Accumulation Period; Crediting of
Accumulation Units; Value of
Variable Annuity Payments:
Assumed Investment Rates
(c) Daily Calculation................. Crediting of Accumulation Units
(d) Underwriter....................... Distributor of the Contracts
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PART A (Continued)
ITEM OF FORM N-4 PROSPECTUS CAPTION
11. Redemptions
(a) - By Owners....................... Full and Partial Withdrawals;
Systematic Withdrawals; Loans
Available from Certain Qualified
Contracts; Constraints on
Distributions from Certain
Section 403(b) Annuity Contracts
- By Annuitant.................... Optional Annuity Forms
(b) Texas ORP......................... Restrictions Under the Texas
Optional Retirement Program
(c) Check Delay....................... N/A
(d) Lapse............................. Contract Application and Purchase
Payments; Full and Partial
Withdrawals
(e) Free Look......................... Free-Look Right; Contract
Application and Purchase Payments
12. Taxes................................... Federal Tax Matters; Qualified
Contracts; Non-Qualified
Contracts; Taxation of Owners of
Two or More Contracts; State
Premium Taxes; Charges for Taxes
13. Legal Proceedings...................... N/A
14. Table of Contents for the Statement
of Additional Information.............. Statement of Additional
Information
PART B
STATEMENT OF ADDITIONAL
ITEM OF FORM N-4 INFORMATION CAPTION
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Other Information; Legal Matters
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PART B (Continued)
STATEMENT OF ADDITIONAL
ITEM OF FORM N-4 INFORMATION CAPTION
18. Services
(a) Fees and Expenses of Registrant... Variations in Charges; Additional
Federal Tax Matters
(b) Management Contracts.............. Records and Reports
(c) Custodian......................... Safekeeping of Variflex Account
Assets
Independent Public Accountant..... Experts
(d) Assets of Registrant.............. N/A
(e) Affiliated Persons................ N/A
(f) Principal Underwriter............. Distribution of the Contracts
19. Purchase of Securities Being Offered... Group Contracts; Distribution
of the Contracts; State
Regulation
20. Underwriters........................... Distribution of the Contracts
21. Calculation of Performance Data........ Performance Information
22. Annuity Payments....................... The Contract; Valuation of
Accumulation Units; Computation
of Variable Annuity Payments;
Illustration; Termination of
Contract; Limits on Stipulated
Payments (Under the Internal
Revenue Code); Assignment
23. Financial Statements................... Financial Statements; Taxation of
SBL; Tax Status of the Contracts
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VARIFLEX
PROSPECTUS
JULY 1, 1996
Also including a prospectus
for SBL Fund, a Member of
the Security Benefit Group
of Companies
[SBLIC LOGO]
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VARIFLEX
VARIABLE ANNUITY CONTRACTS
SOLD BY--
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON, TOPEKA, KANSAS 66636-0001
(913) 295-3000
This Prospectus describes the Variflex Variable Annuity Contracts (the
"Variflex Contracts" or "Contracts") offered by Security Benefit Life Insurance
Company ("SBL"). The Contracts may be issued for use with retirement plans
qualified for favorable tax treatment under the Internal Revenue Code, such as
pension and profit sharing plans, annuity purchase plans of public school
systems and certain tax-exempt organizations, individual retirement plans and
individual retirement annuities, and certain deferred compensation plans of
state and local governments and with plans and trusts which are not so
qualified. This Prospectus offers Contracts which may be purchased with single
or multiple purchase payments, with annuity payments commencing immediately or
at some later date. The Contracts are offered on both an individual and group
basis.
Variflex Contracts offer Contractowners and Participants the opportunity to
arrange for a Variable Annuity, with lifetime or other annuity payments based on
the investment performance of one or more Series of Variflex. Variflex, a
separate account of SBL, is registered as a unit investment trust and issues
eleven separate series--Growth Series, Growth-Income Series (formerly the
"Income-Growth Series"), Money Market Series, Worldwide Equity Series (formerly
the "High Yield Series"), High Grade Income Series (formerly the "U.S.
Government Series"), Social Awareness Series, Emerging Growth Series, Global
Aggressive Bond Series, Specialized Asset Allocation Series, Managed Asset
Allocation Series, and Equity Income Series. Each Series reflects the investment
results of a corresponding series of SBL Fund ("the Fund"), a registered
open-end management investment company.
Contractowners and Participants may additionally elect to accumulate values
and receive all or a portion of the benefits in the form of Guaranteed Annuity
payments funded by the General Account assets of SBL.
Depending on the state where the Contract is sold, it may contain a
provision which allows the Contract to be canceled within 10 or more days after
receipt of the Contract.
This Prospectus sets forth the information that a prospective investor
should know before investing. A Statement of Additional Information about the
Variflex Contract and Variflex is free and may be obtained by writing SBL at the
address above or by calling (913) 295-3112 or (800) 888-2461, extension 3112.
The Statement of Additional Information, which has the same date as this
Prospectus, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents of the Statement of
Additional Information is set forth at the end of this Prospectus.
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ATTACHED TO THIS PROSPECTUS IS A CURRENT PROSPECTUS OF SBL FUND. BOTH
PROSPECTUSES SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE CONTRACT AND CERTAIN VARIFLEX SERIES ARE NOT AVAILABLE IN ALL STATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE CONTRACT INVOLVES RISK, INCLUDING LOSS OF PRINCIPAL, AND IS NOT A DEPOSIT OR
OBLIGATION OF, OR GUARANTEED BY, ANY BANK. THE CONTRACT IS NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
PROSPECTUS DATED: JULY 1, 1996 RETAIN FOR FUTURE REFERENCE
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1
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VARIFLEX CONTENTS
Page
Glossary of Terms........................................................... 3
Summary of the Contract .................................................... 4
Summary of Expenses ........................................................ 5
Condensed Financial Information ............................................ 7
Financial Statements ..................................................... 11
Security Benefit Life Insurance Company and Variflex ....................... 11
Security Benefit Life Insurance Company .................................. 11
Variflex ................................................................. 11
SBL Fund ................................................................... 11
Voting Rights ............................................................ 12
Substituted Securities ................................................... 12
Variflex Contracts ......................................................... 12
Purpose of the Contracts.................................................. 12
Types of Variflex Contracts .............................................. 13
Contract Application and Purchase Payments ............................... 13
Allocation of Purchase Payments .......................................... 14
Crediting of Accumulation Units .......................................... 14
Dollar Cost Averaging Option.............................................. 14
Asset Reallocation Option................................................. 14
Transfer of Contract Value ............................................... 15
Contract Value............................................................ 15
Determination of Contract Value........................................... 15
Contractowner Inquiries .................................................. 16
Charges and Deductions ..................................................... 16
Contingent Deferred Sales Charge ......................................... 16
Hospital/Nursing Home Waiver.............................................. 17
Other Charges ............................................................ 17
(a) Administrative Fees .................................................. 17
(b) State Premium Taxes .................................................. 18
(c) Actuarial Risk Fee ................................................... 18
(d) Charges for Taxes .................................................... 18
Sequential Deduction of Fees ............................................. 18
Variations in Charges .................................................... 18
Distributions Under the Contract ........................................... 18
Accumulation Period ...................................................... 18
Full and Partial Withdrawals ............................................. 18
Systematic Withdrawals ................................................... 19
Free-Look Right........................................................... 20
Death Benefit During Accumulation Period ................................. 20
Loans Available from Certain Qualified Contracts ......................... 21
Constraints on Distributions from Certain Section 403(b) Annuity Contracts 21
Taxation of Owners of Two or More Contracts .............................. 22
Annuity Period ........................................................... 22
Annuity Provisions ....................................................... 22
Election of Annuity Commencement Date and Form of Annuity ................ 22
Allocation of Benefits ................................................... 23
Optional Annuity Forms ................................................... 23
Value of Variable Annuity Payments:
Assumed Investment Rates ............................................... 24
Restrictions Under the Texas Optional Retirement Program ................. 24
Federal Tax Matters ........................................................ 24
Qualified Contracts....................................................... 24
Non-Qualified Contracts................................................... 25
Distributor of the Contracts ............................................... 26
Performance Information .................................................. 26
The General Account ........................................................ 27
Statement of Additional Information ........................................ 27
THE CONTRACT AND CERTAIN VARIFLEX SERIES ARE NOT AVAILABLE IN ALL STATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, THE FUND'S PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION OF
THE FUND OR ANY SUPPLEMENT THERETO.
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2
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GLOSSARY OF TERMS
THE FOLLOWING DEFINITIONS MAY BE USEFUL IN READING THIS PROSPECTUS.
CERTAIN ADDITIONAL TERMS ARE DEFINED IN THE TEXT.
ACCUMULATION PERIOD--The period from the date Accumulation Units are first
purchased under the Contract to the Annuity Commencement Date, or, if earlier,
when the Contract is terminated, either through a full withdrawal, payment of
charges or payment of the death benefit.
ACCUMULATION UNIT--Unit of measure used to calculate the value of a
Contractowner's or Participant's interest in Variflex during the Accumulation
Period. The value of an Accumulation Unit fluctuates with the value of shares of
the corresponding series of the underlying Fund.
ANNUITANT--The person designated to receive, or actually receiving, annuity
payments under a Variflex Contract.
ANNUITY COMMENCEMENT DATE--The date when annuity payments are to begin.
CONTRACTOWNER--The person or entity entitled to exercise all legal rights of
ownership in a Variflex Contract and in whose name the Contract is issued.
CONTRACT DATE--The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that the initial Purchase Payment is credited to the Contract.
CONTRACT DEBT--The unpaid loan balance including accrued loan interest.
CONTRACT VALUE--The total value of the amounts in a Contract allocated to the
Series of Variflex and the General Account, as well as any amount set aside in
the General Account to secure loans as of any Valuation Date.
CONTRACT YEAR--Each twelve-month period measured from the Contract Date.
GUARANTEED ANNUITY--An annuity under which the amount of each annuity payment
does not vary with the investment experience of the Variflex Separate Account
and which is guaranteed by SBL.
GROUP ALLOCATED CONTRACT--A master agreement between the Contractowner and SBL
under which a Participant's individual account is established for each person
for whom payments are being made under the Plan.
GROUP UNALLOCATED CONTRACT--A Contract between the Contractowner and SBL under
which individual accounts are not established for each Participant, but instead,
all Accumulation Units are credited to one accumulation account; when a Plan
Participant becomes entitled to receive payments under the Plan, the appropriate
number of units may be withdrawn to purchase an Annuity.
HOSPITAL--An institution that is licensed as such by the Joint Commission of
Accreditation of Hospitals, or any lawfully operated institution that provides
in-patient treatment of sick and injured persons through medical, diagnostic and
surgical facilities directed by physicians and 24 hour nursing services.
NON-QUALIFIED CONTRACT--A Variflex Contract issued in connection with a
retirement plan that does not receive favorable tax treatment under Section 401,
403, 408 or 457 of the Internal Revenue Code.
PARTICIPANT--Any person who is covered under the terms of a group Variflex
Contract, and for whom an Annuity is being funded, particularly a person for
whom annuity payments have not commenced.
PARTICIPANT'S INDIVIDUAL ACCOUNT--The Participant's allocated share of the value
of a Group Allocated Variflex Contract.
PLAN--The document or agreement defining the retirement benefits and those who
are eligible to receive them. The Plan is not part of the Variflex Contract and
Security Benefit Life Insurance Company is not a party to the Plan.
PURCHASE PAYMENT--A payment made into a Variflex Contract.
QUALIFIED CONTRACT--A Variflex Contract issued in connection with a retirement
plan that receives favorable tax treatment under Section 401, 403, 408 or 457 of
the Internal Revenue Code.
QUALIFIED SKILLED NURSING FACILITY--A facility licensed by the state to provide
on a daily basis convalescent or chronic care for in-patients who, by reason of
infirmity or illness, are not able to care for themselves.
VALUATION DATE--Each date on which Variflex 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, Presidents' Day, Good Friday, Memorial Day, July Fourth, Labor Day,
Thanksgiving Day, and Christmas Day.
VALUATION PERIOD--A period used in measuring the investment experience of each
Series of Variflex. The Valuation Period begins at the close of one Valuation
Date and ends at the close of the next succeeding Valuation Date.
VARIABLE ANNUITY--An Annuity providing payments which vary in dollar amount
depending on the investment results of Variflex and the Fund.
VARIFLEX CONTRACTS-401(K) AND 408(K)--A version of the Variflex Contract offered
prior to May 1, 1990, to plans that qualify under Section 401(k) and 408(k)(6)
of the Internal Revenue Code. The differences between this contract and the
currently offered versions of the Variflex Contract qualifying under Section
401(k) and 408(k)(6) of the Code are noted where appropriate.
VARIFLEX INCOME VARIABLE ANNUITY ("VIVA") CONTRACT--A version of the Variflex
Contract offered prior to May 1, 1995 that is funded by a single payment, with
additional purchase payments allowed during the first Contract Year, pursuant to
which annuity payments will commence at some agreed time in the future. The
differences between this contract and the currently offered versions of the
Variflex Contract are noted where appropriate.
VARIFLEX CONTRACT--A contract issued pursuant to this Prospectus which sets
forth the obligations and contractual promises which SBL makes to the
Contractowner to provide a Guaranteed or Variable Annuity or combination
Guaranteed and Variable Annuity in return for Purchase Payments made for
allocation in any combination at the discretion of the Contractowner for
investment in one or more Series of Variflex or the General Account during the
Accumulation Period. Depending on the allocations made by the Contractowner,
benefits will be guaranteed (to the extent based on SBL's General Account) or
will reflect the investment results of selected Series of SBL Fund. A group
Variflex Contract is a master agreement between the Contractowner and the
insurance company covering the Participants in a Plan.
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3
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SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACTS
The objective of a Variable Annuity is to provide benefits which will tend,
to a greater degree than a Guaranteed Annuity, to reflect the changes in the
cost of living. The Contracts offer Contractowners and Participants the
opportunity to arrange for a Variable Annuity with lifetime or other annuity
payments based on the investment performance of the investments chosen by the
Contractowner or Participant.
There is no assurance that a Contract's objective will be obtained or that
its value will increase. Because a Variable Annuity value is based on investment
performance and is not guaranteed, a Variflex Contract entails more risk than
traditional guaranteed insurance. There is, however, a General Account option
whereby Contractowners or Participants can elect to accumulate values, and
receive all or a portion of their benefits in the form of guaranteed payments.
INVESTMENT ALTERNATIVES
You may choose to invest the payments made under the Contracts in one or
more of the eleven separate Variflex Series: Growth Series, Growth-Income Series
(formerly the "Income-Growth Series"), Money Market Series, Worldwide Equity
Series (formerly the "High Yield Series"), High Grade Income Series (formerly
the "U.S. Government Series"), Social Awareness Series, Emerging Growth Series,
Global Aggressive Bond Series, Specialized Asset Allocation Series, Managed
Asset Allocation Series, and Equity Income Series. Each of the Series invests
exclusively in the shares of a corresponding series of the SBL Fund. Each Series
has a different investment objective. (See "SBL Fund," page 11).
PURCHASING A CONTRACT
Individuals wishing to purchase a Contract must complete an application and
provide an initial Purchase Payment which will be sent to the SBL home office.
The minimum and maximum amount of Purchase Payments vary depending upon the type
of Contract purchased. (See "Contract Application and Purchase Payments," page
13 and "Limits on Purchase Payments" in the Statement of Additional
Information.)
ALLOCATION AND TRANSFER AMONG INVESTMENT ALTERNATIVES
Payments will be allocated to each Variflex Series pursuant to instructions
in the application. Changes in the allocation of future Purchase Payments may be
made by writing to the SBL home office. However, no allocation will be allowed
that would result in less than $25 being allocated to any one Variflex Series.
Prior to the Annuity Commencement Date, transfers may be made among the
Variflex Series. At present, there is no charge for such transfers. Transfers
among the Variflex Series, changes in allocation of future Purchase Payments and
changes to an existing Dollar Cost Averaging or Asset Reallocation Option may be
made by telephone instruction, provided that either the Telephone Transfer
section of the application has been completed or a Telephone Transfer
Authorization form is on file with SBL. (See "Transfer of Contract Value" on
page 15.)
THE DEATH BENEFIT
For individual and Group Allocated Contracts, the Contract provides for a
death benefit upon the death of the Annuitant during the Accumulation Period.
The death benefit will vary depending on your Contract's investment results and
the age of the Annuitant on the Contract Date. SBL will pay the death benefit
proceeds to the beneficiary upon receipt of due proof of the Annuitant's death
and instructions regarding payment. For Non-Qualified Contracts, the death
benefit will be paid upon the death of the Annuitant OR CONTRACTOWNER to meet
the distribution requirements of Section 72(s) of the Internal Revenue Code.
Under a Group Unallocated Contract, the death benefit will be determined by the
provisions of the Plan. (See "Death Benefit During Accumulation Period" on page
20.)
WITHDRAWALS FROM THE CONTRACT PRIOR TO MATURITY
Prior to the Annuity Commencement Date, all or part of a Contract's value
may be withdrawn upon your written request. In addition to potential losses due
to investment risks, your withdrawals may be reduced by any Contract Debt, a
contingent deferred sales charge, a 10% penalty tax and income tax. Contracts
purchased in connection with retirement plans may be subject to additional
withdrawal restrictions imposed by the Plan. (See "Full and Partial Withdrawals"
on page 18, "Constraints on Distributions from Certain Section 403(b) Annuity
Contracts" on page 21 and "Federal Tax Matters" on page 24.)
HOW ANNUITY PAYMENTS ARE DETERMINED
There are a number of ways to receive annuity payments. They include
monthly payments for a specified number of years, an annuity for life with
payments guaranteed for 5, 10, 15 or 20 years, or a joint and survivor annuity.
Payments may be received on a fixed basis or on a variable basis. The amount of
a variable annuity payment will increase or decrease according to the investment
experience of the Variflex Series you select.
CHARGES AND DEDUCTIONS
An Actuarial Risk Fee is assessed daily against Variflex net assets at an
annual rate of 1.2%. Variflex Contracts also provide for certain deductions and
charges against the contract. These deductions and charges include a $30 annual
Administrative Fee (not applicable to all Contracts), and any state premium
taxes that may be assessed. Additionally, a contingent deferred sales charge may
be
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4
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assessed against certain withdrawals during the first eight Contract Years
(declining from 8% in the first Contract Year to 0% in the ninth such year).
(See "Charges and Deductions" on page 16.)
FREE-LOOK RIGHT
The laws of certain states require that Contractowners be given an
examination period, generally ten days, within which a Contractowner may return
the Contract to SBL's home office. In such cases, SBL will refund payments made,
adjusted to the extent permitted by state law, to reflect changes in the value
of the applicable Variflex Series during the period the contract was held. (See
"Free-Look Right" on page 20.)
SUMMARY OF EXPENSES
CONTRACTOWNER TRANSACTION EXPENSES
- ----------------------------------
Sales Load Imposed on Purchase (as a percentage of Purchase Payments) .... 0%
Contingent Deferred Sales Load
(as a percentage of Purchase Payments or amount withdrawn, as applicable)(1)8%
Surrender Fees (as a percentage of amount surrendered, if applicable) .... 0%
Exchange Fee ............................................................. 0
ANNUAL CONTRACT FEE (2) ................................................... $30
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SEPARATE ACCOUNT ANNUAL FEE (as a percentage of average account value)
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Mortality and Expense Risk Fees........................................... 1.2%
Account Fees and Expenses................................................. 0.0%
----
Total Separate Account Annual Expenses ................................... 1.2%
SBL FUND ANNUAL EXPENSES (as a percentage of average net assets)
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<TABLE>
<CAPTION>
HIGH GLOBAL SPECIALIZED MANAGED
GROWTH- MONEY WORLDWIDE GRADE SOCIAL EMERGING AGGRESSIVE ASSET ASSET EQUITY
GROWTH INCOME MARKET EQUITY INCOME AWARENESS GROWTH BOND ALLOCATION ALLOCATION INCOME
(SERIES A)(SERIES B)(SERIES C)(SERIES D)(SERIES E)(SERIES S)(SERIES J)(SERIES K)(SERIES M)(SERIES N)(SERIES O)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after fee waiver) .. .75% .75% .50% 1.00% .75% .75% .75% .00% 1.00% 1.00% 1.00%
Other Expenses (after expense
reimbursement) (3) .. .08% .08% .10% .31% .10% .11% .09% 1.28% .94% .90% .40%
---- ---- ---- ----- ---- ---- ---- ----- ----- ----- -----
Total Annual Expenses (3).83% .83% .60% 1.31% .85% .86% .84% 1.28% 1.94% 1.90% 1.40%
</TABLE>
(1) The contingent deferred sales load is decreased based on the Contract Year
in which the withdrawal is made from 8% in the first Contract Year to 0% in
the ninth Contract Year. Variflex Contracts-401(k) and 408(k) are subject
to a schedule of charges that has a different rate of decline in the
percentage than other Contracts. Under certain circumstances, the
contingent deferred sales load may be reduced or waived, including certain
annuity options.
(2) The annual Administrative Fee for Variflex Contracts-401(k) and 408(k) is
the lesser of 2% of assets valued as of the year end or $30.
(3) During the fiscal year ended December 31, 1995, the Investment Manager
waived .40% of the management fees of Series K and, during the fiscal year
ending December 31, 1996, the Investment Manager will waive all of the
management fees of Series K; absent such expense reimbursement and waiver,
Series K's "Total Annual Expenses" would have been 2.03%.
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5
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<TABLE>
EXAMPLE: VARIFLEX CONTRACTS (EXCLUDING VARIFLEX CONTRACTS - 401(K) AND 408(K))
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IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $102 $127 $158 $253
GROWTH-INCOME SERIES........................................ $102 $127 $158 $253
MONEY MARKET SERIES......................................... $100 $121 $146 $230
WORLDWIDE EQUITY SERIES..................................... $107 $141 $182 $301
HIGH GRADE INCOME SERIES.................................... $103 $128 $159 $255
SOCIAL AWARENESS SERIES..................................... $102 $128 $158 $254
EMERGING GROWTH SERIES...................................... $102 $127 $158 $253
GLOBAL AGGRESSIVE BOND SERIES............................... $107 $140 $181 $298
SPECIALIZED ASSET ALLOCATION SERIES......................... $113 $159 $212 $360
MANAGED ASSET ALLOCATION SERIES............................. $113 $158 $210 $357
EQUITY INCOME SERIES........................................ $108 $144 $186 $310
IF YOU DO NOT SURRENDER YOUR CONTRACT:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $22 $69 $118 $253
GROWTH-INCOME SERIES........................................ $22 $69 $118 $253
MONEY MARKET SERIES......................................... $20 $62 $106 $230
WORLDWIDE EQUITY SERIES..................................... $27 $83 $142 $301
HIGH GRADE INCOME SERIES.................................... $23 $69 $119 $255
SOCIAL AWARENESS SERIES..................................... $22 $69 $118 $254
EMERGING GROWTH SERIES...................................... $22 $69 $118 $253
GLOBAL AGGRESSIVE BOND SERIES............................... $27 $82 $141 $298
SPECIALIZED ASSET ALLOCATION SERIES......................... $33 $102 $173 $360
MANAGED ASSET ALLOCATION SERIES............................. $33 $101 $171 $357
EQUITY INCOME SERIES........................................ $28 $86 $146 $310
EXAMPLE: VARIFLEX CONTRACTS - 401(K) AND 408(K) (SOLD PRIOR TO MAY 1, 1990)
- -----------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $103 $128 $159 $256
GROWTH-INCOME SERIES........................................ $103 $128 $159 $256
MONEY MARKET SERIES......................................... $100 $122 $148 $233
WORLDWIDE EQUITY SERIES..................................... $107 $142 $183 $304
HIGH GRADE INCOME SERIES.................................... $103 $129 $160 $258
SOCIAL AWARENESS SERIES..................................... $103 $129 $160 $257
EMERGING GROWTH SERIES...................................... $103 $128 $159 $256
GLOBAL AGGRESSIVE BOND SERIES............................... $107 $141 $182 $301
SPECIALIZED ASSET ALLOCATION SERIES......................... $114 $159 $213 $363
MANAGED ASSET ALLOCATION SERIES............................. $113 $158 $211 $359
EQUITY INCOME SERIES........................................ $108 $144 $188 $313
IF YOU DO NOT SURRENDER YOUR CONTRACT:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $23 $70 $119 $256
GROWTH-INCOME SERIES........................................ $23 $70 $119 $256
MONEY MARKET SERIES......................................... $20 $63 $108 $233
WORLDWIDE EQUITY SERIES..................................... $27 $84 $143 $304
HIGH GRADE INCOME SERIES.................................... $23 $70 $120 $258
SOCIAL AWARENESS SERIES..................................... $23 $70 $120 $257
EMERGING GROWTH SERIES...................................... $23 $70 $119 $256
GLOBAL AGGRESSIVE BOND SERIES............................... $27 $83 $142 $301
SPECIALIZED ASSET ALLOCATION SERIES......................... $34 $103 $174 $363
MANAGED ASSET ALLOCATION SERIES............................. $33 $102 $172 $359
EQUITY INCOME SERIES........................................ $28 $87 $148 $313
</TABLE>
The purpose of the preceding table is to assist Contractowners in
understanding the various costs and expenses that a Contractowner will bear
directly or indirectly and, thus, the table reflects expenses of both the
Variflex separate account and the SBL Fund. The example should not be considered
to be a representation of past or future expenses, and the example does not
include the deduction of state premium taxes, which in a number of states may be
assessed. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The example
assumes a 5% annual rate of return pursuant to the requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund.
Pursuant to the requirements of the Securities and Exchange Commission, any
annual contract fee is deducted pro rata from each Series; however, under the
contract the annual Administrative Fee is deducted sequentially from the Series
as specified under "Sequential Deduction of Fees" in the Prospectus. For a more
complete description of the various costs and expenses of the Fund, see the
prospectus for SBL Fund.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values at the beginning and end of each year as well as ending accumulation
units outstanding for Qualified and Non-Qualified Contracts under each Series of
Variflex.
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
QUALIFIED CONTRACTS
- -------------------
GROWTH SERIES (SERIES A)
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59 $13.41 $12.77 $12.15
End of period $37.75 $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59 $13.41 $12.77
Accumulation units
outstanding at the end
of period 9,203,332 7,723,910 6,900,722 6,640,177 5,420,372 4,616,955 3,191,257 3,032,118 3,620,263 2,475,018
GROWTH-INCOME SERIES (SERIES B)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46 $14.81 $14.46 $12.28
End of period $39.88 $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46 $14.81 $14.46
Accumulation units
outstanding at the end
of period 14,963,215 14,312,801 13,236,948 11,381,462 8,753,337 6,449,776 4,613,783 3,388,090 2,932,678 1,628,800
MONEY MARKET SERIES (SERIES C)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30 $12.56 $11.94 $11.36
End of period $17.59 $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30 $12.56 $11.94
Accumulation units
outstanding at the end
of period 2,989,809 3,578,026 2,680,809 2,373,251 2,161,924 1,913,734 3,216,085 2,774,046 962,056 404,485
WORLDWIDE EQUITY SERIES (SERIES D)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33 $12.18 $11.80
End of period $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74 $11.33 $12.18
Accumulation units
outstanding at the end
of period 10,236,349 9,361,197 5,863,967 2,070,715 917,833 466,703 607,650 633,816 648,066 732,878
HIGH GRADE INCOME SERIES (SERIES E)
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90 $12.17 $12.04 $11.11
End of period $22.11 $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90 $12.17 $12.04
Accumulation units
outstanding at the end
of period 3,912,046 3,891,426 3,731,587 2,912,605 2,255,909 1,673,154 1,403,313 1,037,740 1,013,973 935,218
SOCIAL AWARENESS SERIES (SERIES S)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $12.65 $13.31 $12.04 $10.47 $10.00 --- --- --- --- ---
End of period $15.97 $12.65 $13.31 $12.04 $10.47 --- --- --- --- ---
Accumulation units
outstanding at the end
of period 1,615,845 1,344,063 993,233 513,953 127,699 --- --- --- --- ---
EMERGING GROWTH SERIES (SERIES J)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $13.10 $13.97 $12.44 $10.00 --- --- --- --- --- ---
End of period $15.46 $13.10 $13.97 $12.44 --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 4,387,739 3,947,047 2,131,858 455,105 --- --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
QUALIFIED CONTRACTS
- -------------------
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.69 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 129,589 --- --- --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.64 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 611,652 --- --- --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.66 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 295,053 --- --- --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $11.62 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 604,325 --- --- --- --- --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
NON-QUALIFIED CONTRACTS
- -----------------------
GROWTH SERIES (SERIES A)
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59 $13.41 $12.76 $12.14
End of period $37.74 $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59 $13.41 $12.76
Accumulation units
outstanding at the end
of period 2,306,163 1,578,797 1,483,618 1,766,896 1,328,865 952,806 594,856 493,463 664,251 375,309
GROWTH-INCOME SERIES (SERIES B)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46 $14.80 $14.45 $12.27
End of period $39.84 $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46 $14.80 $14.45
Accumulation units
outstanding at the end
of period 3,669,299 3,515,364 3,262,600 2,560,986 1,774,534 1,293,121 1,000,815 836,735 801,802 480,437
MONEY MARKET SERIES (SERIES C)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29 $12.55 $11.94 $11.36
End of period $17.59 $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29 $12.55 $11.94
Accumulation units
outstanding at the end
of period 1,469,153 2,475,349 1,913,212 1,031,855 1,000,378 954,107 846,414 853,615 422,130 268,446
WORLDWIDE EQUITY SERIES (SERIES D)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33 $12.19 $11.81
End of period $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74 $11.33 $12.19
Accumulation units
outstanding at the end
of period 3,140,486 2,803,304 2,150,932 678,110 279,878 125,010 211,920 214,723 225,118 242,989
HIGH GRADE INCOME SERIES (SERIES E)
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89 $12.17 $12.03 $11.11
End of period $22.09 $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89 $12.17 $12.03
Accumulation units
outstanding at the end
of period 1,325,159 1,392,830 1,290,268 962,775 784,496 582,285 519,624 419,410 420,483 453,028
SOCIAL AWARENESS SERIES (SERIES S)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $12.66 $13.31 $12.04 $10.47 $10.00 --- --- --- --- ---
End of period $15.98 $12.66 $13.31 $12.04 $10.47 --- --- --- --- ---
Accumulation units
outstanding at the end
of period 612,235 543,287 389,861 226,145 98,344 --- --- --- --- ---
EMERGING GROWTH SERIES (SERIES J)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $13.09 $13.96 $12.44 $10.00 --- --- --- --- --- ---
End of period $15.46 $13.09 $13.96 $12.44 --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 1,248,987 1,211,099 610,801 68,338 --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
NON-QUALIFIED CONTRACTS
- -----------------------
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.69 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 74,528 --- --- --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.64 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 297,967 --- --- --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.66 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 226,555 --- --- --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $11.62 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 234,242 --- --- --- --- --- --- --- --- ---
</TABLE>
(a) Social Awareness Series of Variflex was first publicly offered on May 1,
1991.
(b) Effective May 1, 1991, the investment objective of Worldwide Equity Series
of Variflex was changed from high current income to long-term capital growth
through investment in common stocks and equivalents of companies domiciled
in foreign countries and the United States.
(c) Emerging Growth Series of Variflex was first publicly offered on October 1,
1992
(d) Global Aggressive Bond, Specialized Asset Allocation, Managed Asset
Allocation and Equity Income Series were first publicly offered on June 1,
1995.
(e) Effective June 1, 1995, the investment objective of Growth-Income Series of
Variflex was changed from seeking to provide income with secondary emphasis
on capital appreciation to seeking long-term growth of capital with
secondary emphasis on income.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The full financial statements for Variflex and the financial statements of
SBL as well as the auditor's reports thereon are in the Statement of Additional
Information.
SECURITY BENEFIT LIFE INSURANCE
COMPANY AND VARIFLEX
SECURITY BENEFIT LIFE INSURANCE COMPANY
Security Benefit Life Insurance Company ("SBL") is a mutual life insurance
company. SBL, which was formed originally as a fraternal benefit society under
the laws of Kansas and commenced business February 22, 1892, became a mutual
life insurance company under its present name on January 2, 1950. Its home
office is 700 Harrison Street, Topeka, Kansas 66636-0001. SBL is licensed in the
District of Columbia, and in all states except New York.
VARIFLEX
Variflex was established by SBL as a separate account on January 31, 1984,
and is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940 (the "Act"). Variflex
is designed to provide the funding for Variable Annuities. Under Kansas law,
regulation of SBL by the Commissioner of Insurance includes regulation of
Variflex. The insurance laws of Kansas under which Variflex was established
provide that the assets of Variflex shall not be chargeable with liabilities
arising out of any other business which SBL may conduct (except to the extent
that the assets of Variflex exceed the reserves and other liabilities of the
separate account). Accordingly, Variflex Contracts provide that the income,
gains and losses from the assets allocated to Variflex, whether or not realized,
are credited to or charged against Variflex without regard to other income,
gains, or losses of SBL. The assets of Variflex will thus be held exclusively
for the benefit of Contractowners and beneficiaries under the Contracts (and
other contracts which may be offered in the future under which net premiums are
placed in Variflex and which provide benefits varying in accordance with the
investment results of Variflex) to the extent they are entitled to benefits
based on Variflex.
Variflex contains eleven Series--Growth Series, Growth-Income Series, Money
Market Series, Worldwide Equity Series, High Grade Income Series, Social
Awareness Series, Emerging Growth Series, Global Aggressive Bond Series,
Specialized Asset Allocation Series, Managed Asset Allocation Series, and Equity
Income Series. Amounts allocated by Contractowners or Participants to each of
these Series are invested, respectively, in Series A, B, C, D, E, S, J, K, M, N
and O of SBL Fund (the "Fund"). Additional Series may be added to Variflex at
the discretion of SBL.
SBL FUND
The Fund is a diversified, open-end management investment company. The
assets of the Fund are managed by Security Management Company (the "Investment
Manager"), the investment adviser to the Fund, under the supervision of the
Fund's board of directors.
The Fund currently issues its shares in eleven separate series: Series A,
Series B, Series C, Series D, Series E, Series S, Series J, Series K, Series M,
Series N and Series O ("Series"). The assets of each Series are held separate
from the assets of other Series, and each Series has different investment
objectives and policies. As a result, each Series operates as a separate
investment fund. Each Series of Variflex invests solely in a corresponding
Series of the Fund.
SERIES A--Amounts allocated to the GROWTH SERIES of Variflex 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--Amounts allocated to the GROWTH-INCOME SERIES of Variflex 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 (commonly referred to as "junk bonds").
SERIES C--Amounts allocated to the MONEY MARKET SERIES of Variflex 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--Amounts allocated to the WORLDWIDE EQUITY SERIES of Variflex 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--Amounts allocated to the HIGH GRADE INCOME SERIES of Variflex 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 in a broad range of debt securities, including U.S. and
foreign corporate debt securities and securities issued by the U.S. and foreign
governments.
SERIES S--Amounts allocated to the SOCIAL AWARENESS SERIES of Variflex are
invested in Series S. The investment objective of Series S is to seek high total
return through a combination of income and capital appreciation by investing
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
in various types of securities which meet certain social criteria established
for the Series. Series S will invest in a diversified portfolio of common
stocks, convertible securities, preferred stocks and debt securities.
SERIES J--Amounts allocated to the EMERGING GROWTH SERIES of Variflex 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--Amounts allocated to the GLOBAL AGGRESSIVE BOND SERIES of
Variflex 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 referred to as "junk bonds").
SERIES M--Amounts allocated to the SPECIALIZED ASSET ALLOCATION SERIES of
Variflex 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 by following an asset allocation strategy that
contemplates shifts among a wide range of investment categories and market
sectors, including equity and debt securities of domestic and foreign issuers.
SERIES N--Amounts allocated to the MANAGED ASSET ALLOCATION SERIES of
Variflex 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--Amounts allocated to the EQUITY INCOME SERIES of Variflex 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.
The Investment Adviser has engaged Lexington Management Corporation, Park
80 West Plaza Two, Saddle Brook, New Jersey 07662, to provide certain investment
advisory services to Series D and K of the Fund. The Investment Adviser has
engaged T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202 to provide certain investment advisory services to Series N and
O. The Investment Adviser has engaged Meridian Investment Management
Corporation, 12835 East Arapahoe Road, Tower II, 7th Floor, Englewood, Colorado
80112 and Templeton/Franklin Investment Services, Inc., 777 Mariners Island
Boulevard, San Mateo, California 94404, to provide certain analytic research
services with respect to Series M.
THERE IS NO ASSURANCE THAT ANY OF THESE SERIES WILL ATTAIN THEIR RESPECTIVE
STATED OBJECTIVES.
ADDITIONAL INFORMATION CONCERNING THE INVESTMENT OBJECTIVES AND POLICIES OF
THE SERIES AND THE INVESTMENT ADVISORY SERVICES AND CHARGES CAN BE FOUND IN THE
CURRENT PROSPECTUS FOR THE FUND, WHICH IS ATTACHED TO AND SHOULD BE READ IN
CONJUNCTION WITH THIS PROSPECTUS BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF PURCHASE PAYMENTS, SINCE THE INVESTMENT PERFORMANCE OF THE SERIES
WILL AFFECT THE VARIABLE ANNUITY VALUES.
VOTING RIGHTS
As the record owner of the Fund shares which represent the assets of
Variflex, including the Variflex assets represented by reserves for Annuitants
currently receiving Annuity payments, SBL will vote at all Fund shareholder
meetings. However, Contractowners will have the right to instruct SBL with
respect to such voting. Each Contractowner will receive all Fund periodic
reports and proxy materials and a form with which to give voting instructions. A
Participant under a group Contract will have no rights with regard to voting or
instructing SBL unless the Participant's views are solicited by the
Contractowner. It should be noted that the number of votes allocable to a
particular Contract will gradually decrease as annuity payments are made during
the annuity period.
In addition, the bylaws of SBL provide that each SBL policyholder, without
regard to the number of contracts owned or the amount of each such contract,
shall have the right to cast one vote, in person or by proxy, for the election
of directors of SBL, and on all other corporate matters brought before its
policyholders.
SUBSTITUTED SECURITIES
If shares of the Fund or any Series should become unavailable for purchase
by Variflex, or if in the judgment of SBL further investment in such shares is
no longer appropriate in view of the purposes of Variflex, SBL reserves the
right, subject to any applicable law, to make certain changes including (i) to
substitute therefor shares of another fund or another Series of the Fund; or
(ii) net payments received after a date specified by SBL may be applied to the
purchase of shares of such other fund or of another Series of the Fund. In
either event, to the extent required by the Act, prior approval by a vote of a
majority of the votes to be cast by persons having a voting interest in the Fund
shares held in the affected Series within Variflex and the Securities and
Exchange Commission shall be obtained.
VARIFLEX CONTRACTS
PURPOSE OF THE CONTRACTS
The Contracts described in this Prospectus may be issued for use with
retirement plans and trusts qualified under the Internal Revenue Code of 1986,
as amended (the "Code"), for favorable tax treatment ("Qualified Contracts") and
for use with plans and trusts which are not so qualified ("Non-Qualified
Contracts"). Retirement plans qualified for favorable tax treatment include
pension and profit sharing plans qualified under Section 401 or 403(a) of the
Internal Revenue Code, annuity purchase plans of public school systems and
certain tax-exempt organizations which qualify
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for tax deferred treatment under Section 403(b) or 403(c) of the Code,
individual retirement plans and individual retirement annuities under Section
408 of the Code and deferred compensation plans under Section 457 of the Code.
See section entitled "Federal Tax Matters-Qualified Contracts," page 24 for
further details.
The basic objective of the Contracts is to provide a Guaranteed or Variable
Annuity or a combination Guaranteed and Variable Annuity. Variable Annuities
pursuant to the Contracts are funded by Variflex. The objective of a Variable
Annuity is to provide benefits which will tend to a greater degree than a
Guaranteed Annuity to reflect the changes in the cost of living. There can be no
assurance that this objective will be attained. Annuity payments based on any of
the Series of Variflex are not guaranteed and entail more risk to the Annuitant
than traditional guaranteed insurance.
This Prospectus generally describes only the variable aspects of the
Variflex Contracts, except where guaranteed aspects are specifically mentioned.
For a discussion of the guaranteed investment option and guaranteed benefits
available in connection with Variflex Contracts, see "The General Account" on
page 27.
The terms of the Contracts may only be changed by mutual agreement between
SBL and each Contractowner, except as described in "Substituted Securities,"
above, and except for changes required to make the contracts comply with, or
give Contractowners the benefit of, any law or regulation issued by a
governmental agency to which SBL or the Variflex Contracts are subject.
TYPES OF VARIFLEX CONTRACTS
Different types of the Contracts are offered by SBL through this
Prospectus. The Contracts vary in the amount and timing of the minimum payments,
and in various other respects. The different types of Contracts are described
below:
a. SINGLE PAYMENT IMMEDIATE ANNUITY CONTRACT - This type of contract is
used for an individual where a single Purchase Payment has been allocated to
provide for life contingent annuity payments to commence immediately.
b. SINGLE AND INSTALLMENT PAYMENT DEFERRED ANNUITY CONTRACTS - This type of
contract is used for an individual where either a single Purchase Payment (which
may be supplemented with additional payments within thirteen months) or periodic
Purchase Payments will be made to the individual's account with annuity payments
to commence at a later date.
c. GROUP SINGLE AND INSTALLMENT PAYMENT DEFERRED ANNUITY CONTRACT - This
type of contract may be used when Purchase Payments, either single or
installment, under group plans are to be accumulated until the retirement date
of each Participant. Generally, under a Group Allocated Contract, an Individual
Account is established for each Participant for whom payments are being made and
normally the benefit at retirement will be determined by the value of the
Participant's Individual Account at that time.
Under a Group Unallocated Contract, the Purchase Payments are applied to
acquire Accumulation Units. However, the Accumulation Units are not allocated to
the individual Participants but are credited to the Contractowner's accumulation
account. When a Participant becomes entitled to receive pension payments under
the provisions of the Plan, the appropriate number of Accumulation Units may be
withdrawn from the accumulation account by the Contractowner to provide the
Participant with an annuity.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
Individuals wishing to purchase a Contract must complete an application and
provide an initial Purchase Payment which will be sent to the SBL home office.
If the application can be accepted in the form received, the initial Purchase
Payment will be credited within two business days after receipt by the SBL home
office. If an incomplete application cannot be completed within five days of its
receipt, the applicant will be notified of the reasons for the delay and any
payments received will be returned immediately unless the applicant specifically
consents to have SBL retain them pending completion of the application.
The Contracts set certain minimum amounts for the initial and subsequent
Purchase Payments. For Qualified Contracts, the minimum initial and subsequent
payments are $25, except Group Unallocated Contracts, which require a minimum
initial payment of $500 and subsequent payments of $25. For Non-Qualified
Contracts, the minimum initial payment is $500 and subsequent payments must be
at least $25. For Single Payment Immediate and Single Payment Deferred Annuity
Contracts, the minimum initial payment is $2,500. The maximum amount of Purchase
Payments under Variflex Contracts is $1,000,000, without the prior approval of
SBL. These amounts may be changed at the sole discretion of SBL. In addition,
SBL reserves the right to terminate any individual or Group Contract for certain
specified reasons, including failure of the Contract Value to meet certain
specified minimums. (See "Termination of the Contract" in the Statement of
Additional Information for a detailed listing of such circumstances.)
For an Installment Payment Deferred Annuity, Purchase Payments may be made
at such intervals as desired, but are usually made on an annual, semiannual,
quarterly or monthly basis. The frequency of Purchase Payments may be changed by
the Contractowner. If Purchase Payments cease, they may be resumed at a future
date, subject to the Annuity Commencement Date requirements. The amount of
future Purchase Payments may be increased or decreased on any date a payment is
submitted. Submission of a Purchase Payment different from the previous payment
will automatically effect an increase or decrease. The number of changes
permitted and the maximum payments allowed under the Internal Revenue Code for
Qualified Plans vary depending on the type of plan. For a discussion
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of those limitations see "Limits on Purchase Payments" in the Statement of
Additional Information. Failure to comply with those limitations may subject the
Contract to adverse tax treatment.
ALLOCATION OF PURCHASE PAYMENTS
The Purchase Payments will be allocated to each Series within Variflex in
accordance with the written instructions contained in the application. The
Contractowner or Participant may by written instruction to the home office
indicate one or more Series to which a specified portion or portions of the
Purchase Payment should be applied, except that no allocation is permitted which
would result in less than $25 per payment being allocated to any one Series
within Variflex. Changes in allocation of future Purchase Payments (with the
same $25 minimum per Series) may be made at any time by specific written
instruction to the home office or by telephone instruction, provided that a
properly completed Telephone Transfer Authorization form is on file with SBL or
the Telephone Transfer section of the application has been completed. (See
"Transfer of Contract Value" on page 15.)
CREDITING OF ACCUMULATION UNITS
During the Accumulation Period, when a Purchase Payment is received in its
home office, SBL currently credits the entire payment to the Variflex Contract.
Amounts allocated to Series of Variflex are credited in the form of Accumulation
Units. The number of Accumulation Units that may be purchased for any Series is
found by dividing the Purchase Payment allocated to that Series by the
Accumulation Unit value for that Series determined at the end of the Valuation
Period in which the Purchase Payment is credited. The Accumulation Unit value
for each Series is determined as of 3:00 p.m. Central time on each Valuation
Date and on any other day in which there is a sufficient degree of trading in
the portfolio securities of a Series of the Fund that the Accumulation Unit
value of an applicable Series of Variflex might be materially affected.
The value of an Accumulation Unit in each Series is expected to increase or
decrease, reflecting the investment experience of the corresponding Series of
the underlying Fund less any deductions for charges or taxes. The Statement of
Additional Information contains a detailed description of how the Accumulation
Units are valued.
DOLLAR COST AVERAGING OPTION
SBL currently offers an option under which Contractowners may dollar cost
average their allocations in the Series under the Contract by authorizing SBL to
make periodic allocations of Contract Value from any one Series to one or more
of the other Series. 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 allocation of Contract
Value to one or more Series, and these amounts will be credited at the
Accumulation Unit value as of the end of the Valuation Dates on which the
transfers are effected. Since the value of Accumulation Units will vary, the
amounts allocated to a Series will result in the crediting of a greater number
of units when the Accumulation Unit value is low and a lesser number of units
when the Accumulation Unit value is high. Similarly, the amounts transferred
from a Series will result in a debiting of a greater number of units when the
Accumulation Unit value is high. Dollar cost averaging does not guarantee
profits, nor does it assure that a Contractowner will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the
form, the Contractowner must designate whether a specific dollar amount,
percentage of Contract Value or earnings only are to be transferred, the Series
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 SBL has received a Dollar Cost Averaging Request in proper form at
its home office, Security Benefit will transfer Contract Value in amounts
designated by the Contractowner from the Series from which transfers are to be
made to the Series chosen by the Contractowner. The minimum amount that may be
transferred to any one Series is $25. Each transfer will be effected on the
monthly or quarterly anniversary, whichever corresponds to the period selected
by the Contractowner, of the date of receipt at SBL's home office of a Dollar
Cost Averaging Request in proper form, until the total amount elected has been
transferred, or until Contract Value in the Series from which transfers are made
has been depleted. Amounts periodically transferred under this option are not
currently subject to any transfer charges.
