<PAGE>
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. 20 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Post-Effective Amendment No. 19 |X|
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(Check appropriate box or boxes)
VARIFLEX SEPARATE ACCOUNT (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:
(785) 431-3000
Copies to:
Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group, Inc. 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
|_| on November 1, 1998 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|X| on November 1, 1998, pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on November 1, 1998, pursuant to paragraph (a)(2) 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.
Title of securities being registered: Interests in a separate account under
individual and group flexible premium deferred variable annuity contracts.
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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
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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1. Cover Page........................................................... Cover Page
2. Definitions.......................................................... Definitions
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; Year 2000
Compliance
(b) Registrant...................................................... Variflex
(c) Portfolio Company............................................... SBL Fund
(d) Fund Prospectus................................................. SBL Fund
(e) Voting Rights................................................... Voting of SBL Fund Shares
(f) Administrators.................................................. N/A
6. Deductions and Expenses.............................................. Charges and Deductions
(a) General......................................................... Other Charges; Administrative Fees; Mortality and
Expense Risk Charge; 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
(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 of SBL Fund Shares; 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
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; Introduction; Tax Status of
Security Benefit and the Separate Account; Income
Taxation of Annuities in General--Non-Qualified
Contracts; Additional Considerations; Qualified
Contracts
13. Legal Proceedings.................................................... N/A
14. Table of Contents for the Statement of Additional Information........ Statement of Additional Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
<S> <C>
15. Cover Page........................................................... Cover Page
16. Table of Contents.................................................... Table of Contents
17. General Information and History...................................... Other Information; Legal Matters
18. Services
(a) Fees and Expenses of Registrant................................. Variations in Charges
(b) Management Contracts............................................ N/A
(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 Purchase Payments
Under Tax-Qualified Retirement Plans; Assignment
23. Financial Statements................................................. Financial Statements
</TABLE>
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VARIFLEX
VARIABLE ANNUITY CONTRACTS
SOLD BY--
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON, TOPEKA, KANSAS 66636-0001
(785) 431-3000
This Prospectus describes the Variflex Variable Annuity Contracts (the
"Variflex Contracts" or "Contracts") offered by Security Benefit Life Insurance
Company ("SBL"). SBL issues the Contracts 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 ("Qualified Contracts") and with plans and trusts
which are not so qualified ("Non-Qualified Contracts"). This Prospectus offers
Contracts which may be purchased with single or multiple purchase payments, with
annuity payments commencing immediately or at some later date. SBL offers the
Contracts 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
fourteen separate series--Growth Series, Growth-Income Series, Money Market
Series, Worldwide Equity Series, High Grade Income Series, Emerging Growth
Series, Global Aggressive Bond Series, Specialized Asset Allocation Series,
Managed Asset Allocation Series, Equity Income Series, High Yield Series, Social
Awareness Series, Value Series and Small Cap Series. Each Series reflects the
investment results of a corresponding series of SBL Fund (the "Fund"), a
registered open-end management investment company. Certain Variflex Series are
not available in all states or under certain Contracts issued prior to November
1, 1998.
Contractowners and Participants may additionally elect to accumulate values,
and receive all or a portion of the benefits in the form of Fixed 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
Contracts and Variflex is free and may be obtained by writing SBL at the address
above or by calling (785) 431-3112 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. The Statement of
Additional Information, as it may be supplemented from time to time, is
incorporated herein by reference. The Table of Contents of the Statement of
Additional Information is set forth at the end of this Prospectus.
The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding companies
that file electronically with the Securities and Exchange Commission.
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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: November 1, 1998 RETAIN FOR FUTURE REFERENCE
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VARIFLEX CONTENTS
PAGE
DEFINITIONS................................................................ 4
SUMMARY OF THE CONTRACT.................................................... 5
Purpose of the Contract.................................................. 5
The Separate Account and SBL Fund........................................ 5
General Account.......................................................... 5
Purchase Payments........................................................ 5
Contract Benefits........................................................ 5
Free-Look Right.......................................................... 5
Charges and Deductions................................................... 6
Contingent Deferred Sales Charge....................................... 6
Mortality and Expense Risk Charge...................................... 6
Administrative Fee..................................................... 6
Premium Tax Charge..................................................... 6
Other Expenses......................................................... 6
Contacting SBL........................................................... 6
SUMMARY OF EXPENSES........................................................ 7
CONDENSED FINANCIAL INFORMATION............................................ 9
SECURITY BENEFIT LIFE INSURANCE COMPANY AND VARIFLEX....................... 13
Security Benefit Life Insurance Company.................................. 13
Year 2000 Compliance..................................................... 13
Variflex................................................................. 13
SBL FUND................................................................... 14
VARIFLEX CONTRACTS......................................................... 15
Purpose of the Contracts................................................. 15
Types of Variflex Contracts.............................................. 15
Contract Application and Purchase Payments............................... 16
Allocation of Purchase Payments.......................................... 16
Crediting of Accumulation Units.......................................... 16
Dollar Cost Averaging Option............................................. 17
Asset Reallocation Option................................................ 17
Transfer of Contract Value............................................... 18
Contract Value........................................................... 18
Determination of Contract Value.......................................... 18
Contractowner Inquiries.................................................. 19
CHARGES AND DEDUCTIONS..................................................... 19
Contingent Deferred Sales Charge......................................... 19
Hospital/Nursing Home Waiver........................................... 19
Other Charges............................................................ 20
Administrative Fee..................................................... 20
State Premium Taxes.................................................... 20
Mortality and Expense Risk Charge...................................... 20
Charges for Taxes...................................................... 20
Sequential Deduction of Fees............................................. 20
Variations in Charges.................................................... 21
Guarantee of Certain Charges............................................. 21
SBL Fund Expenses........................................................ 21
DISTRIBUTIONS UNDER THE CONTRACT........................................... 21
Accumulation Period...................................................... 21
Full and Partial Withdrawals........................................... 21
Systematic Withdrawals................................................. 22
Free-Look Right........................................................ 22
Death Benefit During Accumulation Period............................... 22
Death of the Annuitant................................................. 23
Loans Available from Certain Qualified Contracts....................... 24
Constraints on Distributions from Certain Section 403(b)
Annuity Contracts.................................................... 25
Annuity Period........................................................... 25
Annuity Provisions..................................................... 25
Election of Annuity Commencement Date and Form of Annuity.............. 25
Non-Qualified Contracts.............................................. 25
Qualified Contracts.................................................. 25
Allocation of Benefits................................................. 26
Optional Annuity Forms................................................. 26
Value of Variable Annuity Payments:
Assumed Investment Rates............................................. 27
Restrictions Under the Texas Optional Retirement Program............... 27
FEDERAL TAX MATTERS........................................................ 27
Introduction............................................................. 27
Tax Status of SBL and the Separate Account............................... 28
General................................................................ 28
Charge for SBL Taxes................................................... 28
Diversification Standards.............................................. 28
Income Taxation of Annuities in General - Non-Qualified Contracts........ 28
Surrenders or Withdrawals Prior to the Annuity Commencement Date....... 29
Surrenders or Withdrawals On or After the Annuity Commencement Date.... 29
Penalty Tax on Certain Surrenders and Withdrawals...................... 29
Additional Considerations................................................ 29
Distribution-at-Death Rules............................................ 29
Gift of Annuity Contracts.............................................. 30
Contracts Owned by Non-Natural Persons................................. 30
Multiple Contract Rule................................................. 30
Possible Tax Changes................................................... 30
Transfers, Assignments or Exchanges of a Contract...................... 30
Qualified Contracts...................................................... 30
Section 401............................................................ 31
Section 403(b)......................................................... 32
Section 408 and Section 408A........................................... 32
Section 457............................................................ 33
Rollovers.............................................................. 33
Tax Penalties.......................................................... 34
Withholding............................................................ 34
DISTRIBUTOR OF THE CONTRACTS............................................... 34
OTHER INFORMATION.......................................................... 35
Voting of SBL Fund Shares................................................ 35
Substituted Securities................................................... 35
Reports to Owners........................................................ 35
Performance Information.................................................. 36
THE GENERAL ACCOUNT........................................................ 36
Financial Statements..................................................... 37
STATEMENT OF ADDITIONAL INFORMATION........................................ 37
APPENDIX A - IRA Disclosure Statement
APPENDIX B - Roth IRA Disclosure Statement
APPENDIX C - Security Benefit Life Insurance Company Fixed and
Variable Annuity SIMPLE IRA Disclosure Statement
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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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DEFINITIONS
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 the Contract is first purchased
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--A unit of measure used to calculate the value of a
Contractowner's or Participant's interest in Variflex during the Accumulation
Period. It is also used to calculate variable annuity payments under Annuity
Options 5, 6 and 8. 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 scheduled to
begin.