A Contractowner may instruct SBL at any time to terminate the option by
written request to SBL's home office. In that event, the Contract Value in the
Series from which transfers were being made that has not been transferred will
remain in that Series unless the Contractowner instructs otherwise. If a
Contractowner wishes 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 Series 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 SBL's home office. SBL may discontinue, modify, or suspend the
Dollar Cost Averaging Option at any time.
Contract Value may also be dollar cost averaged to or from the General
Account, provided that such transfers do not violate the restrictions on
transfers as described in "The General Account," page 27.
ASSET REALLOCATION OPTION
SBL currently offers an option under which Contractowners authorize SBL to
automatically transfer
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their Contract Value each quarter to maintain a particular percentage allocation
among the Series as selected by the Contractowner. The Contract Value allocated
to each Series will grow or decline in value at different rates during the
quarter, and Asset Reallocation automatically reallocates the Contract Value in
the Series each quarter to the allocation selected by the Contractowner. Asset
Reallocation is intended to transfer Contract Value from those Series that have
increased in value to those Series that have declined in value. Over time, this
method of investing may help a Contractowner buy low and sell high. This
investment method does not guarantee profits, nor does it assure that a
Contractowner will not have losses.
To elect the Asset Reallocation Option, an Asset Reallocation Request in
proper form must be received by SBL at its home office. An Asset Reallocation
Request form is available upon request. On the form, the Contractowner must
indicate the applicable Series and the percentage of Contract Value which should
be allocated to each of the applicable Series each quarter ("Asset Reallocation
Program"). If the Asset Reallocation Option is elected, all Contract Value
invested in the Series must be included in the Asset Reallocation Program.
This option will result in the transfer of Contract Value to one or more of
the Series on the date of SBL's receipt of the Asset Reallocation Request in
proper form and each quarterly anniversary of that date thereafter. The amounts
transferred will be credited at the Accumulation Unit value as of the end of the
Valuation Dates on which the transfers are effected. Amounts periodically
transferred under this option are not currently subject to any transfer charges.
A Contractowner may instruct SBL at any time to terminate this option by
written request to SBL's home office. In that event, the Contract Value in the
Series that has not been transferred will remain in those Series regardless of
the percentage allocation unless the Contractowner instructs otherwise. If a
Contractowner wishes to continue Asset Reallocation after it has been canceled,
a new Asset Reallocation Request form must be completed and sent to SBL's home
office. SBL may discontinue, modify, or suspend, and reserves the right to
charge a fee for the Asset Reallocation Option at any time. Asset Reallocation
is not available for Group Unallocated Contracts.
Contract Value invested in the General Account may be included in the Asset
Reallocation Program, provided that transfers from the General Account do not
violate the restrictions on transfers as described in "The General Account,"
page 27.
TRANSFER OF CONTRACT VALUE
During the Accumulation Period, the Contractowner or Participant may elect
by written notice to the SBL home office to transfer all or any part of the
Contract Value invested in a particular Variflex Series to any other Variflex
Series. Such transfers (and changes to an existing Dollar Cost Averaging or
Asset Reallocation Option) may be made by telephone if a properly completed
Telephone Transfer Authorization form, which may be obtained from SBL, is on
file with SBL or the Telephone Transfer section of the application has been
completed. SBL reserves the right to deny any telephone transfer request. SBL
has established procedures to confirm that instructions communicated by
telephone are genuine and may be liable for any losses due to fraudulent or
unauthorized instructions if it fails to comply with its procedures. SBL`s
procedures require that any person requesting a telephone transfer provide the
account and contract number and the owner`s tax identification number and such
instructions must be received on a recorded line. Neither SBL nor any of its
affiliates will be liable for any claim, loss or expense resulting from any
alleged error or mistake in connection with a telephone transfer which was
authorized by the Contractowner, or by anyone else who purports to give
instructions on his or her behalf, provided that SBL complied with its
procedures. The frequency of transfers generally is not limited, although SBL
reserves the right to limit them as to any individual, or in the future, in
general, to not more than once every 30 days. Such transfers are currently made
without charge. The telephone transfer privilege may be suspended, modified or
discontinued at any time without notice. SBL's policy concerning telephone
transfers may require a Contractowner who authorizes telephone transfers to bear
the risk of loss from a fraudulent or unauthorized telephone transfer. For a
discussion of transfers after the Annuity Commencement Date, see "Allocation of
Benefits" on page 23.
CONTRACT VALUE
The Contract Value is the sum of the amounts under the Contract held in
each Series of Variflex and in the General Account, including amounts set aside
in the General Account to secure loans.
On each Valuation Date, the portion of the Contract Value allocated to any
particular Series will be adjusted to reflect the investment experience of that
Series. See "Determination of Contract Value," below. No minimum amount of
Contract Value is guaranteed. A Contractowner bears the entire investment risk
relating to the investment performance of Contract Value allocated to the
Variflex Series.
DETERMINATION OF CONTRACT VALUE
The Contract Value will vary to a degree that depends upon several factors,
including investment performance of the Series to which Contract Value has been
allocated, payment of Purchase Payments, the amount of any outstanding Contract
Debt, partial withdrawals, and the charges assessed in connection with the
Contract. The amounts allocated to the Series will be invested in shares of the
corresponding Series of the SBL Fund. The investment performance of the Series
will reflect increases or decreases in the net asset value per share of the
corresponding Series of SBL Fund and any dividends or distributions declared by
such Series.
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Assets in the Series are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's
interest in a Series. When a Contractowner allocates Purchase Payments to a
Series, the Contract is credited with Accumulation Units. The number of
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the particular Series by the Accumulation Unit value for the
particular Series at 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 unit value
of the affected Series. The Accumulation Unit value of each Series 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 Series and
charges against the Series.
The Accumulation Unit value of each Series' unit initially was $10. The
unit value of a Series on any Valuation Date is calculated by dividing the value
of each Series' net assets by the number of Accumulation Units credited to the
Series on that date. Determination of the value of the net assets of a Series
takes into account the following: (1) the investment performance of the Series,
which is based upon the investment performance of the corresponding Series of
the SBL Fund, (2) any dividends or distributions paid by the corresponding
Series, (3) the charges, if any, that may be assessed by SBL for taxes
attributable to the operation of the Series, and (4) the Actuarial Risk Fee
under the Contract.
CONTRACTOWNER INQUIRIES
Contractowner inquiries and Purchase Payments should be addressed to
Security Benefit Life Insurance Company at its home office, P.O. Box 750497,
Topeka, Kansas 66675-0497, or made by calling (913) 295-3112 or (800) 888-2461,
extension 3112.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
Variflex Contracts. However, except as set forth below, a contingent deferred
sales charge (which may also be referred to as a withdrawal charge), may be
assessed by SBL on a full or partial withdrawal from the Contracts, to the
extent the amount withdrawn is attributable to Purchase Payments made. During
the first Contract Year, the withdrawal charge applies against the total amount
withdrawn attributable to total Purchase Payments made. Each Contract Year
thereafter, a withdrawal charge will not be assessed upon the first withdrawal
in the Contract Year of up to 10% of the Contract Value, as of the date of the
withdrawal (the "Free Withdrawal Right"). All or any part of the Free Withdrawal
Right for that Contract Year that is not applied to the first withdrawal is
forfeited. The free withdrawal is not available to Contractowners receiving
"systematic withdrawals" as discussed under "Systematic Withdrawals," page 19.
The Free Withdrawal Right for certain Contracts funding charitable
remainder trusts is available immediately and allows free withdrawals to the
extent that such withdrawals do not in any Contract Year exceed 10% of the
Contract Value on the date of the first withdrawal in that Contract Year. For
Group Unallocated Contracts, after the first Contract Year the Contractowner
shall be allowed one free withdrawal per calendar month. (Any partial month
immediately following a Contract Year anniversary shall be treated as a calendar
month for this purpose.) The free withdrawal for such Contracts applies only to
the first withdrawal in any calendar month. In any Contract Year, the total free
withdrawals from Group Unallocated Contracts cannot exceed 10% of the Contract
Value as of the beginning of such Contract Year. All or any part of the free
withdrawal for a month that is not applied to the first withdrawal in that month
is forfeited and once the 10% level described in the previous sentence is met,
the right to any further monthly free withdrawals is forfeited for the remainder
of the Contract Year.
For purposes of determining the withdrawal charge, a withdrawal will be
attributed first to Purchase Payments and then will be attributed to earnings,
even if the Contractowner elects to redeem amounts allocated to an Account
(including the General Account) other than an Account to which Purchase Payments
were allocated. The amount of the charge will depend upon the Contract Year in
which the withdrawal is made.
The applicable withdrawal charge for the Contracts except Variflex
Contracts-401(k) and 408(k), is as follows, based on the Contract Year in which
the withdrawal is made:
Contract
Year of Withdrawal
Withdrawal Charge
---------- ------
1 8
2 7
3 6
4 5
5 4
6 3
7 2
8 1
9 and after 0
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For Variflex Contracts-401(k) and 408(k), the following withdrawal charges
apply:
Contract
Year of Withdrawal
Withdrawal Charge
---------- ------
1 8
2 8
3 8
4 8
5 7
6 6
7 5
8 4
9 and after 0
In no event will the amount of any withdrawal charge, when added to any
such charge previously assessed against any amount withdrawn from the Contract,
exceed 8% of the Purchase Payments paid under a Contract. In addition, no charge
will be imposed (1) upon payment of the death benefit under the Contract; (2)
upon annuity payments under Annuity Options 1, 2, 3, 4 or any similar life
contingent payment option that is mutually agreed upon between the Contractowner
and SBL; (3) upon withdrawals that qualify for the hospital/nursing home waiver,
discussed below; or (4) upon certain systematic withdrawals. The contingent
deferred sales charge will be deducted, to the extent applicable, from
withdrawals and annuity payments under Annuity Options 5, 6, 7, 8 and other
non-life contingent payment options, unless annuity payments extend over a
period of at least five years and are made in substantially equal amounts.
The contingent deferred sales charge will be paid to SBL for its services
and expenses relating to the sales of the Contracts, including commissions to
sales personnel, the costs of preparing sales literature and other promotional
activity. SBL anticipates it will pay the selling broker-dealer or any national
banks that sell Variflex a sales commission or fee of not more than 6% of all
Purchase Payments. In addition, under certain circumstances, SBL may pay certain
broker-dealers persistency bonuses which will take into account, among other
things, the length of time and the amount of Purchase Payments held under
Variflex Contracts invested in certain Series of Variflex. A persistency bonus
is not anticipated to exceed .25%, on an annual basis, of the Contract Values
considered in connection with the bonus. If total contingent deferred sales
charges realized are not sufficient to pay sales expenses for Variflex Contracts
in any one year or in total, SBL will pay the difference from its general
account assets, including charges realized from the Actuarial Risk Fee. The
Actuarial Risk Fee includes a charge of .10% to cover the risk that sales
charges will not cover the costs of these selling expenses. To the extent such
amount is not needed to meet sales costs, SBL will realize a gain. SBL
anticipates recovering its sales expenses through the contingent deferred sales
charge and through .10% of the Actuarial Risk Fee over the life of the contract.
HOSPITAL/NURSING HOME WAIVER
SBL will waive the withdrawal charge on any full or partial withdrawal upon
the Contractowner's request for such a waiver, provided that the Contractowner:
(1) has been confined to a "hospital" or "qualified skilled nursing facility"
for at least 90 consecutive days prior to the date of the withdrawal; (2) is so
confined when SBL receives the withdrawal request; and (3) became so confined
after the date the Contract was issued. (See the "Glossary of Terms" on page 3.)
Any request for the hospital/nursing home waiver must be accompanied by a
properly completed claim form which may be obtained from SBL and a written
physician's statement acceptable to SBL certifying that such confinement is a
medical necessity and is due to illness or infirmity. SBL reserves the right to
have the Contractowner examined by a physician of SBL's choice and at SBL's
expense to determine if the Contractowner is eligible for the hospital/nursing
home waiver. The hospital/nursing home waiver is not available in certain states
pending department of insurance approval. If the waiver is later approved by the
insurance department of a state, SBL intends to make the waiver available to all
Contractowners in that state at that time, but there can be no assurance that
the waiver will be approved. Prospective contractowners should contact their
agent concerning availability of the waiver in their state.
OTHER CHARGES
(A) ADMINISTRATIVE FEES
Except as noted below, SBL deducts at each calendar year-end from each
individual and Group Contract and from each Participant's Individual Account an
annual administrative fee ("Administrative Fee") of $30 to cover expenses
relating to maintenance of the Contract or account. The Administrative Fee is
$30 for all Contracts except the Variflex Contracts-401(k) and 408(k) for which
the fee is the lesser of 2% of Contract Value valued as of the calendar year-end
or $30. SBL will waive the Administrative Fee during a Contract Year for any
Contract that has been in force for eight Contract Years or more AND the
Contract Value of which is $25,000 or more at year-end (or in the event of a
full withdrawal, on the date of the withdrawal). This fee is designed only to
reimburse SBL for the expenses of maintaining the Contracts. When a Contract is
withdrawn for its full value or where a Contract has been in force for less than
a full calendar year, a pro rata annual Administrative Fee will be deducted at
the time of the withdrawal or at year-end. The Administrative Fee is deducted
both during the Accumulation Period and after annuity payments have commenced;
however, no Administrative Fee is charged on life-contingent Single Stipulated
Payment Immediate Annuity Contracts or during any payout under Options 1, 2, 3,
4 or similar life-contingent payment options agreed to by SBL. Once the contract
is issued, the amount of the Administrative Fee under that Contract may not be
increased by SBL.
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(B) STATE PREMIUM TAXES
An amount for state premium taxes (which presently range from 0% to 3.5%)
customarily will be deducted when assessed by a given state. In most cases, if
the Contract is to be annuitized, the dollar amount of any such tax is assessed
and deducted from the Contract Value at the time annuity payments commence. In
some states, premium taxes are assessed by the state at the time Purchase
Payments are made rather than at the time annuity payments commence. In such
states, SBL will pay the tax when assessed and will deduct a pro rata share of
the amount of any such tax from any partial withdrawal and any remaining amount
of tax from the Contract Value at the time the contract is surrendered or
annuity payments commence. SBL, however, reserves the right to deduct the
premium tax when assessed.
(C) ACTUARIAL RISK FEE
SBL assumes a number of risks under the Variflex Contracts. While Variable
Annuity payments will vary in accordance with the investment performance of the
selected Series, the amount of such payments will not be decreased because of
adverse mortality experience of Annuitants as a class or because of an increase
in actual expenses of SBL over the expense charges provided for in the
Contracts. SBL assumes the risk that Annuitants as a class may live longer than
expected (necessitating a greater number of annuity payments) and that fees
deducted may not prove sufficient to cover its actual costs. In assuming these
risks, SBL agrees to continue annuity payments under life-contingent annuity
options, determined in accordance with the annuity tables and other provisions
of the Variflex Contracts, to the Annuitant or other payee for as long as he or
she may live. In addition, SBL is at risk for the death benefits payable under
the Variflex Contracts, to the extent that the death benefit in such cases
exceeds the Contract Value.
For SBL's contractual promise to accept these risks, an Actuarial Risk Fee
will be assessed daily against Variflex based on the value of its net assets, at
an annual rate of 1.2%. This fee is assessed during the Accumulation Period and
the Annuity Period against life-contingent and non-life-contingent options, even
though certain of the covered risks are not present in the latter case. Of the
1.2% Actuarial Risk Fee, 0.60% is for mortality risk, 0.10% is for death benefit
risk and 0.50% is for expense risk. SBL would realize a gain from such fee to
the extent, if any, that the entire amount is not needed to provide for excess
annuity payments or to reimburse costs and expenses.
(D) CHARGES FOR TAXES
Charges may be made against Variflex only as may be appropriate in the
future to reimburse SBL for the amount of any tax liability (state or federal)
paid or reserved by SBL which results from the maintenance of Variflex. SBL does
not currently expect that there will be any charge for such taxes. (See the
Statement of Additional Information -- Federal Tax Status of Variflex.)
SEQUENTIAL DEDUCTION OF FEES
When annual Administrative Fees are deducted from the value of a Contract,
they shall be deducted from the Contractowner's Contract value in the Variflex
Series in the following order: Money Market Series, High Grade Income
Series,Global Aggressive Bond Series, Growth-Income Series, Equity Income
Series, Managed Asset Allocation Series, Specialized Asset Allocation Series,
Growth Series, Worldwide Equity Series, Social Awareness Series, and Emerging
Growth Series, and then from the General Account. The value in each Variflex
Series will be depleted before the next Series is charged. This sequence is
designed to charge first those account assets which are more liquid or tend to
experience less capital fluctuation.
VARIATIONS IN CHARGES
SBL may reduce or waive the amount of the contingent deferred sales charge
and administrative charge 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, the amounts of projected Purchase Payments, or that the Contract is
sold in connection with a group or sponsored arrangement. SBL may also reduce or
waive the contingent deferred sales charge and administrative charge on
Contracts sold to directors, officers and bona fide full-time employees of SBL
and its affiliated companies; the spouses, grandparents, parents, children,
grandchildren and siblings of such directors, officers and employees and their
spouses; and salespersons (and their spouses and minor children) who are
licensed with SBL to sell variable annuities.
SBL will only reduce or waive such charges where expenses associated with
the sale of the Contract or the costs associated with administering and
maintaining the Contract are reduced. Additional information about reductions in
charges is contained in the Statement of Additional Information.
DISTRIBUTIONS UNDER THE CONTRACT
ACCUMULATION PERIOD
FULL AND PARTIAL WITHDRAWALS
To the extent permitted by the Plan under the terms of which the Contract
was purchased, any Contract or Participant's Individual Account may be
withdrawn, in full or partially, during the Accumulation Period, subject to the
limitations discussed herein. If any partial withdrawal exceeds 90% of the then
current Contract Value of a Participant's Individual Account or an individual
Contract, the then current full value may be paid and the account shall be
closed or the Contract canceled, respectively. A request for a partial
withdrawal under a Contract should specify the allocation of that withdrawal, as
applicable,
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from the General Account and each Series of Variflex. In the absence of
specification, SBL will, without further instruction, take the amounts needed to
satisfy the withdrawal from the Series in the manner set forth in "Sequential
Deduction of Fees," above.
The proceeds received upon a full withdrawal will be equal to the Contract
Value as of the end of the Valuation Period during which a proper withdrawal
request is received by SBL at its home office, minus any pro rata Administrative
Fee, any applicable contingent deferred sales charge, and any outstanding
Contract Debt. To the extent possible, upon a partial withdrawal, any charges
will be deducted from the value remaining in the Contract after the
Contractowner has received the amount requested.
Upon receipt of an application for a partial or full withdrawal of a
Contract or account signed by the Contractowner, the applicable Accumulation
Unit value will be that determined as of the end of the Valuation Period that a
proper written request is received in SBL's home office.
A full or partial withdrawal may subject a Contractowner to adverse tax
consequences, including the 10% penalty tax that may be imposed on withdrawals
made prior to the Contractowner attaining age 59 1/2. For a discussion of the
tax consequences of withdrawals, see "Constraints on Distributions from Certain
Section 403(b) Annuity Contracts" on page 21 and "Federal Tax Matters" on page
24.
Payment of any withdrawal will be made in cash as soon as practicable, but
in no event later than seven days after a request is received in SBL's home
office, subject to postponement (i) for any period during which the New York
Stock Exchange is closed other than customary weekend and holiday closing or
when trading on such exchange is restricted, (ii) for any period during which an
emergency exists as a result of which disposal by Variflex of securities owned
by it is not reasonably practicable or it is not reasonably practicable for
Variflex fairly to determine the value of its net assets, or (iii) for such
other periods as the Securities and Exchange Commission may by order permit for
the protection of Contractowners and Participants. The Securities and Exchange
Commission shall, by rules and regulations, determine the conditions under which
trading shall be deemed to be restricted, and an emergency shall be deemed to
exist.
Except as specified with respect to partial withdrawals exceeding 90%, no
partial withdrawal will directly affect future requirements to make Purchase
Payments or the maturity date of the Contract or account. Contracts have other
provisions which encourage the Contractowner to continue the Contract in times
of emergency, including the right to discontinue Purchase Payments for such
periods as may be permitted by the Plan and to resume payments at a later date
without penalty.
SYSTEMATIC WITHDRAWALS
SBL currently offers a feature under which systematic withdrawals may be
elected. Under this feature, a Contractowner may elect, before the Annuity
Commencement Date, to receive systematic withdrawals that are not subject to a
contingent deferred sales charge by sending a properly completed Systematic
Withdrawal Request form to SBL. Systematic withdrawals are available immediately
from VIVA Contracts and generally are available from other Variflex Contracts
beginning 37 months after the date that the initial Purchase Payment is credited
to the Contract. Systematic withdrawals are available, however, during the first
37 months of a Contract, provided that Contract Value is $40,000 or more at the
time the systematic withdrawal request is received by SBL.
A Contractowner may request that systematic withdrawals be made monthly,
quarterly, semiannually, or annually (1) in a fixed amount not to exceed in any
Contract Year an amount equal to 10% of Contract Value as of the date of the
first systematic withdrawal under the current request; (2) in Level Payments
calculated by SBL subject to the 10% limit described in (1) above; (3) for a
specified period of at least five years for Variflex Contracts that have been in
force 37 months or more, 10 years for other Variflex Contracts and 15 years for
VIVA Contracts; (4) of all earnings in the Contract; or (5) calculated according
to age recalculation which is described under "Optional Annuity Forms" on page
23.
Each systematic withdrawal must be at least $25. Upon payment of a
systematic withdrawal, the Contractowner's Contract Value will be reduced by an
amount equal to the payment proceeds plus any applicable premium taxes and, if
withdrawals exceed the amounts described in (1) through (5) above, any
applicable contingent deferred sales charges. Any systematic withdrawal that
equals or exceeds the Contract Value will be treated as a full withdrawal. The
Contract will automatically terminate if a systematic withdrawal causes the
Contract Value to equal zero.
Each systematic withdrawal will be effected as of the end of the Valuation
Period during which the withdrawal is scheduled. The deduction caused by the
systematic withdrawal will be allocated to the Contractowner's Contract Value in
the Variflex Series and the General Account as instructed by the Contractowner.
If no instructions are provided, SBL will make systematic withdrawals from the
Variflex Series and the General Account in the order set forth under "Sequential
Deduction of Fees," on page 18.
The Free Withdrawal Right discussed under "Charges and Deductions" on page
16 is not available while a Contractowner is receiving systematic withdrawals
and systematic withdrawals in excess of the amounts described above are subject
to any applicable contingent deferred sales charges. Upon termination of
systematic withdrawals,
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the Free Withdrawal Right will be available in the Contract Year following
termination. Systematic withdrawals may be terminated upon proper written
request by the Contractowner received by SBL at least 30 days in advance of the
requested date of termination.
The tax consequences of systematic withdrawals, including the 10% penalty
tax that may be imposed on withdrawals made prior to the Owner attaining age 59
1/2, should be carefully considered. For a discussion of the tax consequences of
withdrawals, see "Constraints on Distributions from Certain Section 403(b)
Annuity Contracts" on page 21 and "Federal Tax Matters" on page 24. SBL may, at
any time, discontinue, modify or suspend systematic withdrawals.
FREE-LOOK RIGHT
A Contractowner may return a Contract within the Free-Look Period, which is
generally a ten-day period beginning when the Contractowner receives the
Contract. The returned Contract will then be deemed void and SBL will refund any
Purchase Payments allocated to the General Account plus the Contract Value in
the Variflex Series plus any charges deducted from the Series and premium taxes,
if any. SBL will refund Purchase Payments allocated to the Series rather than
Contract Value in those states that require it to do so.
DEATH BENEFIT DURING ACCUMULATION PERIOD
If the Annuitant under a Variflex Contract, other than a Group Unallocated
Contract, dies during the Accumulation Period, SBL will pay the death benefit
proceeds to the beneficiary upon receipt of due proof of the Annuitant's death
and instructions regarding payment. The death benefit proceeds will be the death
benefit reduced by any outstanding Contract Debt and any uncollected premium
taxes. If the Annuitant dies during the Accumulation Period and the age of the
Annuitant was 75 or younger on the Cont ract Date, the amount of the death
benefit will be the greatest of: (1) the sum of all Purchase Payments made
reduced by any partial withdrawals; (2) the Contract Value on the date due proof
of death and instructions regarding payment are received by SBL at its home
office; or (3) the stepped-up death benefit. The stepped-up death benefit is:
(a) the largest Contract Value on any Contract anniversary that is both an exact
multiple of six and occurs prior to the Annuitant reaching age 76, plus (b) any
Purchase Payments received since the applicable Contract anniversary, less (c)
any reductions caused by partial withdrawals since the applicable Contract
anniversary. For Contracts in effect for six Contract Years or more as of May 1,
1991, the Contract Value on the Contract anniversary immediately preceding May
1, 1991, will be used as the sixth Contract anniversary in determining the
stepped-up death benefit.
If the Annuitant dies during the Accumulation Period and the age of the
Annuitant was 76 or greater on the Contract Date, the amount of the death
benefit will be the greater of: (1) the sum of all Purchase Payments made
reduced by any partial withdrawals; or (2) the Contract Value on the date due
proof of death and instructions regarding payment are received by SBL at its
home office.
Notwithstanding the foregoing, the death benefit for Contracts issued in
Florida is as follows. If the Annuitant was 75 or younger on the date of death,
the death benefit is the greatest of (1) or (2) above or (3) the largest
Contract Value on any Contract anniversary that is an exact multiple of six,
less any partial withdrawals since that anniversary. If the Annuitant was 76 or
older on the date of death, the death benefit is the Contract Value on the date
due proof of death and instructions regarding payment are received, less any
applicable withdrawal charges. SBL currently waives any withdrawal charges
applicable to the death benefit.
In lieu of payment in one lump sum, an individual Contractowner or a
Participant under a Group Allocated Contract may elect that the death benefit be
applied under any one of the optional annuity forms described on page 23. If the
Contractowner or Participant did not make such an election, the beneficiary may
do so. The person selecting the optional annuity settlement may also designate
contingent beneficiaries to receive any further amounts due, should the first
beneficiary die before completion of the specified payments. The manner in which
annuity payments to the beneficiary are determined and in which they may vary
from month to month are described under "Annuity Period," on page 22.
The death benefit under a Group Unallocated Contract will be an amount not
greater than that under the provisions of the Plan to be paid in the case of the
death of the Participant. The death benefit for a Participant cannot exceed the
present value of the current accrued portion of the pension benefit payable at
the normal retirement date under the Plan for the Participant. If the Plan is
being funded by more than one method and/or contract, the maximum death benefit
payable under a Variflex Contract will be reduced. In this case of multiple
funding, the maximum death benefit will be reduced by multiplying it by the
following ratio of "a" divided by "b" where:
a. is the total value under the Variflex Contract.
b. is the total of the contract values and/or funds accumulated under all
funding methods and/or contracts.
The Contractowner must provide the information to calculate the death benefit
before it will be paid and the death benefit amount will be paid as a partial
surrender under the Group Unallocated Contract. The partial surrender will be
paid without imposition of a contingent deferred sales charge and will not be
considered as a free withdrawal.
For Non-Qualified Contracts, the death benefit described herein will be
paid in the event of the death of the Annuitant OR CONTRACTOWNER to meet the
requirements
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of Section 72(s) of the Internal Revenue Code. The amount of the death benefit
in the event of the Contractowner's death will be based on the age of the
Contractowner on the Contract Date. For Non-Qualified Contracts, if the
surviving spouse of the deceased Contractowner is the sole beneficiary, such
spouse may elect to continue the Contract in force until the earliest of the
surviving spouse's death or the Annuity Commencement Date or receive the death
benefit proceeds. For any beneficiary other than a surviving spouse, only those
options may be chosen that provide for complete distribution of the
Contractowner's interest in the Contract within five years of the death of the
Owner. If the beneficiary is a natural person, that person alternatively can
elect to begin receiving annuity payments within one year of the Contractowner's
death over a period not extending beyond the beneficiary's life or life
expectancy. The beneficiary of the death benefit payable upon the death of the
Contractowner prior to maturity is the same beneficiary as that designated for
the Annuitant's death benefit, unless another beneficiary is designated.
LOANS AVAILABLE FROM CERTAIN QUALIFIED CONTRACTS
The Contractowner of a Contract issued in connection with a retirement plan
that is qualified under Section 401 or 403(b) of the Internal Revenue Code may
borrow money from SBL using his or her Contract Value as the only security for
the loan by submitting a written request to SBL. A loan may be taken while the
Owner is living and prior to the Annuity Commencement Date. The minimum loan
that may be taken is $1,000. For Contracts with a Contract Value of $20,000 or
less, the maximum loan that can be taken is the amount that produces a loan
balance immediately after the loan that is the lesser of $10,000 or 75% of the
Contract Value. For Contracts with Contract Value over $20,000, the maximum loan
that can be taken is the amount that produces a loan balance immediately after
the loan that is 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. Reference should
be made to the terms of the particular Qualified Plan for any additional loan
restrictions.
When an eligible Contractowner takes a loan, Contract Value is transferred
from the Variflex Series to the General Account in an amount equal to the loan
amount into an account called the Loan Account. Amounts allocated to the Loan
Account earn interest at the rate of 3.5%, the minimum rate of interest
guaranteed under the General Account. In addition, Contract Value is transferred
from the Variflex Series to the General Account in an amount equal to the loan
amount for loans from Contracts with Contract Value of $20,000 or more or in an
amount equal to 1/3 of the loan amount for loans from Contracts with Contract
Value of less than $20,000. This Contract Value earns the current rate of
interest paid by SBL on General Account assets and is security for the loan.
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 will always be equal
in amount to the outstanding loan balance, the net cost of a loan is 2%.
Loans must be repaid within five years and before the Annuity Commencement
Date, unless SBL determines that the loan is to be used to acquire a principal
residence for the Owner, in which case the loan must be repaid within 30 years
and before the Annuity Commencement Date. Loan repayments must be made at least
quarterly. Loans that are not repaid within the required time periods will be
subject to taxation as distributions from the Contract. Loans may be prepaid at
any time. Upon receipt of a loan payment , Security Benefit will transfer
Contract Value from the Loan Account to the General Account and/or the Series
according to the Contractowner's 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 a loan payment is not received when due, a
partial withdrawal equal to the repayment amount due and any applicable
withdrawal charge will be made from the Contract and paid to Security Benefit.
The portion of the partial withdrawal equal to the unpaid principal due will be
deducted from the Contract Value serving as security for the loan and the
portion equal to interest due will be deducted from other Contract Value.
The partial withdrawal may be subject to taxation as a distribution.
Contractowners should consult with their tax advisers before requesting a loan.
While the amount to secure the loan is held in the General Account and the
amount of the outstanding loan balance is held in the Loan Account, the Owner
forgoes the investment experience of the Series and the current rate of interest
on the Loan Account. Outstanding Contract Debt will reduce the amount of
proceeds paid upon full withdrawal or upon payment of the death benefit.
A Contractowner should consult with his or her tax adviser on the effect of
a loan.
The foregoing discussion of Contract loans is general and does not address
the tax consequences resulting from all situations in which a person may receive
a Contract loan. For plans that are subject to the Employee Retirement Income
Security Act ("ERISA"), loans may not be available or may be subject to certain
restrictions. A competent tax adviser should be consulted before obtaining a
Contract loan.
CONSTRAINTS ON DISTRIBUTIONS FROM CERTAIN SECTION 403(B) ANNUITY CONTRACTS
The Internal Revenue Code imposes restrictions on certain distributions
from tax-sheltered annuity contracts meeting the requirements of Section 403(b).
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c)(3) of the
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Code to purchase annuity contracts and, subject to certain limitations, exclude
the amount of purchase payments from gross income for tax purposes. Section
403(b)(11) requires that distributions from Section 403(b) annuities that are
attributable to employee contributions under a salary reduction agreement not
begin before the employee (i) reaches age 59 1/2, (ii) separates from service,
(iii) dies, (iv) becomes disabled or (v) incurs a hardship. SBL reserves the
right to require satisfactory written proof of the events in items (i) through
(v) prior to any distribution from the Contract. Furthermore, distributions of
income attributable to such contributions may not be made on account of
hardship. Hardship, for this purpose, is generally defined as an immediate and
heavy financial need, such as for paying medical expenses, the purchase of a
principal residence, or paying certain tuition expenses. A Participant in a
Variflex Contract purchased as a Section 403(b) annuity contract will not,
therefore, be entitled to exercise the right of withdrawal, including systematic
withdrawals, as described in this Prospectus, in order to receive amounts
attributable to elective contributions credited to such Participant after
December 31, 1988 under the Contract unless one of the foregoing conditions has
been satisfied. A Participant's value in a Contract may be able to be
transferred to certain other investment alternatives meeting the requirements of
Section 403(b) that are available under an employer's Section 403(b)
arrangement.
TAXATION OF OWNERS OF TWO OR MORE CONTRACTS
For Contracts entered into on or after October 21, 1988, the Internal
Revenue Code provides that all annuity contracts issued by the same life
insurance company to the same Contractowner during a twelve-month period shall
be treated as one annuity contract for purposes of determining the amount
includable in the Contractowner's gross income for amounts that are not received
as an annuity. This rule will apply to a distribution received under the
Contract, including a distribution by full surrender, or partial withdrawal, or
other distribution that is not in the form of a payment received pursuant to an
annuity option under the Contract.
ANNUITY PERIOD
ANNUITY PROVISIONS
Life-contingent Variable Annuity payments are determined on the basis of
(a) the mortality table (1983 Table a) specified in the contract (except for
single payment immediate contracts which contain no tables, but for which
annuity rates are available upon request) which generally reflects the age and
sex of the Variable Annuitant and the type of annuity payment option selected,
and (b) the investment performance of Variflex.
Pursuant to the U.S. Supreme Court decision in Arizona Governing Committee
for Tax Deferral Annuity and Deferred Compensation Plans v. Norris, which held
that an employer subject to Title VI of the Civil Rights Act of 1964 may not
offer its employees the option of receiving retirement benefits calculated on
the basis of sex, Variflex Contracts for Participants in such Plans will offer
retirement benefits calculated only on a unisex basis. To the extent that future
legislation expands requirements for unisex rates, Variflex Contracts will
conform to such requirements.
ELECTION OF ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
(A) NON-QUALIFIED CONTRACTS
The date on which annuity payments are to begin and the form of option are
elected in the application. A Contract may not be purchased after age 80 and
annuity payments must begin no later than age 90, except that for Contracts
purchased on or before June 1, 1986, payments must begin no later than age 85.
If no such elections are made, SBL reserves the right to automatically begin
payments at age 65 (or if age at purchase was over 55, then 10 years after
issue) under Option 2 set out below, with 120 monthly payments certain. The
Annuity Commencement Date of individual and Group Allocated Contracts cannot be
less than 37 months after the date the first contribution is credited to the
Contract, except for Single Stipulated Payment Immediate Annuity Contracts.
(B) QUALIFIED CONTRACTS
For Qualified Contracts, the Annuity Commencement Date cannot be less than
37 months after the date the first contribution is credited to the contract,
except for Single Payment Immediate Annuity Contracts.
Contracts purchased in accordance with Plans qualifying under Section 401
or 403(a) of the Internal Revenue Code provide for annuity payments to begin on
the date and under the annuity options provided for in the Plan. Contracts
qualifying under Section 408 of the Code provide that annuity payments may not
commence without penalty until after the Participant attains age 59 1/2, but no
later than age 70 1/2, and that the optional annuity form selected must conform
to the distribution requirements of Section 408.
For contracts qualifying under Section 403(b) of the Code, the date on
which annuity payments are to begin and the form of option are elected in the
application. The option may be any one of Options 1 through 5 or Option 8 as
shown below (provided that distributions under the option comply with the
minimum distribution rules of the Code), and the Annuity Commencement Date must
be no later than that allowed by law. Distributions from 403(b) contracts must
generally begin by the April 1 following the year in which the Annuitant reaches
age 70 1/2.
For Contracts qualifying under Section 403(c) or 457 of the Code, the date
on which annuity payments are to begin and the form of option are provided for
in the Plan
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agreement. Changes in such election of option may be made at any time up to 30
days prior to the date on which annuity payments are to begin. Payments under a
Contract qualifying under Section 457 of the Code must comply with minimum
distribution rules generally applicable to qualified retirement plans.
If no election of an Annuity Commencement Date is made, SBL reserves the
right to automatically begin payments at age 65 (or if age at purchase was over
55, then 10 years after issue) under Option 2, with 120 monthly payments
certain.
ALLOCATION OF BENEFITS
For the Annuity Period, if no election is made to the contrary, the
Accumulation Units of each Series in Variflex (held on the Annuity Commencement
Date) will be changed into Variable Annuity Units and applied to provide a
Variable Annuity based on that Series.
In lieu of this automatic allocation of annuity benefits, the Contractowner
or Participant may elect to convert his or her Accumulation Units to any other
Series in Variflex. After the Annuity Commencement Date, further changes
affecting the account allocation may be made only once each calendar year except
for contracts receiving payments pursuant to annuity options 5, 6, 7 or 8, the
allocation of which may be changed as described under "Transfer of Contract
Value" on page 15. Each Contractowner or Participant may convert Variable
Annuity Units of one Series into Variable Annuity Units of another Series as
discussed above at any time other than the five-day interval prior to and
including any annuity payment date.
No election may be made for any individual unless such election would
produce a periodic payment of at least $25 to that individual and if a
combination benefit is elected, no election may be made unless the guaranteed
and variable payments would each be at least $25.
OPTIONAL ANNUITY FORMS
The following optional annuity forms are available. Individual factual
situations or Plan provisions may vary, however, and special rules not discussed
herein may control.
OPTION 1--LIFE INCOME--Monthly payments will be made during the lifetime of
the Annuitant with payments ceasing upon death, regardless of the number of
payments received. There is no minimum number of payments guaranteed under this
option and it is possible for an Annuitant to receive only one annuity payment
if the Annuitant's death occurred prior to the due date of the second annuity
payment, or only two if death occurred prior to the third annuity payment due
date, etc.
OPTION 2--LIFE INCOME WITH GUARANTEED PAYMENTS OF 5, 10, 15, OR 20 YEARS--
Monthly payments will be made during the lifetime of the Annuitant with payments
made for a stated period of not less than 5, 10, 15, or 20 years, as elected.
If, at the death of the Annuitant, payments have been made for less than the
stated period, annuity payments will be continued during the remainder of such
period to the beneficiary.
OPTION 3--UNIT REFUND LIFE INCOME--Monthly payments will be made during the
lifetime of the Annuitant. If, at the death of the Annuitant, payments have been
made for less than the number of months determined by dividing the amount
applied under this Option by the first monthly payment, the remainder of such
payments will continue to the beneficiary. The Option guarantees that the
annuity units but not necessarily the dollar value applied under a variable
payout will be repaid to the Annuitant or his or her beneficiary.
OPTION 4--JOINT AND SURVIVOR ANNUITY--Monthly payments will be made during
the lifetime of the Annuitant and another named Annuitant and thereafter during
the lifetime of the survivor, ceasing upon the death of the survivor. There is
no minimum number of payments guaranteed under this option and it is possible
for only one annuity payment to be made if both Annuitants under the Option died
prior to the due date of the second annuity payment, or only two payments if
both died prior to the third annuity payment due date, etc.
OPTION 5--INSTALLMENT PAYMENTS FOR A FIXED PERIOD--Monthly payments will be
made for a specified number of years. The amount of each payment will be
determined by multiplying (a) the Accumulation Unit Value for the day the
payment is made, times (b) the result of dividing the number of Accumulation
Units applied under this Option by the number of remaining monthly payments. If
at the death of the Annuitant, payments have been made for less than the
specified number of years, the remaining unpaid payments will be paid to the
beneficiary.
OPTION 6--INSTALLMENT PAYMENTS FOR A FIXED AMOUNT--Equal monthly payments
will be made until the amount applied, adjusted daily by the investment results,
is exhausted. The final payment will be the amount remaining with SBL.
OPTION 7--DEPOSIT OPTION--The amount due under the Contract on the Maturity
Date may be left on deposit with SBL for placement in its General Account with
interest at the rate of not less than 2% per year. Interest will be paid
annually, semiannually, quarterly or monthly as elected. This option may not be
available under certain Qualified Contracts.
OPTION 8--IRC AGE RECALCULATION--Monthly payments will be made until the
amount applied to this Option, adjusted daily by the investment results, is
exhausted. The amount of monthly payments will be based upon the Annuitant's
life expectancy, or the joint life expectancies of the Annuitant and his or her
beneficiary, at the Annuitant's attained age (and the beneficiary's attained or
adjusted age, if applicable) each year as computed by reference to actuarial
tables prescribed by the Treasury Secretary.
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The contingent deferred sales charge, where applicable, will be deducted
from annuity payments under Annuity Options 5, 6, 7 and 8 and other non-life
contingent payment options mutually agreed to with SBL, except that the
contingent deferred sales charge is waived if annuity payments extend over a
period of at least 5 years and are made in substantially equal amounts.
OTHER ANNUITY FORMS--Provision may be made for annuity payments in any
reasonable arrangement mutually agreed upon.
If the beneficiary dies while receiving payments certain under Option 2, 3,
5, 6 or 8 above, the present value will be paid in a lump sum to the estate of
the beneficiary.
VALUE OF VARIABLE ANNUITY PAYMENTS: ASSUMED INVESTMENT RATES
The annuity tables in the Contract which are used to calculate the annuity
payments are based on an "assumed investment rate" of 3 1/2%. If the actual
investment performance of the particular Series selected is such that the net
investment return to Variflex is 3 1/2% per annum, payments will remain
constant. If the net investment return exceeds 3 1/2%, the payments will
increase and if the return is less than 3 1/2%, the payments will decline. Use
of a higher investment rate assumption would mean a higher initial payment but a
more slowly rising series of subsequent payments in a rising market (or a more
rapidly falling series of subsequent payments in a declining market). A lower
assumption would have the opposite effect. Generally, one might expect an equity
investment to experience more significant market fluctuations than a debt
investment, and a longer term debt investment to experience more market
fluctuation than a shorter term debt investment. Thus, while there can be no
certainty, more fluctuation might be expected in the value of Growth,
Growth-Income, Worldwide Equity, Social Awareness, Emerging Growth, Global
Aggressive Bond, Equity Income, Specialized Asset Allocation and Managed Asset
Allocation Series. The High Grade Income Series should experience a lesser
amount of fluctuation, and the Money Market Series should experience the least
fluctuation.
The payment amount will be greater for shorter guaranteed periods than for
longer guaranteed periods, and greater for life annuities than for joint and
survivor annuities, because the life annuities are expected to be made for a
shorter period.
At the election of the Contractowner, where state law permits, a Single
Payment Immediate Annuity Contract with annuity payments commencing immediately
may provide annuity benefits based on an assumed investment rate other than 3
1/2%. The annuity rates for Single Payment Immediate Annuity Contracts are
available upon request from the home office.
The method of computing the Variable Annuity payment is described in more
detail in the Statement of Additional Information.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Plans for participants in the Texas Optional Retirement Program contain
restrictions required under the Texas Education Code. In accordance with those
restrictions, a participant in such a Plan will not be permitted to make
withdrawals prior to such participant's retirement, death or termination of
employment in a Texas public institution of higher education.
FEDERAL TAX MATTERS
The following discussion is general and is not intended as tax advice. This
discussion does not address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a Variflex Contract. Each person should consult a competent tax adviser
before making a Purchase Payment. This discussion is based upon SBL's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of the continuation of the present federal income tax laws or of the
current interpretation, nor does this discussion consider any applicable state
or other tax laws.
The following discusses the taxation of annuities in general. The tax
treatment of Variflex is described in the Statement of Additional Information,
including diversification requirements imposed on Variflex.
QUALIFIED CONTRACTS
The Qualified Contracts were designed for use with several types of
qualified plans. 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. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax qualified plan in order to continue
receiving favorable tax treatment, including the requirement that distributions
under the Variflex Contract must satisfy certain minimum distribution
requirements. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of the Contract for their
situation, the applicable requirements and the tax treatment of the rights and
benefits under a Contract. The following discussion assumes that Variflex
Contracts are used in retirement plans that qualify for special federal income
tax treatment.
The investment results credited to a Variflex Contract are not taxable to a
Participant until benefits are received. At that time there is no distinction
made between investment income and realized or unrealized capital gains in
determining the amount of taxes payable. Under current federal income tax laws,
when annuity payments begin, the total of the after tax payments made by the
Participant for a Variflex Contract establishes the Participant's cost basis. A
portion of each annuity payment will be treated as a
- --------------------------------------------------------------------------------
24
<PAGE>
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return of the Participant's cost basis, and will not be taxable. The remainder
of each payment is taxable. The portion of the payment that is not taxable is
determined by multiplying each payment by a fraction, the numerator of which is
the Participant's cost and the denominator of which is the total expected
payments under the annuity. Once the Participant's cost basis is returned, the
entire amount of the payment is taxable as ordinary income.
For Contracts, issued under a Plan that qualifies under Section 401, 403,
408, or 457 of the Code, the cost basis normally is zero as the Participant will
not normally have made any payment with income on which he or she has been
previously taxed. If such is the case, the entire amount of the annuity payments
is taxable when received as ordinary income. If, on the other hand, the
Participant has been taxed previously on amounts paid to the Contract, such
amounts become his or her cost basis.
If a Contract issued under a Plan that qualifies under Section 403(b),
403(c), 408, or 457 of the Code (or a Participant's Individual Account in such a
group contract) is fully withdrawn in a lump sum, the entire amount in excess of
the Participant's cost basis is taxed as ordinary income to the Participant. For
Contracts purchased to fund Section 401 plans, including plans covering
self-employed individuals, and 403(a) plans, if a Participant receives his or
her withdrawal value in a qualifying lump sum distribution, a special taxation
election may be available.
Early distributions from a Contract under a qualified retirement plan may
be subject to 10% additional federal income tax on the amount of the taxable
distribution. The general exceptions to this early distribution tax include
distributions after age 59 1/2, death, disability, or separation from service
after reaching age 55; distributions in the form of substantially equal periodic
payments for life; or distributions used to pay deductible medical expenses.
The provisions of the Retirement Equity Act of 1984 also impose certain
requirements with respect to payouts from qualified plans for married
Participants and provide certain restrictions involving qualified domestic
relations orders.
Distributions from a Contract issued under Section 403(b) of the Code that
are attributable to salary reduction contributions may be limited. (See
"Constraints on Distributions from Certain Section 403(b) Annuity Contracts,"
page 21.)
Periodic distributions (e.g., annuities and installment payments) from a
qualified retirement plan or individual retirement annuity that will last for a
period of ten or more years are 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 elect not to
have withholding apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than 10 years) from a qualified retirement plan are generally
subject to mandatory 20 percent income tax withholding. However, no withholding
is imposed if the distribution is transferred directly to another qualified
retirement plan or individual retirement account or annuity.
In addition, nonperiodic distributions from an individual retirement
account or annuity are subject to income tax withholding at a flat 10 percent
rate. The recipient of such a distribution may elect not to have withholding
apply.
NON-QUALIFIED CONTRACTS
A Contractowner is not subject to income tax on increases in the Contract
Value of the Contract until payments are received under the Contract. Income
taxation of benefits received under the Contract, whether received before or
after the Annuity Commencement Date, is determined under Section 72 of the Code.
(A) DISTRIBUTIONS BEFORE THE ANNUITY COMMENCEMENT DATE.
A distribution by full or partial withdrawal prior to the Annuity
Commencement Date may subject the Contractowner to income tax. For this purpose,
a loan under any Contract, or an assignment or pledge (or an agreement to assign
or pledge) is considered a distribution prior to maturity.
If the distribution is by full withdrawal, the Contractowner is taxed on
the amount distributed less premiums paid reduced by any prior partial
surrenders which were not subject to income tax.
A distribution by partial withdrawal is deemed to come first from any
previously untaxed accumulation and then from principal. The Contractowner is
subject to income tax on any previously untaxed accumulation which is
distributed.
Premiums may be paid by means of a tax free exchange of annuity contracts
under Section 1035 of the Code. Contracts exchanged under Code Section 1035
after January 18, 1985 will be subject to the annuity income tax rules of
Section 72 of the Code in effect after that date, with exceptions set out in (c)
regarding the First-in First-out treatment of pre-August 14, 1982 contracts.
(B) DISTRIBUTIONS AFTER THE ANNUITY COMMENCEMENT DATE
If payments are received after the Annuity Commencement Date pursuant to an
Annuity option, that portion of each payment which represents the
Contractowner's investment in the contract is excluded from gross income for
income tax purposes. The "investment in the contract" is equal to the total
consideration paid for the Contract less any payments under the Contract that
were excluded from the individual's gross income. Once the Contractowner's
investment in the contract is returned in full, the entire amount of each
annuity payment is taxable as ordinary income.
(C) PENALTY TAX.
If there is a taxable distribution from the Annuity, there is a penalty tax
equal to 10% of the taxable amount distributed to the extent the taxable
distribution is considered to be an early distribution under the annuity
- --------------------------------------------------------------------------------
25
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contract. The penalty tax does not apply to taxable distributions made as a
result of the death or disability of the Contractowner; to distributions made
after the Contractowner reaches age 59 1/2; to distributions made under
immediate annuities; to distributions made under Optional Annuity Forms 1 or 4,
provided the distribution under such plans are substantially equal; and to
distributions attributable to premiums paid prior to August 14, 1982. In
addition, for contracts issued during the period August 14, 1982 through January
18, 1985 and for additional Purchase Payments to contracts issued prior to
August 14, 1982, the penalty tax will not apply to distributions attributable to
premiums paid ten (10) years or more prior to the distribution. For this
purpose, distributions will be attributed to Purchase Payments on a "First-in
First-out" basis (i.e., to the earliest Purchase Payment which has not been
fully allocated to prior distributions).
(D) WITHHOLDING.
All distributions from the Contract are subject to voluntary income tax
withholding. The recipient may elect not to have withholding apply.
DISTRIBUTOR OF THE CONTRACTS
Subject to arrangements with SBL, the Contracts will be sold by independent
broker/dealers who are members of the National Association of Securities
Dealers, Inc. and who become licensed to sell life insurance and variable
annuities for SBL, and by national banks. Variflex Contracts may also be sold by
individuals who in addition to being licensed as agents for SBL, are associated
persons of Security Distributors, Inc., which is registered as a broker/dealer
under the Securities Exchange Act of 1934.
PERFORMANCE INFORMATION
Performance information for the Series of Variflex may appear in
advertisements, sales literature or reports to Contractowners or prospective
purchasers. All Series except the Money Market Series may advertise "average
annual total return" and "total return." The Money Market Series may advertise
"yield" and "effective yield." Each of these figures is based upon historical
results and is not necessarily representative of the future performance of the
Series.
Average annual total return and total return calculations measure both the
net income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the investments underlying the Series for the
designated period. Average annual total return will be quoted for periods of 1,
5 and 10 years (up to the life of the Series) ending with a recent calendar
quarter. Average annual total return figures are annualized and, therefore,
represent the average annual percentage change in the value of an investment in
a Series over the designated period. Total return figures are not annualized and
represent the actual percentage change over the designated period. Yield is a
measure of the net dividend and interest income earned over a specific seven-day
period for the Money Market Series expressed as a percentage of the offering
price of the Series' units. Yield is an annualized figure, which means that it
is assumed that the Series generates the same level of net income over a one
year period. The effective yield for the Money Market Series is calculated
similarly but includes the effect of assumed compounding calculated under rules
prescribed by the Securities and Exchange Commission. The Money Market Series'
effective yield will be slightly higher than its yield due to this compounding
effect.
The Series' units are sold at Accumulation Unit value. The Series'
performance figures and Accumulation Unit values will fluctuate. Units of the
Series are redeemable by an investor at Accumulation Unit value, which may be
more or less than original cost. The performance figures include the deduction
of all expenses and fees, including a prorated portion of the Administrative
Fee, except total return figures which do not reflect deduction of the
Administrative Fee. Redemptions within the first eight years after purchase may
be subject to a contingent deferred sales charge that ranges from 8% the first
year to 0% after eight years. Yield, effective yield and total return figures do
not include the effect of any contingent deferred sales charge that may be
imposed upon the redemption of units, and thus may be higher than if such
charges were deducted. Average annual total return figures include the effect of
the applicable sales charge that may be imposed at the end of the designated
period.
Although the Contracts were not available for purchase until June 8, 1984,
the underlying investment vehicle of Variflex, the SBL Fund, has been in
existence since May 26, 1977. Performance information for Variflex may also
include quotations of total return for periods beginning prior to the
availability of Variflex contracts that incorporate the performance of the SBL
Fund.
From time to time, performance information for a Series may be compared to
the Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average or other
unmanaged indices; other variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services, Morningstar and the Variable
Annuity Research and Data Service ("VARDS(R)"), widely used independent research
firms that rank variable annuities and in the case of Lipper and Morningstar,
other investment companies by overall performance, and investment objectives, 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 the Consumer Price Index (measure for inflation). Additional
information concerning the Series' performance appears in the Statement of
Additional Information.
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26
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THE GENERAL ACCOUNT
In addition to the eleven Series of Variflex, the Contracts provide a
General Account option for Qualified and Non-Qualified Contracts during the
Accumulation Period and a Guaranteed Annuity Option for Qualified and
Non-Qualified Contracts during the Annuity Period. Allocations and transfers to
the General Account become part of SBL's General Account, which supports its
insurance and annuity obligations.
Interests in the General Account are not registered under the Securities
Act of 1933 ("1933 Act") nor is the General Account registered as an investment
company under the Investment Company Act of 1940 ("1940 Act"). Accordingly,
neither the General Account nor any interests therein are generally subject to
the 1933 and 1940 Acts and we have been advised that the staff of the Securities
and Exchange Commission has not reviewed the disclosure in this Prospectus which
relates to the General Account or Guaranteed Annuity. Disclosures regarding the
General Account and Guaranteed Annuities, however, may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Amounts allocated to the General Account for a Guaranteed Annuity are
guaranteed with a fixed rate of interest declared in advance. Excess interest
for a period is declared at the discretion of SBL. Pursuant to Qualified and
Non-Qualified Contracts, amounts may be allocated to the General Account in
addition to, or in lieu of, allocation to Series of Variflex, subject to the
same $25 minimum allocation applicable in the case of Variflex. Amounts
allocated to the General Account or for a Guaranteed Annuity are also subject to
the annual Administrative Fee. (See "Administrative Fees," page 17).
Annuity options available for Variable Annuities (see "Optional Annuity
Forms," page 23) are also available for Guaranteed Annuities as well as for
combined Variable and Guaranteed Annuities. With respect to Option 5 (Fixed
Period Option), installment payments under Guaranteed Annuities will be
determined by SBL and will reflect an effective yearly interest rate of not less
than 2.5%. Under Option 6 (Fixed Installment Option), interest on any unpaid
balance allocated to a Guaranteed Annuity will be at least 2.5% per year and the
last installment will be the remaining sum left in the General Account for that
Contract or account. The Annuity Unit value under a Guaranteed Annuity otherwise
remains constant throughout the payout period.
Any amounts allocated to the General Account during the Accumulation Period
will automatically be allocated to provide a Guaranteed Annuity unless an
alternative allocation to one or more Series of Variflex is made at least 30
days prior to the Annuity Commencement Date. The annual conversion right during
the Annuity Period (see "Allocation of Benefits," page 23) does not include the
right to convert Variable Annuity Units of any Series into Guaranteed Annuity
Units, nor Guaranteed Annuity Units into any Variable Annuity Unit.
During the Accumulation Period, a Contractowner or Participant in a
Qualified or Non-Qualified Contract may elect, during any Contract Year, to
transfer amounts from the General Account to the various Series of Variflex. The
amount which may be transferred during any Contract Year is the greatest of (1)
$5,000, (2) 1/3 of the Contract Value in the General Account at the time of the
first transfer in the Contract Year,or (3) 120% of the dollar amount transferred
from the General Account in the prior Contract Year. SBL reserves the right for
a period of time to allow transfers from the General Account in amounts that
exceed the limits set forth above ("Waiver Period"). In any Contract Year
following such a Waiver Period, the total dollar amount that may be transferred
from the General Account is the greatest of: (1) above; (2) above; or (3) 120%
of the lesser of: (i) the dollar amount transferred from the General Account in
the prior Contract Year; or (ii) the maximum dollar amount that would have been
allowed in the prior Contract Year under the transfer provisions above absent
the Waiver Period.
The frequency of transfers of units from the General Account is not
currently limited; however, SBL reserves the right to limit them to no more
frequently than once each 30 days. All of the Contract Value of the General
Account may be transferred at the final conversion prior to the Annuity
Commencement Date.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is a
Table of Contents for that Statement:
TABLE OF CONTENTS
Page
THE CONTRACT ............................................................... 1
Valuation of Accumulation Units........................................ 1
Computation of Variable Annuity Payments .............................. 1
Illustration .......................................................... 2
Variations in Charges ................................................. 2
Termination of Contract ............................................... 3
Group Contracts ....................................................... 3
PERFORMANCE INFORMATION .................................................... 3
ADDITIONAL FEDERAL TAX MATTERS ............................................. 5
Limits on Stipulated Payments (Under the Internal Revenue Code) ....... 5
Taxation of SBL ....................................................... 5
Tax Status of the Contracts............................................ 5
ASSIGNMENT ................................................................. 5
DISTRIBUTION OF THE CONTRACTS .............................................. 5
SAFEKEEPING OF VARIFLEX ACCOUNT ASSETS ..................................... 6
STATE REGULATION ........................................................... 6
RECORDS AND REPORTS ........................................................ 6
LEGAL MATTERS .............................................................. 6
EXPERTS .................................................................... 6
OTHER INFORMATION .......................................................... 6
FINANCIAL STATEMENTS ....................................................... 7
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VARIFLEX
VARIABLE ANNUITY CONTRACTS
ISSUED BY--
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON, TOPEKA, KANSAS 66636-0001
(913) 295-3000
THE DATE OF THIS SUPPLEMENT IS JULY 1, 1996
This Supplement updates certain information in the Prospectus dated June 1,
1995, for Variflex Variable Annuity Contracts offered by Security Benefit Life
Insurance Company. Please read this Supplement carefully. You should attach this
Supplement to your copy of the Prospectus and retain both for future reference.
You may obtain an additional copy of the Prospectus, free of charge, by calling
1-800-888-2461, extension 3112.
The Prospectus is updated by adding the following terms to the "GLOSSARY OF
TERMS," page 3:
HOSPITAL--An institution that is licensed as such by the Joint Commission
of Accreditation of Hospitals, or any lawfully operated institution that
provides in-patient treatment of sick and injured persons through medical,
diagnostic and surgical facilities directed by physicians and 24 hour
nursing services.
QUALIFIED SKILLED NURSING FACILITY--A facility licensed by the state to
provide on a daily basis convalescent or chronic care for in-patients who,
by reason of infirmity or illness, are not able to care for themselves.
"HOW THE DEATH BENEFIT VARIES," page 4 is replaced with the following:
THE DEATH BENEFIT
For individual and Group Allocated Contracts, the Contract provides for a
death benefit upon the death of the Annuitant during the Accumulation
Period. The death benefit will vary depending on your Contract's investment
results and the age of the Annuitant on the Contract Date. SBL will pay the
death benefit proceeds to the beneficiary upon receipt of due proof of the
Annuitant's death and instructions regarding payment. For Non-Qualified
Contracts, the death benefit will be paid upon the death of the Annuitant
OR CONTRACTOWNER to meet the distribution requirements of Section 72(s) of
the Internal Revenue Code. Under a Group Unallocated Contract, the death
benefit will be determined by the provisions of the Plan. (See "Death
Benefit During Accumulation Period" on page 18.)
The description of Series E under "SBL FUND," page 9, is replaced with the
following:
SERIES E--Amounts allocated to the HIGH GRADE INCOME SERIES of Variflex 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 in a broad range of debt securities,
including U.S. and foreign corporate debt securities and securities issued
by U.S. and foreign governments.
The last paragraph under "SBL FUND," page 9, is replaced with the following:
The Investment Manager has engaged Lexington Management Corporation, Park
80 West Plaza Two, Saddle Brook, New Jersey 07662, to provide certain
investment advisory services to Series D and K of the Fund. The Investment
Manager has engaged T. Rowe Price Associates, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202 to provide certain investment advisory services
to Series N and O. The Investment Manager has engaged Meridian Investment
Management Corporation, 12835 East Arapahoe Road, Tower II, 7th Floor,
Englewood, Colorado 80112 and Templeton/Franklin Investment Services, Inc.,
777 Mariners Island Boulevard, San Mateo, California 94404, to provide
certain analytic research services with respect to Series M.
"CONTRACTOWNER INQUIRIES," page 14, is replaced with the following:
Contractowner inquiries and Purchase Payments should be addressed to
Security Benefit Life Insurance Company at its home office, P.O. Box
750497, Topeka, Kansas 66675-0497, or made by calling (913) 295-3112 or
(800) 888-2461, extension 3112.
The following section is added under "CONTINGENT DEFERRED SALES CHARGE" which
begins on page 14:
HOSPITAL/NURSING HOME WAIVER
SBL will waive the withdrawal charge on any full or partial withdrawal upon
the Contractowner's request for such a waiver, provided that the
Contractowner: (1) has been confined to a "hospital" or "qualified skilled
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THIS SUPPLEMENT SHOULD BE RETAINED FOR FUTURE REFERENCE.
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1
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nursing facility" for at least 90 consecutive days prior to the date of the
withdrawal; (2) is so confined when SBL receives the withdrawal request;
and (3) became so confined after the date the Contract was issued. (See the
"Glossary of Terms" on page 3.) Any request for the hospital/nursing home
waiver must be accompanied by a properly completed claim form which may be
obtained from SBL and a written physician's statement acceptable to SBL
certifying that such confinement is a medical necessity and is due to
illness or infirmity. SBL reserves the right to have the Contractowner
examined by a physician of SBL's choice and at SBL's expense to determine
if the Contractowner is eligible for the hospital/nursing home waiver. The
hospital/nursing home waiver is not available in certain states pending
department of insurance approval. If the waiver is later approved by the
insurance department of a state, SBL intends to make the waiver available
to all Contractowners in that state at that time, but there can be no
assurance that the waiver will be approved. Prospective Contractowners
should contact their agent concerning availability of the waiver in their
state.
The following sentence is added to "ADMINISTRATIVE FEES," page 15:
SBL will waive the Administrative Fee during a Contract Year for any
Contract that has been in force for eight Contract Years or more AND the
Contract Value of which is $25,000 or more at year-end (or in the event of
a full withdrawal, on the date of the withdrawal).
The first two paragraphs under "DEATH BENEFIT DURING THE ACCUMULATION PERIOD,"
page 18, are replaced with the following:
If the Annuitant under a Variflex Contract, other than a Group Unallocated
Contract, dies during the Accumulation Period, SBL will pay the death
benefit proceeds to the beneficiary upon receipt of due proof of the
Annuitant's death and instructions regarding payment. The death benefit
proceeds will be the death benefit reduced by any outstanding Contract Debt
and any uncollected premium taxes. If the Annuitant dies during the
Accumulation Period and the age of the Annuitant was 75 or younger on the
Contract Date, the amount of the death benefit will be the greatest of: (1)
the sum of all Purchase Payments made reduced by any partial withdrawals;
(2) the Contract Value on the date due proof of death and instructions
regarding payment are received by SBL at its home office; or (3) the
stepped-up death benefit. The stepped-up death benefit is: (a) the largest
Contract Value on any Contract anniversary that is both an exact multiple
of six and occurs prior to the Annuitant reaching age 76, plus (b) any
Purchase Payments received since the applicable Contract anniversary, less
(c) any reductions caused by partial withdrawals since the applicable
Contract anniversary. For Contracts in effect for six Contract Years or
more as of May 1, 1991, the Contract Value on the Contract anniversary
immediately preceding May 1, 1991, will be used as the sixth Contract
anniversary in determining the stepped-up death benefit.
If the Annuitant dies during the Accumulation Period and the age of the
Annuitant was 76 or greater on the Contract Date, the amount of the death
benefit will be the greater of: (1) the sum of all Purchase Payments made
reduced by any partial withdrawals; or (2) the Contract Value on the date
due proof of death and instructions regarding payment are received by SBL
at its home office.
Notwithstanding the foregoing, the death benefit for Contracts issued in
Florida is as follows. If the Annuitant was 75 or younger on the date of
death, the death benefit is the greatest of (1) or (2) above or (3) the
largest Contract Value on any Contract anniversary that is an exact
multiple of six, less any partial withdrawals since that anniversary. If
the Annuitant was 76 or older on the date of death, the death benefit is
the Contract Value on the date due proof of death and instructions
regarding payment are received, less any applicable withdrawal charges. SBL
currently waives any withdrawal charges applicable to the death benefit.
The final paragraph under "Death Benefit During the Accumulation Period" is
replaced with the following:
For Non-Qualified Contracts, the death benefit described above will be paid
in the event of the death of the Annuitant OR CONTRACTOWNER to meet the
requirements of Section 72(s) of the Internal Revenue Code. The amount of
the death benefit in the event of the Contractowner's death will be based
on the age of the Contractowner on the Contract Date. For Non-Qualified
Contracts, if the surviving spouse of the deceased Contractowner is the
sole beneficiary, such spouse may elect to continue the Contract in force
until the earliest of the surviving spouse's death or the Annuity
Commencement Date or receive the death benefit proceeds. For any
beneficiary other than a surviving spouse, only those options may be chosen
that provide for complete distribution of the Contractowner's interest in
the Contract within five years of the death of the Owner. If the
beneficiary is a natural person, that person alternatively can elect to
begin receiving annuity payments within one year of the Contractowner's
death over a period not extending beyond the beneficiary's life or life
expectancy. The beneficiary of the death benefit payable upon the death of
the Contractowner prior to maturity is the same beneficiary as that
designated for the Annuitant's death benefit, unless another beneficiary is
designated.
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2
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The "SUMMARY OF EXPENSES," page 5, is updated below:
SUMMARY OF EXPENSES
CONTRACTOWNER TRANSACTION EXPENSES
- ----------------------------------
Sales Load Imposed on Purchase (as a percentage of Purchase Payments) .... 0%
Contingent Deferred Sales Load
(as a percentage of Purchase Payments or amount withdrawn, as applicable)(1)8%
Surrender Fees (as a percentage of amount surrendered, if applicable) .... 0%
Exchange Fee ............................................................. 0
ANNUAL CONTRACT FEE (2) ................................................... $30
- -------------------
SEPARATE ACCOUNT ANNUAL FEE (as a percentage of average account value)
- ---------------------------
Mortality and Expense Risk Fees........................................... 1.2%
Account Fees and Expenses................................................. 0.0%
----
Total Separate Account Annual Expenses ................................... 1.2%
SBL FUND ANNUAL EXPENSES (as a percentage of average net assets)
- ------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL SPECIALIZED MANAGED
GROWTH- MONEY WORLDWIDE GRADE SOCIAL EMERGING AGGRESSIVE ASSET ASSET EQUITY
GROWTH INCOME MARKET EQUITY INCOME AWARENESS GROWTH BOND ALLOCATION ALLOCATION INCOME
(SERIES A)(SERIES B)(SERIES C)(SERIES D)(SERIES E)(SERIES S)(SERIES J)(SERIES K)(SERIES M)(SERIES N)(SERIES O)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after fee waiver) .. .75% .75% .50% 1.00% .75% .75% .75% .00% 1.00% 1.00% 1.00%
Other Expenses (after expense
reimbursement) (3) .. .08% .08% .10% .31% .10% .11% .09% 1.28% .94% .90% .40%
---- ---- ---- ----- ---- ---- ---- ----- ----- ----- -----
Total Annual Expenses (3).83% .83% .60% 1.31% .85% .86% .84% 1.28% 1.94% 1.90% 1.40%
</TABLE>
(1) The contingent deferred sales load is decreased based on the Contract Year
in which the withdrawal is made from 8% in the first Contract Year to 0% in
the ninth Contract Year. Variflex Contracts-401(k) and 408(k) are subject
to a schedule of charges that has a different rate of decline in the
percentage than other Contracts. Under certain circumstances, the
contingent deferred sales load may be reduced or waived, including certain
annuity options.
(2) The annual Administrative Fee for Variflex Contracts-401(k) and 408(k) is
the lesser of 2% of assets valued as of the year end or $30.
(3) During the fiscal year ended December 31, 1995, the Investment Manager
waived .40% of the management fees of Series K and, during the fiscal year
ending December 31, 1996, the Investment Manager will waive all of the
management fees of Series K; absent such expense reimbursement and waiver,
Series K's "Total Annual Expenses" would have been 2.03%.
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3
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<TABLE>
EXAMPLE: VARIFLEX CONTRACTS (EXCLUDING VARIFLEX CONTRACTS - 401(K) AND 408(K))
- --------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $102 $127 $158 $253
GROWTH-INCOME SERIES........................................ $102 $127 $158 $253
MONEY MARKET SERIES......................................... $100 $121 $146 $230
WORLDWIDE EQUITY SERIES..................................... $107 $141 $182 $301
HIGH GRADE INCOME SERIES.................................... $103 $128 $159 $255
SOCIAL AWARENESS SERIES..................................... $102 $128 $158 $254
EMERGING GROWTH SERIES...................................... $102 $127 $158 $253
GLOBAL AGGRESSIVE BOND SERIES............................... $107 $140 $181 $298
SPECIALIZED ASSET ALLOCATION SERIES......................... $113 $159 $212 $360
MANAGED ASSET ALLOCATION SERIES............................. $113 $158 $210 $357
EQUITY INCOME SERIES........................................ $108 $144 $186 $310
IF YOU DO NOT SURRENDER YOUR CONTRACT:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $22 $69 $118 $253
GROWTH-INCOME SERIES........................................ $22 $69 $118 $253
MONEY MARKET SERIES......................................... $20 $62 $106 $230
WORLDWIDE EQUITY SERIES..................................... $27 $83 $142 $301
HIGH GRADE INCOME SERIES.................................... $23 $69 $119 $255
SOCIAL AWARENESS SERIES..................................... $22 $69 $118 $254
EMERGING GROWTH SERIES...................................... $22 $69 $118 $253
GLOBAL AGGRESSIVE BOND SERIES............................... $27 $82 $141 $298
SPECIALIZED ASSET ALLOCATION SERIES......................... $33 $102 $173 $360
MANAGED ASSET ALLOCATION SERIES............................. $33 $101 $171 $357
EQUITY INCOME SERIES........................................ $28 $86 $146 $310
EXAMPLE: VARIFLEX CONTRACTS - 401(K) AND 408(K) (SOLD PRIOR TO MAY 1, 1990)
- -----------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $103 $128 $159 $256
GROWTH-INCOME SERIES........................................ $103 $128 $159 $256
MONEY MARKET SERIES......................................... $100 $122 $148 $233
WORLDWIDE EQUITY SERIES..................................... $107 $142 $183 $304
HIGH GRADE INCOME SERIES.................................... $103 $129 $160 $258
SOCIAL AWARENESS SERIES..................................... $103 $129 $160 $257
EMERGING GROWTH SERIES...................................... $103 $128 $159 $256
GLOBAL AGGRESSIVE BOND SERIES............................... $107 $141 $182 $301
SPECIALIZED ASSET ALLOCATION SERIES......................... $114 $159 $213 $363
MANAGED ASSET ALLOCATION SERIES............................. $113 $158 $211 $359
EQUITY INCOME SERIES........................................ $108 $144 $188 $313
IF YOU DO NOT SURRENDER YOUR CONTRACT:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
GROWTH SERIES............................................... $23 $70 $119 $256
GROWTH-INCOME SERIES........................................ $23 $70 $119 $256
MONEY MARKET SERIES......................................... $20 $63 $108 $233
WORLDWIDE EQUITY SERIES..................................... $27 $84 $143 $304
HIGH GRADE INCOME SERIES.................................... $23 $70 $120 $258
SOCIAL AWARENESS SERIES..................................... $23 $70 $120 $257
EMERGING GROWTH SERIES...................................... $23 $70 $119 $256
GLOBAL AGGRESSIVE BOND SERIES............................... $27 $83 $142 $301
SPECIALIZED ASSET ALLOCATION SERIES......................... $34 $103 $174 $363
MANAGED ASSET ALLOCATION SERIES............................. $33 $102 $172 $359
EQUITY INCOME SERIES........................................ $28 $87 $148 $313
</TABLE>
The purpose of the preceding table is to assist Contractowners in
understanding the various costs and expenses that a Contractowner will bear
directly or indirectly and, thus, the table reflects expenses of both the
Variflex separate account and the SBL Fund. The example should not be considered
to be a representation of past or future expenses, and the example does not
include the deduction of state premium taxes, which in a number of states may be
assessed. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The example
assumes a 5% annual rate of return pursuant to the requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund.
Pursuant to the requirements of the Securities and Exchange Commission, any
annual contract fee is deducted pro rata from each Series; however, under the
contract the annual Administrative Fee is deducted sequentially from the Series
as specified under "Sequential Deduction of Fees" in the Prospectus. For a more
complete description of the various costs and expenses of the Fund, see the
prospectus for SBL Fund.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
The "CONDENSED FINANCIAL INFORMATION" set forth below has been updated to
include financial information for the period ended December 31, 1995:
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values at the beginning and end of each year as well as ending accumulation
units outstanding for Qualified and Non-Qualified Contracts under each Series of
Variflex.
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
QUALIFIED CONTRACTS
- -------------------
GROWTH SERIES (SERIES A)
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59 $13.41 $12.77 $12.15
End of period $37.75 $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59 $13.41 $12.77
Accumulation units
outstanding at the end
of period 9,203,332 7,723,910 6,900,722 6,640,177 5,420,372 4,616,955 3,191,257 3,032,118 3,620,263 2,475,018
GROWTH-INCOME SERIES (SERIES B)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46 $14.81 $14.46 $12.28
End of period $39.88 $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46 $14.81 $14.46
Accumulation units
outstanding at the end
of period 14,963,215 14,312,801 13,236,948 11,381,462 8,753,337 6,449,776 4,613,783 3,388,090 2,932,678 1,628,800
MONEY MARKET SERIES (SERIES C)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30 $12.56 $11.94 $11.36
End of period $17.59 $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30 $12.56 $11.94
Accumulation units
outstanding at the end
of period 2,989,809 3,578,026 2,680,809 2,373,251 2,161,924 1,913,734 3,216,085 2,774,046 962,056 404,485
WORLDWIDE EQUITY SERIES (SERIES D)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33 $12.18 $11.80
End of period $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74 $11.33 $12.18
Accumulation units
outstanding at the end
of period 10,236,349 9,361,197 5,863,967 2,070,715 917,833 466,703 607,650 633,816 648,066 732,878
HIGH GRADE INCOME SERIES (SERIES E)
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90 $12.17 $12.04 $11.11
End of period $22.11 $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90 $12.17 $12.04
Accumulation units
outstanding at the end
of period 3,912,046 3,891,426 3,731,587 2,912,605 2,255,909 1,673,154 1,403,313 1,037,740 1,013,973 935,218
SOCIAL AWARENESS SERIES (SERIES S)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $12.65 $13.31 $12.04 $10.47 $10.00 --- --- --- --- ---
End of period $15.97 $12.65 $13.31 $12.04 $10.47 --- --- --- --- ---
Accumulation units
outstanding at the end
of period 1,615,845 1,344,063 993,233 513,953 127,699 --- --- --- --- ---
EMERGING GROWTH SERIES (SERIES J)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $13.10 $13.97 $12.44 $10.00 --- --- --- --- --- ---
End of period $15.46 $13.10 $13.97 $12.44 --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 4,387,739 3,947,047 2,131,858 455,105 --- --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
QUALIFIED CONTRACTS
- -------------------
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.69 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 129,589 --- --- --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.64 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 611,652 --- --- --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.66 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 295,053 --- --- --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $11.62 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 604,325 --- --- --- --- --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
NON-QUALIFIED CONTRACTS
- -----------------------
GROWTH SERIES (SERIES A)
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59 $13.41 $12.76 $12.14
End of period $37.74 $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59 $13.41 $12.76
Accumulation units
outstanding at the end
of period 2,306,163 1,578,797 1,483,618 1,766,896 1,328,865 952,806 594,856 493,463 664,251 375,309
GROWTH-INCOME SERIES (SERIES B)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46 $14.80 $14.45 $12.27
End of period $39.84 $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46 $14.80 $14.45
Accumulation units
outstanding at the end
of period 3,669,299 3,515,364 3,262,600 2,560,986 1,774,534 1,293,121 1,000,815 836,735 801,802 480,437
MONEY MARKET SERIES (SERIES C)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29 $12.55 $11.94 $11.36
End of period $17.59 $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29 $12.55 $11.94
Accumulation units
outstanding at the end
of period 1,469,153 2,475,349 1,913,212 1,031,855 1,000,378 954,107 846,414 853,615 422,130 268,446
WORLDWIDE EQUITY SERIES (SERIES D)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33 $12.19 $11.81
End of period $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74 $11.33 $12.19
Accumulation units
outstanding at the end
of period 3,140,486 2,803,304 2,150,932 678,110 279,878 125,010 211,920 214,723 225,118 242,989
HIGH GRADE INCOME SERIES (SERIES E)
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89 $12.17 $12.03 $11.11
End of period $22.09 $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89 $12.17 $12.03
Accumulation units
outstanding at the end
of period 1,325,159 1,392,830 1,290,268 962,775 784,496 582,285 519,624 419,410 420,483 453,028
SOCIAL AWARENESS SERIES (SERIES S)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $12.66 $13.31 $12.04 $10.47 $10.00 --- --- --- --- ---
End of period $15.98 $12.66 $13.31 $12.04 $10.47 --- --- --- --- ---
Accumulation units
outstanding at the end
of period 612,235 543,287 389,861 226,145 98,344 --- --- --- --- ---
EMERGING GROWTH SERIES (SERIES J)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $13.09 $13.96 $12.44 $10.00 --- --- --- --- --- ---
End of period $15.46 $13.09 $13.96 $12.44 --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 1,248,987 1,211,099 610,801 68,338 --- --- --- --- ---
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988 1987 1986
NON-QUALIFIED CONTRACTS
- -----------------------
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.69 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 74,528 --- --- --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.64 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 297,967 --- --- --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $10.66 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 226,555 --- --- --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value:
Beginning of period $10.00 --- --- --- --- --- --- --- --- ---
End of period $11.62 --- --- --- --- --- --- --- --- ---
Accumulation units
outstanding at the end
of period 234,242 --- --- --- --- --- --- --- --- ---
</TABLE>
(a) Social Awareness Series of Variflex was first publicly offered on May 1,
1991.
(b) Effective May 1, 1991, the investment objective of Worldwide Equity Series
of Variflex was changed from high current income to long-term capital growth
through investment in common stocks and equivalents of companies domiciled
in foreign countries and the United States.
(c) Emerging Growth Series of Variflex was first publicly offered on October 1,
1992
(d) Global Aggressive Bond, Specialized Asset Allocation, Managed Asset
Allocation and Equity Income Series were first publicly offered on June 1,
1995.
(e) Effective June 1, 1995, the investment objective of Growth-Income Series of
Variflex was changed from seeking to provide income with secondary emphasis
on capital appreciation to seeking long-term growth of capital with
secondary emphasis on income.
This supplement is preceded or accompanied by the 1995 Annual Report to
Contractowners which contains audited financial statements of the Variflex
separate account for the year ended December 31, 1995.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
[SBLIC LOGO] BULK RATE
700 SW Harrison St. U.S. POSTAGE
Topeka, Kansas 66636-0001 PAID
(913) 295-3000 PERMIT NO. 428
(800) 888-2461 TOPEKA, KANSAS
- --------------------------------------------------------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
VARIFLEX
VARIABLE ANNUITY CONTRACTS
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1996
RELATING TO THE PROSPECTUS DATED JULY 1, 1996
(913) 295-3112
(800) 888-2461
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison, Topeka, Kansas 66636-0001
VARIFLEX
VARIABLE ANNUITY CONTRACTS
STATEMENT OF
ADDITIONAL INFORMATION
July 1, 1996
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Variflex Variable Annuity Contracts (the
"Contract") offered by Security Benefit Life Insurance Company. You may obtain a
copy of the Prospectus dated July 1, 1996, by calling (913) 295-3112, or writing
to Security Benefit Life Insurance Company, 700 SW Harrison, Topeka, Kansas
66636-0001. Terms used in the current Prospectus for the Contract are
incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS
Page
The Contract................................................................ 1
Valuation of Accumulation Units.......................................... 1
Computation of Variable Annuity Payments................................. 1
Illustration............................................................. 2
Variations in Charges.................................................... 2
Termination of Contract.................................................. 3
Group Contracts.......................................................... 3
Performance Information..................................................... 3
Additional Federal Tax Matters.............................................. 5
Limits on Stipulated Payments (Under the Internal Revenue Code).......... 5
Taxation of SBL.......................................................... 5
Tax Status of the Contracts.............................................. 5
Assignment.................................................................. 5
Distribution of the Contracts............................................... 5
Safekeeping of Variflex Account Assets...................................... 6
State Regulation............................................................ 6
Records and Reports......................................................... 6
Legal Matters............................................................... 6
Experts..................................................................... 6
Other Information........................................................... 6
Financial Statements........................................................ 7
<PAGE>
THE CONTRACT
The following provides additional information about the Contracts which
supplements the description in the Prospectus and which may be of interest to
some Contractowners.
VALUATION OF ACCUMULATION UNITS
The objective of a Variable Annuity is to provide level payments during
periods when the market is relatively stable and to reflect as increased
payments only the excess investment results following from inflation or an
increase in productivity.
The Accumulation Unit value for a Series on any day is equal to (a) divided
by (b), where (a) is the net asset value of the underlying Fund shares of the
Series less the Actuarial Risk Fee and any deduction for provision for federal
income taxes and (b) is the number of Accumulation Units of that Series at the
beginning of that day.
The value of a contract on any Valuation Date during the Accumulation
Period can be determined by subtracting (b) from (a), where (a) is determined by
multiplying the total number of Accumulation Units of each Series within
Variflex credited to the Contract by the applicable Accumulation Unit value of
each such Series, and (b) is any pro rata Annual Administrative Fee. During the
Accumulation Period, all cash dividends and other cash distributions made to
each Variflex Series will be reinvested in additional shares of the appropriate
Series of SBL Fund.
COMPUTATION OF VARIABLE ANNUITY PAYMENTS
(a) DETERMINATION OF AMOUNT OF FIRST ANNUITY PAYMENT
For Annuities under options 1, 2, 3, and 4, the Contracts contain tables
indicating the dollar amount of the first monthly payment under each optional
form of Annuity for each $1,000 applied. The total first monthly annuity payment
is determined by multiplying the value of the Contract or participant's
Individual Account (expressed in thousands of dollars) by the amount of the
first monthly payment per $1,000 of value, in accordance with the tables set out
in the Contract. The value of the contract or Participant's Individual Account
for the purpose of establishing the first periodic payment under options 1, 2,
3, 4 or similar life contingent payment options mutually agreed upon is equal to
the number of Accumulation Units applied to the option times the Accumulation
Unit value at the end of the second day preceding the date the first annuity
payment is made. For Annuities under these options, any pro rata Administrative
Fee is assessed prior to the first annuity payment under such option. For
Annuities under options 5, 6, 7, 8 or other mutually agreed upon non-life
contingent payment option, the value of the Contract or Participant's Individual
Account for the purpose of the first and subsequent periodic payments is based
on the Accumulation Unit value at the end of the day the annuity payment is
made.
Each deferred annuity Contract contains a provision that the first monthly
payment will be not less than the first monthly payment determined on the most
favorable mortality risk basis used in determining rates for immediate Variable
Annuities then being issued by SBL for the same class of Participants. This
provision assures the Annuitants that if, at retirement, the annuity rates then
applicable to new immediate annuity contracts are more favorable than those
provided in their contracts, they will be given the benefit of the new annuity
rates.
(b) AMOUNT OF THE SECOND AND SUBSEQUENT ANNUITY PAYMENTS
For Variable Annuities under options 1, 2, 3 and 4, the amount of the first
monthly annuity payment determined as described above is divided by the
applicable value of an Annuity Unit (see "(c)" below) for the day in which the
payment is due in order to determine the number of Annuity Units represented by
the first payment. This number of Annuity Units remains fixed during the Annuity
period and each subsequent payment period. The dollar amount of the annuity
payment is determined by multiplying the fixed number of Annuity Units by the
Annuity Unit value for the day the payment is due.
(c) ANNUITY UNIT
The value of an Annuity Unit of Series A, B, C and D was set at $1.00 on
April 1, 1984. The value of an Annuity Unit of Series E was set at $1.00 on
April 25, 1985. The value of an annuity unit of Series S was set at $1.00 on
April 23, 1991. The value of an annuity unit of Series J was set at $1.00 on
October 1, 1992. The value of an Annuity Unit of Series K, M, N and O was set at
$1.00 on June 1, 1995. The value of an Annuity Unit for any subsequent day is
determined by multiplying the value for the immediately preceding day by the
product of (a) the
1
<PAGE>
Net Investment Factor for the second day preceding the day for which the value
is being calculated and (b) .9999057540, the interest neutralization factor (the
factor required to neutralize the assumed investment rate of 3 1/2% built into
the annuity rates contained in the Contract). The Net Investment Factor of any
Series is determined by subtracting 0.00003307502, the Actuarial Risk Fee, from
the ratio of (a) to (b) where (a) is the value of a share of the underlying
Series of SBL Fund at the end of the day plus the value of any dividends or
other distributions attributable to such share during a day and minus any
applicable income tax liabilities as determined by SBL (see "Additional Federal
Tax Matters"), and (b) is the value of a share of the underlying Series of SBL
Fund at the end of the previous day.
The formula for daily valuation of annuity units is set forth below:
Dollar Amount of First Monthly Payment
Number of Annuity Units=--------------------------------------------------------
Annuity Unit Value for Day on Which First Payment is Due
Value of Annuity Unit Net Investment Factor
Annuity Unit Value= for Preceding Day x for Second Preceding Day x 0.9999057540
Value of a Dividends or Other
Series Share* Distributions
at End of Day + During Day Per Share
Net Investment Factor=------------------------------------------ - 0.00003307502
Value of a Series Share*
at End of the Previous Day
Annuity Unit Value
Dollar Amount of Second and for Day on Which
Subsequent Annuity Payments = Number of Annuity Units x Payment is Due
*A share of the underlying Series of SBL Fund.
ILLUSTRATION
The Annuity Unit and the Annuity payment may be illustrated by the
following hypothetical example: Assume an annuitant at the annuity commencement
date has credited to his Contract 4,000 Accumulation Units and that the value of
an Accumulation Unit at the end of the second day preceding the day on which
retirement occurs was $5.13, producing a total value for the contract of
$20,520. Any premium taxes due would reduce the total value of the Contract that
could be applied towards the Annuity, however, in this illustration it is
assumed no premium taxes are applicable. Assume also the Annuitant elects an
option for which the annuity table in the Contract indicates the first monthly
payment is $6.40 per $1,000 of value applied; the resulting first monthly
payment would be 20.520 multiplied by $6.40 or $131.33.
Assume the Annuity Unit value for the day on which the first payment was
due was $1.0589108749. When this is divided into the first monthly payment the
number of Annuity Units represented by that payment is 124.0236578101. The value
of the same number of Annuity Units will be paid in each subsequent month
Assume further the value of a Series share was $5.15 at the end of the
third day preceding the date of the second annuity payment, that it was $5.17 at
the end of the second day preceding the due date of the second Annuity payment
and that there was no cash income during such second day. The Net Investment
Factor for that second day was 1.0038504201 ($5.17 divided by $5.15 minus
.00003307502). Multiplying this factor by 0.9999057540 to neutralize the assumed
investment rate (the 3 1/2% per annum built into the number of Annuity Units as
determined above) produces a result of 1.0037558112. The Annuity Unit value for
the valuation period is therefore 1.0639727137 which is 1.0037558112 x
$1.0599915854 (the value at the beginning of the day).
The current monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value or 124.0236578101 times
1.0639727127 which produces a current monthly payment of $131.96.
VARIATIONS IN CHARGES
The contingent deferred sales charges or other charges or deductions may be
reduced or waived for sales of Variflex Contracts where the expenses associated
with the sale of the Contract or the administrative and
2
<PAGE>
maintenance costs associated with the Contract are reduced for reasons such as
the amount of the initial Purchase Payment, the amounts of projected Purchase
Payments, or that the Contract is sold in connection with a group or sponsored
arrangement. SBL will only reduce or waive such charges where expenses
associated with the sale of the Contract or the costs associated with
administering and maintaining the Contract are reduced.
Directors, officers and bona fide full-time employees of Security
Management Company, SBL, Security Benefit Group, Inc., SBL Fund, or Security
Distributors, Inc.; the spouses, grandparents, parents, children, grandchildren
and siblings of such directors, officers and employees and their spouses; any
trust, pension, profit-sharing or other benefit plan established by any of the
foregoing corporations for persons described above; and salespersons (and their
spouses and minor children) who are licensed with SBL to sell variable annuities
are permitted to purchase contracts with substantial reduction of the contingent
deferred sales charges or other administrative charges or deductions. Contracts
so purchased are for investment purposes only and may not be resold except to
SBL. No sales commission will be paid on such contracts.
TERMINATION OF CONTRACT
SBL reserves the right to terminate any Group Unallocated Contract under
the following circumstances: (1) the contract value is less than $10,000 after
the end of the first contract year, or $20,000 after the end of the third
contract year; (2) the Plan pursuant to which the contract is issued is
terminated for any reason or becomes disqualified under Section 401 or 403 of
the Internal Revenue Code; or (3) for any reason after the eighth policy year.
SBL may also terminate individual and Group Allocated contracts during the
accumulation period if certain conditions exist. These conditions are that (1)
no purchase payments have been received by SBL for the contract or account for
two full years; (2) the combined value of the contract or account in the
Separate and General Accounts is less than $2,000; and (3) the value of the
contract or account which is allocated to the General Account, projected to the
maturity date, would produce installments of less than $20 per month using
contractual guarantees. Termination of a Variflex Contract may have adverse tax
consequences. (See the Prospectus at "Full and Partial Withdrawals," page 16,
"Constraints on Distributions from Certain Section 403(b) Annuity Contracts,"
page 19, and "Federal Tax Matters," page 22.)
GROUP CONTRACTS
In the case of Group Allocated Variflex Contracts, a master group contract
is issued to the employer or other organization, or to the trustee, who is the
Contractowner. The master group contract covers all Participants. Where funds
are allocated to a participant's individual contract, each participant receives
a certificate which summarizes the provisions of the master group contract and
evidences participation in the Plan established by the organization. A Group
Unallocated Contract is a contract between the Contractowner and the insurance
company and individual accounts are not established for Participants.
PERFORMANCE INFORMATION
Performance information for the Series of the Variflex Separate Account may
appear in advertisements, sales literature or reports to Contractowners or
prospective purchasers. Performance information in advertisements or sales
literature may be expressed as yield and effective yield of the Money Market
Series, and average annual total return and total return of all Series except
the Money Market Series. Current yield for the Money Market Series will be based
on the change in the value of a hypothetical investment (exclusive of capital
changes) over a particular seven-day period, less a hypothetical charge
reflecting deductions from Contractowner accounts 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 hundredth of 1%. "Effective yield" for the Money Market Series assumes
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 calculation of yield, 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, 1995, the yield of the Money
Market Series was 2.84% and the effective yield of the Series was 2.88%.
3
<PAGE>
Quotations of average annual total return for any Series of the Separate
Account will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the Series over certain periods that will
include periods of 1, 5 and 10 years (up to the life of the Series), 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). Such total
return figures reflect the deduction of the applicable contingent deferred sales
charge and other recurring Variflex fees and charges on an annual basis,
including charges for Actuarial Risk Fee of the account and the annual
administrative fee, although other quotations may be simultaneously given that
do not assume a surrender and do not take into account deduction of a contingent
deferred sales charge or the annual administrative fee.
For the 1-, 5- and 10-year periods ended December 31, 1995, respectively,
the average annual total return was 24.11%, 14.12% and 9.73% for the Growth
Series; 17.52%, 10.93% and 10.51% for the Growth-Income Series (formerly the
"Income-Growth Series"); -1.46%, 5.85% and -3.49% for the Worldwide Equity
Series (formerly the High Yield Series); and 6.17%, 4.72% and 4.35% for the High
Grade Income Series. For the 1-year period ended December 31, 1995 and the
period between May 1, 1991 (date of inception) and December 31, 1995,
respectively, the average annual total return was 15.24% and 7.02% for the
Social Awareness Series. For the 1-year period ended December 31, 1995 and the
period between October 1, 1992 (date of inception) and December 31, 1995,
respectively, the average annual total return was 17.02% and 10.39% for the
Emerging Growth Series. For the period between June 1, 1995 (date of inception)
and December 31, 1995, the average annual total return was -4.33% for Global
Aggressive Bond Series; -5.24% for Specialized Asset Allocation Series; -4.87%
for Managed Asset Allocation Series; and 13.85% for Equity-Income Series.
Quotations of total return for any Series 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 Annual
Administrative fee and the applicable contingent deferred sales charge.
For the year ended December 31, 1995, and the period between June 8, 1984
(date of inception) and December 31, 1995, respectively, the total return for
the Growth Series was 24.11% and 199.20%.
Although Variflex Contracts were not available for purchase until June 8,
1984, the underlying investment vehicle of Variflex, the SBL Fund, has been in
existence since May 26, 1977. Performance information for Variflex may also
include quotations of average annual total return and total return for periods,
beginning prior to the availability of Variflex contracts, that incorporate the
performance of the SBL Fund.
Performance information for a Series 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"), or other unmanaged indices so that
investors may compare a Series' results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of 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 The Variable Annuity Research and Data Service ("VARDS"), an independent
service which monitors and ranks the performance of variable annuity issuers 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 Variable Account. Unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for administrative and management costs
and expenses. Such investment company rating services include the following:
Lipper Analytical Services; VARDS; Morningstar, Inc.; Investment Company Data;
Schabacker Investment Management; Wiesenberger Investment Companies Service;
Computer Directions Advisory (CDA); and Johnson's Charts.
Performance information for any Series reflects only the performance of a
hypothetical investment in the Series during the 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 portfolio of the
4
<PAGE>
Series of the Fund in which the Series of the Separate Account 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.
ADDITIONAL FEDERAL TAX MATTERS
LIMITS ON STIPULATED PAYMENTS (UNDER THE INTERNAL REVENUE CODE)
The amount of the Stipulated Payment may be increased or decreased on any
date, and submission of a Stipulated Payment different from the previous payment
will automatically effect such an increase or decrease. However, U.S. Treasury
Regulations currently permit only one change to a salary reduction agreement in
any taxable year for contracts issued to qualify under Section 403(b) of the
Internal Revenue Code. Contracts issued under Section 408 of the Code provide
that the maximum Stipulated Payment for each Participant for a taxable year
shall be $2,000 or other such amount as may become permissible under amended
laws. Contracts issued to qualify under Section 408(k) of the Code provide that
the maximum annual Stipulated Payment by an employer for each employee shall be
$30,000 or such other amount as may become permissible under amended law.