BENEFICIARY--For Contracts issued on or after November 1, 1998, the
beneficiary is the first person on the following list who is alive on the date
of the Owner's death: the Owner; joint Owner; primary beneficiary; secondary
beneficiary; annuitant; or if none of the above are alive, the Owner's estate.
For a Contract issued prior to November 1, 1998, the beneficiary is the primary
beneficiary; secondary beneficiary; or if none of the above are alive, the
Annuitant's estate.
CONTRACTOWNER OR OWNER--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 Contract Date is shown in the Contract or Certificate.
Annual Contract anniversaries are measured from the Contract Date.
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.
FIXED 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.
GENERAL ACCOUNT--An account that is part of SBL's general account in which
all or a portion of the Contract Value may be held for accumulation at fixed
rates of interest (which may not be less than 3 percent) declared by SBL
periodically at its discretion.
GROUP ALLOCATED CONTRACT--A master agreement between the Contractowner and
SBL under which a Participant Account is established for Participants under the
Plan.
GROUP UNALLOCATED CONTRACT--A group version of the Variflex Contracts under
which individual accounts are not established for each Participant, but instead,
all Accumulation Units are credited to one accumulation account.
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.
PARTICIPANT--A person for whom or with respect to whom purchase payments are
made under a Group Allocated Contract.
PARTICIPANT ACCOUNT--An individual account which is established for a
Participant to record Contract Value for the Participant under a Group Allocated
Contract.
PLAN--The employer-sponsored retirement plan, annuity purchase arrangement,
or deferred compensation program for which the Contract is issued. To the extent
provided by the Plan, any rights that may be exercised by a Participant under
the Group Allocated Contract may instead be exercised by the Owner or a Plan
representative.
PURCHASE PAYMENT--A payment applied to a Variflex Contract.
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.
SEPARATE ACCOUNT OR VARIFLEX--Variflex is a separate account of SBL that
consists of accounts, referred to as Series, each of which invests in a
corresponding series of the SBL Fund.
VALUATION DATE--Each date on which Variflex is valued, which currently
includes each day that SBL is open for business and the New York Stock Exchange
is open for trading. The New York Stock Exchange is closed on weekends and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
VALUATION PERIOD--A period used in measuring the investment experience of
each 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 Contracts
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
Contracts 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.
WITHDRAWAL VALUE--The amount a Contractowner may receive upon full withdrawal
of the Contract, which is equal to Contract Value less any Contract Debt, any
applicable withdrawal charges, a pro rata Administrative Fee and any uncollected
premium taxes.
<PAGE>
SUMMARY OF THE CONTRACT
This summary is intended to provide a brief overview of the more significant
aspects of the Contract. Further detail is provided in this Prospectus, the
Statement of Additional Information, and the Contract. Unless the context
indicates otherwise, the discussion in this summary and the remainder of the
Prospectus relates to the portion of the Contract involving the Separate
Account. The General Account is briefly described under "The General Account,"
page 36 and in the Contract.
PURPOSE OF THE CONTRACT
The variable annuity contract (the "Contract") described in this Prospectus
is designed to give Contractowners and Participants flexibility in planning for
retirement and other financial goals. The Contract provides for the accumulation
of values on a variable basis, a fixed basis, or both, during the Accumulation
Period and provides several options for annuity payments on a variable basis, a
fixed basis, or both. During the Accumulation Period, an Owner or Participant
can pursue various allocation options by allocating purchase payments to the
Series of the Separate Account or to the General Account. See "Variflex
Contracts," page 15.
The Contract is eligible for purchase as a non-tax qualified retirement plan
for an individual ("Non-Qualified Contracts"). The Contract is also eligible for
an individual or group in connection with a retirement plan qualified under
Section 401, 403(b), 408, or 457 of the Internal Revenue Code of 1986, as
amended. These plans are sometimes referred to in this Prospectus as "Qualified
Contracts."
THE SEPARATE ACCOUNT AND SBL FUND
Purchase payments designated to accumulate on a variable basis are allocated
to the Separate Account. The Separate Account is currently divided into fourteen
accounts referred to as Series. Each Series invests exclusively in shares of a
corresponding series of SBL Fund. The Series of the Separate Account, each of
which has a different investment objective or objectives, are as follows: Growth
Series, Growth-Income Series, Money Market Series, Worldwide Equity Series, High
Grade Income Series, Emerging Growth Series, Global Aggressive Bond Series,
Specialized Asset Allocation Series, Managed Asset Allocation Series, Equity
Income Series, High Yield Series, Social Awareness Series, Value Series and
Small Cap Series. See "Variflex," and "SBL Fund," page 14. Amounts held in a
Series will increase or decrease in dollar value depending on the investment
performance of the series of SBL Fund in which such Series invests. The
Contractowner or Participant bears the investment risk for amounts allocated to
a Series of the Separate Account.
GENERAL ACCOUNT
Purchase payments designated to accumulate on a fixed basis may be allocated
to the General Account, which is part of SBL's general account. Amounts
allocated to the General Account earn interest at rates determined at the
discretion of SBL and are guaranteed to be at least an effective annual rate of
3 percent (or higher for certain Contracts issued prior to November 1, 1998).
See "The General Account," page 36.
PURCHASE PAYMENTS
The minimum initial purchase payment is $500 for Non-Qualified Contracts, $25
for Qualified Contracts and $2,500 for single premium immediate annuity
contracts. Thereafter, the Contractowner may choose the amount and frequency of
purchase payments, except that the minimum subsequent purchase payment is $25.
See "Contract Application and Purchase Payments," page 16.
CONTRACT BENEFITS
During the Accumulation Period, Contract Value may be transferred by the
Contractowner or Participant among the Series of the Separate Account and to and
from the General Account, subject to certain restrictions as described in
"Variflex Contracts," page 15 and "The General Account," page 36.
At any time before the Annuity Commencement Date, a Contract may be
surrendered for its Withdrawal Value, and partial withdrawals, including
systematic withdrawals, may be taken from the Contract Value, subject to certain
restrictions described in "The General Account," page 36. See "Full and Partial
Withdrawals," page 21 and "Federal Tax Matters," page 27 for more information
about withdrawals, including the 10 percent penalty tax that may be imposed upon
full and partial withdrawals (including systematic withdrawals) made prior to
the Owner or Participant attaining age 59 1/2.