Contracts issued to qualify under Section 457 of the Code provide that the
maximum Stipulated Payment in any taxable year shall be $7,500 for each
Participant or such other amount as may become permissible under amended law.
Such contracts further provide for an increase in Stipulated Payments for one or
more of the Participant's last three taxable years ending before normal
retirement age in accordance with the provisions of the applicable Plan
agreement.
Stipulated Payments pursuant to the salary reduction agreements to
contracts issued under Section 403(b), 408(k), 401(k) or 457 of the Code that
are in excess of $7,000 in a taxable year ($9,500 in the case of Section 403(b)
contracts), may be subject to adverse tax treatment.
TAXATION OF SBL
SBL is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since Variflex is not an entity separate from SBL and its operations
form a part of SBL, it will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. Investment income and realized net
capital gains on the Variflex assets are reinvested and are taken into account
in determining the contract values. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the Contract. Under existing federal income tax law, SBL believes that
Variflex investment income and realized net capital gains should not be taxed to
the extent that such income and gains are retained as part of the reserves under
the Contract.
TAX STATUS OF THE CONTRACTS
To comply with regulations under Section 817(h) of the Code, the investment
of Variflex must be "adequately diversified" in order for the Contracts to
qualify as annuity contracts under Section 72 of the code. Variflex, through the
Fund, intends to comply with the diversification requirements prescribed by the
Treasury which affect how the Fund's assets may be invested. Although the Fund's
investment adviser is an affiliate of SBL, SBL does not completely control the
Fund, or its investments. However, SBL believes the Fund will meet the
diversification requirements and SBL will monitor compliance with this
requirement. Thus, SBL believes that the Contracts will be treated as annuity
contracts for federal tax purposes.
ASSIGNMENT
Variflex Contracts may be assigned by the Contractowner except when issued
to plans or trusts qualified under Section 403(b) or 408 of the Internal Revenue
Code or the plans of self-employed individuals (either under the HR-10 Act or
later acts).
DISTRIBUTION OF THE CONTRACTS
Subject to arrangements with SBL, Variflex contracts are sold by
independent broker-dealers who are members of the National Association of
Security Dealers, Inc., and who become licensed to sell variable annuities for
SBL and by national banks. Security Distributors, Inc., acts as the principal
underwriter on behalf of SBL for the distribution of the Variflex contracts.
5
<PAGE>
The Variflex offering is continuous. During the years ended December 31,
1995, 1994 and 1993, SBL received contingent deferred sales charges from
Variflex as follows: $1,182,820, $881,215 and $545,569, respectively.
SAFEKEEPING OF VARIFLEX ACCOUNT ASSETS
All assets of Variflex are held in the custody and safekeeping of SBL.
Additional protection for such assets is offered by SBL's blanket fidelity bond
presently covering all officers and employees for a total of $5,000,000 per
loss.
STATE REGULATION
As a mutual insurance company organized under the laws of Kansas, SBL
(including Variflex) is subject to regulation by the Commissioner of Insurance
of the State of Kansas. An annual statement is filed with the Kansas
Commissioner of Insurance on or before March 1 each year covering the operations
of SBL for the prior year and its financial condition on December 31 of that
year. SBL is subject to a complete examination of its operations, including an
examination of the liabilities and reserves of SBL and Variflex, by the Kansas
Commissioner of Insurance whenever such examination is deemed necessary by the
Commissioner. Such regulation and examination does not, however, involve any
supervision of the investment policies applicable to Variflex.
In addition, SBL is subject to insurance laws and regulations of the other
jurisdictions in which it is or may become licensed to operate. Generally, the
insurance department of any such other jurisdiction applies the laws of the
state of domicile in determining permissible investments.
RECORDS AND REPORTS
Reports concerning each Contract will be sent annually to each
Contractowner. Contractowners will additionally receive annual and semiannual
reports concerning SBL Fund and annual reports concerning Variflex.
Contractowners will also receive confirmations of receipt of payments, changes
in allocation of payments and conversion of variable Accumulation Units and
variable Annuity Units.
LEGAL MATTERS
Matters of Kansas law pertaining to the validity of the Contracts,
including SBL's right to issue the Contracts under Kansas insurance law and its
qualification to do so under applicable regulations issued thereunder, have been
passed upon by Amy J. Lee, Associate General Counsel of SBL.
EXPERTS
The financial statements of Security Benefit Life Insurance Company and
Variflex included in this Statement have been audited by Ernst & Young LLP,
independent auditors, for the periods indicated in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
OTHER INFORMATION
There has been filed with the Securities and Exchange Commission ("SEC"),
Washington, DC, a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Variflex Contracts and under the Investment Company
Act of 1940, with respect to Variflex. Statements in this Prospectus relating to
Variflex and the Variflex Contracts are summaries only. For further information,
reference is made to the Registration Statements and the exhibits filed as parts
thereof. Copies of the Variflex Contracts also will be on file with the
Insurance Commissioner of each state in which SBL is authorized to issue such
Contracts.
There has also been filed with the SEC a Registration Statement with
respect to SBL Fund. Further information about the Fund may be obtained from
such Registration Statement.
6
<PAGE>
VARIFLEX
Financial Statements
Years ended December 31, 1995 and 1994
CONTENTS
Report of Independent Auditors............................................... 8
Audited Financial Statements
Balance Sheet................................................................ 9
Statement of Operations and Changes in Net Assets (1995)..................... 11
Statement of Operations and Changes in Net Assets (1994)..................... 12
Notes to Financial Statements................................................ 13
7
<PAGE>
Report of Independent Auditors
The Contract Owners of VARIFLEX and
The Board of Directors of Security
Benefit Life Insurance Company
We have audited the accompanying balance sheet of VARIFLEX (the Company) as of
December 31, 1995, and the related statements of operations and changes in net
assets for each of the two years in the period 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1995, 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 audits provide 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 VARIFLEX at December 31, 1995,
and the results of its operations and changes in its net assets for each of the
two years in the period then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Kansas City, Missouri
February 2, 1996
8
<PAGE>
VARIFLEX
Balance Sheet
December 31, 1995
(DOLLARS IN THOUSANDS)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) -- 20,734,283 shares at net asset
value of $21.03 per share (cost, $376,479) $ 436,042
Series B (Income-Growth Series) -- 21,959,051 shares at net
asset value of $33.95 per share (cost, $626,642) 745,510
Series C (Money Market Series) -- 6,376,526 shares at net
asset value of $12.34 per share (cost, $79,025) 78,686
Series D (Worldwide Equity Series) -- 30,116,971 shares at
net asset value of $5.56 per share (cost, $155,283) 167,450
Series E (High Grade Income Series) -- 9,046,994 shares at
net asset value of $12.86 per share (cost, $110,504) 116,344
Series S (Social Awareness Series) -- 2,158,665 shares at net
asset value of $16.49 per share (cost, $29,306) 35,596
Series J (Emerging Growth Series) -- 5,437,676 shares at net
asset value of $16.06 per share (cost, $75,775) 87,329
Series K (Global Aggressive Bond Series) -- 214,109 shares
at net asset value of $10.22 per share (cost, $2,179) 2,188
Series M (Specialized Asset Allocation Series) -- 904,641
shares at net asset value of $10.71 per share (cost, $9,435) 9,689
Series N (Managed Asset Allocation Series) -- 521,633
shares at net asset value of $10.73 per share (cost, $5,340) 5,597
Series O (Equity Income Series)-- 833,838 shares at net
asset value of $11.70 per share (cost, $9,055) 9,756
===========
Total assets $1,694,187
===========
9
<PAGE>
LIABILITIES AND NET ASSETS
Mortality guarantee payable
Net assets are represented by (NOTE 3): $ 35
NUMBER
OF UNITS UNIT VALUE AMOUNT
---------------------------------
Growth Series:
Accumulation units 11,509,495 $37.75 $434,492
Annuity reserves 41,081 37.75 1,551 436,043
--------
Growth-Income Series:
Accumulation units 18,632,514 39.87 742,846
Annuity reserves 66,129 39.87 2,636 745,482
--------
Money Market Series:
Accumulation units 4,458,963 17.59 78,440
Annuity reserves 13,973 17.59 246 78,686
--------
Worldwide Equity Series:
Accumulation units 13,376,835 12.51 167,279
Annuity reserves 13,714 12.51 171 167,450
--------
High Grade Income Series:
Accumulation units 5,237,205 22.11 115,787
Annuity reserves 25,215 22.11 557 116,344
--------
Social Awareness Series:
Accumulation units 2,228,080 15.97 35,587
Annuity reserves 583 15.97 9 35,596
--------
Emerging Growth Series:
Accumulation units 5,636,725 15.46 87,158
Annuity reserves 11,087 15.46 171 87,329
--------
Global Aggressive Bond Series:
Accumulation units 204,118 10.69 2,181
Annuity reserves 641 10.69 7 2,188
--------
Specialized Asset Allocation Series:
Accumulation units 909,619 10.64 9,676
Annuity reserves 1,219 10.64 13 9,689
--------
Managed Asset Allocation Series:
Accumulation units 521,608 10.64 5,551
Annuity reserves 3,642 10.64 39 5,590
--------
Equity Income Series
Accumulation units 838,567 11.62 9,745
Annuity reserves 897 11.62 10 9,755
-------------------
Total liabilities and net assets $1,694,187
==========
SEE ACCOMPANYING NOTES.
10
<PAGE>
VARIFLEX
Statement of Operations and Changes in Net Assets
Year ended December 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH GLOBAL SPECIALIZED MANAGED
GROWTH- MONEY WORLDWIDE GRADE SOCIAL EMERGING AGGRESSIVE ASSET ASSET EQUITY
GROWTH INCOME MARKET EQUITY INCOME AWARENESS GROWTH BOND ALLOCATION ALLOCATION INCOME
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 2,960 $ 11,576 $ 3,092 $ 27 $ 7,165 $ 154 $ --- $ 100 $ --- $ --- $ ---
Expenses (NOTE 2):
Mortality and
expense risk fee (4,280) (7,839) (921) (1,848) (1,330) (350) (935) (10) (32) (25) (28)
Administrative fee (340) (1,520) (136) (73) (303) (27) (21) (3) (6) (2) (11)
------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (1,660) 2,217 2,035 (1,894) 5,532 (223) (956) 87 (38) (27) (39)
Capital gains
distributions 12,476 --- --- 1,732 --- --- --- 9 --- --- ---
Realized gain (loss)
on investments 1,019 16,514 1,623 3,960 (6,221) 1,049 2,488 7 44 11 60
Unrealized appreciation
(depreciation) on
investments 92,456 141,783 (700) 11,265 17,866 5,855 10,991 9 254 257 701
------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
on investments 105,951 158,297 923 16,957 11,645 6,904 13,479 25 298 268 761
------------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting
from operations 104,291 160,514 2,958 15,063 17,177 6,681 12,523 112 260 241 722
Net assets at
beginning of year 260,963 555,314 102,451 139,186 100,185 23,889 67,668 --- --- --- ---
Variable annuity
deposits
(NOTES 2 AND 3) 156,379 132,721 132,678 70,832 50,070 9,024 39,149 2,207 9,955 5,539 9,395
Terminations and
withdrawals
(NOTES 2 AND 3) (85,337) (102,434) (159,213) (57,355) (50,939) (3,992) (31,968) (130) (526) (182) (362)
Annuity payments
(NOTES 2 AND 3) (264) (642) (189) (277) (149) (6) (44) (1) --- (1) ---
Net mortality
guarantee transfer 11 9 1 1 --- --- 1 --- --- (7) ---
------------------------------------------------------------------------------------------------------------
Net assets at end of
year $436,043 $ 745,482 $ 78,686 $167,450 $116,344 $35,596 $ 87,329 $2,188 $9,689 $5,590 $9,755
============================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
11
<PAGE>
VARIFLEX
Statement of Operations and Changes in Net Assets
Year ended December 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH- MONEY WORLDWIDE HIGH GRADE SOCIAL EMERGING
GROWTH INCOME MARKET EQUITY INCOME AWARENESS GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 4,949 $ 13,001 $ 1,928 $ 133 $ 5,565 $ 243 $ ---
Expenses (NOTE 2):
Mortality and expense risk fee (2,981) (6,563) (1,094) (1,473) (1,252) (258) (657)
Administrative fee (235) (1,414) (137) (69) (307) (24) (18)
--------------------------------------------------------------------------------------
Net investment income (loss) 1,733 5,024 697 (1,409) 4,006 (39) (675)
Capital gains distributions 41,645 32,121 --- --- 4,976 112 33
Realized gain (loss) on investments 2,421 19,783 722 9,947 (4,015) 865 512
Unrealized appreciation (depreciation)
on investments (53,256) (81,207) 707 (8,531) (14,453) (1,982) (2,094)
--------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (9,190) (29,303) 1,429 1,416 (13,492) (1,005) (1,549)
--------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (7,457) (24,279) 2,126 7 (9,486) (1,044) (2,224)
Net assets at beginning of year 241,939 536,273 75,883 90,268 104,210 18,415 38,326
Variable annuity deposits (NOTES 2 AND 3) 115,575 136,892 142,301 93,464 59,425 9,916 47,812
Terminations and withdrawals (NOTES 2 AND 3) (88,925) (93,270) (117,757) (44,500) (53,208) (3,398) (16,235)
Annuity payments (NOTES 2 AND 3) (163) (294) (103) (53) (755) (2) (11)
Net mortality guarantee transfer (6) (8) 1 --- (1) 2 ---
--------------------------------------------------------------------------------------
Net assets at end of year $260,963 $555,314 $ 102,451 $139,186 $100,185 $23,889 $ 67,668
======================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
VARIFLEX
Notes to Financial Statements
December 31, 1995 and 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
VARIFLEX (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. All deposits received by the Account
have been invested in the SBL Fund, a mutual fund not otherwise available to the
public. As directed by the owners, amounts deposited are 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 S (Social Awareness Series -
emphasis on high total return) and Series J (Emerging Growth Series - emphasis
on capital appreciation), and the following new series introduced on June 1,
1995:
Series K (Global Aggressive Bond Series), with emphasis on high current
income and secondary emphasis on capital appreciation by investing in a
combination of foreign and domestic high yield securities.
Series M (Specialized Asset Allocation Series), with emphasis on high total
return consisting of capital appreciation and current income through
investment in a wide range of investment categories and market sectors, both
domestic and foreign.
Series N (Managed Asset Allocation Series), with emphasis on high level of
total return by investing primarily in a diversified portfolio of debt and
equity securities.
Series O (Equity Income Series), with emphasis on substantial dividend
income and capital appreciation by investing primarily in dividend-paying
common stocks of established companies.
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company (SMC), a
wholly-owned subsidiary of Security Benefit Group, Inc. (SBG), a wholly-owned
subsidiary of SBL. SMC has engaged Lexington Management Corporation to provide
sub-advisory
13
<PAGE>
VARIFLEX
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The cost of investments purchased and proceeds from investments sold were as
follows:
1995 1994
--------------------------------------------------------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
--------------------------------------------------------------
(IN THOUSANDS)
Series A $177,876 $ 96,275 $169,533 $ 99,674
Series B 152,642 120,749 191,017 110,544
Series C 139,143 163,831 149,838 124,699
Series D 74,933 61,894 101,635 54,135
Series E 59,080 54,565 78,424 63,985
Series S 9,710 4,907 10,755 4,165
Series J 40,723 34,541 51,005 20,083
Series K 3,363 1,191 --- ---
Series M 11,354 1,963 --- ---
Series N 5,594 265 --- ---
Series O 9,546 551 --- ---
14
<PAGE>
VARIFLEX
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SBG's investment in the subaccounts represented the following number of units
and contract value of VARIFLEX contracts owned at December 31, 1995 (DOLLARS IN
THOUSANDS):
NUMBER CONTRACT
OF UNITS VALUE
------------------------
Global Aggressive Bond Series 99,997 $1,069
Specialized Asset Allocation Series 100,000 1,064
Managed Asset Allocation Series 230,000 2,447
Equity Income Series 50,000 581
ANNUITY RESERVES
Annuity reserves relate to contracts which 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.
15
<PAGE>
VARIFLEX
Notes to Financial Statements (continued)
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts an administrative fee of $30 per year for each contract. Mortality
and expense risks assumed by SBL are compensated for by a fee equivalent to an
annual rate of 1.2% 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 the purchase payments or from the amount
applied to effect an annuity at the time annuity payments commence.
A contingent deferred sales charge is assessed against certain withdrawals
during the first eight years of the contract, declining from 8% in the first
year to 1% in the eighth year. Such surrender charges and other contract charges
totaled $1,182,819 and $881,215 during 1995 and 1994, respectively.
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
---------------------
1995 1994
---------------------
(IN THOUSANDS)
Growth Series:
Variable annuity deposits 4,863 4,110
Terminations, withdrawals and annuity payments 2,655 3,184
Growth-Income Series:
Variable annuity deposits 3,787 4,377
Terminations, withdrawals and annuity payments 2,989 3,046
Money Market Series:
Variable annuity deposits 7,695 8,552
Terminations, withdrawals and annuity payments 9,288 7,090
Worldwide Equity Series:
Variable annuity deposits 6,154 8,007
Terminations, withdrawals and annuity payments 4,955 3,841
High Grade Income Series:
Variable annuity deposits 2,466 3,080
Terminations, withdrawals and annuity payments 2,514 2,848
Social Awareness Series:
Variable annuity deposits 626 772
Terminations, withdrawals and annuity payments 285 268
16
<PAGE>
VARIFLEX
Notes to Financial Statements (continued)
3. SUMMARY OF UNIT TRANSACTIONS (CONTINUED)
UNITS
---------------------
1995 1994
---------------------
(IN THOUSANDS)
Emerging Growth Series:
Variable annuity deposits 2,712 3,686
Terminations, withdrawals and annuity payments 2,231 1,263
Global Aggressive Bond Series:
Variable annuity deposits 218 ---
Terminations, withdrawals and annuity payments 13 ---
Specialized Asset Allocation Series:
Variable annuity deposits 962 ---
Terminations, withdrawals and annuity payments 51 ---
Managed Asset Allocation Series:
Variable annuity deposits 543 ---
Terminations, withdrawals and annuity payments 18 ---
Equity Income Series:
Variable annuity deposits 873 ---
Terminations, withdrawals and annuity payments 34 ---
17
<PAGE>
Security Benefit Life Insurance Company
Financial Statements
Years ended December 31, 1995, 1994 and 1993
CONTENTS
Report of Independent Auditors............................................... 1
Audited Financial Statements
Balance Sheets............................................................... 2
Statements of Operations..................................................... 4
Statements of Surplus........................................................ 5
Statements of Cash Flows..................................................... 6
Notes to Financial Statements................................................ 8
18
<PAGE>
Report of Independent Auditors
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying balance sheets of Security Benefit Life
Insurance Company (the Company) as of December 31, 1995 and 1994, and the
related statements of operations, surplus and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security Benefit Life Insurance
Company at December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles and with reporting
practices prescribed or permitted by the Kansas Insurance Department.
Ernst & Young LLP
Kansas City, Missouri
February 2, 1996
19
<PAGE>
Security Benefit Life Insurance Company
Balance Sheets
DECEMBER 31
1995 1994
------------------------
(IN THOUSANDS)
ASSETS
Investments (NOTES 2 AND 5):
Fixed maturities, at amortized cost (fair value:
1995 - $2,340,910; 1994 - $1,987,040) $2,294,802 $2,160,550
Equity securities:
Preferred stock, at cost (fair value: 1995 - $4,490;
1994 - $6,423) 4,044 5,979
Common stock, at fair value (cost: 1995 - $8,309;
1994 - $2,509) 8,346 3,071
------------------------
12,390 9,050
Affiliated entities 29,590 21,028
Mortgage loans 70,777 90,509
Real estate, less accumulated depreciation
(1995 - $10,864; 1994 - $10,821):
Home office properties 10,027 9,953
Investment properties 11,591 14,576
------------------------
21,618 24,529
Policy loans 100,452 92,130
Short-term investments 992 50,406
Other invested assets 40,309 27,402
------------------------
Total investments 2,570,930 2,475,604
Cash and certificates of deposit 12,059 10,820
Premiums deferred and uncollected 856 9,101
Investment income due and accrued 30,577 25,857
Other assets 16,894 14,088
Separate account assets (NOTE 3) 2,065,306 1,517,627
------------------------
$4,696,622 $4,053,097
========================
20
<PAGE>
DECEMBER 31
1995 1994
------------------------
(IN THOUSANDS)
LIABILITIES AND SURPLUS
Policy reserves (NOTE 6):
Life $ 337,289 $ 355,338
Annuity 2,006,799 1,963,066
Accident and health 1,067 1,204
Policy proceeds left at interest 17,849 19,600
------------------------
2,363,004 2,339,208
Policy and contract claims 9,602 8,058
Other policyholders' funds:
Dividend accumulations 19,525 19,697
Dividends payable in subsequent year 2,604 2,787
Premium deposit funds and other 1,331 2,446
------------------------
23,460 24,930
Other liabilities, including income taxes of
$9,851 in 1995 and $3,111 in 1994 19,275 17,762
Net transfers due from separate accounts (NOTE 3) (38,615) (40,034)
Asset valuation reserve 33,478 27,834
Interest maintenance reserve 13,443 6,986
Separate account liabilities (NOTE 3) 2,065,306 1,517,627
------------------------
Total liabilities 4,488,953 3,902,371
Commitments and contingencies (NOTES 6 AND 9)
Surplus:
Contingency surplus 900 900
Unassigned surplus 206,769 149,826
------------------------
Total surplus 207,669 150,726
------------------------
$4,696,622 $4,053,097
========================
SEE ACCOMPANYING NOTES.
21
<PAGE>
Security Benefit Life Insurance Company
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Annuity considerations and deposits $484,907 $530,530 $467,396
Individual life premiums (NOTE 6) (15,177) 49,837 59,373
Group life and health premiums 18,936 18,435 15,632
Reinsurance premiums 694 944 988
Amortization of interest maintenance reserve 1,394 1,077 804
Net investment income (NOTE 2) 185,605 173,391 172,879
Other income 32,722 27,972 26,431
-----------------------------------
Total revenues 709,081 802,186 743,503
Benefits and expenses:
Death benefits 32,164 29,368 34,990
Annuity benefits 36,902 36,587 41,743
Accident and health and disability benefits 2,053 2,177 2,912
Surrender benefits 352,206 275,283 229,554
Increase in reserves and funds for all policies 164,517 333,749 319,457
Other benefits 13,811 12,126 13,407
Commissions 34,979 39,059 41,116
Other insurance operating expenses 32,699 31,994 29,226
-----------------------------------
Total benefits and expenses 669,331 760,343 712,405
-----------------------------------
Gain from operations before dividends to
policyholders, federal income taxes and net
realized losses 39,750 41,843 31,098
Dividends to policyholders 2,391 2,689 2,725
-----------------------------------
Gain from operations before federal income
taxes and net realized losses 37,359 39,154 28,373
Federal income taxes (NOTE 7) 7,520 10,678 4,569
-----------------------------------
Gain from operations before net realized
losses 29,839 28,476 23,804
Net realized losses (NOTE 2) (1,083) (1,122) (3,280)
-----------------------------------
Net income $ 28,756 $ 27,354 $ 20,524
===================================
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
Security Benefit Life Insurance Company
Statements of Surplus
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $150,726 $128,785 $106,000
Add (deduct):
Net income 28,756 27,354 20,524
Increase in asset valuation (5,644) (2,958) (4,854)
Unrealized gain on investments 2,571 546 6,027
Reinsurance transaction, net of tax (NOTE 6) 33,270 --- ---
Other (2,010) (3,001) 1,088
-----------------------------------
56,943 21,941 22,785
-----------------------------------
Balance at end of year $207,669 $150,726 $128,785
===================================
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
Security Benefit Life Insurance Company
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 28,756 $ 27,354 $ 20,524
Adjustments to reconcile net income to
net cash provided by operating activities:
Increase in investment income due and
accrued (4,720) (577) (4,147)
Increase in policy reserves 23,796 163,700 138,931
Accretion of discount on investments (3,400) (3,580) (5,135)
Amortization of premium on investments 9,725 15,623 16,440
Reinsurance transaction, net of tax 33,270 --- ---
Other 8,399 1,529 (16,820)
-----------------------------------
Net cash provided by operating activities 95,826 204,049 149,793
INVESTING ACTIVITIES
Investments sold or matured:
Fixed maturities 566,887 460,070 1,251,398
Equity securities 10,242 3,830 2,103
Mortgage loans 22,953 20,432 16,969
Real estate 3,173 2,782 1,293
Short-term investments 229,871 834,082 2,416,685
Other invested assets 22,053 3,602 2,458
-----------------------------------
855,179 1,324,798 3,690,906
Acquisition of investments:
Fixed maturities 706,581 606,368 1,403,541
Equity securities 19,500 4,627 741
Mortgage loans 2,939 33,516 12,021
Real estate 1,511 554 448
Short-term investments 180,259 854,833 2,426,336
Other invested assets 30,654 17,036 875
-----------------------------------
941,444 1,516,934 3,843,962
Net increase in policy loans (8,322) (5,579) (2,212)
-----------------------------------
Net cash used in investing activities (94,587) (197,715) (155,268)
-----------------------------------
Increase (decrease) in cash and certificates
of deposit 1,239 6,334 (5,475)
Cash and certificates of deposit at beginning
of year 10,820 4,486 9,961
-----------------------------------
Cash and certificates of deposit at end of
year $ 12,059 $ 10,820 $ 4,486
===================================
</TABLE>
24
<PAGE>
Security Benefit Life Insurance Company
Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for federal income taxes $ 9,055 $ 8,851 $ 6,284
===================================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of mortgage loans to
real estate owned $ --- $ 2,350 $ 673
===================================
</TABLE>
SEE ACCOMPANYING NOTES.
25
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Benefit Life Insurance Company (the Company) is a Kansas-domiciled
mutual life insurance company licensed to sell insurance products in 49 states.
The Company offers a diversified portfolio of individual and group annuities,
ordinary life, and mutual fund products through multiple distribution channels.
In recent years, the Company's new business activities have increasingly been
concentrated in the individual flexible premium variable annuity markets.
BASIS OF PRESENTATION
The financial statements have been prepared on the basis of accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
(NAIC) and the Kansas Insurance Department. "Prescribed" statutory accounting
practices include state laws, regulations and general administrative rules, as
well as a variety of publications of the NAIC. "Permitted" statutory accounting
practices encompass all accounting practices that are not prescribed; such
practices may differ from state to state, may differ from company to company
within a state, and may change in the future. The NAIC is currently in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of prescribed statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1997,
will likely change, to some extent, prescribed statutory accounting practices,
and may result in changes to the accounting practices that the Company uses to
prepare its statutory financial statements. Statutory accounting practices
presently are regarded as generally accepted accounting principles for mutual
life insurance companies.
In April 1993, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises." Under this
Interpretation, financial statements of mutual life insurance companies prepared
on the basis of statutory accounting principles no longer will be considered to
be prepared in conformity with generally accepted accounting principles. In
January 1995, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts," and
the American Institute of Certified Public Accountants issued its Statement of
Position No. 95-1, "Accounting for Certain Insurance
26
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Activities of Mutual Life Insurance Enterprises," which define generally
accepted accounting principles for mutual life insurance enterprises.
Interpretation No. 40, SFAS No. 120 and Statement of Position No. 95-1 are
concurrently effective for fiscal years beginning after December 15, 1995.
The Company has not yet determined whether it will continue to file statutory
financial statements with the Securities and Exchange Commission as currently
permitted by Regulation S-X, Rule 7-02(b) or file financial statements prepared
in accordance with all applicable authoritative accounting pronouncements that
define generally accepted accounting principles for all enterprises. The Company
has assessed the impact of FASB Interpretation No. 40, SFAS No. 120 and
Statement of Position No. 95-1, and estimates the adoption will result in an
increase to surplus of approximately $100 million.
INVESTMENTS
Investments are valued as prescribed by the NAIC.
Fixed maturities are reported at cost, adjusted for amortization of discount or
premium using the effective interest method. For mortgage-backed fixed
maturities, anticipated prepayments are considered using market consensus
prepayment speeds when determining the amortization of discount or premium.
Adjustments to discount or premium resulting when actual prepayments differ
substantially from estimates are determined using the retrospective method.
Preferred stocks in good standing are carried at cost. Bonds and preferred
stocks not in good standing are carried at market value. Common stocks are
valued at market except investments in stocks of unconsolidated subsidiaries,
which are carried at cost adjusted to reflect subsequent operating results. Home
office property (including the portion reported as investment real estate) is
reported at 1989 appraised value less accumulated depreciation as permitted by
the Kansas Insurance Department. Investment real estate or property acquired in
satisfaction of debt is reported at the lower of depreciated cost, less
encumbrances, or estimated market value. Other investments are reported on the
equity basis. Policy loans are stated at the aggregate unpaid balance. Mortgage
loans on real estate are carried at the aggregate unpaid balance adjusted for
any unamortized discount or premium.
27
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Asset Valuation Reserve (AVR) is computed in accordance with the formula
prescribed by the NAIC and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, and other invested
assets. Changes to the AVR are charged or credited directly to unassigned
surplus.
Realized gains and losses are determined on a specific identification basis and
are reported in income net of related federal income tax. Under a formula
prescribed by the NAIC, the Company reports an Interest Maintenance Reserve
(IMR) that represents the net accumulated unamortized realized capital gains and
losses on sales of fixed income investments, principally bonds and mortgage
loans, attributable to changes in the general level of interest rates. Such
gains or losses are amortized into income on a straight-line basis over the
remaining period to maturity based on groupings of individual securities sold in
five-year bands.
The investment in Security Benefit Group, Inc. (SBG), a wholly-owned subsidiary,
is reported on an equity basis, as permitted by the Kansas Insurance Department.
Changes in SBG's equity are reflected as unrealized gains (losses) on
investments and are accounted for through surplus and investment reserves as
described above. Dividends received from SBG are recorded as investment income
when received.
RESERVES FOR LIFE AND ANNUITY POLICIES
The reserves for life and annuity policies are developed by actuarial methods,
and the life reserves are established and maintained on the basis of published
mortality tables. Life and annuity reserves are computed using assumed interest
rates and valuation methods that will provide, in the aggregate, reserves that
are greater than the minimum valuation required by law and greater than the
guaranteed policy cash values.
For life policies, the 1941, 1958 and 1980 CSO mortality tables have been used
principally, and interest assumptions range from 2% to 5 1/2%. For annuity
contracts, the PAT, 1971 IAM, 1983a, and 1980 CSO mortality tables have been
used principally, and interest assumptions range from 2 1/2% to 11 1/2%.
28
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF PREMIUM REVENUES AND ACQUISITION COSTS
For life and annuity contracts, premiums are recognized as revenues over the
premium paying period, whereas commissions and other costs applicable to the
acquisition of new business are charged to operations as incurred.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and certificates of deposits, short-term investments: The carrying
amounts reported in the balance sheet for these instruments approximate
their fair values.
Investment securities: The fair values for fixed maturity securities are
based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair values are estimated using values
obtained from independent pricing services or estimated by discounting
expected future cash flows using a current market rate applicable to the
yield, credit quality and maturity of the investments. The fair values for
equity securities are based on quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans and
policy loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated
for purposes of the calculations.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming
company would realize from the business is calculated. Those amounts are
then discounted at a rate of return commensurate with the rate presently
offered by the Company on similar contracts.
USE OF ESTIMATES
The preparation of the financial statements 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.
29
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 financial statements have been reclassified
to conform to the 1995 presentation.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses and fair
values of the Company's portfolio of fixed maturities at December 31, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 1,192 $ 206 $ --- $ 1,398
Obligations of states and political
subdivisions 90,353 1,725 140 91,938
Corporate securities 1,044,051 36,090 13,189 1,066,952
Mortgage-backed securities 1,159,206 23,299 1,883 1,180,622
----------------------------------------------------
Totals $2,294,802 $61,320 $ 15,212 $2,340,910
====================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 10,490 $ 55 $ 622 $ 9,923
Obligations of states and political
subdivisions 21,147 --- 2,615 18,532
Corporate securities 773,714 1,809 64,494 711,029
Mortgage-backed securities 1,355,199 200 107,843 1,247,556
----------------------------------------------------
Totals $2,160,550 $ 2,064 $175,574 $1,987,040
====================================================
</TABLE>
30
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of debt securities at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
AMORTIZED FAIR
COST VALUE
--------------------------
(IN THOUSANDS)
Due in one year or less $ 12,575 $ 12,716
Due after one year through five years 239,718 244,165
Due after five years through 10 years 292,943 301,247
Due after 10 years 590,360 602,160
--------------------------
1,135,596 1,160,288
Mortgage-backed securities 1,159,206 1,180,622
==========================
$2,294,802 $2,340,910
==========================
The cost and the fair values of the Company's equity securities at December 31,
1995 and 1994 are as follows:
DECEMBER 31, 1995
----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------
(IN THOUSANDS)
Preferred stock $ 4,044 $ 446 $--- $ 4,490
Common stock 8,309 123 86 8,346
----------------------------------------------
$12,353 $ 569 $ 86 $12,836
==============================================
31
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------
(IN THOUSANDS)
Preferred stock $ 5,979 $ 568 $124 $ 6,423
Common stock 2,509 599 37 3,071
----------------------------------------------
$ 8,488 $1,167 $161 $ 9,494
==============================================
Proceeds from sales of fixed maturities and related realized gains and losses,
including valuation adjustments, are as follows:
1995 1994 1993
----------------------------------
(IN THOUSANDS)
Proceeds from sales $293,864 $119,773 $891,044
Gross realized gains 4,294 4,966 35,955
Gross realized losses 2,971 4,813 21,375
The composition of the Company's portfolio of fixed maturity securities by
quality rating at December 31, 1995 is as follows:
QUALITY RATING AMOUNT %
------------------- -------------- ------
(IN THOUSANDS)
AAA $1,248,468 54.4%
AA 119,533 5.2
A 314,283 13.7
BBB 431,147 18.8
Noninvestment grade 181,371 7.9
-------------- ------
$2,294,802 100.0%
============== ======
The Company has a diversified portfolio of commercial and residential mortgage
loans outstanding in 26 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1995 being in the states of Kansas (36%)
and Texas (13%).
32
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
Major categories of net investment income are summarized as follows:
1995 1994 1993
-------------------------------------
(IN THOUSANDS)
Interest on fixed maturities $165,742 $151,688 $150,930
Interest on mortgage loans 7,656 7,552 7,835
Real estate income 3,524 3,563 3,451
Interest on policy loans 5,934 5,446 5,174
Dividends from subsidiary (NOTE 5) 4,200 5,200 8,300
Other 4,749 5,857 2,705
-------------------------------------
Total investment income 191,805 179,306 178,395
Investment expenses 6,200 5,915 5,516
-------------------------------------
Net investment income $185,605 $173,391 $172,879
=====================================
The Company did not hold any investments that individually exceeded 10% of
surplus at December 31, 1995 except for securities guaranteed by the U.S.
government or an agency of the U.S. government.
Net realized losses consist of the following:
1995 1994 1993
-------------------------------------
(IN THOUSANDS)
Fixed maturities $ 1,323 $ 153 $14,580
Equity securities 607 (62) (5,179)
Other 566 (2,401) (1,934)
-------------------------------------
Total realized gains (losses) 2,496 (2,310) 7,467
Income tax expense (benefit) (4,272) (3,593) 1,937
-------------------------------------
6,768 1,283 5,530
Transferred to interest maintenance
reserve, net of tax 7,851 (2,405) (8,810)
-------------------------------------
$(1,083) $(1,122) $(3,280)
=====================================
33
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
The Company's principal objective in holding derivatives for purposes other than
trading is asset-liability management. The operations of the Company are subject
to risk of interest rate fluctuations to the extent that there is a difference
between the amount of the Company's interest-earning assets and interest-bearing
liabilities that mature in specified periods. The principal objective of the
Company's asset-liability management activities is to provide maximum levels of
net interest income while maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the Company. To achieve
that objective, the Company uses financial futures instruments and interest rate
exchange agreements. Financial futures contracts are commitments to either
purchase or sell a financial instrument at a specific future date for a
specified price and may be settled in cash or through delivery of the financial
instrument. Interest rate exchange agreements generally involve the exchange of
fixed and floating rate interest payments, without an exchange of the underlying
principal.
If a financial futures contract that is used to manage interest rate risk is
terminated early or results in a single payment based on the change in value of
an underlying asset, any resulting gain or loss is deferred and amortized as an
adjustment to yield of the designated asset over its remaining life. Deferred
losses totaling $3.9 million and deferred gains totaling $1.8 million at
December 31, 1995 and 1994, respectively, resulting from terminated and expired
futures contracts are included in fixed maturities and will be amortized as an
adjustment to interest income. The notional amount of outstanding agreements to
sell securities was $79 million and $51 million at December 31, 1995 and 1994,
respectively.
For interest rate exchange agreements, the differential of interest to be paid
or received is accrued as interest rates change and recognized as an adjustment
to interest income. The related amount payable to or receivable from
counterparties is included in investment income due and accrued. These amounts
were insignificant to the Company. There were no closed or terminated agreements
during 1995 or 1994. The fair values of the interest rate exchange agreements
are not recognized in the financial statements. The notional amount of
outstanding agreements was $50 million at December 31, 1995. Also, as of
December 31, 1995, these agreements have maturities ranging from March 1997 to
June 2005. Under these agreements, the Company receives variable rates based on
the one- and three-month LIBOR and pays fixed rates ranging from 6.430% to
7.215%.
34
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
3. SEPARATE ACCOUNT TRANSACTIONS
The separate accounts are established in conformity with Kansas Insurance Laws
and are not chargeable with liabilities that arise from any other business of
the Company. Premiums designated for investment in the separate accounts are
included in income with corresponding liability increases included in benefits.
Separate account surplus created through the use of Commissioners' Annuity
Reserve Valuation Method is reported as an unsettled transfer from the separate
account to the general account. Assets and liabilities of the separate accounts,
representing net deposits and accumulated net investment earnings held primarily
for the benefit of contract holders, are shown as separate captions in the
balance sheet. Assets held in the separate accounts are carried at quoted market
values, or where quoted market values are not available, at fair market value as
determined by the fund investment managers. Security Management Company, a
wholly-owned subsidiary of SBG, serves as the investment manager for the SBL
fund separate account assets. T. Rowe Price separate account assets are managed
by T. Rowe Price Associates, Inc. (or an affiliated company) and the Parkstone
separate account assets are managed by First of America Investment Corporation.
The Company receives administrative and risk fees relating to amounts invested
in the separate accounts.
The statement of operations includes the following separate account
transactions, which have no effect on net income:
1995 1994 1993
----------------------------------
(IN THOUSANDS)
Annuity considerations and deposits $275,257 $256,061 $235,624
==================================
Benefits:
Benefits and other charges $127,205 $ 83,933 $ 52,283
Net transfers to separate accounts 148,052 172,128 183,341
----------------------------------
$275,257 $256,061 $235,624
==================================
35
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified, noncontributory
defined benefit pension plan sponsored by the Company and certain of its
affiliates. Benefits are based on years of service and an employee's average
compensation during the last five years of service. The Company's policy has
been to contribute funds to the plan in amounts required to maintain sufficient
plan assets to provide for accrued benefits. In applying this general policy,
the Company considers, among other factors, the recommendations of its
independent consulting actuaries, the requirements of federal pension law and
the limitations on deductibility imposed by federal income tax law.
The Company records pension cost in accordance with the provisions of SFAS No.
87, "Employers' Accounting for Pensions." Pension cost for the year is allocated
to each sponsoring company based on the ratio of salary costs for each company
to total salary cost. Pension cost allocated to the Company for 1995, 1994 and
1993 was $151,000, $218,000, and $139,000, respectively.
Separate information disaggregated by sponsoring employer company is not
available on the components of the net pension cost or on the funded status of
the plan. Pension cost for the total plan for 1995, 1994 and 1993 is summarized
as follows:
1995 1994 1993
------------------------------
(IN THOUSANDS)
Service cost $ 528 $ 679 $ 571
Interest cost 508 535 483
Actual return on plan assets (1,568) 310 (966)
Net amortization and deferral 900 (949) 277
==============================
Net pension cost $ 368 $ 575 $ 365
==============================
36
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS (CONTINUED)
The funded status of the total plan as of December 31, 1995 and 1994 was as
follows:
DECEMBER 31
1995 1994
---------------------
(IN THOUSANDS)
Actuarial present value of benefit obligations:
Vested benefit obligation $(5,243) $(4,589)
Non-vested benefit obligation (165) (157)
---------------------
Accumulated benefit obligation (5,408) (4,746)
Excess of projected benefit obligation over
accumulated benefit obligation (2,865) (2,405)
---------------------
Projected benefit obligation (8,273) (7,151)
Plan assets at fair market value 8,342 6,514
---------------------
Plan assets greater than (less than) projected
benefit obligation 69 (637)
Unrecognized net loss 1,560 1,971
Unrecognized prior service cost 758 815
Unrecognized net asset established at the date
of initial application (2,025) (2,209)
=====================
Net prepaid (accrued) pension expense $ 362 $ (60)
=====================
Assumptions were as follows:
1995 1994 1993
----------------------
Weighted average discount rate 7.5% 8.5% 7.5%
Weighted average compensation rate for
participants age 45 and older 4.5 4.5 4.5
Weighted average expected long-term return
on plan assets 9.0 9.0 9.0
Compensation rates that vary by age for participants under age 45 were used in
determining the actuarial present value of the projected benefit obligation in
1995. Plan assets are invested in a diversified portfolio of affiliated mutual
funds that invest in equity and debt securities.
37
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS (CONTINUED)
In addition to the Company's defined benefit pension plan, the Company and
certain of its affiliates provide certain medical and life insurance benefits to
full-time employees who have retired after the age of 55 with five years of
service. The plan is contributory, with retiree contributions adjusted annually,
and contains other cost-sharing features, such as deductibles and coinsurance.
Contributions vary based on the employee's years of service earned after age 40.
The Company and its affiliates' portion of the costs is frozen after 1996 with
all future cost increases passed on to the retirees. Retirees in the plan prior
to July 1, 1993 are covered 100% by the Company.
The Company records net periodic cost for non-pension postretirement benefits in
accordance with the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The net periodic cost is allocated
among the Company and its affiliates based on the number of eligible employees.
The net periodic cost allocated to the Company was $198,000, $171,000 and
$166,000 for 1995, 1994 and 1993, respectively.
Separate information disaggregated by sponsoring employer company is not
available on the components of the net retiree medical care and life insurance
costs or on the funded status of the plan. Retiree medical care and life
insurance costs for the total plan for 1995, 1994 and 1993 are summarized as
follows:
1995 1994 1993
----------------------
(IN THOUSANDS)
Service cost $151 $116 $118
Interest cost 305 275 233
----------------------
$456 $391 $351
======================
38
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
4. EMPLOYEE BENEFIT PLANS (CONTINUED)
The funded status of the total plan as of December 31, 1995 and 1994 was as
follows:
DECEMBER 31
1995 1994
---------------------
(IN THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees $(2,514) $(2,418)
Active participants:
Retirement eligible (632) (620)
Others (1,035) (706)
---------------------
(4,181) (3,744)
Unrecognized net (gain) loss 67 (30)
---------------------
Accrued postretirement benefit cost $(4,114) $(3,774)
=====================
The annual assumed rate of increase in the per capita cost of covered benefits
is 11% for 1995 and is assumed to decrease gradually to 5% for 2001 and remain
at that level thereafter. The health care cost trend rate has a significant
effect on the amount reported. For example, increasing the assumed health care
cost trend rates by one percentage point each year would increase the
accumulated postretirement benefit obligation as of December 31, 1995 by
$233,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1995 by $60,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5%, 8.5% and 7.5% at December 31, 1995, 1994 and 1993,
respectively.
The Company has a profit-sharing and savings plan for which substantially all
employees are eligible after one year of employment with the Company.
Contributions for profit sharing are based on a formula established by the Board
of Directors with pro rata allocation among employees based on salaries. The
savings plan is a tax-deferred 401(k) retirement plan. Employees may contribute
up to 10% of their eligible compensation. The Company matches 50% of the first
6% of the employee contributions. Employee contributions are fully vested, and
Company contributions are vested over a five-year period. Company contributions
to the profit-sharing and savings plan charged to operations were $721,000,
$371,000 and $463,000 for 1995 1994 and 1993, respectively.
39
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
5. RELATED-PARTY TRANSACTIONS
SBG provides certain management and administrative services to the Company.
During 1995, 1994 and 1993, the Company incurred $18,654,000, $16,852,000 and
$14,729,000, respectively, for such services. The Company leases certain office
space to SBG for which annual rent income of $1,133,000 was recorded in 1995,
1994 and 1993. Additionally, in 1995, 1994 and 1993, the Company paid
commissions of $2,546,000, $2,700,000, $2,985,000, respectively, to Security
Distributors, Inc., a wholly-owned subsidiary of SBG.
Effective January 2, 1995, the Company acquired, pursuant to an assumption
reinsurance agreement from Pioneer National Life Insurance Company (PNL), then a
wholly-owned subsidiary of SBG, substantially all of PNL's life insurance
business. Concurrent with the assumption reinsurance agreement, the Company
entered into a 100% coinsurance agreement with PNL reinsuring the remaining
business. The Company did not recognize any gain or loss on the above
transactions. The Company received $2.9 million of assets as consideration for
the liabilities assumed by the Company in the assumption reinsurance and
coinsurance agreement. Assumed premiums and claims related to this business were
not significant to the Company during 1995. PNL was subsequently merged with
First Security Benefit Life Insurance and Annuity Company of New York (FSBL), a
newly formed wholly-owned subsidiary of SBG.
During 1995, the Company purchased an SBG note for the principal amount of $17
million. The note is due May 24, 2000 and provides for semiannual interest
payments at 7.35% per annum commencing on November 24, 1995. The note has been
registered with the NAIC and is included in fixed maturities in the accompanying
balance sheet. SBG used $12 million of the proceeds to purchase Company-issued
annuity contracts for the purpose of funding new investment options within the
Company's separate account. The account balance of these contracts totaled
$13,005,000 at December 31, 1995. The remaining $5 million of proceeds were used
to purchase shares in new mutual funds managed by Security Management Company, a
wholly-owned subsidiary of SBG. The net asset value of these shares totaled
$5,364,000 at December 31, 1995.
At December 31, 1995 and 1994, the Company's investment in SBG was $29,590,000
and $21,028,000, respectively. The Company recorded cash dividends of
$4,200,000, $5,200,000 and $8,300,000 from SBG during 1995, 1994 and 1993,
respectively.
40
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
5. RELATED-PARTY TRANSACTIONS (CONTINUED)
Condensed financial information related to SBG is as follows:
Balance Sheets:
1995 1994
---------------------
(IN THOUSANDS)
Cash and investments $45,221 $19,456
Property and equipment 8,138 8,736
Other assets 7,594 7,910
---------------------
$60,953 $36,102
=====================
Accounts payable and other liabilities $14,363 $15,074
Note payable to parent 17,000 ---
Stockholder's equity 29,590 21,028
---------------------
$60,953 $36,102
=====================
Statements of Operations:
1995 1994 1993
---------------------------------
(IN THOUSANDS)
Revenues:
Management fees $18,654 $16,852 $14,729
Mutual fund fees 24,266 22,058 21,352
Other 3,226 2,373 7,287
---------------------------------
46,146 41,283 43,368
General, administrative and other expenses 36,488 32,390 30,080
Income taxes 3,927 3,430 5,233
Cumulative effect of SFAS No. 106 --- --- 1,735
---------------------------------
Net income $ 5,731 $ 5,463 $ 6,320
=================================
41
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
6. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. The Company's maximum retention on any one life is $500,000.