For individual and Group Allocated Contracts, the Contract provides for a
death benefit upon the death of the Owner during the Accumulation Period. The
death benefit will vary depending on the Contract's investment results and the
age of the Owner on the Contract Date. SBL will pay the death benefit proceeds
to the beneficiary upon receipt of due proof of the Owner's death and
instructions regarding payment. Variflex Contracts issued prior to November 1,
1998, provide for a death benefit upon the death of the Annuitant rather than
the Owner. For Non-Qualified Contracts, including Contracts issued prior to
November 1, 1998, the death benefit will be paid upon the death of the Owner 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,"
page 22.)
FREE-LOOK RIGHT
An Owner or Participant may return a Contract within the Free-Look Period,
which is generally a ten-day period beginning when the Owner or Participant
receives the Contract. In this event, SBL will refund to the Owner or
Participant purchase payments allocated to the General Account plus the Contract
Value in the Series plus any charges deducted from Contract Value in the Series.
SBL will refund purchase payments allocated to the Series rather than the
Contract Value in those states or under those circumstances where it is required
to do so.
CHARGES AND DEDUCTIONS
SBL does not make any deductions for sales load from purchase payments before
allocating them to the Contract Value. Certain charges will be deducted in
connection with the Contract as described below.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (which also may be referred to as a
withdrawal charge) may be assessed by SBL on a full or partial withdrawal,
including certain systematic withdrawals, depending on the Contract Year in
which the withdrawal is 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 percent 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 withdrawal charge
applies to the amount of any withdrawal that exceeds the Free Withdrawal amount
to the extent the amount withdrawn is attributable to purchase payments. For the
purpose of determining any withdrawal charge, withdrawals are deemed to be made
first from purchase payments and then from earnings. The amount of the charge
will depend on the Contract Year in which the withdrawal is made according to
the following schedule:
Withdrawal Charge
-----------------------------------------------------------
Contract Year Variflex Contracts Variflex Contracts-401(k) and 408(k)
- -------------- ------------------ ------------------------------------
1 8% 8%
2 7% 8%
3 6% 8%
4 5% 8%
5 4% 7%
6 3% 6%
7 2% 5%
8 1% 4%
9 and later 0% 0%
In no event will the amount of any withdrawal charge, when added to such
charge previously assessed against any amount withdrawn from the Contract,
exceed 8 percent of purchase payments paid under the Contract. In addition, no
withdrawal charge will be imposed upon: (1) payment of death benefit proceeds;
(2) certain systematic withdrawals; or (3) annuity options that provide for
payments for life, or a period of at least seven years (five years for Contracts
issued prior to November 1, 1998). Subject to insurance department approval, the
withdrawal charge also will be waived on a full or partial withdrawal if the
Owner has been diagnosed with a medically determinable condition which results
in a life expectancy of one year or less, or upon confinement to a hospital or
qualified skilled nursing facility for 90 consecutive days or more. See
"Contingent Deferred Sales Charge," page 19.
MORTALITY AND EXPENSE RISK CHARGE
SBL deducts a daily charge from the assets of each Series of Variflex for
mortality and expense risks assumed by SBL under the Contract. The charge is
equal to an annual rate of 1.2 percent of each Series' average daily net assets.
See "Mortality and Expense Risk Charge," page 20.
ADMINISTRATIVE FEE
SBL deducts from each Contract or Participant Account an annual
Administrative Fee of $30 on each Contract Anniversary (or, for Contracts issued
prior to November 1, 1998, at each calendar year end). The Administrative Fee
for Variflex Contracts-401(k) and 408(k) is the lesser of $30 or 2 percent of
Contract Value as of the calendar year end. The Administrative Fee is not
assessed against Contract Value which has been applied under Annuity Options 1
through 4, 9 and 10. See "Administrative Fee," page 20.
PREMIUM TAX CHARGE
SBL assesses a premium tax charge to reimburse itself for any premium taxes
that it incurs with respect to this Contract. This charge will usually be
deducted on annuitization or upon full withdrawal if a premium tax was incurred
by SBL and is not refundable. Partial withdrawals, including systematic
withdrawals, may be subject to a premium tax charge if a premium tax is incurred
on the withdrawal by SBL and is not refundable. SBL reserves the right to deduct
such taxes when due or anytime thereafter. Premium tax rates currently range
from 0 percent to 3.5 percent. See "State Premium Taxes," page 20.
OTHER EXPENSES
The operating expenses of the Separate Account are paid by SBL. Investment
advisory fees and operating expenses of SBL Fund are paid by the Fund and are
reflected in the net asset value of the Fund shares. For a description of these
charges and expenses, see the accompanying Prospectus for SBL Fund.
CONTACTING SBL
All written requests, notices, and forms required by the Contract, and any
questions or inquiries should be directed to Security Benefit Life Insurance
Company, P.O. Box 750497, Topeka, Kansas 66675-0497 or by phone by calling (785)
431-3112 or 1-800-888-2461, extension 3112.
<PAGE>
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>
MANAGEMENT OTHER EXPENSES TOTAL
FEES (AFTER (AFTER EXPENSE ANNUAL
FEE WAIVER)(3) REIMBURSEMENT) EXPENSES(3)
-------------- -------------- -----------
<S> <C> <C> <C>
Growth (Series A)......................... 0.75% 0.06% 0.81%
Growth-Income (Series B).................. 0.75% 0.08% 0.83%
Money Market (Series C)................... 0.50% 0.08% 0.58%
Worldwide Equity (Series D)............... 1.00% 0.24% 1.24%
High Grade Income (Series E).............. 0.75% 0.08% 0.83%
Emerging Growth (Series J)................ 0.75% 0.07% 0.82%
Global Aggressive Bond (Series K)......... 0.75% 0.64% 1.39%
Specialized Asset Allocation (Series M)... 1.00% 0.26% 1.26%
Managed Asset Allocation (Series N)....... 1.00% 0.35% 1.35%
Equity Income (Series O).................. 1.00% 0.09% 1.09%
Social Awareness (Series S)............... 0.75% 0.08% 0.83%
</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, 1997, the Investment Manager
waived the management fees of Series K. Beginning May 1, 1998, the
Investment Manager will no longer waive Series K's management fee. The
expense information above has been restated to reflect what Series K's
expenses would have been during fiscal year 1997 absent the fee waiver.