Risks are reinsured with other companies to permit recovery of a portion of
direct losses.
Principal reinsurance transactions are summarized as follows:
1995 1994 1993
--------------------------------------
(IN THOUSANDS)
Reinsurance assumed:
Premiums received $ 866 $ 1,276 $ 1,359
======================================
Commissions paid $ 144 $ 239 $ 96
======================================
Claims paid $ 1,597 $ 1,469 $ 7,290
======================================
Reinsurance ceded:
Premiums paid $ 73,916 $ 12,018 $ 4,194
======================================
Commissions received $ 230 $ 1,443 $ 148
======================================
Claim recoveries $ 3,089 $ 2,485 $ 2,231
======================================
Reinsurance in force (at December 31):
Assumed policies $ 25,438 $ 30,814 $ 39,730
======================================
Ceded policies $3,932,146 $1,150,828 $1,081,591
======================================
The liabilities for policy reserves and policy and contract claims include the
following amounts for reinsurance assumed: $354,000 and $2,790,000 at December
31, 1995 and $120,000 and $3,187,000 at December 31, 1994.
The ceding of insurance through reinsurance agreements does not discharge the
primary liability of the original underwriters to the insured. However,
statutory accounting practices treat risks that have been reinsured, to the
extent of reinsurance, as though they were not risks for which the original
insurer is liable. Therefore, in financial statement presentations, policy
reserves and policy and contract claim liabilities are presented net of that
portion of risk reinsured. Accordingly, policy reserves and policy and contract
claim liabilities have been shown net of reinsurance credits of $77,908,000 and
$968,000 at December 31, 1995 and $11,048,000 and $459,000 at December 31, 1994.
42
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
6. REINSURANCE (CONTINUED)
In 1995, the Company transferred, through a 100% coinsurance agreement, $66.9
million in policy reserves and claim liabilities. The agreement related to a
block of whole life and decreasing term life insurance business. The Company
recorded a pretax gain of $42.6 million which represented the initial ceding
commission. This gain, net of tax, was recorded as an increase to unassigned
surplus.
In prior years, the Company was involved in litigation arising out of its
participation from 1986 to 1990 in a reinsurance pool. The litigation related to
the pool manager and a reinsurance intermediary placing major medical business
in the pool without authorization. During 1993, the Company settled the major
medical portion of the pool's activity with no significantly adverse effect on
the Company. The nonmajor medical business placed in the pool has experienced
significant losses. At December 31, 1995, the Company believes adequate
provision has been made for such losses.
7. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return with
SBG. Income taxes are allocated to the Company on the basis of its filing a
separate tax return. The Company is taxed at usual corporate rates as defined by
the applicable income tax laws for mutual life insurance companies. These laws
provide for differences in the recognition of certain income and expenses, and
provide for deductions that may result in a provision for income taxes that does
not have the customary relationship of taxes to income. The provision for income
taxes differs from the amount computed at the statutory federal rate due
primarily to the dividends received deduction and tax credits.
During the year ended December 31, 1993, the Company began establishing deferred
income taxes on its tax-basis deferred policy acquisition costs. Prior to this
time, no deferred income taxes had been established on any difference between
the financial statement and income tax bases of assets and liabilities, and, at
December 31, 1995, this remains the only item to which deferred income tax
accounting has been applied. The Company's policy is to nonadmit any resulting
deferred tax asset; accordingly, this practice has no impact on surplus. The
cumulative effect of adopting this change as of January 1, 1993 amounted to
$3,464,000 and was reflected as a nonadmitted asset at that time. The effect of
the new method increased income tax expense by $115,000 for 1995 and decreased
income tax expense by $927,000 and $1,444,000 for 1994 and 1993, respectively.
43
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
8. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," requires
disclosures of fair value information about financial instruments, whether
recognized or not recognized in a company's balance sheet, for which it is
practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under all
insurance contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings over interest credited) to be earned
in the future on investment-type products, or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------------------- -----------------------
(IN THOUSANDS)
Fixed maturities (NOTE 2) $2,294,802 $2,340,910 $2,160,550 $1,987,040
Equity securities (NOTE 2) 12,390 12,836 9,050 9,494
Mortgage loans 70,777 76,610 90,509 88,894
Policy loans 100,452 104,077 92,130 91,492
Short-term investments 992 992 50,406 50,406
Cash and certificates of deposit 12,059 12,059 10,820 10,820
Investment income due and accrued 30,577 30,577 25,857 25,857
Futures contracts --- (737) --- 240
Interest rate exchange agreements --- (2,291) --- ---
Supplementary contracts
without life contingencies 34,363 35,387 41,239 39,771
Individual and group annuities 1,922,901 1,774,642 1,828,753 1,690,693
----------------------- -----------------------
$4,479,313 $4,385,062 $4,309,314 $3,994,707
======================= =======================
44
<PAGE>
Security Benefit Life Insurance Company
Notes to Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES
The Company has a $75.5 million line of credit facility from the Federal Home
Loan Bank of Topeka. Any borrowings in connection with this facility bear
interest at .1% over the Federal Funds rate. At December 31, 1995, there were no
borrowings outstanding under this facility.
The economy and other factors have caused an increase in the number of insurance
companies that have required regulatory supervision. This circumstance is
expected to result in an increase in assessments by state guaranty funds, or
voluntary payments by solvent insurance companies, to cover losses to
policyholders of insolvent or rehabilitated companies. Mandatory assessments can
be partially recovered through a reduction in future premium taxes in some
states. The Company records these assessments on a cash basis and has paid
$2,014,000, $2,270,000 and $2,077,000 for the years ended December 31, 1995,
1994 and 1993, respectively. The ultimate amounts or the ultimate effect of any
such increased assessments or voluntary payments on the Company's financial
position and results of operations are not currently determinable. The
accompanying financial statements do not include any provision for any such
potential assessments.
10. ANNUITY AND DEPOSIT LIABILITIES
The withdrawal characteristics of the liability for future policy benefits for
annuities and supplementary contracts and deposits as of December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
GENERAL SEPARATE
ACCOUNT ACCOUNT TOTAL PERCENT
----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 557 $ --- $ 557 ---%
At book value less current surrender
charge of 5% or more 572,902 652,843 1,225,745 30
----------------------------------------------------
Total with adjustment 573,459 652,843 1,226,302 30
Subject to discretionary withdrawal
at book value with minimal or no
charge or adjustment 1,394,680 1,360,750 2,755,430 67
Not subject to discretionary withdrawal 112,382 12,070 124,452 3
----------------------------------------------------
$2,080,521 $2,025,663 $4,106,184 100%
====================================================
</TABLE>
45
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
b. Exhibits
(1) Resolution of the Board of Directors of Security Benefit
Life Insurance Company authorizing establishment of the
Separate Account(a)
(2) Not Applicable
(3) (a) Service Facilities Agreement(a)
(b) Variable Annuity Sales Agreement(a)
(4) Sample Contracts including riders and endorsements
(5) Form of Application(a)
(6) (a) Composite of Articles of Incorporation of SBL(a)
(b) Bylaws of SBL(a)
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel(a)
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedules of Computation of Performance(b)
(14) Financial Data Schedules
(15) Powers of Attorney of Howard R. Fricke, Thomas R. Clevenger,
Sister Loretto Marie Colwell, John C. Dicus, Melanie S.
Fannin, William W. Hanna, John E. Hayes, Jr., Laird G.
Noller, Robert C. Wheeler, and Frank C. Sabatini
(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 13 under the Securities Act of
1933 and Amendment No. 12 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (April 28, 1995).
(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 16 under the Securities Act of
1933 and Amendment No. 15 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (April 30, 1996).
<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, President, Chief
Executive Officer and Director
Thomas R. Clevenger Director
P.O. Box 8514
Wichita, Kansas 67208
Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66606
John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603
Melanie S. Fannin Director
220 SE 6th Street
Topeka, Kansas 66603
William W. Hanna Director
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes, Jr. Director
818 Kansas Avenue
Topeka, Kansas 66612
Laird G. Noller Director
2245 Topeka Avenue
Topeka, Kansas 66611
Frank C. Sabatini Director
120 SW 6th Street
Topeka, Kansas 66603
Robert C. Wheeler Director
P.O. Box 148
Topeka, Kansas 66601
Donald J. Schepker* Senior Vice President, Chief Financial Officer
and Treasurer
<PAGE>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
James L. Woods* Senior Vice President
Jeffrey P. Pantages* Senior Vice President and Chief Investment
Officer
Roger K. Viola* Senior Vice President, General Counsel and
Secretary
T. Gerald Lee* Senior Vice President-Administration
Malcolm E. Robinson* Senior Vice President and Assistant to the
President
Donald E. Caum* Senior Vice President and Chief Marketing
Officer
Richard K Ryan* Senior Vice President
James R. Schmank* Vice President-Corporate Development
Kathleen R. Blum* Vice President-Administration
Amy J. Lee* Associate General Counsel and Vice President
*Located at 700 Harrison Street, Topeka, Kansas 66636.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor, Security Benefit Life Insurance Company ("SBL") is
owned by its policyowners. No one person holds more than approximately
0.0005% of the voting power of SBL. The Registrant is a segregated
asset account of SBL.
<PAGE>
The following chart indicates the persons controlled by or under
common control with Variflex or SBL:
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BY SBL
Security Benefit Life Insurance Company Kansas ---
(Mutual Life Insurance Company)
Security Benefit Group, Inc. Kansas 100%
(Holding Company)
Security Management Company Kansas 100%
(Mutual Funds Management Company)
Security Distributors, Inc. (Broker/Dealer, Kansas 100%
Principal Underwriter of Mutual Funds)
First Advantage Insurance Agency, Inc. Kansas 100%
(Insurance Agency)
Security Benefit Academy, Inc. Kansas 100%
(Daycare Company)
Creative Impressions, Inc. Kansas 100%
(Advertising Agency)
Security Benefit Clinic and Hospital Kansas 100%
(Nonprofit provider of hospital benevolences
for fraternal certificate holders)
First Security Benefit Life Insurance and New York 100%
Annuity Company of New York
SBL is also the depositor of the following separate accounts: SBL
Variable Annuity Accounts I, III, and IV, SBL Variable Life Insurance
Account Varilife, Security Varilife Separate Account, Variflex LS, T.
Rowe Price Variable Annuity Account and Parkstone Variable Annuity
Account.
Through the above-referenced separate accounts, SBL might be deemed to
control the open-end management investment companies listed below. The
approximate percentage of ownership by the separate accounts for each
company is as follows:
Security Equity Fund 17% Security Income Fund - 6.1%
Corporate Bond Series
Security Growth and Income Fund 40.6% SBL Fund 100%
<PAGE>
ITEM 27. NUMBER OF CONTRACTOWNERS
As of May 31, 1996, there were 97,380 owners of Variflex Qualified
Contracts and 18,923 owners of Variflex Non-Qualified Contracts.
ITEM 28. INDEMNIFICATION
The bylaws of Security Benefit Life Insurance Company provide that the
Company shall, to the extent authorized by the laws of the State of
Kansas, indemnify officers and directors for certain liabilities
threatened or incurred in connection with such person's capacity as
director or officer.
The Articles of Incorporation include the following provision:
A Director shall not be personally liable to the Corporation or
to its policyholders for monetary damages for breach of fiduciary
duty as a director, provided that this sentence shall not
eliminate nor limit the liability of a director
A. for any breach of his or her duty of loyalty to the
Corporation or its policyholders;
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.
This Article Eighth shall not eliminate or limit the liability of
a director for any act or omission occurring prior to the date
this Article Eighth becomes effective.
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.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Security Distributors, Inc. ("SDI"), a subsidiary of SBL, acts as
distributor of the Variflex contracts. SDI receives no
compensation for its distribution function in excess of the
commissions it pays to selling broker/dealers. SDI performs
similar functions for SBL Variable Annuity Accounts I, III and
IV, SBL Variable Life Insurance Account Varilife, Security
Varilife Separate Account, Variflex LS, and Parkstone Variable
Annuity Account. SDI also acts as principal underwriter for the
following management investment companies for which Security
Management Company, a subsidiary of SBL, acts as investment
adviser: Security Equity Fund, Security Income Fund, Security
Growth and Income Fund, Security Tax-Exempt Fund and Security
Ultra Fund. SDI further acts as principle underwriter for The
Parkstone Advantage Fund and Parkstone Variable Annuity.
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by SBL at its
administrative offices--700 Harrison, 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
Variflex 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant has caused this Registration Statement to be
signed on its behalf in the City of Topeka, and State of Kansas on this 24th day
of June, 1996.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman of the Board, (The Depositor)
President and Chief Executive
Officer
By: ROGER K. VIOLA
---------------------------------------
Thomas R. Clevenger Roger K. Viola, Senior Vice President,
Director General Counsel and Secretary as
Attorney-In-Fact for the Officers and
Directors Whose Names Appear Opposite
Sister Loretto Marie Colwell
Director
VARIFLEX (The Registrant)
William W. Hanna By: SECURITY BENEFIT LIFE INSURANCE COMPANY
Director (The Depositor)
John C. Dicus By: HOWARD R. FRICKE
Director ---------------------------------------
Howard R. Fricke, President and Chief
Executive Officer
John E. Hayes, Jr.
Director By: DONALD J. SCHEPKER
---------------------------------------
Donald J. Schepker, Senior Vice
Laird G. Noller President, Chief Financial Officer and
Director Treasurer
(ATTEST): ROGER K. VIOLA
Frank C. Sabatini ---------------------------------
Director Roger K. Viola, Senior Vice
President, General Counsel and
Secretary
Robert C. Wheeler
Director
Date: June 24, 1996
<PAGE>
EXHIBIT INDEX
(1) None
(2) None
(3) (a) None
(b) None
(4) Sample Contract
(5) None
(6) (a) None
(b) None
(7) None
(8) None
(9) None
(10) Consent of Independent Auditors
(11) None
(12) None
(13) None
(14) Financial Data Schedules
(15) Powers of Attorney
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A MUTUAL COMPANY/FOUNDED IN 1892/TOPEKA, KS
Security Benefit Life, subject to the terms of this Policy, will pay the
following benefits:
1. Annuity installments to each Participant, if living on the Retirement Date,
derived from applying the Retirement Value to a settlement option as
specified in a Participant's Certificate.
2. The Death Benefit when due proof of the Participant's death prior to the
Retirement Date is received at the Home Office at 700 Harrison, Topeka,
Kansas 66636-0001.
SBL, when used in this Policy, means Security Benefit Life Insurance Company.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS POLICY
This is a GROUP FLEXIBLE PREMIUM ALLOCATED ANNUITY POLICY:
- - Benefit installments begin on the Retirement Date using the method as
specified in a Participant's Certificate.
- - A Death Benefit is payable if a Participant dies prior to his Retirement Date.
- - Flexible purchase payments are payable until a Participant's Retirement Date
or until the prior death of the Participant.
ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001 (913) 295-3000
<PAGE>
A GUIDE TO THE
PROVISIONS OF YOUR POLICY
PROVISION CONTENTS
POLICY SPECIFICATIONS Participant, dates, plan, policy number,
fees & charges, factors, interest rates,
separate account./PG 3
DEFINITIONS Plan, participant, annuitant, certificate,
inactive participant, certificate value,
retirement annuity, statement of
participant, purchase payment./PG 4
GENERAL PROVISIONS Introduction, the contract, individual
certificates, misstatement of age or sex,
claims of creditors, dates, facility of
payment, evidence of survival, due proof of
death, change of contract./PG 5
OWNER Rights of Owner, change of ownership (if
allowed)./PG 5-6
ANNUITY PROVISIONS Method of payment, retirement value,
retirement date./PG 6
DEATH BENEFIT Benefit amount, effect on policy./PG 6
BENEFICIARY Designation and way to change, distribution
of benefits./PG 6
PAYMENT OF ANNUITY BENEFITS Way benefits may be paid, settlement
options, additional provisions./PG 6-9
PURCHASE PAYMENTS Payment of purchase payments./PG 10
VALUATION Value of General Account, Separate Account,
state premium taxes, total policy value./PG
10-11
NONFORFEITURE Policy value, termination value/forced
termination./ PG 11-12
SEPARATE ACCOUNT PROVISIONS Introduction, ownership of Separate Account,
Separate Account defined, funds defined,
guaranteed annuity, variable annuity,
valuing first annuity installment,
investment factors, accumulation unit value,
annuity unit value, splitting units,
fluctuation of values./PG 12-14
APPLICATION Owner.
<PAGE>
POLICY SPECIFICATIONS
POLICY NUMBER: Specimen POLICY DATE: December 1, 1987
OWNER OF POLICY: Trustees of ABC Unified School District TDA Plan
PLAN: The ABC Unified School District, Any City, Kansas
Tax Deferred Annuity Plan
DATE OF ISSUE December 31, 1987
OF POLICY:
ISSUE JURISDICTION This Policy is issued in Kansas and is subject to its
jurisdiction.
PARTICIPANT Any employee, member, or other person who participates in
the Plan and who is covered under this Policy.
RETIREMENT DATE The date elected by the Owner on which annuity installments
(NRD): are to begin for a participant. The date must be the first
or fifteenth of a calendar month.
OWNERSHIP AND Ownership of this Policy may not be transferred nor may it
ASSIGNMENT: be assigned or pledged to anyone other than to SBL.
<PAGE>
POLICY SPECIFICATIONS
FEES & CHARGE FOR A $30.00 per year fee will be charged against the
CERTIFICATES ISSUED Certificate Value of each Participant on each
WITHIN ONE YEAR OF THE December 31st and the date the Certificate is
POLICY DATE: terminated (first and last policy fee prorated
to the nearest $1). No charge will be made after
the Effective Date of Settlement Option 1, 2, 3, or
4 for the Participant. The charge will be made
sequentially against the Series listed in the
Separate Account section in descending order. The
General Account will be the last subject to charge.
Each Series will be depleted before the next is
charged.
WITHDRAWAL CHARGE
FACTOR FOR Certificate Year at
CERTIFICATES ISSUED Time of Withdrawal
WITHIN ONE YEAR OF Termination Charge
THE POLICY DATE:
1 .08
2 .07
3 .06
4 .05
5 .04
6 .03
7 .02
8 .01
9 or later .0
FREE WITHDRAWAL .10
FACTOR FOR
CERTIFICATES ISSUED
WITHIN ONE YEAR OF
THE POLICY DATE:
GUARANTEED INTEREST 3.5% for all years.
RATES FOR CERTIFICATES
ISSUED WITHIN ONE YEAR
OF THE POLICY DATE:
-3A-
<PAGE>
POLICY SPECIFICATIONS
SEPARATE ACCOUNT: The Owner may allocate purchase payments to the
following SBL Separate Account and the Series in
which the Separate Account is invested. Purchase
payments may be allocated to the General Account of
SBL.
Separate Account: VARIFLEX, containing:
Money Market Series: Which is invested in Series C
of SBL Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit value was set at $10
on 04-23-84.
High Grade Income Series: Which is invested in
Series E of SBL Fund. Annuity Unit value was set
at $1 on 04-24-85. Accumulation Unit value was
set at $10 on 04-24-85.
Global Aggressive Bond Series: Which is invested in
Series K of SBL Fund. Annuity Unit value was set
at $1 on 05-01-95. Accumulation Unit value was
set at $10 on 05-01-95.
Growth-Income Series: Which is invested in Series B
of SBL Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit value was set at $10
on 04-23-84.
Equity Income Series: Which is invested in Series O
of SBL Fund. Annuity Unit Value was set at $1 on
05-01-95. Accumulation Unit value was set at $10
on 05-01-95.
Managed Asset Allocation Series: Which is invested
in Series N of SBL Fund. Annuity Unit value was
set at $1 on 05-01-95. Accumulation Unit value
was set at $10 on 05-01-95.
Specialized Asset Allocation Series: Which is
invested in Series M of SBL Fund. Annuity Unit
value was set at $1 on 05-01-95. Accumulation
Unit value was set at $10 on 05-01-95.
Growth Series: Which is invested in Series A of SBL
Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit Value was set at $10
on 04-23-84.
Worldwide Equity Series: Which is invested in
Series D of SBL Fund. Annuity Unit value was set
at $1 on 04-01-84. Accumulation Unit value was
set at $10 on 04-23-84.
Social Awareness Series: Which is invested in
Series S of SBL Fund. Annuity Unit value was set
at $1 on 04-23-91. Accumulation Unit value was
set at $10 on 04-23-91.
Emerging Growth Series: Which is invested in Series
J of SBL Fund. Annuity Unit value was set at $1
on 10-01-92. Accumulation Unit value was set at
$10 on 10-01-92.
ACTUARIAL RISK FEE: Accumulation Units: .00003307502 (1.2% Annually)
(ARF) Annuity Units: .00003307502 (1.2% Annually)
ALLOCATION FEE FOR $0.00
CERTIFICATES ISSUED
WITHIN ONE YEAR OF
THE POLICY DATE:
-3B-
<PAGE>
POLICY SPECIFICATIONS
MINIMUM PURCHASE The amount of each purchase payment is allocated to
PAYMENT: more than one Series or the General Account for
each Participant must be at least $25.00.
CHANGE OF ACCOUNT For each Certificate, the Owner may change the
ALLOCATIONS: allocation of future purchase payment to the
General Account and the various Series. To make a
change, a written notice must be received in the
Home Office of SBL. No change can be made which
allocates less than the equivalent of $25.00 per
month for each Certificate to a Series or the
General Account. There will be no charge for the
first allocation change in a year for each
Certificate. For each additional change in a year,
a charge of an allocation fee (shown on the
Certificate Specifications pages) will be made. A
change in allocation will not affect purchase
payment allocations before the change.
METHOD OF CHARGING The fees discussed in the Change of Account
ALLOCATION FEE: Allocations section will be charged sequentially to
the Certificate Value in the Series in the
descending order shown in the Separate Account
section. Each Series' Certificate Value will be
depleted before the next is charged. The General
Account will be the last charged.
-3C-
<PAGE>
POLICY SPECIFICATIONS
TRANSFER RIGHTS The Owner may transfer part of the Certificate
(PRIOR TO THE Value between the various Series and the General
EFFECTIVE DATE OF A Account once every 30 days. A transfer fee (shown
SETTLEMENT OPTION): on the Certificate Specifications pages) will be
charged after the first transfer in a certificate
year. A transfer within 30 days of the Retirement
Date can be made without charge. The total of
dollar amounts transferred from the General Account
during a certificate year for a Certificate will be
limited to the greatest of the three following
values:
1. Five thousand dollars ($5000.00).
2. One third (1/3) of the amount of the
Certificate Value in the General Account at the
time of transfer.
3. The product of multiplying "a" by "b", where:
"a" is the total of dollar amounts transferred
from the General Account during the previous
certificate year.
"b" is 1.2.
SETTLEMENT OPTION, Once installments have begun, the Owner may elect,
TRANSFER AFTER FIRST once each calendar year, to convert annuity units
INSTALLMENT: of one Series to annuity units of another Series.
The conversion cannot be made within the 5 day
period prior to and including the day an
installment is to be paid. Conversions that would
have been made during this 5 day period shall be
made on the business day after the installment
payment date. This right to convert annuity units
does not include the right to convert a variable
annuity of any Series into a guaranteed annuity.
Neither may a guaranteed annuity be converted to a
variable annuity of any Series. The amount of each
installment for a payee after the conversion must
still be at least $25.00 for each Series.
TRANSFER FEE: $10.00
METHOD OF CHARGING The fee discussed in the Transfer Rights section
TRANSFER FEE: will be charged sequentially to the Certificate
Value in the Series in the descending order shown
in the Separate Account section. Each Series
Certificate Value will be depleted before the next
is charged. The General Account will be the last
charged.
-3D-
<PAGE>
DEFINITIONS
PLAN As used in this Policy, the plan shall mean a
document or agreement which provides the authority
for purchase of the Policy for the Participant(s).
The Plan must meet the requirements of the section
of the Internal Revenue Code as shown on the
Application. The Plan is not a part of this Policy.
SBL assumes no obligation under the Plan. The Plan
is mentioned merely for reference purposes.
PARTICIPANT An eligible employee, member, or other person who
participates in the Plan.
ANNUITANT A participant who is receiving Retirement Annuity
installments under this Policy.
CERTIFICATE The document containing the provisions relating to
the Certificate Value of a Participant.
INACTIVE A Participant for whom purchase payments have
PARTICIPANT ceased before his Retirement Date, but whose
Certificate still is in force and has a value.
CERTIFICATE The accumulated value of the purchase payments
VALUE credited to the General and Separate Accounts for a
Participant. (See valuation portion of this
Policy.)
RETIREMENT A series of installments purchased under this
ANNUITY Policy for a Participant by application of a
benefit amount under the Payment of Annuity
Benefits portion of his Certificate.
STATEMENT OF The form completed by a Participant showing all
PARTICIPANT personal data, including Account and Series
allocation.
PURCHASE The amount contributed each payment period by the
PAYMENT Owner on behalf of each participant. The purchase
payment excludes any underwriting charges and any
premium for benefits provided by rider. In this
Policy premium will mean the amount required by SBL
for benefits provided by rider.
-4-
<PAGE>
GENERAL PROVISIONS
INTRODUCTION This Policy is a Group Retirement Annuity. The
first annuity installment for each Participant is
determined from his Retirement Value and the
Settlement Option Rate.
THE CONTRACT The entire contract between the Owner and SBL
consists of the Application, this Policy, and any
endorsements or riders attached to the Policy. A
copy of the Application is attached to this Policy
at issue. All statements made in the Application
will, in the absence of fraud, be deemed
representations and not warranties. SBL will use no
statement made by or on behalf of any Participant
or Annuitant in defense to a claim under this
Policy unless it is in the written Application or
Statement of Participant. Any change in the
contract can be made only with the written consent
of the President, a Vice President, or the
Secretary of SBL.
INDIVIDUAL SBL will issue a Certificate to each Participant.
CERTIFICATES Each Certificate will show in substance the
benefits to which the Participant is entitled under
this Policy.
MISSTATEMENT OF If the age or the sex of any Annuitant has been
AGE OR SEX incorrectly stated, the benefits under this Policy
will be those the purchase payments would have
purchased for the correct age and sex.
CLAIMS OF The Certificate Values, Termination Values, and
CREDITORS benefits under this Policy will be exempt from the
claims of creditors to the extent permitted by law.
DATES Years, months and anniversaries pertaining to the
Policy are all measured from the Policy Date. All
such dates are shown on the Policy Specifications
pages. Years, months, and anniversaries pertaining
to Certificate Value are all measured from the
Certificate Date. All such dates are shown on the
Certificate Specifications pages.
FACILITY OF In some cases a payee will, in the opinion of SBL,
PAYMENT not be able, for physical or mental reasons, to
give a good receipt and discharge for any benefit
payment due. In this case, SBL may make payment of
the amount due in installments to those persons
whom SBL believes are caring for and supporting the
payee. The installment under this section will not
be greater than $250 per month. The installments
under this section will stop when a claim is made
by a duly appointed guardian or legal
representative of the payee. Payment to such
persons will discharge SBL from liability for the
installments paid. SBL will assume no
responsibility for the proper use of the
installments paid under this section.
EVIDENCE OF SBL may require proof that any payee is living on
SURVIVAL any date a payment or installment is due to the
payee. The proof must be satisfactory to SBL.
DUE PROOF OF Any of the following items will be sufficient as
DEATH due proof of death:
1. A copy of a certified death certificate.
2. A copy of a certified decree of a court of
competent jurisdiction as to the finding of
death.
3. A written statement by a medical doctor who
attended the deceased Participant.
4. Any proof satisfactory to SBL.
CHANGE OF SBL may unilaterally amend the Policy and
CONTRACT BY SBL Certificates to comply with laws and regulations to
which SBL may be subject. SBL may also unilaterally
amend the Policy and Certificates to comply with
changes in the Internal Revenue Code. SBL is not
obligated to make these amendments. SBL shall
provide advance notice to the Owner of any such
amendment. Anytime after the Date of Issue SBL may
change any of the terms of this Policy which will
apply to new Participants.
CHANGE OF The Owner of this Policy and SBL may be written
CONTRACT BY agreement change the terms of this Policy. The
MUTUAL AGREEMENT change may be made retroactive to the Date of
Issue.
OWNER
RIGHTS OF OWNER The Owner of this Policy is shown on the Policy
Specifications pages.
The Owner has all rights in this Policy.
The Owner has all of the rights in a certificate
while the Participant is living.
With the approval of the Owner a participant may
exercise some or all the rights of the Owner with
respect to the provisions of the Certificate
purchased under the terms of this Policy for the
participant.
Anytime prior to 30 days before a Participant's
Retirement Date, the Owner, while the Participant
is living, may elect to have the Termination value
for a Participant applied under Settlement Options
1, 2, 3, 4, or 5.
Anytime prior to 30 days before a Participant's
Retirement Date, the Owner may transfer, with the
approval of SBL, the Termination Value of a
Participant to another Policy being issued by SBL.
This privilege is allowed in anticipation of a
Participant's retirement.
-5-
<PAGE>
OWNER (CONTINUED)
CHANGE OF If allowed by the Assignment section of the Policy
OWNERSHIP Specifications Pages, the Owner can designate a new
owner by written notice satisfactory to SBL. The
change in ownership will take effect as of the date
the notice was signed. The change will be subject
to any payment made or other action taken by SBL
before the change was received by SBL. SBL may
require the Policy for endorsement.
ANNUITY PROVISIONS
METHOD OF If the Participant of a certificate is living on
PAYMENT the Retirement Date, the Retirement Value of the
certificate will be applied to provide a 10 year
fixed period and life annuity, unless an optional
type of annuity is selected by the Owner during the
lifetime of the Participant and 30 days prior to
the Retirement Date. The installments under the
annuity will be paid to the Participant. The
optional types of annuity benefits are outlined in
the settlement options provisions beginning on page
6. Other reasonable settlement options may be
available with the approval of SBL. The Retirement
Value will not be paid as a single cash payment.
RETIREMENT VALUE If applied under settlement options 1, 2, 3, 4, 5,
6, or 7 the Retirement Value will be equal to the
Certificate Value. Amount applied under Options 5,
6, and 7 will continue to be subject to withdrawal
charges on nonscheduled amounts withdrawn. The free
withdrawal provision will not be applicable to
these nonscheduled amounts withdrawn.
RETIREMENT DATE The Retirement Date is shown in the Certificate
Specifications. In some cases, the Retirement Date
may be earlier than 10 years after the Certificate
Date. In this case, the Owner may elect to extend
the Retirement Date up to 10 years after the
Certificate Date. In all other cases, the
Retirement Date may only be changed with SBL's
approval.
DEATH BENEFIT
BENEFIT AMOUNT SBL will pay a death benefit to the Beneficiary if:
1) due proof, satisfactory to SBL, of the
Participant's death is received at the Home Office;
and 2) such proof is received prior to the
Retirement Date; and 3) the Participant's age was
75 or younger at time of death. The death benefit
will be the greater of 'a' or 'b' where:
a - is the Certificate Value for the Participant.
b - is the total of all purchase payments
received by SBL for the certificate less the
total of all Termination Values paid for the
Participant.
If the Participant was older than age 75 as of the
death of death, the death benefit will be the
Termination Value.
EFFECT ON POLICY If applied under one of the settlement options, the
date of death of the Participant will be treated as
the Retirement Date. If taken in cash, the
certificate will cease to be in force upon payment
of the death benefit.
BENEFICIARY
BENEFICIARY The Beneficiary of any Participant will receive the
DESIGNATION AND benefits, if any, under this Policy in the case of
THE WAY TO the death of the Participant while his Certificate
CHANGE IT is still in force. The Beneficiary is named in the
Statement of Participant. However, the Beneficiary
may be changed by the Owner during the
Participant's lifetime. To make a change, a written
notice, satisfactory to SBL, must be received at
the Home Office. The change will take effect as of
the date the notice was signed, even if the
Participant has died before SBL receives it, unless
SBL has already paid the benefits. SBL may require
this Certificate for endorsement.
DISTRIBUTION OF More than one primary beneficiary may be named. The
BENEFITS share each is to receive may also be specified. The
respective shares will be paid to any primary
beneficiary alive at the death of the Participant.
If none survive the Participant, payment will be
made to any contingent beneficiaries who are alive.
Surviving Beneficiaries in the same class will
receive equal shares unless otherwise stated.
If no Beneficiary survives the Participant, the
benefits will be paid to the Participant's estate.
If any Beneficiary dies within twenty-four (24)
hours after the Participant, the benefits will be
paid as if the beneficiary died before the
Participant.
PAYMENT OF
ANNUITY BENEFITS
THE WAY BENEFITS Except for the life option, the Owner, during the
MAY BE PAID lifetime of the Participant and 30 days prior to
the Retirement Date, has the right to choose to
have the benefit amount paid in one of the
following ways. In the event of the Participant's
death, the Beneficiary may choose one of the
options. To make an election, a written notice,
satisfactory to SBL, must be received at the Home
Office. No election can be put into effect which
requires SBL to make a periodic payment of less
than $25.00.
For settlement options 1, 2, 3, and 4 reference
should be made to the Separate Account portion of
this Policy. In that portion the definitions of a
guaranteed and a variable annuity, and the basis
for the value of the second and later installments
are given.
-6-
<PAGE>
PAYMENT OF
BENEFITS (CONTINUED)
SETTLEMENT 1. Life Option: Paid in annual, semiannual,
OPTIONS quarterly or monthly installments during the
lifetime of the payee. Table A shows the
minimum first monthly installment for each
$1,000 of benefit amount applied. The option
will only be available with SBL's approval.
2. Life with Fixed Period Option: Paid in annual,
semiannual, quarterly, or monthly installments.
A period of five, ten, fifteen or twenty years
may be specified. Installments will be paid for
the length of the period, and after for as long
as the payee lives. Table A shows the minimum
first installment payable monthly for each
number of years for $1,000 of benefit amount
applied.
3. Life with Unit Refund Option: Paid in annual,
semiannual, quarterly or monthly installments.
Installments will be paid for the length of the
period obtained by dividing the benefit amount
by the first installment, and for as long after
as the payee lives. Table A shows the minimum
first monthly installment for each $1,000 of
benefit amount applied.
4. Joint and Last Survivor Option: Paid in annual,
semiannual, quarterly, or monthly installments
to the last death of the payee and a named
secondary payee. Table B shows the minimum
first monthly installment for each $1,000 of
benefit amount applied.
5. Fixed Period Option: Paid in annual,
semiannual, quarterly or monthly installments
for a set number of years. Any number of years
of at least 5 and not over 20 may be specified.
For variable annuity installments, the initial
installment will be the product of 'a' times
'b' where:
a - is the accumulation unit value for the day
the installment is paid.
b - is the number of accumulation units applied
to the option divided by the number of
payments selected.
The required number of accumulation units will
be withdrawn to pay this installment.
Subsequent installments will be calculated from
the number of accumulation units not yet
redeemed and number of payments remaining in
the selected period.
For a guaranteed annuity, the installments will
be determined by SBL and will reflect an
effective annual interest rate of not less than
2.5%.
6. Fixed Installment Option: Paid in equal annual,
semiannual, quarterly, or monthly installments.
The installments must be not less than $6.25
per $1,000 applied. Installments will be paid
until the amount applied, adjusted daily for
investment results and expense charges, is
paid. On benefit amounts placed in the General
Account, interest on the unpaid balance will be
paid at an effective yearly rate of not less
than 2.5% per year. The last installment will
be the remaining amount left with SBL after the
last full installment is paid. As of the
effective date of the settlement option the
size of the installment must be such that the
installments are expected to extend for at
least five years and not over twenty years.
7. Deposit Option: Left on deposit with SBL in the
General Account at an effective yearly interest
rate of not less than 2% per year. Interest
will be paid annually, semiannually, quarterly
or monthly as elected. Withdrawal of the amount
left on deposit may be made at any time.
Withdrawals from the amount left on deposit
will be subject to withdrawal charges.
-7-
<PAGE>
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM INITIAL MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS APPLIED
Age of Option One Option Two Option Three
Payee Life Year Fixed Period Ends Unit
Only 5 10 15 20 Refund
- --------------------------------------------------------------------------------
MALE PAYEE
55 4.45 4.44 4.41 4.37 4.30 4.31
56 4.52 4.51 4.48 4.43 4.36 4.37
57 4.60 4.59 4.56 4.50 4.42 4.44
58 4.68 4.67 4.64 4.57 4.47 4.51
59 4.77 4.76 4.72 4.65 4.53 4.58
60 4.87 4.85 4.81 4.72 4.60 4.65
61 4.97 4.95 4.90 4.80 4.66 4.73
62 5.07 5.05 5.00 4.89 4.72 4.82
63 5.19 5.17 5.10 4.97 4.79 4.90
64 5.31 5.29 5.20 5.06 4.85 5.00
65 5.44 5.41 5.32 5.15 4.92 5.09
66 5.58 5.55 5.44 5.24 4.98 5.20
67 5.73 5.69 5.56 5.34 5.05 5.30
68 5.89 5.84 5.69 5.44 5.11 5.41
69 6.06 6.00 5.82 5.54 5.17 5.53
70 6.24 6.17 5.97 5.64 5.23 5.66
71 6.43 6.35 6.11 5.74 5.29 5.79
72 6.63 6.53 6.26 5.84 5.35 5.93
73 6.84 6.73 6.41 5.94 5.40 6.07
74 7.07 6.94 6.57 6.04 5.45 6.22
75 7.31 7.16 6.74 6.14 5.50 6.38
FEMALE PAYEE
55 4.11 4.11 4.10 4.08 4.05 4.05
56 4.17 4.17 4.16 4.14 4.10 4.10
57 4.23 4.23 4.22 4.19 4.15 4.15
58 4.30 4.29 4.28 4.25 4.21 4.21
59 4.37 4.36 4.35 4.32 4.27 4.27
60 4.44 4.44 4.42 4.38 4.33 4.34
61 4.52 4.51 4.49 4.45 4.39 4.40
62 4.60 4.59 4.57 4.52 4.45 4.47
63 4.69 4.68 4.65 4.60 4.52 4.55
64 4.78 4.77 4.74 4.68 4.58 4.63
65 4.88 4.87 4.84 4.76 4.65 4.71
66 4.99 4.98 4.93 4.85 4.72 4.80
67 5.10 5.09 5.04 4.94 4.79 4.89
68 5.23 5.21 5.15 5.04 4.86 4.99
69 5.36 5.34 5.27 5.14 4.94 5.09
70 5.50 5.48 5.39 5.24 5.01 5.20
71 5.65 5.62 5.53 5.35 5.08 5.32
72 5.82 5.78 5.67 5.46 5.15 5.44
73 5.99 5.95 5.81 5.57 5.22 5.57
74 6.19 6.14 5.97 5.68 5.29 5.71
75 6.39 6.33 6.13 5.80 5.35 5.86
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
- --------------------------------------------------------------------------------
TABLE B
SETTLEMENT OPTION FOUR
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF PROCEEDS APPLIED
AGE OF AGE OF MALE PAYEE
FEMALE PAYEE 55 60 62 65 70 75
- --------------------------------------------------------------------------------
Until last Death 55 3.85 3.93 3.95 3.99 4.03 4.06
of Two Payees 60 3.98 4.10 4.15 4.21 4.29 4.35
per $1,000 of 62 4.03 4.18 4.23 4.30 4.40 4.48
benefit amount 65 4.11 4.28 4.35 4.35 4.59 4.69
70 4.21 4.45 4.54 4.69 4.92 5.11
75 4.29 4.58 4.71 4.91 5.26 5.58
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
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<PAGE>
PAYMENT OF
BENEFITS
(CONTINUED)
ADDITIONAL Other reasonable provisions can be made for the
PROVISIONS FOR payment of the benefits under this Policy. Any such
PAYMENT OF provision must be agreed to by SBL.
BENEFITS
Annuity Settlement options shall be available only
with the consent of SBL if the proposed payee be
other than a natural person not acting as
fiduciary.
The Effective Date of a Settlement Option for
options 1 through 6 is the date the first
installment is due to the payee. For option 7 the
first interest payment will be made at the end of
the period selected, with the effective date being
the date at the beginning of the period. If the
Owner has not made any election to the contrary and
the Participant is then living, Settlement Option 2
with a fixed period of 10 years, will become
effective on the Retirement Date. The amount
applied will be the Retirement Value.
Installments required to be paid, if any, after the
death of a payee under a settlement option will be
paid as due to the surviving or next succeeding
payee. The guaranteed rates for options 1 through 4
are based on interest credited at 3.5% Per Year and
the 1983 Table A individual annuity mortality table
updated for 45 years with factors from Projection
Scale G. For Options 5, 6, and 7 the present value
will be the amount remaining with SBL.
For guaranteed annuity settlements, additional
interest may be paid on the amount applied under
the various settlement options. The amount and
method of payment of the additional interest will
be determined by SBL.
On the Effective Date of a Settlement Option, the
settlement option rates being used for single
payment immediate annuity policies of this class,
which are then being issued by SBL, may produce a
higher first installment than guaranteed in this
policy. If this is the case, the Owner may elect to
have SBL use the rates from the single payment
immediate annuity policies then being issued by
SBL. This election can be made only if permitted by
the laws of the state where the election is made.
At any time, any amount remaining under option 5,
6, or 7 may be withdrawn. A Withdrawal Charge may
be made if 5 years have not elapsed from the
Effective Date of the Settlement Option. The
Surrender Charge will be calculated with a free
withdrawal amount of zero. Refer to the
Nonforfeiture option of this Policy for details. If
the amount withdrawn is at least $2,000, it may be
applied to any one of the first four options.
When any of the options 1, 2, 3, or 4 are elected,
the Owner may choose to increase the installments.
Such election: 1) must be made in writing to SBL
before the Effective Date of the Settlement Option;
and 2) must be accompanied by a cash purchase
payment to provide the additional installments. A
cash purchase payment of $1,030 is required to
increase the installments by the amount indicated
per $1,000 of benefit amount shown in Tables A and
B. Cash purchase payments applied under this
provision which produce a total installment of more
than 2 times the installment produced using the
benefit amount alone must be approved by SBL.
-9-
<PAGE>
PURCHASE PAYMENTS
PAYMENT OF This Policy will be in force when the first
PURCHASE purchase payment is received by SBL. Purchase
PAYMENTS payments are payable from the Policy Date. For each
Participant purchase payments are payable from the
Certificate Date to the Retirement Date or to the
death of the Participant. The amount of a purchase
payment may be increased or decreased from the
prior payment amount. A purchase payment for each
Participant may not be less than $25.00 without the
approval of SBL. The total of the purchase payments
for each Participant may not exceed $100,000
without the approval of SBL. Any excess purchase
payments for each Participant will be subject to
conditions that SBL may apply at that time.
All purchase payments are payable at the Home
Office of SBL. If the Owner stops paying purchase
payments for any Participant and this Policy is not
terminated, the Owner may resume paying purchase
payments for that Participant subject to the
conditions above.
Purchase payment intervals for each Participant are
determined by the mode selected by the Owner and
shown on the Certificate Specifications pages. The
mode of the purchase payment may be changed by
notifying SBL in writing.
VALUATION
ACCUMULATIONS OF The purchase payments received by SBL for each
PURCHASE PAYMENTS Participant from the Certificate Date to the
ALLOCATED TO THE Retirement Date will be applied to increase the
GENERAL ACCOUNT Certificate Value of his Certificate. The purchase
payments will be deposited in the General Account
of SBL and the Series of the Separate Account of
SBL as directed by the Owner. The investments of
the General Account of SBL meet the requirements
for the investment of life and annuity reserves
under the insurance code of the state where this
Policy was issued.
The Certificate Value in the General Account for
each Participant on any date will be the
Certificate Value in the General Account on the
previous anniversary date of the Certificate
increased with interest to the date and increased
or decreased by the following events occurring
after the anniversary date for each Participant:
1. Purchase payments received and allocated to
the General Account.
2. Benefits paid from the General Account.
3. Deductions from the Certificate Value in the
General Account for the various charges and
fees of the Certificate.
4. Transfers of part of the Certificate Value in
the General Account to the Separate Account.
5. Transfers of part of the Certificate Value in
the Separate Account to the General Account.
6. Interest on items 1 through 5 from the
transaction date to the date.
The effective yearly rate of interest used to
calculate the Certificate Value in the General
Account will be at least the amount shown in the
Guaranteed Interest Rate section of the Certificate
Specifications. SBL may, at the decision of its
Board of Directors, credit interest in excess of
that guaranteed. The amount and method of crediting
this excess interest will be determined by SBL.
The transfers noted in items 4 and 5 cannot be made
unless specific allowance is made for them in the
Policy and Certificate Specifications pages.
SEPARATE ACCOUNT In addition to the General Account Certificate
Value, the Certificate Value will be increased by
the dollar value of the accumulation units in the
Separate Account for each Participant.
-10-
<PAGE>
VALUATION (CONTINUED)
STATE PREMIUM The Certificate Value will be reduced by any state
TAXES premium taxes which SBL is required to pay on
behalf of the Certificate.
TOTAL POLICY VALUE The Policy Value will be the sum of each
Participant's Certificate Value.
NONFORFEITURE
POLICY VALUE The Policy Value will be as explained in the
Valuation portion of this Policy. SBL will notify
the Owner annually of each Certificate Value to
date. Each Certificate will cease to have a
Certificate Value after termination of this Policy,
after termination of the Certificate, death
benefits are paid, or the Effective Date of a
Settlement Option.
TERMINATION The Owner may terminate any Certificate or withdraw
VALUE part of the Certificate Value any time prior to the
Retirement Date. The request for termination or
withdrawal must be sent to the Home Office of SBL
in writing. When SBL receives the request it will
determine a Termination Value for the Certificate
and pay the Termination Value to the Owner.
The Termination Value for the Certificate will be
the value asked to be withdrawn reduced by a
Withdrawal Charge. The Withdrawal Charge will be
the product of 'a' times 'b' where:
a - is the value asked to be withdrawn.
b - is the appropriate Withdrawal Charge Factor
shown on the Certificate Specifications
pages.
The value of 'a' in the above product will be
reduced if, at the time the request is processed,
either or both of 1 or 2 occur:
1. The value asked to be withdrawn is greater
than the total of the following:
i. total purchase payments for the
Certificate received by SBL;
ii. plus any amount by which 'a' was
reduced because of item 1 or 2 at the
time of any prior withdrawal from the
Certificate;
iii. less total prior values asked to be
withdrawn from the Certificate.
2. This is the first withdrawal processed this
year for the Certificate and at the time more
than one year has elapsed from the
Certificate Date.
For item 1, 'a' will be the value defined in item
1. For item 2, 'a' will be reduced by the Free
Withdrawal Amount. The Free Withdrawal Amount is
the product of the Certificate Value, at the time
the request is processed, times the Free Withdrawal
Factor shown on the Certificate Specifications
pages. In the case where both item 1 and 2 apply,
'a' will be reduced by the greater of the two
possible reductions. In no case will the Withdrawal
Charge be less than zero.
If a request to withdraw part of the Certificate
Value does not state which of the Series or the
General Account the value is to be withdrawn from,
SBL will deplete the Certificate Value of the
Series in the descending order listed under the
Separate Account section of the Certificate
Specifications pages. The General Account will be
the last to be depleted.