<PAGE>
EXAMPLE: VARIFLEX CONTRACTS
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
------ ------- ------- --------
Growth Series......................... 101 125 153 244
Growth-Income Series.................. 102 125 154 246
Money Market Series................... 99 118 142 220
Worldwide Equity Series............... 110 149 197 330
High Grade Income Series.............. 102 125 154 246
Emerging Growth Series................ 102 125 154 245
Global Aggressive Bond Series......... 100 120 145 226
Specialized Asset Allocation Series... 106 138 176 290
Managed Asset Allocation Series....... 107 140 181 298
Equity Income Series.................. 104 133 168 273
Social Awareness Series............... 102 125 154 246
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
------ ------- ------- --------
Growth Series......................... 21 66 113 244
Growth-Income Series.................. 22 67 114 246
Money Market Series................... 19 59 102 220
Worldwide Equity Series............... 30 92 157 330
High Grade Income Series.............. 22 67 114 246
Emerging Growth Series................ 22 66 114 245
Global Aggressive Bond Series......... 20 61 105 226
Specialized Asset Allocation Series... 26 80 136 290
Managed Asset Allocation Series....... 27 82 141 298
Equity Income Series.................. 24 75 128 273
Social Awareness Series............... 22 67 114 246
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
------ ------- ------- --------
Growth Series......................... 102 145 184 246
Growth-Income Series.................. 102 146 185 248
Money Market Series................... 99 139 173 222
Worldwide Equity Series............... 110 169 227 332
High Grade Income Series.............. 102 146 185 248
Emerging Growth Series................ 102 145 185 247
Global Aggressive Bond Series......... 100 140 176 229
Specialized Asset Allocation Series... 106 158 207 291
Managed Asset Allocation Series....... 107 160 212 300
Equity Income Series.................. 104 153 199 275
Social Awareness Series............... 102 146 185 248
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
------ ------- ------- --------
Growth Series......................... 22 67 114 246
Growth-Income Series.................. 22 67 115 248
Money Market Series................... 19 60 103 222
Worldwide Equity Series............... 30 93 158 332
High Grade Income Series.............. 22 67 115 248
Emerging Growth Series................ 22 67 115 247
Global Aggressive Bond Series......... 20 62 106 229
Specialized Asset Allocation Series... 26 80 137 291
Managed Asset Allocation Series....... 27 83 142 300
Equity Income Series.................. 24 75 129 275
Social Awareness Series............... 22 67 115 248
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 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 percent 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 Administrative Fee is deducted sequentially from the Series as
specified under "Sequential Deduction of Fees" in this Prospectus. For a more
complete description of the various costs and expenses of the Fund, see the
prospectus for SBL Fund.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values at the beginning and end of each period as well as ending accumulation
units outstanding for Qualified and Non-Qualified Contracts under the Series of
Variflex.
<TABLE>
<CAPTION>
1997 1996 1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988
---- ---- ---------- ---- ---- ------- ---------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
QUALIFIED CONTRACTS
GROWTH SERIES (SERIES A)
Accumulation unit value:
Beginning of period $45.76 $37.75 $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59 $13.41
End of period $58.19 $45.76 $37.75 $27.94 $28.75 $25.59 $23.30 $17.33 $19.45 $14.59
Accumulation units
outstanding at
the end of period 11,293,953 10,310,079 9,203,332 7,723,910 6,900,722 6,640,177 5,420,372 4,616,955 3,191,257 3,032,118
GROWTH-INCOME SERIES (SERIES B)
Accumulation unit value:
Beginning of period $46.58 $39.88 $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46 $14.81
End of period $58.22 $46.58 $39.88 $31.03 $32.37 $29.89 $28.47 $20.92 $22.16 $17.46
Accumulation units
outstanding at
the end of period 15,086,547 15,264,292 14,963,215 14,312,801 13,236,948 11,381,462 8,753,337 6,449,776 4,613,783 3,388,090
MONEY MARKET SERIES (SERIES C)
Accumulation unit value:
Beginning of period $18.26 $17.59 $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30 $12.56
End of period $18.97 $18.26 $17.59 $16.89 $16.48 $16.26 $15.94 $15.27 $14.33 $13.30
Accumulation units
outstanding at
the end of period 2,479,744 3,252,140 2,989,809 3,578,026 2,680,809 2,373,251 2,161,924 1,913,734 3,216,085 2,774,046
WORLDWIDE EQUITY SERIES (SERIES D)
Accumulation unit value:
Beginning of period $14.51 $12.51 $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33
End of period $15.26 $14.51 $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74
Accumulation units
outstanding at
the end of period 12,804,601 11,881,450 10,236,349 9,361,197 5,863,967 2,070,715 917,833 466,703 607,650 633,816
HIGH GRADE INCOME SERIES (SERIES E)
Accumulation unit value:
Beginning of period $21.69 $22.11 $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90 $12.17
End of period $23.58 $21.69 $22.11 $18.87 $20.52 $18.44 $17.37 $15.04 $14.26 $12.90
Accumulation units
outstanding at
the end of period 3,446,850 3,673,833 3,912,046 3,891,426 3,731,587 2,912,605 2,255,909 1,673,154 1,403,313 1,037,740
EMERGING GROWTH SERIES (SERIES J)
Accumulation unit value:
Beginning of period $18.03 $15.46 $13.10 $13.97 $12.44 $10.00 --- --- --- ---
End of period $21.37 $18.03 $15.46 $13.10 $13.97 $12.44 --- --- --- ---
Accumulation units
outstanding at
the end of period 6,738,379 5,563,881 4,387,739 3,947,047 2,131,858 455,105 --- --- --- ---
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
Accumulation unit value:
Beginning of period $12.00 $10.69 $10.00 --- --- --- --- --- --- ---
End of period $12.50 $12.00 $10.69 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 425,354 306,339 129,589 --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
Accumulation unit value:
Beginning of period $12.01 $10.64 $10.00 --- --- --- --- --- --- ---
End of period $12.59 $12.01 $10.64 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 1,672,896 1,274,106 611,652 --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
Accumulation unit value:
Beginning of period $11.87 $10.66 $10.00 --- --- --- --- --- --- ---
End of period $13.89 $11.87 $10.66 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 1,057,271 626,179 295,053 --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
Accumulation unit value:
Beginning of period $13.78 $11.62 $10.00 --- --- --- --- --- --- ---
End of period $17.49 $13.78 $11.62 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 4,135,375 2,016,966 604,325 --- --- --- --- --- --- ---
SOCIAL AWARENESS SERIES (SERIES S)
Accumulation unit value:
Beginning of period $18.75 $15.97 $12.65 $13.31 $12.04 $10.47 $10.00 --- --- ---
End of period $22.72 $18.75 $15.97 $12.65 $13.31 $12.04 $10.47 --- --- ---
Accumulation units
outstanding at
the end of period 2,531,119 2,083,090 1,615,845 1,344,063 993,233 513,953 127,699 --- --- ---
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995(D)(E) 1994 1993 1992(C) 1991(A)(B) 1990 1989 1988
---- ---- ---------- ---- ---- ------- ---------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-QUALIFIED CONTRACTS
GROWTH SERIES (SERIES A)
Accumulation unit value:
Beginning of period $45.74 $37.74 $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59 $13.41
End of period $58.17 $45.74 $37.74 $27.92 $28.74 $25.58 $23.30 $17.32 $19.45 $14.59
Accumulation units
outstanding at
the end of period 2,652,767 2,575,426 2,306,163 1,578,797 1,483,618 1,766,896 1,328,865 952,806 594,856 493,463
GROWTH-INCOME SERIES (SERIES B)
Accumulation unit value:
Beginning of period $46.54 $39.84 $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46 $14.80
End of period $58.17 $46.54 $39.84 $31.00 $32.34 $29.87 $28.44 $20.91 $22.16 $17.46
Accumulation units
outstanding at
the end of period 3,653,913 3,721,884 3,669,299 3,515,364 3,262,600 2,560,986 1,774,534 1,293,121 1,000,815 836,735
MONEY MARKET SERIES (SERIES C)
Accumulation unit value:
Beginning of period $18.26 $17.59 $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29 $12.55
End of period $18.98 $18.26 $17.59 $16.89 $16.48 $16.26 $15.94 $15.28 $14.32 $13.29
Accumulation units
outstanding at
the end of period 1,089,550 1,681,230 1,469,153 2,475,349 1,913,212 1,031,855 1,000,378 954,107 846,414 853,615
WORLDWIDE EQUITY SERIES (SERIES D)
Accumulation unit value:
Beginning of period $14.51 $12.51 $11.42 $11.25 $ 8.65 $8.99 $8.07 $10.57 $11.74 $11.33
End of period $15.26 $14.51 $12.51 $11.42 $11.25 $8.65 $8.99 $ 8.07 $10.57 $11.74
Accumulation units
outstanding at
the end of period 3,730,734 3,484,411 3,140,486 2,803,304 2,150,932 678,110 279,878 125,010 211,920 214,723
HIGH GRADE INCOME SERIES (SERIES E)
Accumulation unit value:
Beginning of period $21.67 $22.09 $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89 $12.17
End of period $23.56 $21.67 $22.09 $18.85 $20.50 $18.42 $17.36 $15.02 $14.25 $12.89
Accumulation units
outstanding at
the end of period 1,535,471 1,377,342 1,325,159 1,392,830 1,290,268 962,775 784,496 582,285 519,624 419,410
EMERGING GROWTH SERIES (SERIES J)
Accumulation unit value:
Beginning of period $18.03 $15.46 $13.09 $13.96 $12.44 $10.00 --- --- --- ---
End of period $21.36 $18.03 $15.46 $13.09 $13.96 $12.44 --- --- --- ---
Accumulation units
outstanding at
the end of period 2,019,008 1,559,302 1,248,987 1,211,099 610,801 68,338 --- --- --- ---
GLOBAL AGGRESSIVE BOND SERIES (SERIES K)
Accumulation unit value:
Beginning of period $12.00 $10.69 $10.00 --- --- --- --- --- --- ---
End of period $12.49 $12.00 $10.69 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 212,934 178,818 74,528 --- --- --- --- --- --- ---
SPECIALIZED ASSET ALLOCATION SERIES (SERIES M)
Accumulation unit value:
Beginning of period $12.00 $10.64 $10.00 --- --- --- --- --- --- ---
End of period $12.59 $12.00 $10.64 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 687,020 532,893 297,967 --- --- --- --- --- --- ---
MANAGED ASSET ALLOCATION SERIES (SERIES N)
Accumulation unit value:
Beginning of period $11.87 $10.66 $10.00 --- --- --- --- --- --- ---
End of period $13.89 $11.87 $10.66 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 459,560 374,276 226,555 --- --- --- --- --- --- ---
EQUITY INCOME SERIES (SERIES O)
Accumulation unit value:
Beginning of period $13.78 $11.62 $10.00 --- --- --- --- --- --- ---
End of period $17.48 $13.78 $11.62 --- --- --- --- --- --- ---
Accumulation units
outstanding at
the end of period 1,257,818 710,206 234,242 --- --- --- --- --- --- ---
SOCIAL AWARENESS SERIES (SERIES S)
Accumulation unit value:
Beginning of period $18.75 $15.98 $12.66 $13.31 $12.04 $10.47 $10.00 --- --- ---
End of period $22.73 $18.75 $15.98 $12.66 $13.31 $12.04 $10.47 --- --- ---
Accumulation units
outstanding at
the end of period 904,831 746,852 612,235 543,287 389,861 226,145 98,344 --- --- ---
</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.
<PAGE>
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. On July 31,
1998, SBL converted from a mutual life insurance company to a stock life
insurance company ultimately controlled by Security Benefit Mutual Holding
Company, a Kansas mutual holding company. Membership interests of persons who
were SBL policyholders as of July 31, 1998, became membership interests in
Security Benefit Mutual Holding Company as of that date. Persons who acquire
policies from SBL after that date automatically became members in the mutual
holding company. SBL's home office is 700 Harrison Street, Topeka, Kansas
66636-0001. SBL is licensed in the District of Columbia and all states except
New York.
YEAR 2000 COMPLIANCE
Like other insurance companies, as well as other financial and business
organizations around the world, SBL could be adversely affected if the computer
systems used by SBL in performing its administrative functions do not properly
process and calculate date-related information and data before, during and after
January 1, 2000. Some computer software and hardware systems currently cannot
distinguish between the year 2000 and the year 1900 or some other date because
of the way date fields were encoded. This is commonly known as the "Year 2000
Problem." If not addressed, the Year 2000 Problem could impact (i) the
administrative services provided by SBL with respect to the Contract, and (ii)
the management services provided to the Fund by the Investment Manager, as well
as transfer agency, accounting, custody, distribution and other services
provided to the Fund.
SBL has adopted a plan to be "Year 2000 Compliant" with respect to both its
internally built systems as well as systems provided by external vendors. "Year
2000 Compliant" means that systems and programs which require modification will
have the date fields expanded to include the century information and that for
interfaces to external organizations as well as new systems development, the
year portion of the date field will be expanded to four digits using the format
YYYYMMDD. SBL's overall approach to addressing the Year 2000 issue is as
follows: (1) to inventory its internal and external hardware, software,
telecommunications and data transmissions to customers and conduct a risk
assessment with respect to the impact that a failure on any such system would
have on its business operations; (2) to modify or replace its internal systems
and obtain vendor certifications of Year 2000 compliance for systems provided by
vendors or replace such systems that are not Year 2000 Compliant; and (3) to
implement and test its systems for Year 2000 compliance. SBL has completed the
inventory of its internal and external systems and has made substantial progress
toward completing the modification/replacement of its internal systems as well
as toward obtaining Year 2000 Compliant certifications from its external
vendors. Overall systems testing is scheduled to commence in December 1998 and
extend into the first six months of 1999.
Although SBL has taken steps to ensure that its systems will function
properly before, during and after the Year 2000, its key operating systems and
information sources are provided by or through external vendors which creates
uncertainty to the extent SBL is relying on the assurance of such vendors as to
whether its systems will be Year 2000 Compliant. The costs or consequences of
incomplete or untimely resolution of the Year 2000 issue are unknown to SBL at
this time but could have a material adverse impact on the operations of the
Separate Account and administration of the Contracts.
The Year 2000 Problem is also expected to impact companies, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, industry sector and degree of
technological sophistication. SBL is unable to predict what impact, if any, the
Year 2000 Problem will have on issuers of portfolio securities held by the Fund.
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.
The Series of Variflex available under the Contracts are: Growth Series,
Growth-Income Series, Money Market Series, Worldwide Equity Series, High Grade
Income Series, Emerging Growth Series, Global Aggressive Bond Series,
Specialized Asset Allocation Series, Managed Asset Allocation Series, Equity
Income Series, High Yield Series, Social Awareness Series, Value Series, and
Small Cap Series. Amounts allocated by Contractowners or Participants to each of
these Series are invested, respectively, in Series A, B, C, D, E, J, K, M, N, O,
P, S, V and X of SBL Fund (the "Fund"). Additional Series may be added to
Variflex at the discretion of SBL. Certain Series of Variflex are not available
in all states and are not available under certain Contracts issued prior to
November 1, 1998.
SBL FUND
The Fund is a diversified, open-end management investment company. The assets
of the Fund are managed by Security Management Company, LLC (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 fourteen separate series: Series A,
Series B, Series C, Series D, Series E, Series J, Series K, Series M, Series N,
Series O, Series P, Series S, Series V and Series X ("Series"). The assets of
each series are held separate from the assets of the 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, as follows.
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 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.
SERIES P--Amounts allocated to the HIGH YIELD SERIES of Variflex are invested
in Series P. The investment objective of Series P is to seek high current income
and as a secondary objective, capital appreciation by investing in a combination
of domestic and foreign high-yield, lower rated debt securities (commonly known
as "junk bonds").
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 capital
appreciation by investing 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 V--Amounts allocated to the VALUE SERIES of Variflex are invested in
Series V. The investment objective of Series V is to seek long-term growth of
capital by investing primarily in a diversified portfolio of common stocks,
securities convertible into common stocks, preferred stocks, and warrants which
the Investment Manager believes are undervalued.
SERIES X--Amounts allocated to the SMALL CAP SERIES of Variflex are invested
in Series X. The investment objective of Series X is to seek long-term growth of
capital by investing primarily in domestic and foreign equity securities of
small capitalization companies (defined as companies with a market
capitalization of less than $1 billion at the time of purchase).
THE INVESTMENT MANAGER
Security Management Company, LLC (the "Investment Manager") located at 700
Harrison Street, Topeka, Kansas 66636 serves as investment adviser to each
Series of the Fund. The Investment Manager is registered with the SEC as an
investment adviser. The Investment Manager formulates and implements continuing
programs for the purchase and sale of securities in compliance with the
investment objectives, policies, and restrictions of each Series, and is
responsible for the day to day decisions to by and sell securities for the
Series except Series D, K, N, O and X. With respect to Series M, the foregoing
responsibilities are divided between the Investment Adviser and a Sub-Adviser.
See the accompanying SBL Fund prospectus for details. The Investment Manager has
engaged Lexington Management Corporation, Park 80 West, Plaza Two, Saddle Brook,
New Jersey 07663, to provide investment advisory services to Series D and K, and
Lexington has entered into an agreement with MFR Advisors, Inc., One Liberty
Plaza, 46th Floor, New York, New York 10006, to provide certain investment
advisory services to Series K. The Investment Manager has engaged T. Rowe Price
Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202 to provide
investment advisory services to Series N and O, and has engaged Meridian
Investment Management Corporation, 12835 East Arapahoe Road, Tower II, 7th
Floor, Englewood, Colorado 80112, to provide investment advisory and analytic
research services to Series M. The Investment Manager has engaged Strong Capital
Management Corporation, 900 Heritage Reserve, Menomonee, Wisconsin 53051 to
provide investment advisory services to Series X.
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 CONTRACT VALUE.
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 that 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 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 30 for further details.
The basic objective of the Contracts is to provide a Fixed or Variable
Annuity or a combination Fixed 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 Fixed 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," page 36.
The terms of the Contracts may only be changed by mutual agreement between
SBL and each Contractowner, except as described in "Substituted Securities," and
except for changes required to make the contracts comply with, or give
Contractowners the benefit of, any federal or state statute, rule or regulation,
including, but not limited to, requirements for annuity contracts and retirement
plans under the Internal Revenue Code or the laws of any state. In addition, SBL
may make changes to group Contracts upon 30 days notice to the Owner, which
changes will apply only to individuals who become Participants after the
effective date of the change.
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 FLEXIBLE 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 with annuity payments to commence at a later
date.
c. GROUP FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT - This type of contract
may be used when Purchase Payments under group plans are to be accumulated until
the retirement date of each Participant. Under a Group Allocated Contract, a
Participant Account is established for each Participant for whom payments are
being made and the benefit at retirement will be determined by the value of the
Participant Account at that time.
Under a Group Unallocated Contract, the Purchase Payments are applied to
acquire Accumulation Units. 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 Contract Value 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 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 Contract" in the Statement of Additional
Information for a detailed listing of such circumstances.)
For a Flexible 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 of those
limitations see "Limits on Purchase Payments Paid Under Tax-Qualified Retirement
Plans" 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. The amount allocated to a Series may be a
whole dollar amount or whole percentage. 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," page 18.)
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 as of the end of the
Valuation Period in which the Purchase Payment is credited. The Accumulation
Unit value for each Series is determined as of the close of the New York Stock
Exchange (generally 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 a Contractowner or Participant 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 low and a lesser number of units when the
Accumulation Unit value is high. Dollar cost averaging does not guarantee
profits, nor does it assure that a Contractowner or Participant will not have
losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
the Contractowner or Participant 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, SBL will transfer Contract Value in amounts designated by the
Contractowner or Participant from the Series from which transfers are to be made
to the Series chosen by the Contractowner or Participant. 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 or Participant 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 or Participant
instructs otherwise. If a Contractowner or Participant 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 also may 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 36.
ASSET REALLOCATION OPTION
SBL currently offers an option under which a Contractowner or Participant may
authorize SBL to automatically transfer their Contract Value each quarter to
maintain a particular percentage allocation among the Series as selected by the
Contractowner or Participant. 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 or Participant. 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 or Participant buy low and sell
high. This investment method does not guarantee profits, nor does it assure that
a Contractowner or Participant 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 or
Participant 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 or Participant 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 or Participant
instructs otherwise. If a Contractowner or Participant 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 36.
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. The minimum transfer amount is $500, or the amount remaining in a given
Series. The minimum transfer amount does not apply to transfers under the Dollar
Cost Averaging or Asset Reallocation Options.
Such transfers (and changes to an existing Dollar Cost Averaging or Asset
Reallocation Option) may be made by telephone unless the Contractowner or
Participant elected not to have Telephone Transfer privileges in the
application. Contractowners or Participants that elected not to have Telephone
Transfer privileges in the application may subsequently establish such privilege
by properly completing, signing and filing at SBL's home office a Telephone
Transfer Authorization form. 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 Participant, or
by anyone else who purports to give instructions on his or her behalf, provided
that SBL complied with its procedures. 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 or Participant who
authorizes telephone transfers to bear the risk of loss from a fraudulent or
unauthorized telephone transfer.
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 14 transfers per Contract Year. SBL reserves the right to limit
the size and frequency of transfers. Transfers from the General Account to the
Series are restricted as discussed under "The General Account," page 36. For a
discussion of transfers after the Annuity Commencement Date, see "Allocation of
Benefits," page 26.
CONTRACT VALUE
The Contract Value is the sum of the amounts under the Contract (or
Participant Account) 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. The Contractowner or Participant bears the entire
investment risk relating to the investment performance of Contract Value
allocated to the Variflex Series. For Contracts issued on or after November 1,
1998, SBL reserves the right to pay the Owner or Participant the Contract Value
as a lump sum if it is below $2,000.
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.
Assets in the Series are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's (or
Participant's) interest in a Series. When a Contractowner or Participant
allocates Purchase Payments to a Series, the Contract (or Participant Account)
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 that Series as of the end of the
Valuation Period in which the Purchase Payment is credited. In addition, other
transactions including loans, full or partial withdrawals, transfers, and
assessment of certain charges against the Contract affect the number of
Accumulation Units credited to a Contract or Participant Account. 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 Fund
series, (3) the charges, if any, that may be assessed by SBL for taxes
attributable to the operation of the Series, and (4) the Mortality and Expense
Risk Charge 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 (785) 431-3112 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 percent 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 "free systematic withdrawals" as discussed under "Systematic
Withdrawals," page 22.
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 percent 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 percent 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 percent 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 charges are as follows, based on the Contract Year
in which the withdrawal is made:
Withdrawal Charge
-----------------------------------------------------------
Contract Year Variflex Contracts Variflex Contracts-401(k) and 408(k)
- -------------- ------------------ ------------------------------------
1 8% 8%
2 7% 8%
3 6% 8%
4 5% 8%
5 4% 7%
6 3% 6%
7 2% 5%
8 1% 4%
9 and later 0% 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 percent 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 through 9 and other
non-life contingent payment options, unless annuity payments extend over a
period of at least seven years (five years for Contracts issued prior to
November 1, 1998) and are made in substantially equal amounts.