When part of the Certificate Value is withdrawn,
the Certificate Value will be reduced by the value
asked to be withdrawn.
If the value asked to be withdrawn would reduce the
Certificate Value by 90% or more, SBL may terminate
the Certificate and pay the Owner the total
Termination Value.
The Termination Value of each Certificate will
always equal or exceed the minimum required by law.
-11-
<PAGE>
NONFORFEITURE (CONTINUED)
TERMINATION Payment of any Termination Value from the Separate
VALUE (CONTINUED) Account will be made within 7 days of the day the
request is received at the Home Office of SBL,
except that a day on which one of the following
events occur will not be counted as one of the 7:
1. The New York Stock Exchange is closed except
for holidays or weekends.
2. The Securities and Exchange Commissions has
determined that trading on the New York Stock
Exchange is restricted.
3. The Securities and Exchange Commission
permits postponement and so orders.
4. An emergency exists, as defined by the
Securities and Exchange Commission, so that
valuation of the assets or disposal of
securities is not reasonably practicable.
The Termination Value of this Policy will be the
sum of the Termination Values of each Certificate.
This Policy may be terminated by terminating each
of the Certificates.
The payment of any Termination Value from the
General Account may be deferred by SBL for the
amount of time permitted by law. The payment will
not be deferred for more than six months from the
day the request is received by SBL.
Each Certificate will cease to be in force upon
payment of the total Termination Value. This Policy
will cease to be in force upon payment of the total
Termination Values.
FORCED SBL may, at its option, terminate a certificate and
TERMINATION pay the Certificate Value to the Owner whenever the
following conditions exist for both the Certificate
Value in the General and Separate Accounts.
For the General Account prior to or at the
Retirement Date the following two (2) conditions
exist
1. purchase payments have not been received by
SBL for the Certificate for two full years.
2. the Certificate Value in the General Account
projected to the Retirement Date at the
guaranteed interest rate for the Certificate
would produce a monthly installment of less
than $20 under the settlement option that
will be in effect at the Retirement Date
under the Certificate.
For the Separate Account when either condition 1 or
2 exist:
1. if at the Retirement Date the Certificate
Value in the Separate and General Accounts is
less than $2,000, or would provide a total
initial annuity installment of less than $20
per month under the settlement option which
will be in effect at the Retirement Date.
2. if prior to the Retirement Date no purchase
payments have been received for the
Certificate for a period of two full years
and both of the following conditions exist:
a. the total purchase payments received for
the Certificate reduced to reflect any
partial withdrawal from the Certificate
Value is less than $2,000.
b. the total Certificate Value of the
General and Separate Account is less than
$2,000.
SEPARATE ACCOUNT
PROVISIONS
INTRODUCTION This portion of this Policy contains the provisions
relating to the Separate Account of SBL to which
the Owner may allocate purchase payments. The
Separate Account and Series are shown in the
Separate Account section of the Policy and
Certificate Specifications pages.
OWNERSHIP OF SBL has exclusive and absolute ownership and
SEPARATE ACCOUNT control of the assets of the Separate Account. The
Owner of this Policy is entitled to vote at
meetings of Owners of policies of this class as
required under the Investment Company Act of 1940.
At his option the Owner may solicit the
Participant's vote. SBL will send the Owner at
least once each year a report stating the number of
accumulation units credited to each Participant's
account, a statement of investments held by each
Fund, proxy material, and a voting form.
-12-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS (CONTINUED)
SEPARATE ACCOUNT The Separate Account which is invested in the
DEFINED Series, as shown on the Policy Specifications
pages, has been established by SBL under the laws
of Kansas. The Separate Account is a unit
investment trust. When used in this Policy,
Separate Account will mean the assets of SBL in the
Separate Account shown on the Policy Specifications
pages. The Separate Account was established by SBL
to provide variable benefits for this class of
policies. The income, gains, and losses from the
Separate Account will be charged to it, without
regard to the experience of other Separate
Accounts.
FUNDS DEFINED The Series of the Separate Account each are
invested wholly in the Series of the Fund(s) as
shown on the Policy Specifications pages. The Funds
are diversified, open-end management investment
companies registered under the Investment Company
Act of 1940.
GUARANTEED A guaranteed annuity is an annuity with
ANNUITY DEFINED installments which are guaranteed as to dollar
amount throughout the payment period. The reserves,
required by law to be maintained, to fund the
installments will be held in the General Account of
SBL. The installments for a guaranteed annuity must
be at least $25.00.
VARIABLE ANNUITY In contrast, a variable annuity is an annuity with
DEFINED installments varying with the net investment
results of a Series within the Separate Account.
The first installment is determined by using the
values in Table A or B and settlement options 1, 2,
3, or 4 of the Payment of Benefits portion of this
Policy. Also, other reasonable provisions for the
first installment can be made. Any such provision
must be agreed to by SBL.
After the first installment is determined for a
particular Series the number of annuity units is
determined by dividing the first installment by the
annuity unit value for that day for each Series
from which installments are to be made. The amount
of each subsequent installment is that number of
annuity units for the Series multiplied by the
annuity unit value for the Series for the day the
installment is due. The sum of the installments for
all Series and the General Account is the total
installment the payee will receive.
The first installment from each Series must be at
least $25.00. If at any time any installment from
any Series becomes less than $25.00 for a payee,
SBL may change the frequency of installments. The
change will be such as will result in installments
of at least $25.00.
SBL guarantees that the dollar amount of any
variable annuity installment will not be affected
by the mortality experience of the payees. SBL also
guarantees that the variable annuity installment
will not be affected by the actual expenses of
administering the benefits.
For the life contingent variable annuity settlement
options 1, 2, 3, or 4 annuity units will be the
accounting device used to calculate the periodic
installments. For nonlife contingent variable
annuity settlement options 5, 6, and 7 accumulation
units will be the accounting device. Accumulation
units will be redeemed at current value to pay the
periodic installments until the benefit amount
applied adjusted for investment experience and
expense charges is depleted.
At the time of election of a Settlement Option, the
Owner may specify how the total benefit amount for
each payee is to be allocated between the Series
and the General Account for calculation of the
first installments. If the allocation is not
specified, the benefit amount as it then exists
among the Series and the General Account will be
applied to calculate the first installments.
VALUING FIRST For calculating the first installment for an
ANNUITY annuity, the value of the accumulation units
INSTALLMENT applied to settlement options 1, 2, 3, or 4, will
be the value at the end of the second day before
the first installment is paid. For settlement
options 5, 6, and 7, the value of the accumulation
units applied will be the value on the day the
installment is paid.
INVESTMENT The Gross Investment Factor (GIF) for any day for a
FACTORS Series of the Separate Account is equal to value
'a' divided by value 'b'. For each Series, value
'a' is the sum of the net asset value per share of
the Series of the Fund(s) in which the Series is
invested at the close of business on that day plus
the dividends or other distributions per share on
that day. Value 'b' is the net asset value per
share at the close of business on the preceding
day. On days when the New York Stock Exchange is
not open for trading, the GIF is one. No purchase,
benefit, or installment payments will be made on
days when the New York Stock Exchange is closed.
The Net Investment Factor (NIF) for any day for a
Series is the GIF for the Series less the Actuarial
Risk Fee (ARF) and less a deduction for any
increases in the income tax expense for the Series
for the day. The ARF is shown on the Policy
Specifications pages.
-13-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS (CONTINUED)
ACCUMULATION The value of an accumulation unit for each Series
UNIT VALUES of the Separate Account on any day is equal to 'a'
divided by 'b'. For each Series, 'a' is the net
asset value (NAV) of the shares of the Series of
the Fund(s) in which the Series is invested reduced
by:
1. The product of the previous day's NAV
multiplied by the ARF.
2. Any deduction for provision for federal income
tax.
For each Series, 'b' is the number of accumulation
units of the Series at the beginning of the day.
The value of an accumulation unit may increase or
decrease.
Dividend and other cash distributions made by the
Series of the Fund(s) to the Series will be
reinvested in additional mutual fund shares of the
same Series of the Fund(s) and the value of an
accumulation unit will be increased. The Charges
and Fees, explained in that section of the
Certificate Specifications pages will result in the
sale of shares of the Fund and a reduction of the
accumulation units credited to each Certificate.
Purchase payment amounts allocated to each Series
will be used by SBL to purchase additional
accumulation units of that Series for each
certificate. The number of units purchased will be
the amount allocated to the Series divided by the
value of one accumulation unit for the Series on
the day the purchase payment is received by SBL.
Benefit payments because of death or by withdrawal
of part or all of the Termination Value will result
in a reduction of the number of accumulation units
credited to each Certificate. The reduction will be
sufficient to generate the necessary Certificate
Value change.
ANNUITY UNIT The annuity unit value associated with a Series of
VALUES the Separate Account for any day is determined by
multiplying the annuity unit value for the
immediately preceding day by the product of 'a'
times 'b'.
a - is the NIF for the Series for the second day
preceding the date for which the value is
being determined.
b - is the daily Interest Neutralization Factor
(INF) of .9999057540.
The INF is required to neutralize the assumed
interest rate built into Tables A and B. The value
of an annuity unit may increase or decrease. The
first annuity unit value and the date it was set
for each Series is shown in the Separate Account
Section of the Policy and Certificate
Specifications pages.
SPLITTING UNITS SBL has the right to split the value of any annuity
or accumulation unit if such is deemed to be in the
best interest of the Owner, the Participant, the
Annuitant and SBL. Any split made will be made
equitably and will have no material effect on the
benefits and provisions of this Policy.
FLUCTUATION The Policy Value, Certificate Value, and
OF VALUES Termination Value of the Separate Account may be
less than the total value of the purchase payments
allocated to it adjusted for withdrawals,
transfers, and benefits. SBL does not generate the
investment performance of the Series of the Fund(s)
in which the Separate Account is invested.
-14-
<PAGE>
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Policy as of its Policy Date or, if later, the
date shown below.
FEES & CHARGES The "Fees & Charge for Certificates issued within
one year of the Policy Date" section of the Policy
is amended by adding the following: The $30.00 per
year fee will not be charged during a Certificate
Year, if: (1) the Certificate has been in force for
eight Certificate Years or more; and (2)
Certificate Value on December 31 of that Policy
Year (or in the event the Certificate terminates,
on that date) is $25,000 or more.
BENEFIT AMOUNT The entire "Benefit Amount" section is deleted and
replaced with the following: If a Participant dies
prior to the Participant's Retirement Date, a Death
Benefit will be paid to the Beneficiary when: (1)
due proof of death, satisfactory to SBL; and (2)
instructions with regard to payment, are received
at the Home Office.
If the age of the Participant was 75 or less on the
Certificate Date, the Death Benefit will be the
greatest of: (1) the sum of all purchase payments,
less premium tax due or paid by SBL and less the
sum of all Termination Values paid; or (2) the
Certificate Value on the date due proof of death
and instructions with regard to payment are
received at the Home Office, less premium tax due
or paid by SBL; or (3) the Stepped-Up Death Benefit
described below.
The Stepped-Up Death Benefit is:
1. the largest Certificate Value on any
Certificate Anniversary that is both an exact
multiple of six and occurs prior to the
Participant reaching age 76; plus
2. purchase payments received since the applicable
sixth Certificate Anniversary; less
3. reductions caused by Termination Values paid
since the applicable sixth Certificate
Anniversary; less
4. premium tax due or paid by SBL.
For certificates which have been in effect for six
Certificate Years or more as of May 1, 1991, the
Certificate Value on the Certificate Anniversary
immediately prior to May 1, 1991, will be used as
the sixth Certificate Anniversary in determining
the Stepped-Up Death Benefit.
If the age of the Participant on the Certificate
Date was 76 or more, the Death Benefit will be the
greater of: (1) the sum of all purchase payments,
less premium tax due or paid by SBL and less the
sum of all Termination Values paid; or (2) the
Certificate Value on the date due proof of death
and instructions regarding payment are received at
the Home Office, less any premium tax due or paid
by SBL.
<PAGE>
BENEFIT AMOUNT If a lump sum payment is requested, the payment
(CONTINUED) will be made in accordance with any laws and
regulations that govern the payment of Death
Benefits.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Policy Date)
<PAGE>
WITHDRAWAL CHARGE WAIVER
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Contract/Policy (the "Policy") as of: (1) its
Policy Date; or (2) if later, the date shown below.
This Policy is changed by adding the following:
WAIVER OF Security Benefit Life Insurance Company ("SBL")
WITHDRAWAL will waive the Withdrawal Charge on any full or
CHARGES partial Withdrawal of Certificate Value, if: (1)
the Participant has been confined to a "Hospital"
or "Qualified Skilled Nursing Facility" for at
least 90 consecutive days immediately prior to such
Withdrawal and is so confined when the request to
withdraw is received by SBL; (2) such confinement
began after the Participant's Certificate Date; and
(3) the request to withdraw is received along with:
(a) a properly completed claim form; and (b) a
written statement by a licensed physician that
certifies such confinement is a medical necessity
and is due to illness or infirmity. Such written
statement must be approved by SBL.
SBL reserves the right to have the Participant
examined by a physician of SBL's choice and at
SBL's expense to determine if the Owner is eligible
for the Withdrawal Charge Waiver. SBL further
reserves the right to require the claim form and
written statement described in 3(a) and (b) above
with each request to withdraw.
DEFINITIONS A "Hospital" is: (1) an institution that is
licensed as such by the Joint Commission of
Accreditation of Hospitals; or (2) any lawfully
operated institution that provides: (a) in-patient
treatment of sick and injured persons through
medical, diagnostic and surgical facilities
directed by a staff of physicians; and (b) 24 hour
nursing services. A "Qualified Skilled Nursing
Facility" must be licensed by the state to provide,
on a daily basis, convalescent or chronic care for
in-patients who, by reason of illness or infirmity,
are not able to properly care for themselves.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Policy Date)
<PAGE>
TAX-SHELTERED ANNUITY
ENDORSEMENT
TAX-SHELTERED This Contract is established as a Tax-Sheltered
ANNUITY Annuity ("TSA") under Section 403(b) of the
ENDORSEMENT Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision, pursuant to the
Owner's request in the application. Accordingly,
this Endorsement is attached to and made part of
the Contract as of its issue date or, if later, the
date shown below. If this is a group contract,
references to the "Owner" and to the "Contract"
shall, respectively, be deemed to include the
Participant and the Participant's Certificate where
appropriate.
TAX-SHELTERED To ensure treatment as TSA, this Contract will be
ANNUITY PROVISIONS subject to the requirements of Code Section 403(b),
which are briefly summarized below:
CONTRIBUTION (a) Purchase payments made on behalf of the Owner
LIMITATIONS pursuant to a salary reduction agreement when
added to "elective deferral" contributions
under all other plans, contracts or
arrangements in which the Owner participates,
may not exceed the annual limitation on such
contributions as provided in Code Section
402(g).
(b) Purchase Payments applied to the Contract on
behalf of the owner which exceed the
applicable "exclusion allowance" (within the
meaning of Code Section 403(b)(2)) or the
limitations contained in Code Section 415
shall not be excludable from gross income.
(c) Purchase Payments that exceed any of the
foregoing limitations may be returned,
distributed or otherwise corrected using any
method permissible under the Code.
NONDISCRIMINATION (a) Except if this Contract is purchased by a
REQUIREMENTS "church" (within the meaning of Code Section
3121 (w)), the Plan must satisfy the
nondiscrimination requirements of Code Section
403(b)(12).
(b) Purchase Payments not made pursuant to a
salary reduction agreement will satisfy the
nondiscrimination requirements of Code Section
403(b)(12) provided they satisfy the
requirements of Code Section 401(a)(4)
(nondiscrimination in contributions), Code
Section 401(a)(5) (permitted disparity), Code
Section 401(a)(17) (annual limit on
compensation), Code Section 401(a)(26)
(minimum participation), Code Section 401(m)
(average contribution percentage test) and
Code Section 401(b) (coverage).
(c) Purchase Payments made pursuant to a salary
reduction agreement will satisfy the
nondiscrimination requirements of Code Section
403(b)(12) provided that every employee of the
Employer sponsoring the Plan, may elect to
make Purchase Payments of more than $200
pursuant to a salary reduction agreement.
DISTRIBUTION (a) Distributions attributable to Purchase
RESTRICTIONS AND Payments made pursuant to a salary reduction
REQUIREMENTS agreement may be made only when the Owner
attains age 59 1/2, separates from service,
dies, become "disabled" (within the meaning of
Code Section 403(b)(11)) or incurs a hardship.
A distribution made due to a hardship may not
include income attributable to such Purchase
Payments.
<PAGE>
PLAN PROVISIONS The Plan, including certain Plan provisions
required by the Employee Retirement Income Security
Act of 1974 or other applicable law, may limit the
Owner's rights under this Contract. The Plan
provisions may:
(a) Limit the Owner's right to make Purchase
Payments;
(b) Restrict the time when the Owner may elect
to receive payments under this Contract;
(c) Require the consent of the Owner's spouse
before the Owner may elect to receive
payments under this Contract;
(d) Require that all distributions be made in
the form of a joint and survivor annuity for
the Owner and the Owner's spouse unless both
consent to a different form of distribution.
(e) Require that the Owner's spouse be the
Designated Beneficiary;
(f) Require that the Owner remain employed by
the Employer sponsoring the Plan for a
specified period of time before the Owner's
rights under this Contract become fully
vested; or
(g) Otherwise restrict the Owner's exercise of
rights under the Contract or give the
Employer sponsoring the Plan (or a Plan
representative) the right to exercise
certain rights on the Owner's behalf.
No such Plan provision shall limit an Owner's
rights under this Contract, unless the Employer
sponsoring the Plan has provided the Company with
written notification of such provision. In no event
shall any such Plan provision enlarge the Company's
obligations under this Contract.
TAX CONSEQUENCES (a) The Company will not incur any liability or be
responsible for the timing, purpose or
propriety of any contribution or distribution;
any tax or penalty imposed on account of any
such contribution or distribution; or any
other failure, in whole or in part, by the
Owner or the Employer to comply with the
provisions set forth in the Code or any other
law.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
-3-
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A MUTUAL COMPANY/FOUNDED IN 1892/TOPEKA, KS
Security Benefit Life, subject to the terms of this Policy, will pay the
following benefits:
1. Annuity installments to the Annuitant, if living on the Maturity Date,
derived from applying the Maturity Value to a settlement option as specified
in this Policy.
2. The Death Benefit when due proof of the Annuitant's death prior to the
Maturity Date is received at the Home Office at 700 Harrison, Topeka, Kansas
66636-0001.
This and the following pages are the Policy.
This Policy may be returned within 10 days after the Applicant receives it by
delivering or mailing it to the Home Office or the agent through whom it was
purchased. Immediately on such delivery or mailing, the Policy shall be deemed
void from the beginning. Any purchase payments paid and allocated to the General
Account will be refunded. The Policy Value of the Separate Account as of the
date the Policy is received by SBL will be refunded. Any fees or charges on
purchase payments paid and allocated to the Separate Account will be refunded.
SBL, when used in this Policy, means Security Benefit Life Insurance Company.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS POLICY
This is a FLEXIBLE PREMIUM DEFERRED RETIREMENT ANNUITY POLICY:
- - Benefit installments begin on the Maturity Date using the method as specified
in this Policy.
- - A Death Benefit is payable if the Annuitant dies prior to the Maturity Date.
- - Flexible purchase payments are payable until the Maturity Date or until the
prior death of the Annuitant.
ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW Harrison St., Topeka, Kansas 66636-0001 (913) 295-3000
<PAGE>
A GUIDE TO THE
PROVISIONS OF YOUR POLICY
PROVISION CONTENTS
POLICY SPECIFICATIONS Annuitant, dates, payment, policy number,
kind of benefit, fees & charges, factors,
interest rates, separate account./PG. 3
GENERAL PROVISIONS Introduction, the contract, incontestability,
misstatement of age or sex, claims of
creditors, dates, facility of payment,
evidence of survival, due proof of death,
change of policy./PG. 5
OWNER Rights of Owner, change of ownership (if
allowed)./PG. 5
ANNUITY PROVISION Method of payment, maturity value, maturity
date./PG. 6
DEATH BENEFIT Benefit amount, effect on policy./PG. 6
BENEFICIARY Designation and way to change, distribution
of benefits./PG. 6
PAYMENT OF ANNUITY BENEFITS Way benefits may be paid, settlement options,
additional provisions./PG. 7-9
PURCHASE PAYMENTS Payment of purchase payments./PG. 10
VALUATION Value of General Account, Separate Account,
state premium taxes./PG. 10
NONFORFEITURE Policy value, termination value, forced
termination./PG. 10-12
SEPARATE ACCOUNT Introduction, ownership of Separate Account,
PROVISIONS Separate Account defined, guaranteed annuity,
variable annuity, valuing first annuity
installment, investment factors, accumulation
unit value, annuity unit value, splitting
units, fluctuation of values./ PG. 12-13
APPLICATION Owner, Beneficiary, allocation of purchase
payment to accounts./ Attached to and a part
of this policy.
<PAGE>
POLICY SPECIFICATIONS
Annuitant: John Doe Sex: Male
Date of Birth: August 19, 1958
Policy Number: Specimen Date of Issue: December 30, 1993
Maturity Date: August 19, 2023
Owner: John Doe
Policy Date: Date First Purchase
Payment Received by SBL
Mode of Payment: Monthly Stipulated Purchase
Payment: $200.00
Kind of Benefit: Retirement Annuity Installments
Assignment: This policy may not be assigned,
nor ownership changed.
-3-
<PAGE>
POLICY SPECIFICATIONS
FEES & CHARGES: A $30.00 per year fee will be charged against the
Policy Value on each December 31st and the date the
Policy is terminated (First and last policy fee
prorated to the nearest $1). No charge will be made
after the Effective Date of Settlement Option 1, 2,
3, or 4. The charge will be made sequentially
against the Series listed in the Separate Account
section in descending order. The General Account
will be the last subject to charge. Each Series
will be depleted before the next is charged.
WITHDRAWAL CHARGE
FACTOR:
Policy Year at
Time of Withdrawal
Termination Charge
1 .08
2 .07
3 .06
4 .05
5 .04
6 .03
7 .02
8 .01
9 or later .0
FREE WITHDRAWAL
FACTOR: .10
GUARANTEED INTEREST
RATES: 3.5% for all years.
-3A-
<PAGE>
POLICY SPECIFICATIONS
SEPARATE ACCOUNT: The Owner may allocate purchase payments to the
following SBL Separate Account and the Series in
which the Separate Account is invested. The owner
may allocate purchase payments to the General
Account of SBL.
Separate Account. VARIFLEX, containing:
Money Market Series: Which is invested in Series
C of SBL Fund. Annuity Unit value was set at $1
on 04-01-84. Accumulation Unit value was set at
$10 on 04-23-84.
High Grade Income Series: Which is invested in
Series E of SBL Fund. Annuity Unit value was
set at $1 on 04-24-85. Accumulation Unit value
was set at $10 on 04-24-85.
Global Aggressive Bond Series: Which is invested
in Series K of SBL Fund. Annuity Unit value was
set at $1 on 05-01-95. Accumulation Unit value
was set at $10 on 05-01-95.
Growth-Income Series: Which is invested in Series
B of SBL Fund. Annuity Unit value was set at $1
on 04-01-84. Accumulation Unit value was set at
$10 on 04-23-84.
Equity Income Series: Which is invested in Series
O of SBL Fund. Annuity Unit Value was set at $1
on 05-01-95. Accumulation Unit value was set at
$10 on 05-01-95.
Managed Asset Allocation Series: Which is
invested in Series N of SBL Fund. Annuity Unit
value was set at $1 on 05-01-95. Accumulation
Unit value was set at $10 on 05-01-95.
Specialized Asset Allocation Series: Which is
invested in Series M of SBL Fund. Annuity Unit
value was set at $1 on 05-01-95. Accumulation
Unit value was set at $10 on 05-01-95.
Growth Series: Which is invested in Series A of
SBL Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit value was set at
$10 on 04-23-84.
Worldwide Equity Series: Which is invested in
Series D of SBL Fund. Annuity Unit value was
set at $1 on 04-01-84. Accumulation Unit value
was set at $10 on 04-23-84.
Social Awareness Series: Which is invested in
Series S of SBL Fund. Annuity Unit value was
set at $1 on 04-23-91. Accumulation Unit value
was set at $10 on 04-23-91.
Emerging Growth Series: Which is invested in
Series J of SBL Fund. Annuity Unit value was
set at $1 on 10-01-92. Accumulation Unit value
was set at $10 on 10-01-92.
ACTUARIAL RISK FEE: Accumulation Units: .00003307502 (1.2% Annually)
(ARF) Annuity Units: .00003307502 (1.2% Annually)
ALLOCATION FEE: $0.00
-3B-
<PAGE>
POLICY SPECIFICATIONS
MINIMUM PURCHASE If the purchase payment is allocated to more than
PAYMENT: one Series or the General Account, the amount of
each purchase payment allocated to each of the
Series or the General Account must be at least
$25.00.
CHANGE OF ACCOUNT: The Owner may change the allocation of future
purchase payments to the General Account and the
various Series. To make a change, a written notice
must be received in the Home Office of SBL. If the
change will allocate future purchase payments to
more than one Series of the General Account, the
amount of each purchase payment to each Series or
the General Account must be at least $25.00. There
will be no charge for the first allocation change
in a year. For each additional change in a year, a
charge of an allocation fee (shown previously) will
be made. A change in allocation will not affect
purchase payment allocations before the change.
METHOD OF CHARGING: The Allocation Fee will be charged sequentially to
the Policy Value in the Series in the descending
order shown in the Separate Account Section. The
Policy Value of each Series will be depleted before
the next is charged. The General Account will be
the last charged.
-3C-
<PAGE>
POLICY SPECIFICATIONS
TRANSFER RIGHTS The Owner may transfer part of the Policy Value
(PRIOR TO THE between the various Series and the General Account.
EFFECTIVE DATE OF A A transfer fee (shown following) will be charged
SETTLEMENT OPTION): after the first transfer in a policy year. SBL
reserves the right to limit: (1) the size of
transfers; (2) the number of transfers per calendar
year; and (3) the amount remaining in any Series or
the General Account after a transfer. Transfers
must be at least $500 or the lesser remaining
balance in the General Account or any Series. A
transfer within 30 days of the Maturity Date can be
made without charge. The total dollar amount that
may be transferred from the General Account in a
policy year is the greatest of:
1. $5,000;
2. 1/3 of the Policy Value in the General
Account at the time of the first transfer in
the policy year; or
3. 120% of the dollar amount transferred from
the General Account in the prior policy year
subject to the limitation below.
The Company reserves the right for a period of time
to allow transfers from the General Account in
amounts that exceed the limits set forth above
("Waiver Period"). In any policy year following
such a Waiver period, the total dollar amount that
may be transferred from the General Account is the
greatest of: 1 above; 2 above or
3. 120% of the lesser of:
a. the dollar amount transferred from the
General Account in the prior policy year;
or
b. the maximum total dollar amount that
would have been allowed in the prior
policy year under the transfer provisions
above absent the Waiver Period.
SBL reserves the right at a future date to limit
the size of transfers, and to limit the number of
transfers per calendar year. Transfers must be at
least $500 or the remaining balance in the General
Account or any Series.
SETTLEMENT OPTION, Once installments have begun, the Owner may elect,
TRANSFER AFTER once each calendar year, to convert annuity units
FIRST INSTALLMENT: of one Series to annuity units of another Series.
The conversion cannot be made within the 5 day
period prior to and including the day an
installment is to be paid. Conversions that would
have been made during this 5 day period shall be
made on the business day after the installment
payment date. This right to convert annuity units
does not include the right to convert a variable
annuity of any Series into a fixed annuity of the
General Account. Neither may a fixed annuity of the
General Account be converted to a variable annuity
of any Series. The amount of each installment after
the conversion must still be at least $25.00 for
each Series.
TRANSFER FEE: $10.00
METHOD OF CHARGING: The Transfer Fee will be charged sequentially to
the Policy Value in the Series in the descending
order shown in the Separate Account section. The
Policy Value of each Series will be depleted before
the next is charged. The General Account will be
the last charged.
-3D-
<PAGE>
GENERAL PROVISION
INTRODUCTION This Policy is a Retirement Annuity. The first
annuity installment is determined from the Policy
Value and the Settlement Option Rate.
THE CONTRACT The entire contract between the Owner and SBL
consists of the Application, this Policy, and any
endorsements or riders attached to the Policy. A
copy of the Application is attached to this Policy
at issue. All statements made in the Application
will, in the absence of fraud, be deemed
representations and not warranties. SBL will use no
statement made by or on behalf of the Annuitant to
void this Policy unless it is in the written
Application. Any change in the contract can be made
only with the written consent of the President, a
Vice President, or the Secretary of SBL.
INCONTESTABILITY SBL will not contest the validity of this Policy
after it has been in force during the lifetime of
the annuitant for 2 years from the Date of Issue.
MISSTATEMENT OF If the age or the sex of the annuitant has been
AGE OR SEX incorrectly stated, the benefits under this Policy
will be those the purchase payments would have
purchased for the correct age and sex.
CLAIMS OF The Policy Value, Termination Value, and benefits
CREDITORS under this Policy will be exempt from the claims of
creditors to the extent permitted by law.
DATES Years, months and anniversaries are all measured
from the Policy Date. The contestable period begins
with the Date of Issue. All dates are shown on the
Policy Specifications pages.
FACILITY OF In some cases a payee will, in the opinion of SBL,
PAYMENT not be able, for physical or mental reasons, to
give a good receipt and discharge for any benefit
payment due. In this case, SBL may make payment of
the amount due in installments to those persons
whom SBL believes are caring for and supporting the
payee. The installment under this section will not
be greater than $250 per month. The installments
under this section will stop when a claim is made
by a duly appointed guardian or legal
representative of the payee. Payment to such
persons will discharge SBL from liability for the
installments paid. SBL will assume no
responsibility for the proper use of the
installments paid under this section.
EVIDENCE OF SBL may require proof that any payee is living on
SURVIVAL any date a payment or installment is due to the
payee. The proof must be satisfactory to SBL.
DUE PROOF OF Any of the following items will be sufficient as
DEATH due proof of death:
1. A copy of a certified death certificate
2. A copy of a certified decree of a court of
competent jurisdiction as to the finding of
death.
3. A written statement by a medical doctor who
attended the deceased annuitant.
4. Any proof satisfactory to SBL.
CHANGE OF POLICY SBL may unilaterally amend the Policy to comply
BY SBL with laws and regulations to which SBL may be
subject. SBL may also unilaterally amend the Policy
to comply with changes in the Internal Revenue
Code. SBL is not obligated to make these
amendments. SBL shall provide advance notice to the
Owner of any such amendment.
OWNER
RIGHTS OF OWNER The Annuitant is the Owner of this Policy, unless 1
or 2 occurs:
1. Some other Owner is named in the application.
2. The Owner is later changed.
The Owner has all rights in this Policy while the
Annuitant is living.
If the Owner dies before the Annuitant, unless
otherwise provided, the Owner's estate shall become
the Owner.
CHANGE OF If allowed by the Assignment section of the Policy
OWNERSHIP Specifications pages, the Owner can designate a new
owner by written notice satisfactory to SBL. The
change in ownership will take effect as of the date
the notice was signed. The change will be subject
to any payment made or other action taken by SBL
before the change was received by SBL. SBL may
require the Policy for endorsement. A Change of
Ownership does not automatically cause a Change of
Beneficiary.
-5-
<PAGE>
ANNUITY PROVISION
METHOD OF PAYMENT If the Annuitant of this policy is living on the
Maturity Date, the Maturity Value of this policy
will be applied to provide a 10 year fixed period
and life annuity, unless an optional type of
annuity is selected by the Owner during the
lifetime of the Annuitant and 30 days prior to the
Maturity Date. The installments under the annuity
will be paid to the Annuitant. The optional types
of annuity benefits are outlined in the settlement
options provisions beginning on page 7. Other
reasonable settlement options may be available with
the approval of SBL.
MATURITY VALUE The Maturity Value will not be paid as a single
cash payment. If applied under settlement options
1, 2, 3, 4, 5, 6, or 7 the Maturity Value will be
equal to the Policy Value. Amounts applied under
Options 5, 6, and 7 will continue to be subject to
withdrawal charges on nonscheduled amounts
withdrawn. The free withdrawal provisions will not
be applicable to these nonscheduled amounts
withdrawn.
MATURITY DATE The Maturity Date is shown in the Policy
Specifications. In some cases, the Maturity Date
may be earlier than 10 years after the Policy Date.
In this case, the Owner may elect to extend the
Maturity Date up to 10 years after the Policy Date.
In all other cases, the Maturity Date may only be
changed with SBL's approval.
DEATH BENEFIT
BENEFIT AMOUNT SBL will pay a death benefit to the Beneficiary if:
1) due proof, satisfactory to SBL, of the
Annuitant's death is received at the Home Office;
2) such proof is received prior to the Maturity
Date; and 3) the Annuitant's age was 75 or younger
at time of death. The death benefit will be the
greater of 'a' or 'b' where:
a - is the Policy Value.
b - is the total of all purchase payments
received by SBL less the total of all
Termination Values Paid.
If the Annuitant was older than age 75 as of the
date of death, the death benefit will be the
Termination Value.
EFFECT ON POLICY If applied under one of the settlement options, the
date of death of the Annuitant will be treated as
the Maturity Date. If taken in cash, this Policy
will cease to be in force upon payment of the death
benefit.
BENEFICIARY
BENEFICIARY The Beneficiary will receive the benefits, if any,
DESIGNATION under this Policy in the case of the death of the
AND THE WAY Annuitant while this Policy is still in force. The
TO CHANGE IT Beneficiary is named in the Application. However,
the Beneficiary may be changed by the Owner during
the Annuitant's lifetime. To make a change, a
written notice, satisfactory to SBL, must be
received at the Home Office. The change will take
effect as of the date the notice was signed, even
if the Annuitant has died before SBL receives it,
unless SBL has already paid the benefits. SBL may
require this Policy for endorsement.
DISTRIBUTION More than one Primary Beneficiary may be named. The
OF BENEFITS share each is to receive may also be specified. The
respective shares will be paid to any Primary
Beneficiary alive at the death of the Annuitant. If
none survive the Annuitant, payment will be made to
any Contingent Beneficiaries who are alive.
Surviving Beneficiaries in the same class will
receive equal shares unless otherwise stated.
If no Beneficiary survives the Annuitant, the
benefits will be paid to the Annuitant's estate. If
any Beneficiary dies within twenty-four (24) hours
after the Annuitant, the benefits will be paid as
if the Beneficiary died before the Annuitant.
-6-
<PAGE>
PAYMENT OF
ANNUITY BENEFITS
THE WAY BENEFITS Except for the life option, the Owner, during the
MAY BE PAID lifetime of the Annuitant and 30 days prior to the
Maturity Date, has the right to choose to have the
benefit amount paid in one of the following ways.
In the event of the Annuitant's death, the
Beneficiary may choose one of the options. To make
an election, a written notice, satisfactory to SBL,
must be received at the Home Office. No election
can be put into effect which requires SBL to make a
periodic payment of less than $25.00.
For settlement options 1, 2, 3, and 4 reference
should be made to the Separate Account portion of
this Policy. In that portion the definitions of a
guaranteed and a variable annuity, and the basis
for the value of the second and later installments
are given.
SETTLEMENT OPTIONS 1. Life Option: Paid in annual, semiannual,
quarterly or monthly installments during the
lifetime of the payee. Table A shows the
minimum first monthly installment for each
$1,000 of benefit amount applied. This option
will only be available with SBL's approval.
2. Life with Fixed Period Option: Paid in
annual, semiannual, quarterly, or monthly
installments. A period of five, ten, fifteen
or twenty years may be specified.
Installments will be paid for the length of
the period, and after for as long as the
payee lives. Table A shows the minimum first
installment payable monthly for each number
of years for $1,000 of benefit amount
applied.
3. Life with Unit Refund Option: Paid in annual,
semiannual, quarterly or monthly
installments. Installments will be paid for
the length of the period obtained by dividing
the benefit amount by the first installment,
and for as long after as the payee lives.
Table A shows the minimum first monthly
installment for each $1,000 of benefit amount
applied.
4. Joint and Last Survivor Option: Paid in
annual, semiannual, quarterly or monthly
installments to the last death of the payee
and a named secondary payee. Table B shows
the minimum first monthly installment for
each $1,000 of benefit amount applied.
5. Fixed Period Option: Paid in annual,
semiannual, quarterly or monthly installments
for a set number of years. Any number of
years of at least 5 and not over 20 may be
specified. For variable annuity installments,
the initial installment will be the product
of 'a' times 'b' where:
a - is the accumulation unit value for the
day the installment is paid.
b - is the number of accumulation units
applied to the option divided by the
number of payments selected.
The required number of accumulation units
will be withdrawn to pay this installment.
Subsequent installments will be calculated
from the number of accumulation units not yet
redeemed and number of payments remaining in
the selected period.
For a guaranteed annuity, the installments
will be determined by SBL and will reflect an
effective annual interest rate of not less
than 2.5%.
6. Fixed Installment Option: Paid in equal
annual, semiannual, quarterly, or monthly
installments. The installments must be not
less than $6.25 per $1,000 applied.
Installments will be paid until the amount
applied, adjusted daily for investment
results and expense charges, is paid. On
benefit amounts placed in the General
Account, interest on the unpaid balance will
be paid at an effective yearly rate of not
less than 2.5% per year. The last installment
will be the remaining amount left with SBL
after the last full installment is paid. As
of the effective date of the settlement
option the size of the installment must be
such that the installments are expected to
extend for at least five years and not over
twenty years.
7. Deposit Option: Left on deposit with SBL in
the General Account at an effective yearly
interest rate of not less than 2% per year.
Interest will be paid annually, semiannually,
quarterly or monthly as elected. Withdrawal
of the amount left on deposit may be made at
any time. Withdrawals from the amount left on
deposit will be subject to withdrawal
charges.
-7-
<PAGE>
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM INITIAL MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Age of Option One Option Two Option Three
Payee Life Year Fixed Period Ends Unit
Only 5 10 15 20 Refund
- --------------------------------------------------------------------------------
MALE PAYEE
55 4.45 4.44 4.41 4.37 4.30 4.31
56 4.52 4.51 4.48 4.43 4.36 4.37
57 4.60 4.59 4.56 4.50 4.42 4.44
58 4.68 4.67 4.64 4.57 4.47 4.51
59 4.77 4.76 4.72 4.65 4.53 4.58
60 4.87 4.85 4.81 4.72 4.60 4.65
61 4.97 4.95 4.90 4.80 4.66 4.73
62 5.07 5.05 5.00 4.89 4.72 4.82
63 5.19 5.17 5.10 4.97 4.79 4.90
64 5.31 5.29 5.20 5.06 4.85 5.00
65 5.44 5.41 5.32 5.15 4.92 5.09
66 5.58 5.55 5.44 5.24 4.98 5.20
67 5.73 5.69 5.56 5.34 5.05 5.30
68 5.89 5.84 5.69 5.44 5.11 5.41
69 6.06 6.00 5.82 5.54 5.17 5.53
70 6.24 6.17 5.97 5.64 5.23 5.66
71 6.43 6.35 6.11 5.74 5.29 5.79
72 6.63 6.53 6.26 5.84 5.35 5.93
73 6.84 6.73 6.41 5.94 5.40 6.07
74 7.07 6.94 6.57 6.04 5.45 6.22
75 7.31 7.16 6.74 6.14 5.50 6.38
FEMALE PAYEE
55 4.11 4.11 4.10 4.08 4.05 4.05
56 4.17 4.17 4.16 4.14 4.10 4.10
57 4.23 4.23 4.22 4.19 4.15 4.15
58 4.30 4.29 4.28 4.25 4.21 4.21
59 4.37 4.36 4.35 4.32 4.27 4.27
60 4.44 4.44 4.42 4.38 4.33 4.34
61 4.52 4.51 4.49 4.45 4.39 4.40
62 4.60 4.59 4.57 4.52 4.45 4.47
63 4.69 4.68 4.65 4.60 4.52 4.55
64 4.78 4.77 4.74 4.68 4.58 4.63
65 4.88 4.87 4.84 4.76 4.65 4.71
66 4.99 4.98 4.93 4.85 4.72 4.80
67 5.10 5.09 5.04 4.94 4.79 4.89
68 5.23 5.21 5.15 5.04 4.86 4.99
69 5.36 5.34 5.27 5.14 4.94 5.09
70 5.50 5.48 5.39 5.24 5.01 5.20
71 5.65 5.62 5.53 5.35 5.08 5.32
72 5.82 5.78 5.67 5.46 5.15 5.44
73 5.99 5.95 5.81 5.57 5.22 5.57
74 6.19 6.14 5.97 5.68 5.29 5.71
75 6.39 6.33 6.13 5.80 5.35 5.86
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
- --------------------------------------------------------------------------------
TABLE B
SETTLEMENT OPTION FOUR
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF AMOUNT APPLIED
AGE OF AGE OF MALE PAYEE
FEMALE PAYEE 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.85 3.93 3.95 3.99 4.03 4.06
60 3.98 4.10 4.15 4.21 4.29 4.35
62 4.03 4.18 4.23 4.30 4.40 4.48
65 4.11 4.28 4.35 4.45 4.59 4.69
70 4.21 4.45 4.54 4.69 4.92 5.11
75 4.29 4.58 4.71 4.91 5.26 5.58
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
-8-
<PAGE>
PAYMENT OF
ANNUITY BENEFITS
(CONTINUED)
ADDITIONAL Other reasonable provisions can be made for the
PROVISIONS payment of the benefits under this Policy. Any such
FOR PAYMENT provision must be agreed to by SBL. Annuity
OF BENEFITS Settlement options shall be available only with the
consent of SBL if the proposed payee be other than
a natural person not acting as fiduciary.
The Effective Date of a Settlement Option for
options 1 through 6 is the date the first
installment is due to the payee. For option 7 the
first interest payment will be made at the end of
the period selected, with the effective date being
the date at the beginning of the period. If the
Owner has not made any election to the contrary and
the Annuitant is then living, Settlement Option 2
with a fixed period of 10 years, will become
effective on the Maturity Date. The amount applied
will be the Maturity Value.
Installments required to be paid, if any, after the
death of a payee under a settlement option will be
paid as due to the surviving payee or beneficiary
as the case may be. The guaranteed rates for
options 1 through 4 are based on interest credited
at 3.5% per year and the 1983 Table A individual
annuity mortality table updated for 45 years with
factors from Projection Scale G.
For guaranteed annuity settlements, additional
interest may be paid on the amount applied under
the various settlement options. The amount and
method of payment of the additional interest will
be determined by SBL.
On the Effective Date of a Settlement Option, the
settlement option rates being used for single
payment immediate annuity policies of this class,
which are then being issued by SBL, may produce a
higher first installment than guaranteed in this
policy. If this is the case, the Owner may elect to
have SBL use the rates from the single payment
immediate annuity policies then being issued by
SBL. This election can be made only if permitted by
the laws of the state where the election is made.
At any time, any amount remaining under option 5,
6, or 7 may be withdrawn. A Withdrawal Charge may
be made if 5 years have not elapsed from the
Effective Date of the Settlement Option. The
Surrender Charge will be calculated with a free
withdrawal amount of zero. Refer to the
Nonforfeiture option of this Policy for details. If
the amount withdrawn is at least $2,000, it may be
applied to any one of the first four options.
When any of the options 1, 2, 3, or 4 are elected,
the Owner may choose to increase the installments.
Such election 1) must be made in writing to SBL
before the Effective Date of the Settlement Option;
and 2) must be accompanied by a cash purchase
payment to provide the additional installments. A
cash purchase payment of $1,030 is required to
increase the installments by the amount indicated
per $1,000 of benefit amount shown in Tables A and
B. Cash purchase payments applied under this
provision which produce a total installment of more
than 2 times the installment produced using the
benefit amount alone must be approved by SBL.
-9-
<PAGE>
PURCHASE PAYMENTS
PAYMENT OF This Policy will be in force when the first
PURCHASE purchase payment is received by SBL. Purchase
PAYMENTS payments are payable from the Policy Date to the
Maturity Date or to the death of the Annuitant. The
amount of a purchase payment may be increased or
decreased from the prior payment amount. A purchase
payment may not be less than $25.00 without the
approval of SBL. The total of the purchase payment
may not exceed $100,000 without the approval of
SBL. Any excess purchase payments will be subject
to conditions that SBL may apply at that time.
All purchase payments are payable at the Home
Office of SBL. If the Owner stops paying purchase
payments and this Policy is not terminated, the
Owner may resume paying purchase payments subject
to the conditions above.
Purchase payment intervals are determined by the
mode selected by the Owner and shown on the Policy
Specifications pages. The mode of the purchase
payment may be changed by notifying SBL in writing.
VALUATION
ACCUMULATIONS OF The purchase payments received by SBL from the
PURCHASE PAYMENTS Policy Date to the Maturity Date will be applied to
ALLOCATED TO THE increase the Policy Value of this Policy. The
GENERAL ACCOUNT purchase payments will be deposited in the General
Account of SBL and the Series of the Separate
Account of SBL as directed by the Owner. The
investments of the General Account of SBL meet the
requirements for the investment of life and annuity
reserves under the insurance code of the state
where this Policy was issued.
The Policy Value in the General Account on any date
will be the Policy Value in the General Account on
the previous anniversary date increased with
interest to the date and increased or decreased by
the following events occurring after the
anniversary date:
1. Purchase payments received and allocated to
the General Account.
2. Benefits paid from the General Account.
3. Deductions from the Policy Value in the
General Account for the various charges and
fees of this policy.
4. Transfers of part of the Policy Value in the
General Account to the Separate Account.
5. Transfers of part of the Policy Value in the
Separate Account to the General Account.
6. Interest on items 1 through 5 from the
transaction date to the date.
The effective yearly rate of interest used to
calculate the Policy Value in the General Account
will be at least the amount shown in the Guaranteed
Interest Rate section of the Policy Specifications.
SBL may, at the decision of its Board of Directors,
credit interest in excess of that guaranteed. The
amount and method of crediting this excess interest
will be determined by SBL.
The transfers noted in items 4 and 5 can not be
made unless specific allowance is made for them in
the Policy Specifications pages.
SEPARATE ACCOUNT In addition to the General Account Policy Value,
the Policy Value will be increased by the dollar
value of the accumulation units in the Separate
Account.
STATE PREMIUM TAXES The Policy Value will be reduced by any state
premium taxes which SBL is required to pay on
behalf of this Policy.
NONFORFEITURE
POLICY VALUE The Policy Value will be as explained in the
Valuation portion of this Policy. SBL will notify
the Owner annually of the Policy Value to date.
This Policy will cease to have a Policy Value after
termination of this Policy, death benefits are
paid, or the Effective Date of a Settlement Option.
TERMINATION The Owner may terminate the Policy or withdraw part
VALUE of the Policy Value any time prior to the Maturity
Date The request for termination or withdrawal must
be sent to the Home Office of SBL in writing. When
SBL receives the request it will determine a
Termination Value and pay the Termination Value to
the Owner.
The Termination Value will be the value asked to be
withdrawn reduced by a Withdrawal Charge. The
Withdrawal Charge will be the product of 'a' times
'b' where:
a - is the value asked to be withdrawn.
b - is the appropriate Withdrawal Charge Factor
shown on the Policy Specifications pages.
-10-
<PAGE>
NONFORFEITURE
(CONTINUED)
TERMINATION The value of 'a' in the above product will be
VALUE (CONTINUED) reduced if, at the time the request is processed,
either or both of 1 or 2 occur:
1. The value asked to be withdrawn is greater
than the total of the following:
i. total purchase payments received by
SBL;
ii. plus any amount by which 'a' was
reduced because of item 1 or 2 at the
time of any prior withdrawal;
iii. less total prior values asked to be
withdrawn from this Policy.
2. This is the first withdrawal processed this
year and at the time more than one year has
elapsed from the Policy Date.
For item 1, 'a' will be the value defined in item
1. For item 2, 'a' will be reduced by the Free
Withdrawal Amount. The Free Withdrawal Amount is
the product of the Policy Value, at the time the
request is processed, times the Free Withdrawal
Factor shown on the Policy Specifications pages. In
the case where both item 1 and 2 apply, 'a' will be
reduced by the greater of the two possible
reductions. In no case will the Withdrawal Charge
be less than zero.
If a request to withdraw part of the Policy Value
does not state which of the Series or the General
Account the value is to be withdrawn from, SBL will
deplete the Policy Value of the Series in the
descending order listed under the Separate Account
section of the Policy Specifications pages. The
General Account will be the last to be depleted.
When part of the Policy Value is withdrawn, the
Policy Value will be reduced by the value asked to
be withdrawn.
If the value asked to be withdrawn would reduce the
Policy Value by 90% or more, SBL may terminate this
Policy and pay the Owner the total Termination
Value.
The Termination Value will always equal or exceed
the minimum required by law.
This Policy will cease to be in force upon payment
of the total Termination Value.
Payment of any Termination Value from the Separate
Account will be made within 7 days of the day the
request is received at the Home Office of SBL,
except that a day on which one of the following
events occur will not be counted as one of the 7:
1. The New York Stock Exchange is closed except
for holidays or weekends.
2. The Securities and Exchange Commissions has
determined that trading on the New York Stock
Exchange is restricted.
3. The Securities and Exchange Commission
permits postponement and so orders.
4. An emergency exists, as defined by the
Securities and Exchange Commission, so that
valuation of the assets or disposal of
securities is not reasonably practicable.
The payment of any Termination Value from the
General Account may be deferred by SBL for the
amount of time permitted by law. The payment will
not be deferred for more than six months from the
day the request is received by SBL.
FORCED SBL may, at its option, terminate this policy and
TERMINATION pay the Policy Value to the Owner whenever the
following conditions exist for both the Policy
Value in the General and Separate Accounts.
For the General Account prior to or at the Maturity
Date the following two (2) conditions exist:
1. purchase payments have not been received by
SBL for this Policy for two full years.
2. the Policy Value in the General Account
projected to the Maturity Date at the
guaranteed interest rate would produce a
monthly installment of less than $20 under
the settlement option that will be in effect
at the Maturity Date under this Policy.
For the Separate Account when either condition 1 or
2 exist:
1. if at the Maturity Date the Policy Value in
the Separate and General Accounts is less
than $2,000, or would provide a total initial
annuity installment of less than $20 per
month under the settlement option which will
be in effect at the Maturity Date.
-11-
<PAGE>
NONFORFEITURE
(CONTINUED)
FORCED 2. if prior to the Maturity Date no purchase
TERMINATION payments have been received for the Policy
(CONTINUED) for a period of two full years and both of
the following conditions exist:
a. the total purchase payments received for
this Policy reduced to reflect any
partial withdrawal from the Policy Value
is less than $2,000.
b. the total Policy Value of the General and
Separate Account is less than $2,000.
SEPARATE ACCOUNT
PROVISIONS
INTRODUCTION This portion of this Policy contains the provisions
relating to the Separate Account of SBL to which
the Owner of this Policy may allocate purchase
payments. The Separate Account and Series are shown
in the Separate Account section of the Policy
Specifications pages.
OWNERSHIP OF SBL has exclusive and absolute ownership and
SEPARATE ACCOUNT control of the assets of the Separate Account. The
Owner of this Policy is entitled to vote at
meetings of Owners of policies of this class as
required under the Investment Company Act of 1940.
SBL will send the Owner at least once each year a
report stating the number of accumulation units
credited to his account, a statement of investments
held by each Fund, proxy material, and a voting
form.
SEPARATE ACCOUNT The Separate Account which is invested in the
DEFINED Series, as shown on the Policy Specifications
pages, has been established by SBL under the laws
of Kansas. The Separate Account is a unit
investment trust. When used in this Policy,
Separate Account will mean the assets of SBL in the
Separate Account shown on the Policy Specifications
Pages. The Separate Account was established by SBL
to provide variable benefits for this class of
policies. The income, gains, and losses from the
Separate Account will be charged to it, without
regard to the experience of other Separate
Accounts.
FUNDS DEFINED The Series of the Separate Account each are
invested wholly in the Series of the Fund(s) as
shown on the Policy Specifications pages. The Funds
are diversified, open-end management investment
companies registered under the Investment Company
Act of 1940.
GUARANTEED A guaranteed annuity is an annuity with
ANNUITY DEFINED installments which are guaranteed as to dollar
amount throughout the payment period. The reserves,
required by law to be maintained, to fund the
installments will be held in the General Account of
SBL. The installments for a guaranteed annuity must
be at least $25.00.
VARIABLE ANNUITY In contrast, a variable annuity is an annuity with
DEFINED installments varying with the net investment
results of a Series within the Separate Account.
The first installment is determined by using the
values in Table A or B and settlement options 1, 2,
3, or 4 of the Payment of Benefits portion of this
Policy. Also, other reasonable provisions for the
first installment can be made. Any such provision
must be agreed to by SBL.
After the first installment is determined for a
particular Series the number of annuity units is
determined by dividing the first installment by the
annuity unit value for that day for each Series
from which installments are to be made. The amount
of each subsequent installment is that number of
annuity units for the Series multiplied by the
annuity unit value for the Series for the day the
installment is due. The sum of the installments for
all Series and the General Account is the total
installment the payee will receive.
The first installment from each Series must be at
least $25.00. If at any time any installment from
any Series becomes less than $25.00, SBL may change
the frequency of installments. The change will be
such as will result in installments of at least
$25.00.
SBL guaranteed that the dollar amount of any
variable annuity installment will not be affected
by the mortality experience of the payees. SBL also
guarantees that the variable annuity installment
will not be affected by the actual expenses of
administering the benefits.
For the life contingent variable annuity settlement
options 1, 2, 3, or 4 annuity units will be the
accounting device used to calculate the periodic
installments. For nonlife contingent variable
annuity settlement options 5, 6, and 7 accumulation
units will be the accounting device. Accumulation
units will be redeemed at current value to pay the
periodic installments until the benefit amount
applied adjusted for investment experience and
expense charges is depleted.
At the time of election of a Settlement Option, it
may be specified how the total benefit amount is to
be allocated between the Series and the General
Account for calculation of the first installments.
If the allocation is not specified, the benefit
amount as it then exists among the Series and the
General Account will be applied to calculate the
first installments.
-12-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS
(CONTINUED)
VALUING FIRST For calculating the first installment for an
ANNUITY annuity, the value of the accumulation units
INSTALLMENT applied to settlement options 1, 2, 3, or 4, will
be the value at the end of the second day before
the first installment is paid.
For settlement options 5, 6, and 7, the value of
the accumulation units applied will be the value on
the day the installment is paid.
INVESTMENT The Gross Investment Factor (GIF) for any day for a
FACTORS Series of the Separate Account is equal to value
'a' divided by value 'b'. For each Series, value
'a' is the sum of the net asset value per share of
the Series of the Fund(s) in which the Series is
invested at the close of business on that day plus
the dividends or other distributions per share on
that day. Value 'b' is the net asset value per
share at the close of business on the preceding
day. On days when the New York Stock Exchange is
not open for trading, the GIF is one. No purchase,
benefit, or installment payments will be made on
days when the New York Stock Exchange is closed.
The Net Investment Factor (NIF) for any day for a
Series is the GIF for the Series less the Actuarial
Risk Fee (ARF) and less a deduction for any
increases in the income tax expense for the Series
for the day. The ARF is shown on the Policy
Specifications pages.
ACCUMULATION The value of an accumulation unit for each Series
UNIT VALUES of the Separate Account on any day is equal to 'a'
divided by 'b'. For each Series, 'a' is the net
asset value (NAV) of the shares of the Series of
the Fund(s) in which the Series is invested reduced
by:
1. The product of the previous day's NAV
multiplied by the ARF.
2. Any deduction for provision for federal
income tax.
For each Series, 'b' is the number of accumulation
units of the Series at the beginning of the day.
The value of an accumulation unit may increase or
decrease.
Dividend and other cash distributions made by the
Series of the Fund(s) to the Series will be
reinvested in additional mutual fund shares of the
same Series of the Fund(s) and the value of an
accumulation unit will be increased. The Charges
and Fees, explained in that section of the
accumulation units credited to this Policy.
Purchase payments amounts allocated to each Series
will be used by SBL to purchase additional
accumulation units of that Series. The number of
units purchased will be the amount allocated to the
Series divided by the value of one accumulation
unit for the Series on the day the purchase payment
is received by SBL. Benefit payments because of
death or by withdrawal of part or all of the
Termination Value will result in a reduction of the
number of accumulation units credited to this
Policy. The reduction will be sufficient to
generate the necessary Policy Value change.
ANNUITY UNIT The annuity unit value associated with a Series of
VALUES the Separate Account for any day is determined by
multiplying the annuity unit value for the
immediately preceding day by the product of 'a'
times 'b'.
a - is the NIF for the Series for the second day
preceding the date for which the value is
being determined.
b - is the daily Interest Neutralization Factor
(INF) of .9999057540.
The INF is required to neutralize the assumed
interest rate built into Table A and B. The value
of an annuity unit may increase or decrease. The
first annuity unit value and the date it was set
for each Series is shown in the Separate Account
Section of the Policy Specifications pages.
SPLITTING UNITS SBL has the right to split the value of any annuity
or accumulation unit if such is deemed to be in the
best interest of the Owner, the Annuitant and SBL.
Any split made will be made equitable and will have
no material effect on the benefits and provisions
of the Policy.
FLUCTUATION The Policy Value and Termination Value of the
OF VALUES Separate Account may be less than the total value
of the purchase payments allocated to it adjusted
for withdrawals, transfers, and benefits. SBL does
not generate the investment performance of the
Series of the Fund(s) in which the Separate Account
is invested.
-13-
<PAGE>
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Policy as of its Issue Date or, if later, the
date shown below.
FEES & CHARGES The "Fees & Charges" section of the Policy is
amended by adding the following: The $30.00 per
year fee will not be charged during a Policy Year,
provided that: (1) the Policy has been in force for
eight Policy Years or more; and (2) Policy Value on
December 31 of that Policy Year (or in the event
the Policy is terminated, on the date of
termination) is $25,000 or more.
BENEFIT AMOUNT The "Benefit Amount" section of the Policy is
deleted in its entirety and replaced with the
following: If the Annuitant dies prior to the
Maturity Date, a Death Benefit will be paid to the
Beneficiary when: (1) due proof of death,
satisfactory to SBL; and (2) instructions regarding
payment, are received at the Home Office.
If the age of the Annuitant was 75 or less on the
Policy Date, the Death Benefit will be the greatest
of: (1) the sum of all purchase payments, less any
premium taxes due or paid by SBL and less the sum
of all Termination Values paid; (2) the Policy
Value on the date due proof of death and
instructions regarding payment are received at the
Home Office, less any premium taxes due or paid by
SBL; or (3) the Stepped-Up Death Benefit described
below.
The Stepped-Up Death Benefit is:
1. the largest Policy Value on any Policy
Anniversary that is both an exact multiple of
six and occurs prior to the Annuitant reaching
age 76; plus
2. any purchase payments received since the
applicable sixth Policy Anniversary; less
3. any reductions caused by Termination Values
paid since the applicable sixth Policy
Anniversary; less
4. any premium taxes due or paid by SBL.
For policies in effect for six Policy Years or more
as of May 1, 1991, the Policy Value on the Policy
Anniversary immediately preceding May 1, 1991, will
be used as the sixth Policy Anniversary in
determining the Stepped-Up Death Benefit.
If the age of the Annuitant on the Policy Date was
76 or more, the Death Benefit will be the greater
of: (1) the sum of all purchase payments, less any
premium taxes due or paid by SBL and less the sum
of all Termination Values paid; (2) the Policy
Value on the date due proof of death and
instructions regarding payment are received at the
Home Office, less any premium taxes due or paid by
SBL.
<PAGE>
BENEFIT AMOUNT If a lump sum payment is requested, the payment
(CONTINUED) will be made in accordance with any laws and
regulations that govern the payment of Death
Benefits.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
NOTICE: CONSULT YOUR TAX ADVISOR PRIOR TO REQUESTING THIS BENEFIT. RECEIPT OF
BENEFITS UNDER THIS ENDORSEMENT MAY BE SUBJECT TO AN IRS 10% PENALTY TAX IN
ADDITION TO ANY INCOME TAX THAT MAY BE DUE.
WITHDRAWAL CHARGE WAIVER
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Contract/Policy (the "Policy") as of: (1) its
Issue Date; or (2) if later, the date shown below.
This Policy is changed by adding the following:
WAIVER OF Security Benefit Life Insurance Company ("SBL")
WITHDRAWAL will waive the Withdrawal Charge on any full or
CHARGES partial Withdrawal of Contract Value/Policy Value
if: (1) the Owner has been confined to a "Hospital"
or "Qualified Skilled Nursing Facility" for at
least 90 consecutive days immediately prior to the
date of such Withdrawal and is so confined when the
request to withdraw is received by SBL; (2) such
confinement began after the Issue Date; and (3) the
request to withdraw is received along with: (a) a
properly completed claim form; and (b) a written
statement by a licensed physician that certifies
such confinement is a medical necessity and is due
to illness or infirmity. Such written statement
must be approved by SBL.
SBL reserves the right to have the Owner examined
by a physician of SBL's choice and at SBL's expense
to determine if the Owner is eligible for the
Withdrawal Charge Waiver. SBL reserves the right to
require the claim form and written statement
described in 3(a) and (b) above with each request
to withdraw.
DEFINITIONS A "Hospital" is: (1) an institution that is
licensed as such by the Joint Commission of
Accreditation of Hospitals; or (2) any lawfully
operated institution that provides: (a) in-patient
treatment of sick and injured persons through
medical, diagnostic and surgical facilities
directed by a staff of physicians; and (b) 24 hour
nursing services. A "Qualified Skilled Nursing
Facility" must be licensed by the state to provide,
on a daily basis, convalescent or chronic care for
in-patients who, by reason of illness or infirmity,
are not able to care for themselves.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
TAX-SHELTERED ANNUITY
ENDORSEMENT
TAX-SHELTERED This Contract is established as a Tax-Sheltered
ANNUITY Annuity ("TSA") under Section 403(b) of the
ENDORSEMENT Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision, pursuant to the
Owner's request in the application. Accordingly,
this Endorsement is attached to and made part of
the Contract as of its issue date or, if later, the
date shown below. If this is a group contract,
references to the "Owner" and to the "Contract"
shall, respectively, be deemed to include the
Participant and the Participant's Certificate where
appropriate.
TAX-SHELTERED To ensure treatment as TSA, this Contract will be
ANNUITY PROVISIONS subject to the requirements of Code Section 403(b),
which are briefly summarized below:
CONTRIBUTION (a) Purchase payments made on behalf of the Owner
LIMITATIONS pursuant to a salary reduction agreement when
added to "elective deferral" contributions
under all other plans, contracts or
arrangements in which the Owner participates,
may not exceed the annual limitation on such
contributions as provided in Code Section
402(g).
(b) Purchase Payments applied to the Contract on
behalf of the owner which exceed the
applicable "exclusion allowance" (within the
meaning of Code Section 403(b)(2)) or the
limitations contained in Code Section 415
shall not be excludable from gross income.
(c) Purchase Payments that exceed any of the
foregoing limitations may be returned,
distributed or otherwise corrected using any
method permissible under the Code.
NONDISCRIMINATION (a) Except if this Contract is purchased by a
REQUIREMENTS "church" (within the meaning of Code Section
3121 (w)), the Plan must satisfy the
nondiscrimination requirements of Code Section
403(b)(12).
(b) Purchase Payments not made pursuant to a
salary reduction agreement will satisfy the
nondiscrimination requirements of Code Section
403(b)(12) provided they satisfy the
requirements of Code Section 401(a)(4)
(nondiscrimination in contributions), Code
Section 401(a)(5) (permitted disparity), Code
Section 401(a)(17) (annual limit on
compensation), Code Section 401(a)(26)
(minimum participation), Code Section 401(m)
(average contribution percentage test) and
Code Section 410(b) (coverage).
(c) Purchase Payments made pursuant to a salary
reduction agreement will satisfy the
nondiscrimination requirements of Code Section
403(b)(12) provided that every employee of the
Employer sponsoring the Plan, may elect to
make Purchase Payments of more than $200
pursuant to a salary reduction agreement.
DISTRIBUTION (a) Distributions attributable to Purchase
RESTRICTIONS AND Payments made pursuant to a salary reduction
REQUIREMENTS agreement may be made only when the Owner
attains age 59 1/2, separates from service,
dies, becomes "disabled" (within the meaning
of Code Section 403(b)(11)) or incurs a
hardship. A distribution made due to a
hardship may not include income attributable
to such Purchase Payments.
<PAGE>
(b) Distributions from this Contract must comply
with the minimum distribution and incidental
death benefit requirements of Code Section
403(b)(10). Accordingly, an Owner's entire
interest under the Contract generally must be
distributed:
(1) not later than the April 1 next following
the close of the calendar year in which
the Owner attains age 70 1/2 (the
"Required Beginning Date"); or
(2) commencing not later than the Required
Beginning Date over the life of the Owner
or over the lives of the Owner and his or
her Designated Beneficiary (or over a
period not extending beyond the life
expectancy of the Owner or the life
expectancy of the Owner and his or her
Designated Beneficiary).
(c) If the owner dies before a distribution of his
or her interest in the Contract has begun in
accordance with paragraph (b) above, the
Owner's entire interest must be distributed
within five years, unless (I) such interest is
distributed to a Designated Beneficiary over
his or her life (or over a period not
extending beyond such Designated Beneficiary's
life expectancy) and (iii) such distribution
begins not later than one year after the
Owner's death. If the Designated Beneficiary
is the Owner's surviving spouse, the date on
which the distributions are required to begin
shall not be earlier than the date on which
the Owner would have attained age 70 1/2.
(d) If the Owner dies after distribution of his or
her interest in this Contract has begun in
accordance with paragraph (b) above but before
his or her entire interest has been
distributed, the remaining interest must be
distributed at least as rapidly as under the
method of distribution being used prior to the
Owner's death.
(e) All distributions must comply with a method of
distribution offered by the Company under this
Contract.
(f) If the Owner receives a distribution from this
Contract that qualifies as an "eligible
rollover distribution" (within the meaning of
Code Section 402(f)(2)(A)) and elects to have
such distribution paid directly to an
"eligible retirement plan" (within the meaning
of Code Section 402(c)), such distribution
shall be made in the form of a direct transfer
to the eligible retirement plan. The Company
may establish reasonable administrative rules
applicable to such direct transfers.
NONFORFEITABILITY (a) The Owner's rights under this Contract shall
be nonforfeitable except for failure to pay
future Premiums.
(b) This contract may not be transferred, sold,
assigned or pledged as collateral for a loan
or as security for the performance of an
obligation or for any other purposes to any
person other than the Company.
MULTIPLE CONTRACTS (a) If for any taxable year an Owner is covered by
this Contract and any other TSA, all such
contracts shall be treated as a single
contract.
-2-
<PAGE>
PLAN PROVISIONS The Plan, including certain Plan provisions
required by the Employee Retirement Income Security
Act of 1974 or other applicable law, may limit the
Owner's rights under this Contract. The Plan
provisions may:
(a) Limit the Owner's right to make Purchase
Payments;
(b) Restrict the time when the Owner may elect to
receive payments under this Contract;
(c) Require the consent of the Owner's spouse
before the Owner may elect to receive payments
under this Contract;
(d) Require that all distributions be made in the
form of a joint and survivor annuity for the
Owner and the Owner's spouse unless both
consent to a different form of distribution;
(e) Require that the Owner's spouse be the
Designated Beneficiary;
(f) Require that the Owner remain employed by the
Employer sponsoring the Plan for a specified
period of time before the Owner's rights under
this Contract become fully vested; or
(g) Otherwise restrict the Owner's exercise of
rights under the Contract or give the Employer
sponsoring the Plan (or a Plan representative)
the right to exercise certain rights on the
Owner's behalf.
No such Plan provision shall limit an Owner's
rights under this Contract, unless the Employer
sponsoring the Plan has provided the Company with
written notification of such provision. In no event
shall any such Plan provision enlarge the Company's
obligations under this Contract.
TAX CONSEQUENCES (a) The Company will not incur any liability or be
responsible for the timing, purpose or
propriety of any contribution or distribution;
any tax or penalty imposed on account of any
such contribution or distribution; or any
other failure, in whole or in part, by the
Owner or the Employer to comply with the
provisions set forth in the Code or any other
law.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
-3-
<PAGE>
A BRIEF DESCRIPTION OF THIS POLICY
This is a FLEXIBLE PREMIUM DEFERRED RETIREMENT ANNUITY POLICY:
- - Benefit installments begin on the Maturity Date using the method as specified
in this Policy.
- - A Death Benefit is payable if the Annuitant dies prior to the Maturity Date.
- - Flexible purchase payments are payable until the Maturity Date or until the
prior death of the Annuitant.
ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001 (913) 295-3000
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A MUTUAL COMPANY/FOUNDED IN 1892/TOPEKA, KS
This Policy provides for the accumulation of funds in the General and/or
Separate Accounts of the Security Benefit Life Insurance Company. This Policy is
issued in consideration of the Application and the payment of purchase payments
to SBL. This Policy including the Application and any attachments constitutes
the entire contract between the parties. This Policy is issued and accepted
subject to all the terms set forth herein. This Policy is delivered in the
jurisdiction of issue and is governed by the laws of that jurisdiction.
"SBL", "we", "us", "our", or "the Company" when used in this Policy means the
Security Benefit Life Insurance Company. "You", "your", or "Policyholder", when
used in this Policy, means the Policyholder shown in the Policy Specifications
pages.
This Policy does not make SBL a party to the Plan. The Plan is not a part of
this Policy. The Plan is noted for reference purposes only.
Signed for SBL at its Home Office, 700 Harrison, Topeka, Kansas 66636-0001.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS POLICY
This is a FLEXIBLE PREMIUM GENERAL AND SEPARATE ACCOUNT
UNALLOCATED GROUP ANNUITY POLICY.
ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001 (913) 295-3000
<PAGE>
A GUIDE TO THE
PROVISIONS OF YOUR POLICY
PROVISION CONTENTS
POLICY SPECIFICATIONS Fees & charges, factors, interest rates,
separate account./PG. 3
DEFINITIONS Definition of various terms./PG. 4
GENERAL PROVISIONS Mutual Amendments, Unilateral Amendments,
Agents, Performance Date on Nonbusiness Day,
Assignment, Documentation, Plan Qualification,
Limitation of SBL's Liability./PG. 5
DEATH BENEFIT Benefit amount./PG. 6
PURCHASE PAYMENTS Payment of purchase payments./PG. 6
VALUATION Value of General Account, Separate Account,
state premium taxes./PG. 6-7
NONFORFEITURE Policy value, surrender value, forced
termination./PG. 7-8
SEPARATE ACCOUNT PROVISIONS Introduction, ownership of Separate Account,
Separate Account defined, Funds defined,
accumulation unit values, splitting units,
fluctuation of values, transfer rights./ PG.
8-9
ANNUITIES Availability./PG. 10
ADDITIONAL SERVICES Charges for./PG. 10
APPLICATION Policyholder, allocation of purchase payment
to accounts./Attached to and a part of this
policy.
<PAGE>
POLICY SPECIFICATIONS
Policy Number: Specimen Policy Date: Date first purchase payment
is received by SBL.
Policyholder: Trustees of the ABC
Pension Plan
Plan: ABC Pension Plan
Sponsoring Organization
for the Plan: ABC Company
Jurisdiction of Issue: Any State, USA
-3-
<PAGE>
POLICY SPECIFICATIONS
SURRENDER CHARGE FACTOR:
Policy Year at Surrender
Time of Charge
Termination Factor
1 .08
2 .07
3 .06
4 .05
5 .04
6 .03
7 .02
8 .01
9 or later -0-
FREE WITHDRAWAL FACTOR: .10
GUARANTEED INTEREST
RATES: 3.5% All Years.
FEES & CHARGES: A $30.00 per year fee will be charged against the
Policy Value on each December 31st and the date the
Policy is terminated (first and last policy fee
prorated to the nearest $1). The charge will be
made sequentially against the subaccounts listed in
the Separate Account section in descending order.
The General Account will be the last subject to
charge. Each subaccount will be depleted before the
next is charged.
-3A-
<PAGE>
POLICY SPECIFICATIONS
SEPARATE ACCOUNT: The Policyholder may allocate purchase payments to
any of the subaccounts of the Separate Account of SBL
which are listed below:
Separate Account: "VARIFLEX" a separate account of
SBL having the following subaccounts:
Money Market Series: Which is invested in Series C
of SBL Fund. Accumulation Unit value was set at
$10 on 04-23-84.
High Grade Income Series: Which is invested in
Series E of SBL Fund. Accumulation Unit value was
set at $10 on 04-24-85.
Global Aggressive Bond Series: Which is invested in
Series K of SBL Fund. Accumulation Unit value was
set at $10 on 05-01-95.
Growth-Income Series: Which is invested in Series B
of SBL Fund. Accumulation Unit value was set at
$10 on 04-23-84.
Equity Income Series: Which is invested in Series O
of SBL Fund. Accumulation Unit value was set at
$10 on 05-01-95.
Managed Asset Allocation Series: Which is invested
in Series N of SBL Fund. Accumulation Unit value
was set at $10 on 05-01-95.
Specialized Asset Allocation Series: Which is
invested in Series M of SBL Fund. Accumulation
Unit value was set at $10 on 05-01-95.
Growth Series: Which is invested in Series A of SBL
Fund. Accumulation Unit value was set at $10 on
04-23-84.
Worldwide Equity Series: Which is invested in
Series D of SBL Fund. Accumulation Unit value was
set at $10 on 04-23-84.
Social Awareness Series: Which is invested in
Series S of SBL Fund. Accumulation Unit value was
set at $10 on 04-23-91.
Emerging Growth Series: Which is invested in Series
J of SBL Fund. Accumulation Unit value was set at
$10 on 10-01-92.
The Policyholder may allocate purchase payments to
the General Account of SBL.
ACTUARIAL RISK FEE: For Accumulation Units: .00003307502 (1.2% Annually)
(ARF)
TRANSFER FEE: $0.00
-3B-
<PAGE>
DEFINITIONS
ANNIVERSARY DATES An anniversary date is the same day and month as
the Policy Date for each succeeding calendar year
that this Policy remains in force. February 29 will
be treated as February 28 for purposes of this
definition.
COMPLETE SURRENDER A complete surrender is a surrender of the entire
Policy Value of this Policy. This Policy will be
terminated and cease to be in force after a
complete surrender.
DECLARED INTEREST The declared interest rate is the annual effective
RATE interest rate for this Policy at which we credit
interest to the Policy Value. It will not be less
than the Guaranteed Interest Rate shown on Pages
3-3B.
GENERAL ACCOUNT The General Account is defined in the valuation
section of this Policy on pages 6 and 7. It
consists of the assets used to guarantee the
insurance obligations of SBL.
PARTIAL SURRENDER A partial surrender is a surrender of a fraction of
the Policy Value of this Policy.
PARTICIPANT A participant is any person who becomes a
Participant under the Plan and remains entitled to
benefits in accordance with the terms of the plan.
PLAN The Plan is identified on the Policy Specifications
pages. The Plan is not a part of this Policy. SBL
is not a party to the Plan. The Plan is mentioned
merely for reference purposes.
POLICY YEAR The first policy year is the period from the policy
date through the immediately preceding day of the
next calendar year. Subsequent policy years are the
period from an anniversary date through the
immediately preceding day of the next calendar
year.
POLICYHOLDER The Policyholder is the person or legal entity who
may exercise the rights with respect to this
Policy. The Policyholder is shown on Pages 3-3B.
SEPARATE ACCOUNT The Separate Account is defined in the Separate
Account portion of this Policy on pages 8 and 9. It
consists of the assets upon which the variable
values of this Policy are based.
SUBACCOUNT The subaccounts to which the owner may allocate
portions of the Policy Value of this Policy are
listed on Pages 3-3B. The subaccounts of the
Separate Account are invested in the funds shown in
the Policy Specifications pages.
SURRENDER VALUE The Surrender Value for this Policy is set forth on
pages 7 and 8. It is the Policy Value reduced by
surrender charges.
-4-
<PAGE>
GENERAL PROVISIONS
MUTUAL AMENDMENTS Any and all terms of this Policy may be amended by
mutual agreement in writing between SBL and the
Policyholder. Any amendment to this Policy must be
signed by an authorized officer of SBL.
UNILATERAL SBL may unilaterally amend this Policy to comply
AMENDMENTS with laws and regulations to which SBL may be
subject. SBL may also unilaterally amend this
Policy to comply with changes in the Internal
Revenue Code. SBL is not obliged to make these
amendments. SBL shall provide advance notice to the
Policyholder of any such amendment.
AGENTS Agents of SBL have no authority to alter or modify
any of the terms, conditions or agreements of this
Policy, or to waive any of its provisions.
PERFORMANCE DATE ON If the due date for any activity required by this
NONBUSINESS DAY Policy falls on a nonbusiness day, performance will
be rendered on the first business day following the
due date.
ASSIGNMENT This Policy may not be assigned without the consent
of SBL. If permitted, SBL will not guarantee the
validity of any assignment.
DOCUMENTATION The Policyholder shall provide SBL with any
information and documentation required by SBL to
comply with state or federal law.
PLAN QUALIFICATION The Plan and any trust which is part of the Plan
must meet the requirements for a qualified plan
under Section 401 or 403 of the Internal Revenue
Code. The policyholder is responsible to obtain and
maintain such qualified status. Should the
Policyholder fail to do so, SBL will have the right
to terminate this Policy.
LIMITATION OF Except as provided with respect to payment to SBL
SBL'S LIABILITY for the purchase of annuities this Policy does not
provide for: (a) individual recordkeeping; or (b)
for direct payment by SBL to any individual or
entity other than the Policyholder. SBL makes no
representations that the Policy Value under this
Policy will be sufficient to pay benefits under the
Plan. The Plan Trustee is entirely responsible to
provide benefits under the Plan. The provisions,
conditions, and terms of this Policy will govern
with respect to all rights and obligations of SBL
in spite of any contrary provisions, conditions,
and terms of the Plan. SBL is not a party to the
Plan. The Plan is not a part of this Policy.
DATES Years, months and anniversaries are all measured
from the Policy Date shown on Pages 3-3B.
DUE PROOF OF DEATH Any of the following items will be sufficient as
due proof of death:
1. A copy of a certified death certificate.
2. A copy of a certified decree of a court or
competent jurisdiction as to the finding of
death.
3. A written statement by a medical doctor who
attended the deceased Participant.
4. Any proof satisfactory to SBL.
In spite of the preceding conditions SBL may rely
completely upon a written statement made by the
Policyholder of the death of the Participant.
-5-
<PAGE>
DEATH BENEFIT
BENEFIT AMOUNT SBL will pay a death benefit to the Policyholder
upon receipt at the Home Office of 1) due proof,
acceptable to SBL, of a Participant's death prior
to his retirement date and 2) the following
necessary information. The death benefit will be an
amount not greater than that under the provisions
of the Plan to be paid in the case of the death of
the Participant. The death benefit for a
Participant cannot exceed the present value of the
current accrued portion of the pension benefit
payable at the normal retirement date under the
Plan for the Participant. If the Plan is being
funded by more than one method and/or policy, the
maximum death benefit payable under this Policy
will be reduced. In this case of multiple funding,
the maximum death benefit will be reduced by
multiplying it by the following ratio of 'a'
divided by 'b' where:
a - is the Policy Value under this Policy.
b - is the total of the Policy Values and/or
funds accumulated under all funding methods
and/or policies.
The Policyholder must provide the information to
calculate the death benefit before it will be paid.
The death benefit amount will be paid as a partial
surrender under this Policy. The partial surrender
will be paid without a surrender charge. The
partial surrender will not be considered as a free
withdrawal. The amount of the partial surrender
will not lower the free withdrawal amount
available.
PURCHASE PAYMENTS
PAYMENT OF This Policy will be in force when the first
PURCHASE PAYMENTS purchase payment is received by SBL. Purchase
payments are payable from the Policy Date. The
amount of a purchase payment may be increased or
decreased from the prior payment amount. A purchase
payment may not be less than $25.00 without the
approval of SBL. The total of the purchase payments
may not exceed $2,000,000 without the approval of
SBL. Any excess purchase payments will be subject
to conditions that SBL may apply at that time.
All purchase payments are payable at the Home
Office of SBL. If the Policyholder stops paying
purchase payments and this Policy is not
terminated, the Policyholder may resume paying
purchase payments subject to the conditions above.
The amount of each purchase payment allocated to
each of the subaccounts or the General Account must
be at least $25.00. The Policyholder may change the
allocation of future purchase payment to the
General Account and the various subaccounts. To
make a change, a written notice must be received in
the Home Office of SBL. No change can be made which
allocates less than the equivalent of $25.00 per
month to a subaccount or the General Account. A
change in allocation will not affect purchase
payment allocations before the change.
VALUATION
ACCUMULATION OF The purchase payments received by SBL will be
PURCHASE PAYMENTS applied to increase the Policy Value of this
ALLOCATED TO THE Policy. The purchase payments will be deposited in
GENERAL ACCOUNT the General Account of SBL and the subaccounts of
the Separate Account of SBL as directed by the
Policyholder. The investments of the General
Account of SBL meet the requirements for the
investment of life and annuity reserves under the
insurance code of the state where this Policy was
issued.
The Policy Value in the General Account on any date
will be the Policy Value in the General Account on
the previous anniversary date of the Policy: 1)
increased with interest to the date; and 2)
increased or decreased by the following events
occurring after the anniversary date:
a. Purchase payments received and allocated to
the General Account.
b. Benefits paid from the General Account.
c. Deductions from the Policy Value in the
General Account for the various charges and
fees of the Policy.
d. Transfers of part of the Policy Value in the
General Account to the Separate Account.
e. Transfers of part of the Policy Value in the
Separate Account to the General Account.
f. Interest on items "a" through "e" from the
transaction date to the date.
The effective yearly rate of interest used to
calculate the Policy Value in the General Account
will be at least the amount shown in the guaranteed
interest rate section of Pages 3-3B. SBL may, at
the decision of its Board of Directors, credit
interest in excess of that guaranteed. The amount
and method of crediting this excess interest will
be determined by SBL.
SEPARATE ACCOUNT In addition to the General Account Policy Value,
the Policy Value will be increased by the dollar
value of the accumulation units in the Separate
Account.
-6-
<PAGE>
VALUATION (CONTINUED)
STATE PREMIUM TAXES The Policy Value will be reduced by any state
premium taxes which SBL is required to pay on
behalf of the Policy.
NONFORFEITURE
POLICY VALUE The Policy Value will be as explained in the
valuation portion of this Policy. SBL will notify
the Policyholder each year of the Policy Value to
date. This Policy will cease to have a Policy Value
after termination of this Policy.
SURRENDER VALUE The Policyholder may terminate the Policy or
surrender part or all of the Policy Value at any
time. The request for termination or surrender must
be sent to the Home Office of SBL in writing. When
SBL receives the request, it will determine a
Surrender Value and pay the Surrender Value to the
Policyholder.
The Surrender Value will be the value asked to be
withdrawn reduced by a surrender charge. The
surrender charge will be the product of 'a' times
'b' where:
a - is the value asked to be withdrawn.
b - is the appropriate surrender charge factor
shown in Pages 3-3B.
The value of 'a' in the above product will be
reduced if, at the time the request is processed,
either or both of 1 or 2 occur:
1. The value asked to be withdrawn is greater
than the total of the following:
i. Total purchase payments for the policy
received by SBL;
ii. plus any amount by which 'a' was
reduced because of item 1 or 2 at the
time of any prior surrender from the
policy;
iii. less total prior Policy Values
withdrawn from this Policy.
2. This is the first surrender processed this
calendar month for the Policy and at the time
more than one year has elapsed from the
Policy Date.
For item 1, 'a' will be the value defined in item
1. For item 2, 'a' will be reduced by the free
withdrawal amount. The free withdrawal amount will
be the result of item "i " less item "ii" but not
less than zero:
i. the product of the Policy Value as of the
last Anniversary Date times the free
withdrawal factor shown on Pages 3-3B.
ii. prior amounts withdrawn free of surrender
charges during the current policy year.
In the case where both item 1 and 2 apply, 'a' will
be reduced by the greater of the two possible
reductions. In no case will the surrender charge be
less than zero.
If a request for a partial surrender of the Policy
Value does not state which of the subaccounts or
the General Account the value is to be surrendered
from, SBL will deplete the Policy Value of the
subaccounts in the descending order listed under
the Separate Account section of Pages 3-3B. The
General Account will be the last to be depleted.
When part of the Policy Value is withdrawn, the
Policy Value will be reduced by the value asked to
be withdrawn.
If the value asked to be withdrawn would reduce the
Policy Value by 90% or more, SBL may terminate the
Policy and pay the Policyholder the Policy's total
Surrender Value.
The Surrender Value of this Policy will always
equal or exceed the minimum required by law.
-7-
<PAGE>
NONFORFEITURE
(CONTINUED)
SURRENDER VALUE The Surrender Value is a benefit of this Policy.
(CONTINUED)
Payment of any Surrender Value from the Separate
Account will be made within 7 days of the day the
request is received at the Home Office of SBL,
except that a day on which one of the following
events occur will not be counted as one of the 7:
1. The New York Stock Exchange is closed except
for holidays or weekends.
2. The Securities and Exchange Commission has
determined that trading on the New York Stock
Exchange is restricted.
3. The Securities and Exchange Commission
permits postponement and so orders.
4. An emergency exists, as defined by the
Securities and Exchange Commission, so that
valuation of the assets or disposal of
securities is not reasonably practicable.
The payment of any Surrender Value from the General
Account may be deferred by SBL for the amount of
time permitted by law. The payment will not be
deferred for more than six months from the day the
request is received by SBL.
FORCED TERMINATION SBL may, at its option, terminate this Policy
whenever any of the following conditions exist.
1. If the Policy Value at any time from the end
of the first policy year to just prior to the
end of the third policy year is less than
$10,000.
2. If the Policy Value at any time at or after
the end of the third policy year is less than
$20,000.
3. The Plan noted on Pages 3-3B terminates.
4. The Plan noted on Pages 3-3B becomes
disqualified under Section 401 or 403 of the
Internal Revenue Code of the USA.
5. For any reason after the eighth policy year.
If SBL terminates this Policy under this provision,
SBL will pay to the Policyholder the Surrender
Value. The termination will be processed as a
complete surrender.
SEPARATE ACCOUNT
PROVISIONS
INTRODUCTION This portion of this Policy contains the provisions
relating to the Separate Account of SBL to which
the Policyholder may allocate purchase payments.
The Separate Account and subaccounts are shown in
the Separate Account section of Pages 3-3B.
OWNERSHIP OF SBL has sole ownership and control of the assets of
SEPARATE ACCOUNT the Separate Account. The Policyholder of this
Policy is entitled to vote at meetings of owners of
policies of this class as required under the
Investment Company Act of 1940. SBL will send the
Policyholder at least once each year a report
stating: 1) the number of accumulation units
credited to his account; 2) a statement of
investments held by each fund; 3) proxy material;
and 4) a voting form.
SEPARATE ACCOUNT The Separate Account, as shown on Pages 3-3B, has
DEFINED been established by SBL under the laws of Kansas.
The Separate Account is a unit investment trust.
When used in this Policy, Separate Account will
mean the assets of SBL in the Separate Account
shown on Pages 3-3B. The Separate Account was
established by SBL to provide variable benefits for
this class of policies. The income, gains, and
losses from the Separate Account will be charged to
it, without regard to the experience of the other
separate accounts of the General Account of SBL.
FUNDS DEFINED The subaccounts of the Separate Account each are
invested wholly in the funds as shown on Pages
3-3B. The funds are diversified, open-end
management investment companies registered under
the Investment Company Act of 1940.
-8-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS (CONTINUED)
ACCUMULATION The value of an accumulation unit for each
UNIT VALUES subaccount of the Separate Account on any day is
equal to 'a' divided by 'b.' For each subaccount
'a' is the net asset value (NAV) of the shares of
the Series of the fund in which the subaccount is
invested reduced by:
1. The product of the previous day's NAV
multiplied by the Actuarial Risk Fee (ARF).
2. Any deduction for provision for federal
income tax.
For each subaccount, 'b' is the number of
accumulation units of the subaccount at the
beginning of the day. The value of an accumulation
unit may increase or decrease.
Dividend and other cash distributions made by the
Series of the fund to the subaccount will be
reinvested in additional mutual fund shares of the
same Series of the fund and the value of an
accumulation unit will be increased. The Charges
and Fees, explained in that section of Pages 3-3B,
will result in the sale of shares of the fund and a
reduction of the accumulation units credited to
this Policy. Purchase payment amounts allocated to
each subaccount will be used by SBL to purchase
additional accumulation units of that subaccount.
The number of units purchased will be the amount
allocated to the subaccount divided by the value of
one accumulation unit for the subaccount on the day
the purchase payment is received by SBL. Benefit
payments because of death, or by surrender of part
or all of the Surrender Value, or because of the
purchase of an annuity will result in a reduction
of the number of accumulation units credited to
this Policy. The reduction will be sufficient to
generate the necessary Policy Value change.
SPLITTING UNITS SBL has the right to split the value of any
accumulation unit if such is deemed to be in the
best interest of the Policyholder, the Participant,
and SBL. Any split made will be made equitably and
will have no material effect on the benefits and
provisions of this policy.
FLUCTUATION The Policy Value, and Surrender Value of the
OF VALUES Separate Account may be less than the total value
of the purchase payments allocated to it adjusted
for surrenders, transfers, and benefits. SBL does
not guarantee the investment performance of the
funds in which the Separate Account is invested.
TRANSFER RIGHTS The Policyholder may transfer part of the Policy
Value between the various subaccounts and the
General Account once every 30 days. A transfer fee
(shown on Pages 3-3B) will be charged after the
first transfer in a policy year. The Transfer Fee
will be charged sequentially to the Policy Value in
the subaccounts in the descending order shown in
the Separate Account section of Pages 3-3B. The
Policy Value of each subaccount will be depleted
before the next is charged. The General Account
will be the last charged. The total of dollar
amounts transferred from the General Account during
a policy year will be limited to the greatest of
the three following values:
1. Five thousand dollars ($5,000.00).
2. One third (1/3) of the amount of the Policy
Value in the General Account at time of
transfer.
3. The product of "a" times "b", where:
"a" is the total of dollar amounts
transferred from the General Account during
the previous policy year.
"b" is 1.2.
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<PAGE>
ANNUITIES
AVAILABILITY At the election of and upon application by the
Policyholder in writing, SBL will direct amounts
from the Policy for the purchase of annuities from
SBL and for the payment of any premium taxes which
SBL determines to be applicable to the Policy. The
premium, fees, and form of annuity available will
be determined on a basis consistent with the
annuity purchase rates and types of annuities then
in use by SBL for annuity purchases under other
contracts of this class. The immediate annuities
purchased from SBL under this provision must either
provide that:
1) continued payment of annuity installments is
contingent on survival of an annuitant, or
2) annuity installment payments must be of
nondecreasing amounts extending over at least a
five year period.
ADDITIONAL SERVICES
CHARGES FOR Additional services for the Plan may be provided
through a separate agreement between SBL and the
Policyholder. Payment for services rendered may be
made directly from the Policy Value of this Policy.
If an alternate payment arrangement has been
mutually agreed to, payment will be charged against
the Policy Value of this Policy only if not
otherwise paid when due.
-10-
<PAGE>
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Policy as of its Issue Date or, if later, the
date shown below.
FEES AND CHARGES The "Fees & Charges" section of the Policy is
amended by adding the following: The $30.00 per
year fee will not be charged during a Policy Year,
provided that (1) the Policy has been in force for
eight Policy Years or more; and (2) Policy Value on
December 31 of that Policy Year (or in the event
the Policy is terminated, on the date of
termination) is $25,000 or more.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
WE THANK YOU FOR THE PURCHASE OF THIS ANNUITY AND HOPE THAT YOUR RELATIONSHIP
WITH US WILL ENDURE FOR MANY YEARS TO COME. IF YOU HAVE ANY QUESTIONS ABOUT THIS
OR ANY OTHER SECURITY BENEFIT PRODUCT, PLEASE FEEL FREE TO CALL US AT THE HOME
OFFICE, OR CONTACT YOUR SECURITY BENEFIT AGENT.
A BRIEF DESCRIPTION OF THIS POLICY
This is a FLEXIBLE PREMIUM GENERAL AND SEPARATE ACCOUNT
UNALLOCATED GROUP ANNUITY POLICY.
ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001 (913) 295-3000
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A MUTUAL COMPANY/FOUNDED IN 1892/TOPEKA KS
Security Benefit Life, subject to the terms of the Group Policy, will pay the
following benefits:
1. Annuity installments to the Participant, if living on the Retirement Date,
derived from applying the Retirement Value to a settlement option as
specified in this Certificate.
2. The Death Benefit when due proof of the Participant's death prior to the
Retirement Date is received at the Home Office at 700 Harrison, Topeka,
Kansas 66636-0001.
This and the following pages summarize the Policy as it relates to the
Participant.
This Certificate may be returned within 10 days after the Owner receives it by
delivering or mailing it to the Home Office for the agent through whom it was
purchased. Immediately on such delivery or mailing, this Certificate shall be
deemed void from the beginning. Any purchase payments paid on behalf of the
Participant and allocated to the General Account will be refunded. The
Certificate Value of the Separate Account as of the date the Certificate is
received by SBL will be refunded. Any fees or charges on the purchase payments
paid and allocated to the Separate Account will be refunded.
SBL, when used in this Certificate means Security Benefit Life Insurance
Company
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
FLEXIBLE PREMIUM GROUP DEFERRED RETIREMENT ANNUITY CERTIFICATE
providing a
MEMORANDUM OF COVERAGE
ALL PAYMENTS AND VALUES PROVIDED BY THIS CERTIFICATE, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED
AS TO FIXED DOLLAR AMOUNT.
[SBLIC LOGO]
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001 (913) 295-3000
<PAGE>
A GUIDE TO THE
PROVISIONS OF YOUR CERTIFICATE
PROVISION CONTENTS
POLICY SPECIFICATIONS Participant dates, plan, payment, certificate
number, kind of benefit, fees & charges,
factors, interest rates, separate account./PG.
3
GENERAL PROVISIONS Introduction, the contract, misstatement of
age or sex, claims of creditors, dates, change
of contract./PG. 4
OWNER Rights of Owner, change of ownership (if
allowed)./PG. 5
ANNUITY PROVISION Method of payment, retirement value,
retirement date./PG. 5
DEATH BENEFIT Benefit amount, effect on certificate./PG. 5
BENEFICIARY Designation and way to change, distribution of
benefits./PG. 5
PAYMENT OF BENEFITS Way benefits may be paid, settlement options,
additional provisions./PG. 5-8
PURCHASE PAYMENTS Payment of purchase payments./PG. 9
VALUATION Value of General Account, Separate Account,
state premium taxes./PG. 9
NONFORFEITURE Certificate value, termination value, forced
termination./ PG. 10-11
SEPARATE ACCOUNT PROVISIONS Introduction, ownership of Separate Account,
Separate Account defined, funds defined,
guaranteed annuity, variable annuity, valuing
first annuity installment, investment factors,
accumulation unit value, annuity unit value,
splitting units, fluctuation of values./PG.