HOSPITAL/NURSING HOME WAIVER
SBL will waive the withdrawal charge on any full or partial withdrawal upon
request for such a waiver, provided that the Contractowner or Participant: (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 "Definitions," page 4.) 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 or
Participant examined by a physician of SBL's choice and at SBL's expense to
determine if the Contractowner or Participant 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 and Participants 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 FEE
SBL deducts an annual Administrative Fee of $30 from each Contract and
Participant Account on each Contract Anniversary (at calendar year-end for
Contracts issued prior to November 1, 1998) to cover expenses relating to
maintenance of the Contract or Participant Account. For Variflex
Contracts-401(k) and 408(k), the fee is the lesser of 2 percent 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 as of the date the fee is deducted. A pro rata Administrative
Fee is deducted upon: (1) a full withdrawal of Contract Value; (2) payment of a
death benefit; (3) the Annuity Commencement Date if one of Annuity Options 1
through 4, 9 or 10 or similar life contingent payment option is elected; and (4)
a Contract has been in force for less than a full Contract Year (or calendar
year, if applicable).
(B) STATE PREMIUM TAXES
An amount for state premium taxes (which presently range from 0 percent to
3.5 percent) 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) MORTALITY AND EXPENSE RISK CHARGE
SBL assumes a number of risks under the 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, a Mortality and Expense
Risk Charge will be assessed daily against each Series of Variflex based on the
value of its net assets, at an annual rate of 1.2 percent. 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. SBL may ultimately realize a profit from this
fee to the extent it is not needed to cover mortality and administrative
expenses, but SBL may realize a loss to the extent the fee is not sufficient.
SBL may use any profit derived from this fee for any lawful purpose, including
distribution expenses.
(D) CHARGES FOR TAXES
SBL may charge Variflex or the Series for the federal, state, or local taxes
incurred by SBL that are attributable to Variflex or the Series, or to the
operations of SBL with respect to the Contracts, or that are attributable to
payment of premiums or acquisition costs under the Contracts. No such charge is
currently assessed. See "Charge for SBL Taxes," page 28.
SEQUENTIAL DEDUCTION OF FEES
When the Administrative Fee is deducted from a Contract or Participant
Account, it is deducted from the Contract Value in the Variflex Series in the
following order: Money Market Series, High Grade Income Series, High Yield
Series, Global Aggressive Bond Series, Growth-Income Series, Equity Income
Series, Managed Asset Allocation Series, Specialized Asset Allocation Series,
Growth Series, Value Series, Worldwide Equity Series, Social Awareness Series,
Emerging Growth Series, and Small Cap 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.
GUARANTEE OF CERTAIN CHARGES
SBL guarantees that the charge for mortality and expense risks will not
exceed an annual rate of 1.2 percent of each Series' average daily net assets
and the Administrative Fee will not exceed $30. SBL may increase expenses under
Group Allocated Contracts under certain circumstances for individuals who become
Participants after the effective date of the increase. See "Variflex Contracts,"
page 15.
SBL FUND EXPENSES
Each Series of Variflex purchases shares at the net asset value of the
corresponding series of SBL Fund. Each series' net asset value reflects the
investment advisory fee and other expenses that are deducted from the assets of
the series. These fees and expenses are not deducted from the Variflex Series,
but are paid from the assets of the corresponding series of the Fund. As a
result, the Owner or Participant indirectly bears a pro rata portion of such
fees and expenses. The advisory fees and other expenses, if any, which are more
fully described in the SBL Fund prospectus, are not specified or fixed under the
terms of the Contract.
DISTRIBUTIONS UNDER THE CONTRACT
ACCUMULATION PERIOD
FULL AND PARTIAL WITHDRAWALS
Contract Value may be withdrawn, in full or partially, during the
Accumulation Period, subject to the limitations discussed herein. For Contracts
issued prior to November 1, 1998, if any partial withdrawal exceeds 90 percent
of the then current Contract Value of a Participant Account or an individual
Contract, the then current full value may be paid and the account closed or the
Contract canceled, respectively. A request for a partial withdrawal under a
Contract should specify the allocation of that withdrawal, as applicable, 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, less any pro rata Administrative
Fee, any applicable contingent deferred sales charge, and any outstanding
Contract Debt. SBL requires the signature of all Owners on any request for
withdrawal and a guarantee of all such signatures for withdrawals in excess of
$_______. The signature guarantee must be provided by an eligible guarantor,
such as a bank, broker, credit union, national securities exchange or savings
association. 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 a request for a partial or full withdrawal of Contract Value
signed by the Contractowner or Participant, 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 or Participant to
adverse tax consequences, including the 10 percent penalty tax that may be
imposed on withdrawals made prior to the Contractowner or Participant 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,"
page 25 and "Federal Tax Matters," page 27.
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 closings 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 percent,
no partial withdrawal will directly affect future requirements to make Purchase
Payments or the Annuity Commencement Date of the Contract or Participant
Account. Contracts have other provisions which encourage the Contractowner or
Participant 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, generally after the first Contract Year. Under this feature, a
Contractowner may elect to receive systematic withdrawals while the Owner is
living and before the Annuity Commencement Date by sending a properly completed
Systematic Withdrawal Request form to SBL at its home office. This option may be
elected after the first Contract Year, or if Contract Value is $40,000 or more
on the date the Systematic Withdrawal Request is received, during the first
Contract Year. A Contractowner may designate the systematic withdrawal amount as
a percentage of Contract Value allocated to the Series and/or General Account,
as a fixed period, as a specified dollar amount, as all earnings in the
Contract, or based upon the life expectancy of the Owner or the Owner and a
Beneficiary. A Contractowner also may designate the desired frequency of the
systematic withdrawals, which may be monthly, quarterly, semiannually or
annually. Systematic withdrawals may be stopped or modified upon proper written
request by the Contractowner received by SBL at its home office at least 30 days
in advance of the requested date of termination or modification. A proper
request must include the written consent of any effective assignee or
irrevocable Beneficiary, if applicable.
Each systematic withdrawal must be at least $25. Upon payment, Contract Value
will be reduced by an amount equal to the payment proceeds plus any applicable
withdrawal charge and premium tax. Any systematic withdrawal that equals or
exceeds the Withdrawal Value will be treated as a full withdrawal. In no event
will payment of a systematic withdrawal exceed the Withdrawal Value. The
Contract will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.
Each systematic withdrawal will be effected as of the end of the Valuation
Period during which the withdrawal is scheduled. The deduction caused by the
systematic withdrawal, including any applicable withdrawal charge, will be
deducted from the Contractowner's Contract Value in the Series and the General
Account, as directed by the Contractowner. If a Contractowner does not specify
the allocation, the systematic withdrawal will be deducted from the Contract
Value in the Series and the General Account in the following order: Money Market
Series, High Grade Income Series, High Yield Series, Global Aggressive Bond
Series, Growth-Income Series, Equity Income Series, Managed Asset Allocation
Series, Specialized Asset Allocation Series, Growth Series, Value Series,
Worldwide Equity Series, Social Awareness Series, Emerging Growth Series, and
Small Cap Series and then from the General Account. The value of each Series
will be depleted before the next is charged.
Systematic withdrawals generally are subject to any applicable withdrawal
charges. Systematic withdrawals may be made without a withdrawal charge,
provided that the Free Withdrawal Right has not been exercised during the
Contract Year and to the extent systematic withdrawals do not exceed an amount
determined as follows: 10 percent of Contract Value on the Valuation Date the
first systematic withdrawal request is received during the Contract Year ("free
systematic withdrawals"). Systematic withdrawals that exceed the foregoing
amount are subject to any applicable withdrawal charge.
SBL may, at any time, discontinue, modify or suspend systematic withdrawals.