11-13
STATEMENT OF PARTICIPANT Beneficiary, allocation of purchase payment to
accounts.
<PAGE>
CERTIFICATE SPECIFICATIONS
PARTICIPANT: John Doe
POLICY NUMBER: Specimen
CERTIFICATE NUMBER: Specimen
DATE OF BIRTH
AND SEX: August 19, 1952, Male
CERTIFICATE DATE: Date first purchase payment received by SBL for Participant.
DATE OF ISSUE OF December 31, 1987
CERTIFICATE:
RETIREMENT DATE: August 19, 2017
STIPULATED
PURCHASE
PAYMENT: $340.00
MODE OF PAYMENT: Monthly
KIND OF BENEFIT: Retirement Annuity Installments
ASSIGNMENT: The rights under this Certificate may not be assigned.
PLAN: The ABC Unified School District Tax Deferred Annuity Plan
OWNER OF POLICY: Trustees of the ABC Unified School District TDA Plan
-3-
<PAGE>
CERTIFICATE SPECIFICATIONS
FEES & CHARGES: A $30.00 per year fee will be charged against the
Certificate Value on each December 31st and the
date the Certificate Value is terminated (First and
last fee prorated to the nearest $1). No charge
will be made after the Effective Date of Settlement
Option 1, 2, 3, or 4. The charge will be made
sequentially against the Series listed in the
Separate Account section in descending order. The
General Account will be the last subject to charge.
Each subaccount will be depleted before the next is
charged.
WITHDRAWAL CHARGE
FACTOR:
Certificate Year at
Time of Withdrawal
Termination Charge
1 .08
2 .07
3 .06
4 .05
5 .04
6 .03
7 .02
8 .01
9 or later .0
FREE WITHDRAWAL FACTOR: .10
GUARANTEED INTEREST
RATES: 3.5% All Years.
PLAN: As used in this Certificate, the Plan shall mean a
document or agreement which provides the authority
for purchase of this Certificate for the
Participant. The Plan must meet the requirements of
the section of the Internal Revenue Code as shown
on the Application. The Plan is not a part of this
Certificate. SBL assumes no obligation under the
Plan. The Plan is mentioned merely for reference
purposes.
-3A-
<PAGE>
CERTIFICATE SPECIFICATIONS
SEPARATE ACCOUNT: The Owner may allocate purchase payments to the
following SBL Separate Account and the Series in
which the Separate Account is invested. Purchase
payments may be allocated to the General Account of
SBL.
Separate Account: VARIFLEX, containing:
Money Market Series: Which is invested in Series C
of SBL Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit Value was set at $10
on 04-23-84.
High Grade Income Series: Which is invested in
Series E of SBL Fund. Annuity Unit value was set
at $1 on 04-24-85. Accumulation Unit value was
set at $10 on 04-24-85.
Global Aggressive Bond Series: Which is invested in
Series K of SBL Fund. Annuity Unit value was set
at $1 on 05-01-95. Accumulation Unit value was
set at $10 on 05-01-95.
Growth-Income Series: Which is invested in Series B
of SBL Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit value was set at $10
on 04-23-84.
Equity Income Series: Which is invested in Series O
of SBL Fund. Annuity Unit value was set at $1 on
05-01-95. Accumulation Unit value was set at $10
on 05-01-95.
Managed Asset Allocation Series: Which is invested
in Series N of SBL Fund. Annuity Unit value was
set at $1 on 05-01-95. Accumulation Unit value
was set at $10 on 05-01-95.
Specialized Asset Allocation Series: Which is
invested in Series M of SBL Fund. Annuity Unit
value was set at $1 on 05-01-95. Accumulation
Unit value was set at $10 on 05-01-95.
Growth Series: Which is invested in Series A of SBL
Fund. Annuity Unit value was set at $1 on
04-01-84. Accumulation Unit value was set at $10
on 04-23-84.
Worldwide Equity Series: Which is invested in
Series D of SBL Fund. Annuity Unit value was set
at $1 on 04-01-84. Accumulation Unit value was
set at $10 on 04-23-84.
Social Awareness Series: Which is invested in
Series S of SBL Fund. Annuity Unit value was set
at $1 on 04-23-91. Accumulation Unit value was
set at $10 on 04-23-91.
Emerging Growth Series: Which is invested in Series
J of SBL Fund. Annuity Unit value was set at $1
on 10-01-92. Accumulation Unit value was set at
$10 on 10-01-92.
ACTUARIAL RISK FEE: Accumulation Units: .00003307502 (1.2% Annually)
(ARF) Annuity Units: 00003307502 (1.2% Annually)
ALLOCATION FEE: $0.00
-3B-
<PAGE>
CERTIFICATE SPECIFICATIONS
MINIMUM PURCHASE The amount of each purchase payment allocated to
PAYMENT: each of the Series or the General Account must be
at least $25.00.
CHANGE OF ACCOUNT The Owner may change the allocation of future
ALLOCATIONS: purchase payments to the General Account and the
various Series. To make a change, a written notice
must be received in the Home Office of SBL. No
change can be made which allocates less than the
equivalent of $25.00 per month to a Series or the
General Account. There will be no charge for the
first allocation change in a year. For each
additional change in a year, a charge of an
Allocation Fee (shown previously) will be made. A
change in allocation will not affect purchase
payment allocations before the change.
METHOD OF CHANGING The fee discussed in Change of Account Allocations
ALLOCATION FEE: section will be charged sequentially to the
Certificate Value in the Series in the descending
order shown in the Separate Account section. Each
Series' Certificate Value will be depleted before
the next is charged. The General Account will be
the last charged.
-3C-
<PAGE>
CERTIFICATE SPECIFICATIONS
TRANSFER RIGHTS The Owner may transfer part of the Certificate
(PRIOR TO THE Value between the various Series and the General
EFFECTIVE DATE OF A Account once every 30 days. A transfer fee (shown
SETTLEMENT OPTION): following) will be charged after the first transfer
in a certificate year. A transfer within 30 days of
the Retirement Date can be made without charge. The
total of dollar amounts transferred from the
General Account during a certificate year will be
limited to the greatest of the three following
values:
1. Five thousand dollars ($5,000.00).
2. One third (1/3) of the amount of the
Certificate Value in the General Account at
time of transfer.
3. The product of multiplying "a" by "b", where:
"a" is the total of dollar amounts
transferred from the General Account during
the previous certificate year.
"b" is 1.2.
SETTLEMENT OPTION, Once installments have begun, the Owner may elect,
TRANSFER AFTER once each calendar year, to convert annuity units
FIRST INSTALLMENT: of one Series to annuity units of another Series.
The conversion cannot be made within the five day
period prior to and including the day an
installment is to be paid. Conversions that would
have been made during this five day period shall be
made on the business day after the installment
payment date. This right to convert annuity units
does not include the right to convert a variable
annuity of any Series into a guaranteed annuity.
Neither may a guaranteed annuity be converted to a
variable annuity of any Series. The amount of each
installment after the conversion must still be at
least $25.00 for each Series.
TRANSFER FEE: $10.00
METHOD OF CHARGING The fee discussed in the Transfer Rights section
TRANSFER FEE: will be charged sequentially to the Certificate
Value in the Series in the descending order shown
in the Separate Account section. Each Series
Certificate Value will be depleted before the next
is charged. The General Account will be the last
charged.
-3D-
<PAGE>
GENERAL PROVISION
INTRODUCTION The Policy is a Group Retirement Annuity. The first
annuity installment is determined from the
Retirement Value and the Settlement Option Rate.
THE CONTRACT The entire contract between the Owner and SBL
consists of the Application, the Policy, any
endorsements or riders attached to the Policy. A
copy of the Statement of Participant is attached to
this Certificate at issue. All statements made in
the Statement of Participant will, in the absence
of fraud, be deemed representations and not
warranties. SBL will use no statement made by or on
behalf of the Participant to void the Certificate
unless it is in the written Application or
Statement of Participant. Any change in the
contract can be made only with the written consent
of the President, a Vice President, or the
Secretary of SBL.
INCONTESTABILITY SBL will not contest this Certificate after it has
been in force during the lifetime of the
Participant for 2 years from its Date of Issue.
MISSTATEMENT OF If the age or the sex of any Annuitant has been
AGE OR SEX incorrectly stated, the benefits under this
Certificate will be those the purchase payments
would have purchased for the correct age and sex.
CLAIMS OF CREDITORS The Certificate Value, Termination Value, and
benefits under this Certificate will be exempt from
the claims of creditors to the extent permitted by
law.
DATES Years, months and anniversaries are all measured
from the Certificate Date. The contestable period
begins with the Date of Issue of this Certificate.
All dates shown are on the Certificate
Specifications pages.
FACILITY OF PAYMENT In some cases a payee will, in the opinion of SBL,
not be able, for physical or mental reasons, to
give a good receipt and discharge for any benefit
payment due. In this case, SBL may make payment of
the amount due in installments to those persons who
SBL believes are caring for and supporting the
payee. The installment under this section will not
be greater than $250 per month. The installments
under this section will stop when a claim is made
by a duly appointed guardian or legal
representative of the payee. Payment to such
persons will discharge SBL from liability for the
installments paid. SBL will assume no
responsibility for the proper use of the
installments paid under this section.
EVIDENCE OF SURVIVAL SBL may require proof that any payee is living on
any date a payment or installment is due to the
payee. The proof must be satisfactory to SBL.
DUE PROOF OF DEATH Any of the following items will be sufficient as
due proof of death:
1. A copy of a certified death certificate.
2. A copy of a certified decree of a court or
competent jurisdiction as to the finding of
death.
3. A written statement by a medical doctor who
attended the deceased participant.
4. Any proof satisfactory to SBL.
CHANGE OF SBL may unilaterally amend the Policy and this
CONTRACT BY SBL Certificate to comply with laws and regulations to
which SBL may be subject. SBL may also unilaterally
amend the Policy and this Certificate to comply
with changes in the Internal Revenue Code. SBL is
not obliged to make these amendments. SBL shall
provide advance notice to the Owner of any such
amendment.
CHANGE OF CONTRACT The Owner and SBL may by written agreement change
MUTUAL AGREEMENT any of the terms of the Policy. The change may be
made retroactive to the Date of Issue of the
Policy.
-4-
<PAGE>
OWNER
RIGHTS OF OWNER The Owner of the Policy, is shown on the
Certificate Specifications pages.
The owner has all rights in the Policy.
The Owner has all of the rights in this Certificate
while the Participant is living.
With the approval of the Owner the Participant may
exercise some or all the rights of the Owner with
respect to the provisions of this Certificate
purchased under the terms of the Policy for the
Participant.
Anytime prior to 30 days before the Retirement Date
the Owner while the Participant is living may elect
to have the Termination Value applied under option
1, 2, 3, 4, or 5.
Anytime prior to 30 days before the Participant's
Retirement Date, the Owner may transfer with the
approval of SBL the Termination Value for a
Participant to another policy of SBL. This
privilege is allowed in anticipation of the
Participant's retirement.
CHANGE OF OWNERSHIP If allowed by the Assignment section of the Policy
Specifications Pages, the Owner can designate a new
owner by written notice satisfactory to SBL. The
change in ownership will take effect as of the date
the notice was signed. The change will be subject
to any payment made or other action taken by SBL
before the change was received. SBL may require the
Policy for endorsement.
ANNUITY PROVISION
METHOD OF PAYMENT If the Participant of this Certificate is living on
the Retirement Date, the Retirement Value of this
Certificate will be applied to provide a 10 year
fixed period and life annuity, unless an optional
type of annuity is selected by the Owner during the
lifetime of the Participant and 30 days prior to
the Retirement Date. The installments under the
annuity will be paid to the Participant. The
optional types of annuity benefits are outlined in
the settlement options provisions beginning on page
5. Other reasonable settlement options may be
available with the approval of SBL. The Retirement
Value will not be paid as a single cash payment.
RETIREMENT VALUE If applied under settlement options 1, 2, 3, 4, 5,
6, or 7 the Retirement Value will be equal to the
Certificate Value. Amounts applied under Options 5,
6, and 7 will continue to be subject to withdrawal
charges on nonscheduled amounts withdrawn. The free
withdrawal provision will not be applicable to
these nonscheduled amounts withdrawn.
RETIREMENT DATE The Retirement Date is shown in the Certificate
Specifications. In some cases, the Retirement Date
may be earlier than 10 years after the Certificate
Date. In this case, the Owner may elect to extend
the Retirement Date up to 10 years after the
Certificate Date. In all other cases, the
Retirement Date may only be changed with SBL's
approval.
DEATH BENEFIT
BENEFIT AMOUNT SBL will pay a death benefit to the Beneficiary if:
1) due proof, satisfactory to SBL, of the
Participant's death is received at the Home Office;
2) such proof is received prior to the Retirement
Date; and 3) the Participant's age was 75 or
younger at the time of death. The death benefit
will be the greater of 'a' or 'b' where:
a - is the Certificate Value.
b - is the total of all purchase payments
received by SBL less the total of all
Termination Values paid.
If the Participant was older than age 75 as of the
date of death, the death benefit will be
Termination Value.
EFFECT ON CERTIFICATE If applied under one of the settlement options, the
date of death of the Participant will be treated as
the Retirement Date. If taken in cash, this
Certificate will cease to be in force upon payment
of the death benefit.
BENEFICIARY
BENEFICIARY The Beneficiary will receive the benefits, if any,
DESIGNATION under this Policy in the case of the death of the
AND THE WAY Participant while this Certificate is still in
TO CHANGE IT force. The Beneficiary is named in the Statement of
Participant. However, the Beneficiary may be
changed by the Owner during the Participant's
lifetime. To make a change, a written notice,
satisfactory to SBL, must be received at the Home
Office. The change will take effect as of the date
the notice was signed, even if the Participant has
died before SBL receive it, unless SBL has already
paid the benefits. SBL may require this Certificate
for endorsement.
DISTRIBUTION OF More than one Primary Beneficiary may be named. The
BENEFITS share each is to receive may also be specified. The
respective shares will be paid to any Primary
Beneficiary alive at the death of the Participant.
If none survive the Participant, payment will be
made to any Contingent Beneficiaries who are alive.
Surviving Beneficiaries in the same class will
receive equal shares unless otherwise stated.
If no Beneficiary survives the Participant, the
benefits will be paid to the Participant's estate.
If any Beneficiary dies within twenty-four (24)
hours after the Participant, the benefits will be
paid as if the Beneficiary died before the
Participant.
PAYMENT OF ANNUITY BENEFITS
THE WAY BENEFITS Except for the life option, the Owner, during the
MAY BE PAID lifetime of the Participant and 30 days prior to
the Retirement Date, has the right to choose to
have the benefit amount paid in one of the
following ways. In the event of the Participant's
death, the beneficiary may choose one of the
options. To make an election, a written notice,
satisfactory to SBL, must be received at the Home
Office. No election can be put into effect which
requires SBL to make a periodic payment of less
than $25.00.
For settlement options 1, 2, 3, and 4 reference
should be made to the Separate Account portion of
this Certificate. In that portion the definitions
of a guaranteed and a variable annuity, and the
basis for the value of the second and later
installments are given.
-5-
<PAGE>
PAYMENT OF BENEFITS
(CONTINUED)
SETTLEMENT OPTIONS 1. Life Option: Paid in annual, semiannual,
quarterly or monthly installments during the
lifetime of the payee. Table A shows the
minimum first monthly installment for each
$1,000 of benefit amount applied. This option
will only be available with SBL's approval.
2. Life with Fixed Period Option: Paid in annual,
semiannual, quarterly, or monthly installments.
A period of five, ten, fifteen, or twenty years
may be specified. Installments will be paid for
the length of the period, and after for as long
as the payee lives. Table A shows the minimum
first installment payable monthly for each
number of years for $1,000 of benefit amount
applied.
3. Life with Unit Refund Option: Paid in annual,
semiannual, quarterly, or monthly installments.
Installments will be paid for the length of the
period obtained by dividing the benefit amount
by the first installment, and for as long after
as the payee lives. Table A shows the minimum
first monthly installment for each $1,000 of
benefit amount applied.
4. Joint and Last Survivor Option: Paid in annual,
semiannual, quarterly, or monthly installments
to the last death of the payee and a named
secondary payee. Table B shows the minimum
first monthly installment for each $1,000 of
benefit amount applied.
5. Fixed Period Option: Paid in annual,
semiannual, quarterly, or monthly installments
for a set number of years. Any number of years
of at least 5 and not over 20 may be specified.
For variable annuity installments, the initial
installment will be the product of 'a' times
'b' where:
a - is the accumulation unit value for the day
the installment is paid.
b - is the number of accumulation units applied
to the option divided by the number of
payments selected.
The required number of accumulation units will
be withdrawn to pay this installment.
Subsequent installments will be calculated from
the number of accumulation units not yet
redeemed and number of payments remaining in
the selected period.
For a guaranteed annuity, the installments will
be determined by SBL and will reflect an
effective annual interest rate of not less than
2.5%.
6. Fixed Installment Option: Paid in equal annual,
semiannual, quarterly, or monthly installments.
The installments must be not less than $6.25
per $1,000 applied. Installments will be paid
until the amount applied, adjusted daily for
investment results and expense charges, is
paid. On benefit amounts placed in the General
Account, interest on the unpaid balance will be
paid at an effective yearly rate of not less
than 2.5% per year. The last installment will
be the remaining amount left with SBL after the
last full installment is paid. As of the
effective date of the settlement option the
size of the installment must be such that the
installments are expected to extend for at
least five years and not over twenty years.
7. Deposit Option: Left on deposit with SBL in the
General Account at an effective yearly interest
rate of not less than 2% per year. Interest
will be paid annually, semiannually, quarterly
or monthly as elected. Withdrawal of the amount
left on deposit may be made at any time.
Withdrawals from the amount left on deposit
will be subject to withdrawal charges.
-6-
<PAGE>
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM INITIAL MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS APPLIED
Age of Option One Option Two Option Three
Payee Life Year Fixed Period Ends Unit
Only 5 10 15 20 Refund
- --------------------------------------------------------------------------------
MALE PAYEE
55 4.45 4.44 4.41 4.37 4.30 4.31
56 4.52 4.51 4.48 4.43 4.36 4.37
57 4.60 4.59 4.56 4.50 4.42 4.44
58 4.68 4.67 4.64 4.57 4.47 4.51
59 4.77 4.76 4.72 4.65 4.53 4.58
60 4.87 4.85 4.81 4.72 4.60 4.65
61 4.97 4.95 4.90 4.80 4.66 4.73
62 5.07 5.05 5.00 4.89 4.72 4.82
63 5.19 5.17 5.10 4.97 4.79 4.90
64 5.31 5.29 5.20 5.06 4.85 5.00
65 5.44 5.41 5.32 5.15 4.92 5.09
66 5.58 5.55 5.44 5.24 4.98 5.20
67 5.73 5.69 5.56 5.34 5.05 5.30
68 5.89 5.84 5.69 5.44 5.11 5.41
69 6.06 6.00 5.82 5.54 5.17 5.53
70 6.24 6.17 5.97 5.64 5.23 5.66
71 6.43 6.35 6.11 5.74 5.29 5.79
72 6.63 6.53 6.26 5.84 5.35 5.93
73 6.84 6.73 6.41 5.94 5.40 6.07
74 7.07 6.94 6.57 6.04 5.45 6.22
75 7.31 7.16 6.74 6.14 5.50 6.38
FEMALE PAYEE
55 4.11 4.11 4.10 4.08 4.05 4.05
56 4.17 4.17 4.16 4.14 4.10 4.10
57 4.23 4.23 4.22 4.19 4.15 4.15
58 4.30 4.29 4.28 4.25 4.21 4.21
59 4.37 4.36 4.35 4.32 4.27 4.27
60 4.44 4.44 4.42 4.38 4.33 4.34
61 4.52 4.51 4.49 4.45 4.39 4.40
62 4.60 4.59 4.57 4.52 4.45 4.47
63 4.69 4.68 4.65 4.60 4.52 4.55
64 4.78 4.77 4.74 4.68 4.58 4.63
65 4.88 4.87 4.84 4.76 4.65 4.71
66 4.99 4.98 4.93 4.85 4.72 4.80
67 5.10 5.09 5.04 4.94 4.79 4.89
68 5.23 5.21 5.15 5.04 4.86 4.99
69 5.36 5.34 5.27 5.14 4.94 5.09
70 5.50 5.48 5.39 5.24 5.01 5.20
71 5.65 5.62 5.53 5.35 5.08 5.32
72 5.82 5.78 5.67 5.46 5.15 5.44
73 5.99 5.95 5.81 5.57 5.22 5.57
74 6.19 6.14 5.97 5.68 5.29 5.71
75 6.39 6.33 6.13 5.80 5.35 5.86
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
- --------------------------------------------------------------------------------
TABLE B
SETTLEMENT OPTION FOUR
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF PROCEEDS APPLIED
AGE OF AGE OF MALE PAYEE
FEMALE PAYEE 55 60 62 65 70 75
- --------------------------------------------------------------------------------
Until last Death 55 3.85 3.93 3.95 3.99 4.03 4.06
of Two Payees 60 3.98 4.10 4.15 4.21 4.29 4.35
per $1,000 of 62 4.03 4.18 4.23 4.30 4.40 4.48
benefit amount 65 4.11 4.28 4.35 4.45 4.59 4.69
70 4.21 4.45 4.54 4.69 4.92 5.11
75 4.29 4.58 4.71 4.91 5.26 5.58
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined by multiplying the monthly installments by
11.812853, 5.9572227, and 2.9914196 respectively.
-7-
<PAGE>
PAYMENT OF BENEFITS
(CONTINUED)
ADDITIONAL Other reasonable provisions can be made for the
PROVISIONS payment of the benefits under this Certificate. Any
FOR PAYMENT such provisions must be agreed to by SBL.
OF BENEFITS
Annuity Settlement options shall be available only
with the consent of SBL if the proposed payee be
other than a natural person not acting as
fiduciary.
The Effective Date of a Settlement Option for
options 1 through 6 is the date the first
installment is due to the payee. For option 7 the
first interest payment will be made at the end of
the period selected, with the effective date being
the date at the beginning of the period. If the
Owner has not made any election to the contrary and
the Participant is then living, Settlement Option 2
with a fixed period of 10 years, will become
effective on the Retirement Date. The amount
applied will be the Retirement Value.
Installments required to be paid, if any, after the
death of a payee under a settlement option will be
paid as due to the surviving or next succeeding
payee. The guaranteed rates for options 1 through 4
are based on interest credited at 3.5% Per Year and
the 1983 Table A individual annuity mortality table
updated for 45 years with factors from Projection
Scale G. For Options 5, 6, and 7 the present value
will be the amount remaining with SBL.
For guaranteed annuity settlements, additional
interest may be paid on the amount applied under
the various settlement options. The amount and
method of payment of the additional interest will
be determined by SBL.
On the Effective Date of a Settlement Option, the
settlement option rates being used for single
payment immediate annuity policies of this class,
which are then being issued by SBL, may produce a
higher first installment than guaranteed in this
Certificate. If this is the case, the Owner may
elect to have SBL use the rates from the single
payment immediate annuity policies then being
issued by SBL. This election can be made only if
permitted by the laws of the state where the
election is made.
At any time, any amount remaining under option 5,
6, or 7 may be withdrawn. A Withdrawal Charge may
be made if 5 years have not elapsed from the
Effective Date of the Settlement Option. The
Surrender Charge will be calculated with a free
withdrawal amount of zero. Refer to the
Nonforfeiture option of this Policy for details. If
the amount withdrawn is at least $2,000, it may be
applied to any one of the first four options.
When any of the options 1, 2, 3, or 4 are elected,
the Owner may choose to increase the installments.
Such election 1) must be made in writing to SBL
before the Effective Date of the Settlement Option;
and 2) must be accompanied by a cash purchase
payment to provide the additional installments. A
cash purchase payment of $1,030 is required to
increase the installments by the amount indicated
per $1,000 of benefit amount shown in Tables A and
B. Cash purchase payments applied under this
provision which produce a total installment of more
than 2 times the installment produced using the
benefit amount alone must be approved by SBL.
-8-
<PAGE>
PURCHASE PAYMENTS
PAYMENT OF
PURCHASE PAYMENTS This Certificate will be in force when the first
purchase payment is received by SBL. Purchase
payments are payable from the Certificate Date to
the Retirement Date or to the death of the
Participant. The amount of a purchase payment may
be increased or decreased from the prior payment
amount. A purchase payment may not be less than
$25.00 without the approval of SBL. The total of
the purchase payments received under this
Certificate may not exceed $100,000 without the
approval of SBL. Any excess purchase payments will
be subject to conditions that SBL may apply at that
time.
All purchase payments are payable at the Home
Office of SBL. If the Owner stops paying purchase
payments and this Certificate is not terminated,
the Owner may resume paying purchase payments
subject to the conditions above.
Purchase payment intervals are determined by the
mode selected by the Owner and shown on the
Certificate Specifications pages. The mode of the
purchase payment may be changed by notifying SBL in
writing.
VALUATION
ACCUMULATIONS OF The purchase payments received by SBL for this
PURCHASE PAYMENTS Certificate from the Certificate Date to the
ALLOCATED TO THE Retirement Date will be applied to increase the
GENERAL ACCOUNT Certificate Value of this Certificate. The purchase
payments will be deposited in the General Account
of SBL and the Series of the Separate Account of
SBL as directed by the Owner. The investments of
the General Account of SBL meet the requirements
for the investment of life and annuity reserves
under the insurance code of the state where the
Policy was issued.
The Certificate Value in the General Account on any
date will be the Certificate Value in the General
Account on the previous anniversary date of the
Certificate increased with interest to the date and
increased or decreased by the following events
occurring after the anniversary date in regard to
this Certificate:
1. Purchase payments received and allocated to
the General Account.
2. Benefits paid from the General Account.
3. Deductions from the Certificate Value in the
General Account for the various charges and
fees of the Certificate.
4. Transfers of part of the Certificate Value in
the General Account to the Separate Account.
5. Transfers of part of the Certificate Value in
the Separate Account to the General Account.
6. Interest on items 1 through 5 from the
transaction date to the date.
The effective yearly rate of interest used to
calculate the Certificate Value in the General
Account will be at least the amount shown in the
Guaranteed Interest Rate section of the Certificate
Specifications. SBL may, at the decision of its
Board of Directors, credit interest in excess of
that guaranteed. The amount and method of crediting
this excess interest will be determined by SBL.
The transfers noted in items 4 and 5 cannot be made
unless specific allowance is made for them in the
Policy and Certificate Specifications pages.
SEPARATE ACCOUNT In addition to the General Account Certificate
Value, the Certificate Value will be increased by
the dollar value of the accumulation units in the
Separate Account purchased for this Certificate.
STATE PREMIUM TAXES The Certificate Value will be reduced by any state
premium taxes which SBL is required to pay on
behalf of this Certificate.
-9-
<PAGE>
NONFORFEITURE
CERTIFICATE VALUE The Certificate Value will be as explained in the
Valuation portion of this Certificate. SBL will
notify the Owner annually of the Certificate Value
to date. This Certificate will cease to have a
Certificate Value after termination of the Policy,
after termination of this Certificate, death
benefits are paid, or the Effective Date of a
Settlement Option.
TERMINATION VALUE The Owner may terminate any Certificate or withdraw
part of the Certificate Value any time prior to the
Retirement Date. The request for termination or
withdrawal must be sent to the Home Office of SBL
in writing. When SBL receives the request it will
determine a Termination Value and pay the
Termination Value to the Owner.
The Termination Value will be the value asked to be
withdrawn reduced by a Withdrawal Charge. The
Withdrawal Charge will be the product of 'a' times
'b' where:
a - is the value asked to be withdrawn.
b - is the appropriate Withdrawal Charge Factor
shown on the Certificate Specifications
pages.
The value of 'a' in the above product will be
reduced if, at the time the request is processed,
either or both of 1 or 2 occur:
1. The value asked to be withdrawn is greater
than the total of the following:
i. total purchase received by SBL for this
Certificate;
ii. plus any amount by which 'a' was
reduced because of item 1 or 2 at the
time of any prior withdrawal from this
Certificate;
iii. less total prior values asked to be
withdrawn from this Certificate.
2. This is the first withdrawal processed this
year for the Certificate and at the time more
than one year has elapsed from the
Certificate Date.
For item 1, 'a' will be the value defined in item
1. For item 2, 'a' will be reduced by the Free
Withdrawal Amount. The Free Withdrawal Amount is
the product of the Certificate Value, at the time
the request is processed, times the Free Withdrawal
Factor shown on the Certificate Specifications
pages. In the case where both item 1 and 2 apply,
'a' will be reduced by the greater of the two
possible reductions. In no case will the Withdrawal
Charge be less than zero.
If a request to withdraw part of the Certificate
Value does not state which of the Series or the
General Account the value is to be withdrawn from,
SBL will deplete the Certificate Value of the
Series in the descending order listed under the
Separate Account section of the Certificate
Specifications pages. The General Account will be
the last to be depleted.
When part of the Certificate Value is withdrawn,
the Certificate Value will be reduced by the value
asked to be withdrawn.
If the value asked to be withdrawn would reduce the
Certificate Value by 90% or more, SBL may terminate
this Certificate and pay the Owner or Participant
with the approval of the Owner the total
Termination Value.
The Termination Value will always equal or exceed
the minimum required by law.
This Certificate will cease to be in force upon
payment of the total Termination Value.
-10-
<PAGE>
NONFORFEITURE
(CONTINUED)
TERMINATION VALUE Payment of any Termination Value from the Separate
(CONTINUED) Account will be made within 7 days of the day the
request is received at the Home Office of SBL,
except that a day on which one of the following
events occur will not be counted as one of the 7:
1. The New York Stock Exchange is closed except
for holidays or weekends.
2. The Securities and Exchange Commissions has
determined that trading on the New York Stock
Exchange is restricted.
3. The Securities and Exchange Commission
permits postponement and so orders.
4. An emergency exists, as defined by the
Securities and Exchange Commission, so that
valuation of the assets or disposal of
securities is not reasonably practicable.
The payment of any Termination Value from the
General Account may be deferred by SBL for the
amount of time permitted by law. The payment will
not be deferred for more than six months from the
day the request is received by SBL.
FORCED TERMINATION SBL may, at its option, terminate a certificate and
pay the Certificate Value to the Owner whenever the
following conditions exist for both the Certificate
Value in the General and Separate Accounts.
For the General Account prior to or at the
Retirement Date the following two (2) conditions
exist:
1. purchase payments have not been received by
SBL for the Certificate for two full years.
2. the Certificate Value in the General Account
projected to the Retirement Date at the
guaranteed interest rate for the Certificate
would produce a monthly installment of less
than $20 under the settlement option that
will be in effect at the Retirement Date
under this Certificate.
For the Separate Account when either condition 1 or
2 exist:
1. if at the Retirement Date the Certificate
Value in the Separate and General Accounts is
less than $2,000, or would provide a total
initial annuity installment of less than $20
per month under the settlement option which
will be in effect at the Retirement Date.
2. if prior to the Retirement Date no purchase
payments have been received for the
Certificate for a period of two full years
and both of the following conditions exist.
a. the total purchase payments received for
the Certificate reduced to reflect any
partial withdrawals from the Certificate
Value is less than $2,000.
b. the total Certificate Value of the
General and Separate Account is less than
$2,000.
SEPARATE ACCOUNT
PROVISIONS
INTRODUCTION This portion of this Certificate contains the
provisions relating to the Separate Account of SBL
to which the Owner may allocate purchase payments.
The Separate Account and Series are shown in the
Separate Account section of the Policy and
Certificate Specifications pages.
OWNERSHIP OF SBL has exclusive and absolute ownership and
SEPARATE ACCOUNT control of the assets of the Separate Account. The
Owner of the Policy is entitled to vote at meetings
of Owners of policies of this class as required
under the Investment Company Act of 1940. At his
option the Owner may solicit the Participant's
vote. SBL will send the Owner at least once each
year a report stating the number of accumulation
units credited to each Participant's account, a
statement of investments held by each Fund, proxy
material, and a voting form.
SEPARATE ACCOUNT The Separate Account which is invested in the
DEFINED Series, as shown on the Certificate Specifications
pages, has been established by SBL under the laws
of Kansas. The Separate Account is a unit
investment trust. When used in this Policy,
Separate Account will mean the assets of SBL in the
Separate Account shown on the Certificate
Specifications Pages. The Separate Account was
established by SBL to provide variable benefits for
this class of policies. The income, gains, and
losses from the Separate Account will be charged to
it, without regard to the experience of other
Separate Accounts.
FUNDS DEFINED The Series of the Separate Account each are
invested wholly in the Series of the Fund(s) as
shown on the Certificate Specifications pages. The
Funds are diversified, open-end management
investment companies registered under the
Investment Company Act of 1940.
GUARANTEED ANNUITY A guaranteed annuity is an annuity with
DEFINED installments which are guaranteed as to dollar
amount throughout the payment period. The reserves,
required by law to be maintained to fund the
installments will be held in the General Account of
SBL. The installments for a guaranteed annuity must
be at least $25.00.
-11-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS (CONTINUED)
VARIABLE ANNUITY In contrast, a variable annuity is an annuity with
DEFINED installments varying with the net investment
results of a Series within the Separate Account.
The first installment is determined by using the
values in Table A or B and settlement options 1, 2,
3, or 4 of the Payment of Benefits portion of the
Policy. Also, other reasonable provisions for the
first installment can be made. Any such provision
must be agreed to by SBL.
After the first installment is determined for a
particular Series the number of annuity units is
determined by dividing the first installment by the
annuity unit value for that day for each Series
from which installments are to be made. The amount
of each subsequent installment is that number of
annuity units for the Series multiplied by the
annuity unit value for the Series for the day the
installment is due. The sum of the installments for
all Series and the General Account is the total
installment the payee will receive.
The first installment from each Series must be at
least $25.00. If at any time any installment from
any Series becomes less than $25.00, SBL may change
the frequency of installments. The change will be
such as will result in installments of at least
$25.00.
SBL guarantees that the dollar amount of any
variable annuity installment will not be affected
by the mortality experience of the payees. SBL also
guarantees that the variable annuity installment
will not be affected by the actual expenses of
administering the benefits.
For the life contingent variable annuity settlement
options 1, 2, 3, or 4 annuity units will be the
accounting device used to calculate the periodic
installments. For nonlife contingent variable
annuity settlement options 5, 6, and 7 accumulation
units will be the accounting device. Accumulation
units will be redeemed at current value to pay the
periodic installments until the benefit amount
applied adjusted for investment experience and
expense charges is depleted.
At the time of election of a Settlement Option, the
Owner may specify how the total benefit amount for
each payee is to be allocated between the Series
and the General Account for calculation of the
first installments. If the allocation is not
specified, the benefit amount as it then exists
among the Series and the General Account will be
applied to calculate the first installment.
VALUING FIRST For calculating the first installment for an
ANNUITY annuity, the value of the accumulation units
INSTALLMENT applied to settlement options 1, 2, 3, or 4, will
be the value at the end of the second day before
the first installment is paid. For settlement
options 5, 6, and 7, the value of the accumulation
units applied will be the value on the day the
installment is paid.
INVESTMENT FACTORS The Gross Investment Factor (GIF) for any day for a
Series of the Separate Account is equal to value
'a' divided by value 'b'. For each Series, value
'a' is the sum of the net asset value per share of
the Series of the Fund(s) in which the Series is
invested at the close of business on that day plus
the dividends or other distributions per share on
that day. Value 'b' is the net asset value per
share at the close of business on the preceding
day. On days when the New York Stock Exchange is
not open for trading, the GIF is one. No purchase,
benefit, or installment payments will be made on
days when the New York Stock Exchange is closed.
The Net Investment Factor (NIF) for any day for a
Series is the GIF for the Series less the Actuarial
Risk Fee (ARF) and less a deduction for any
increases in the income tax expense for the Series
for the day. The ARF is shown on the Certificate
Specifications pages.
-12-
<PAGE>
SEPARATE ACCOUNT
PROVISIONS (CONTINUED)
ACCUMULATION The value of an accumulation unit for each Series
UNIT VALUES of the Separate Account on any day is equal to 'a'
divided by 'b'. For each Series, 'a' is the net
asset value (NAV) of the shares of the Series of
the Fund(s) in which the Series is invested reduced
by:
1. The product of the previous day's NAV
multiplied by the ARF.
2. Any deduction for provision for federal income
tax.
For each Series, 'b' is the number of accumulation
units of the Series at the beginning of the day.
The value of an accumulation unit may increase or
decrease.
Dividend and other cash distributions made by the
Series of the Fund(s) to the Series will be
reinvested in additional mutual fund shares of the
same Series of the Fund(s) and the value of an
accumulation unit will be increased. The Charges
and Fees, explained in that section of the
Certificate Specifications pages will result in the
sale of shares of the Fund and a reduction of the
accumulation units credited to this Certificate.
Purchase payment amounts allocated to each Series
will be used by SBL to purchase additional
accumulation units of that Series for each
certificate.. The number of units purchased will be
the amount allocated to the Series divided by the
value of one accumulation unit for the Series on
the day the purchase payment is received by SBL.
Benefit payments because of death or by withdrawal
of part or all of the Termination Value will result
in a reduction of the number of accumulation units
credited to each Certificate. The reduction will be
sufficient to generate the necessary Certificate
Value change.
ANNUITY UNIT VALUES The annuity unit value associated with a Series of
the Separate Account for any day is determined by
multiplying the annuity unit value for the
immediately preceding day by the product of 'a'
times 'b'.
a - is the NIF for the Series for the second day
preceding the date for which the value is
being determined.
b - is the daily Interest Neutralization Factor
(INF) of .9999057540.
The INF is required to neutralize the assumed
interest rate built into Tables A and B. The value
of an annuity unit may increase or decrease. The
first annuity unit value and the date it was set
for each Series is shown in the Separate Account
Section of the Policy and Certificate
Specifications pages.
SPLITTING UNITS SBL has the right to split the value of any annuity
or accumulation unit if such is deemed to be in the
best interest of the Owner, the Participant, the
Annuitant and SBL. Any split made will be made
equitably and will have no material effect on the
benefits and provisions of the Policy.
FLUCTUATION The Certificate Value and Termination Value of the
OF VALUES Separate Account may be less than the total value
of the purchase payments allocated to it for this
Certificate adjusted for withdrawals, transfers,
and benefits. SBL does not guarantee the investment
performance of the Series of the Fund(s) in which
the Separate Account is invested.
-13-
<PAGE>
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Certificate as of its Issue Date or, if later,
the date shown below.
FEES & CHARGES The "Fees & Charges section of the Certificate is
amended by adding the following: The $30.00 per
year fee will not be charged during a Certificate
Year, if: (1) the Certificate has been in force for
eight Certificate Years or more; and (2)
Certificate Value on December 31 of that Year (or
in the event the Certificate is terminated, on that
date) is $25,000 or more.
BENEFIT AMOUNT The entire "Benefit Amount" section of the
Certificate is deleted and replaced with the
following: If the Participant dies prior to the
Retirement Date, a Death Benefit will be paid to
the Beneficiary when: (1) due proof of death,
satisfactory to SBL; and (2) instructions with
regard to payment are received at the Home Office.
If the age of the Participant was 75 or less on the
Certificate Date, the Death Benefit will be the
greatest of: (1) the sum of all purchase payments,
less any premium tax due or paid by SBL and less
the sum of all Termination Values paid; or (2) the
Certificate Value on the date due proof of death
and instructions with regard to payment are
received at the Home Office, less any premium tax
due or paid by SBL; or (3) the Stepped-Up Death
Benefit described below.
The Stepped-Up Death Benefit is:
1. the largest Certificate Value on any
Certificate Anniversary that is both an exact
multiple of six and occurs prior to the
Participant reaching age 76; plus
2. purchase payments received since the applicable
sixth Certificate
Anniversary; less
3. reductions caused by Termination Values paid
since the applicable sixth Certificate
Anniversary; less
4. premium tax due or paid by SBL.
For certificates which have been in effect for six
Certificate Years or more as of May 1, 1991, the
Certificate Value on the Certificate Anniversary
immediately prior to May 1, 1991, will be used as
the sixth Certificate Anniversary in determining
the Stepped-Up Death Benefit.
If the age of the Participant on the Certificate
Date was 76 or more, the Death Benefit will be the
greater of: (1) the sum of all purchase payments,
less premium tax due or paid by SBL and less the
sum of all Termination Values paid; or (2) the
Certificate Value on the date due proof of death
and instructions regarding payment are received at
the Home Office, less premium tax due or paid by
SBL.
<PAGE>
BENEFIT AMOUNT If a lump sum payment is requested, the payment
will be made in accordance with any laws and
regulations that govern the payment of Death
Benefits.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ------------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
NOTICE: CONSULT YOUR TAX ADVISOR PRIOR TO REQUESTING THIS BENEFIT. RECEIPT OF
BENEFITS UNDER THIS ENDORSEMENT MAY BE SUBJECT TO AN IRS 10% PENALTY TAX IN
ADDITION TO ANY INCOME TAX THAT MAY BE DUE.
WITHDRAWAL CHARGE WAIVER
ENDORSEMENT
ENDORSEMENT This Endorsement is attached to and made part of
this Certificate as of: (1) its Certificate Date;
or (2) if later, the date shown below. This
Certificate is changed by adding the following:
WAIVER OF Security Benefit Life Insurance Company ("SBL")
WITHDRAWAL will waive the Withdrawal Charge on any full or
CHARGES partial Withdrawal of Certificate Value if: (1) the
Participant has been confined to a "Hospital" or
"Qualified Skilled Nursing Facility" for at least
90 consecutive days immediately prior to the date
of such Withdrawal and is so confined when the
request to withdraw is received by SBL; (2) such
confinement began after the Certificate Date; and
(3) the request to withdraw is received along with:
(a) a completed claim form; and (b) a written
statement by a licensed physician that certifies
such confinement is a medical necessity and is due
to illness or infirmity. Such written statement
must be approved by SBL.
SBL reserves the right to have the Participant
examined by a physician of SBL's choice and at
SBL's expense to determine if the Owner is eligible
for the Withdrawal Charge Waiver. SBL further
reserves the right to require the claim form and
written statement described in 3(a) and (b) above
with each request to withdraw.
DEFINITIONS A "Hospital" is: (1) an institution that is
licensed as such by the Joint Commission of
Accreditation of Hospitals; or (2) any lawfully
operated institution that provides: (a) in-patient
treatment of sick and injured persons through
medical, diagnostic and surgical facilities
directed by a staff of physicians; and (b) provides
24 hour nursing services. A "Qualified Skilled
Nursing Facility" must be licensed by the state to
provide, on a daily basis, convalescent or chronic
care for in-patients who, by reason of illness or
infirmity, are not able to properly care for
themselves.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- --------------------------------
Endorsement Effective Date
(If Other Than Certificate Date)
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 2, 1996, with respect to the financial
statements of Security Benefit Life Insurance Company and the financial
statements of Variflex included in the Registration Statement on Form N-4 and
the related Statement of Additional Information accompanying the Prospectus of
Variflex and the Supplement dated July 1, 1996 to the Prospectus dated July 1,
1996 of Variflex.
ERNST & YOUNG LLP
Ernst & Young LLP
Kansas City, Missouri
June 24, 1996
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 911
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> .72
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 10
<NAME> SERIES N
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,340
<INVESTMENTS-AT-VALUE> 5,597
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,597
<PAYABLE-FOR-SECURITIES> 5,590
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7
<TOTAL-LIABILITIES> 5,597
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 522
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 257
<NET-ASSETS> 5,590
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (27)
<NET-INVESTMENT-INCOME> (27)
<REALIZED-GAINS-CURRENT> 11
<APPREC-INCREASE-CURRENT> 257
<NET-CHANGE-FROM-OPS> 241
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 543
<NUMBER-OF-SHARES-REDEEMED> 18
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 525
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> .73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 11
<NAME> SERIES O
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 9,055
<INVESTMENTS-AT-VALUE> 9,756
<RECEIVABLES> 0
<ASSETS-OTHER> 9,756
<OTHER-ITEMS-ASSETS> 9,755
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 9,756
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 839
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 701
<NET-ASSETS> 9,755
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (39)
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 60
<APPREC-INCREASE-CURRENT> 701
<NET-CHANGE-FROM-OPS> 722
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 873
<NUMBER-OF-SHARES-REDEEMED> 34
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 839
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 1.71
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.62
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Thomas R. Clevenger, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of June 1996.
THOMAS R. CLEVENGER
--------------------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 14th day of June 1996.
JANA R. SELLEY
--------------------------------------------
Notary Public
My Commission Expires:
JUNE 14, 1996
- -------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Sister Loretto Marie Colwell, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank, and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by SECURITY BENEFIT LIFE INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT
(VARIFLEX) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June 1996.
SISTER LORETTO MARIE COLWELL
--------------------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 10th day of June 1996.
JULIA A. SMIRHA
--------------------------------------------
Notary Public
My Commission Expires:
JULY 7, 1996
- -------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John C. Dicus, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June 1996.
JOHN C. DICUS
--------------------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 10th day of June 1996.
MARY R. FALTER
--------------------------------------------
Notary Public
My Commission Expires:
JANUARY 30, 2000
- ----------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Melanie S. Fannin, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of June 1996.
MELANIE S. FANNIN
--------------------------------------------
Melanie S. Fannin
SUBSCRIBED AND SWORN to before me this 17th day of June 1996.
NANCY A. GERVAL
--------------------------------------------
Notary Public
My Commission Expires:
OCT. 2, 1997
- --------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of June, 1996.
HOWARD R. FRICKE
--------------------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 7th day of June, 1996.
DEBORAH D. PRYER
--------------------------------------------
Notary Public
My Commission Expires:
APRIL 11, 1999
- --------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, W. W. Hanna, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of June 1996.
W. W. HANNA
--------------------------------------------
W. W. Hanna
SUBSCRIBED AND SWORN to before me this 11th day of June, 1996.
CAROLYN R. SOUDERS
--------------------------------------------
Notary Public
My Commission Expires:
JULY 21, 1999
- -------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of June, 1996.
JOHN E. HAYES, JR.
--------------------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 12th day of June, 1996.
LINDA A. FRICKE
--------------------------------------------
Notary Public
My Commission Expires:
DECEMBER 28, 1999
- -----------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Laird G. Noller, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June, 1996.
LAIRD G. NOLLER
--------------------------------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 10th day of June, 1996.
ANNE C. REINKING
--------------------------------------------
Notary Public
My Commission Expires:
MARCH 13, 2000
- -----------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Frank C. Sabatini, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June, 1996.
FRANK C. SABATINI
--------------------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 10th day of June, 1996.
JOAN B. ANDERSON
--------------------------------------------
Notary Public
My Commission Expires:
JULY 20, 1996
- -------------
<PAGE>
POWER OF ATTORNEY
-----------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Robert C. Wheeler, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank, and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SBL VARIABLE ANNUITY ACCOUNT (VARIFLEX) with like
effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June, 1996.
ROBERT C. WHEELER
--------------------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 10th day of June, 1996.
NANCY G. DEBACKER
--------------------------------------------
Notary Public
My Commission Expires:
DECEMBER 15, 1999
- -----------------