The tax consequences of a systematic withdrawal, including the 10 percent
penalty tax which may be imposed on withdrawals made prior to the Owner
attaining age 59 1/2, should be carefully considered. See "Federal Tax Matters,"
page 27.
FREE-LOOK RIGHT
A Contractowner or Participant may return a Contract within the Free-Look
Period, which is generally a ten-day period beginning when the Contractowner or
Participant 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 and under
those circumstances which require it to do so.
DEATH BENEFIT DURING ACCUMULATION PERIOD
If the Owner (or for Contracts issued prior to November 1, 1998, the
Annuitant) under a Variflex Contract dies during the Accumulation Period, SBL
will pay the death benefit proceeds to the Beneficiary upon receipt of due proof
of the Owner's (or if applicable, 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 Owner
(or if applicable, the Annuitant) dies during the Accumulation Period and the
age of the Owner (or 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 death benefit on any Contract anniversary that is
both an exact multiple of six and occurs prior to the Owner (or 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 Owner (or if applicable, the Annuitant) dies during the Accumulation
Period and the age of the Owner (or 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.
The death benefit for Contracts issued in Florida prior to November 1, 1998,
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. Beginning November 1, 1998, the maximum issue age for
Contracts issued in Florida is age 75.
In lieu of payment in one lump sum, an individual Contractowner or a
Participant may elect that the death benefit be applied under any one of the
optional annuity forms described under "Optional Annuity Forms," page 26. If the
Contractowner or Participant did not make such an election, the Beneficiary may
do so. The person selecting the optional annuity settlement also may 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," page 25.
Notwithstanding the foregoing, 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 under such a Contract 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 a free withdrawal.
For Non-Qualified Contracts, the death benefit described herein will be paid
in the event of the death of the 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.
DEATH OF THE ANNUITANT
For Contracts issued on and after November 1, 1998, if the Annuitant dies
prior to the Annuity Commencement Date, and the Owner or Participant is a
natural person and is not the Annuitant, no death benefit proceeds will be
payable under the Contract. The Owner or Participant may name a new Annuitant
within 30 days of the Annuitant's death. If a new Annuitant is not named, SBL
will designate the Owner or Participant as Annuitant. On the death of the
Annuitant after the Annuity Commencement Date, any guaranteed payments remaining
unpaid will continue to be paid to the Beneficiary pursuant to the Annuity
Option in force at the date of death.
LOANS AVAILABLE FROM CERTAIN QUALIFIED CONTRACTS
The Contractowner of the Contract issued in connection with a retirement plan
that is qualified under Section 403(b) of the Internal Revenue Code, the Owner
or Participant 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 or Participant is living and prior to the Annuity
Commencement Date.
The minimum loan that may be taken is $1,000 ($500 for Contracts issued in
New Jersey). The maximum loan that can be taken is generally equal to the lesser
of: (1) $50,000 reduced by the excess of: (a) the highest outstanding loan
balance within the preceding 12-month period ending on the day before the date
the loan is made; over (b) the outstanding loan balance on the date the loan is
made; or (2) 50 percent of the Contract Value or $10,000, whichever is greater.
However, an amount may not be borrowed which exceeds the annuity's total value
minus the amount needed as security for the loan as described below. The
Internal Revenue Code requires aggregation of all loans made to an individual
employee under a single employer plan. However, because SBL has no information
concerning outstanding loans with other providers, SBL will use only information
available under its annuity contracts issued by us. In addition, reference
should be made to the terms of the particular Qualified Plan for any additional
loan restrictions.
When an eligible Contractowner or Participant takes a loan, Contract Value in
an amount equal to the loan amount is transferred from the Variflex Series
and/or the General Account into an account called the "Loan Account." In
addition, 10 percent of the loaned amount will be held in the General Account as
security for the loan. Amounts allocated to the Loan Account earn 3 percent (3.5
percent for Contracts issued prior to November 1, 1998), the minimum rate of
interest guaranteed under the General Account. Amounts acting as security for
the loan in the General Account will earn the current rate of interest.
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 percent
(5.50 percent for Contracts issued prior to November 1, 1998). 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 percent.
Loans must be repaid within five years, unless SBL determines that the loan
is to be used to acquire a principal residence of the Owner or Participant, in
which case the loan must be repaid within 30 years. Loan payments must be made
at least quarterly and may be prepaid at any time. Upon receipt of a loan
payment, SBL will transfer Contract Value from the Loan Account to the General
Account and/or the Series according to the Contractowner's or Participant'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. The
amount held as security for the loan also will be reduced by each loan payment
so that the security is again equal to 10 percent of the outstanding loan
balance immediately after the loan payment is made. However, amounts which are
no longer needed as security for the loan will not automatically be allocated
back among the General Account and/or Series in accordance with the
Contractowner's or Participant's Purchase Payment instructions.
If any required loan payment is not made, within 30 days of the due date for
loans with a monthly repayment schedule or within 90 days of the due date for
loans with a quarterly repayment schedule, the TOTAL OUTSTANDING LOAN BALANCE
will be deemed to be in default, and the entire loan balance, with any accrued
interest, will be reported as income to the Internal Revenue Series ("IRS").
Once a loan has gone into default, regularly scheduled payments will not be
accepted, and no new loans will be allowed while a loan is in default. Interest
will continue to accrue on a loan in default and if such interest is not paid by
December 31st of each year, it will be added to the outstanding balance of the
loan and will be reported to the IRS. Contract Value equal to the amount of the
accrued interest will be transferred to the Loan Account. If a loan continues to
be in default, the total outstanding balance will be deducted from Contract
Value upon the Contractowner's or Participant's attained age 59 1/2. The
Contract will be automatically terminated if the outstanding loan balance on a
loan in default equals or exceeds the amount for which the Contract may be
surrendered, plus any withdrawal charge. The proceeds from the Contract will be
used to repay the debt and any applicable withdrawal charge. Because of the
adverse tax consequences associated with defaulting on a loan, a Contractowner
or Participant should carefully consider his or her ability to repay the loan
and should consult with a tax advisor before requesting a loan.
While the amount to secure the loan is held in the General Account and the
amount of the outstanding loan balance is held in the Loan Account, the Owner or
Participant 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 or Participant 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 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. The
Owner or Participant of 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 Owner or Participant after December 31, 1988 under the Contract unless one
of the foregoing conditions has been satisfied. An Owner or 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.
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 by the Owner prior to the Annuity Commencement Date. A Contract may not
be purchased after age 90 and annuity payments must begin no later than age 95,
except that for Contracts purchased prior to November 1, 1998, payments must
begin no later than age 90 and for Contracts purchased on or before June 1,
1986, payments must begin no later than age 85. If no Annuity Option and Annuity
Commencement Date are selected, 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 below, with 120 monthly payments certain. The Annuity
Commencement Date of individual and Group Allocated Contracts may not be prior
to the third Contract Anniversary, except for Single Payment Immediate Annuity
Contracts.
(B) QUALIFIED CONTRACTS
For Qualified Contracts, the Annuity Commencement Date may not be prior to
the third Contract Anniversary, 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 Options 8
through 10 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 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 converted to 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 transfer 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 among the Variflex Series as
described under "Transfer of Contract Value," page 18. 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
30-day interval prior to the Annuity Commencement Date.
No election may be made for any individual unless such election would produce
a periodic payment of at least $50 ($25 for Contracts issued prior to November
1, 1998) 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 for Contracts issued prior to November 1, 1998.
OPTIONAL ANNUITY FORMS
The following optional annuity forms are available. Although Options 7
through 10 may not be described, or are numbered differently, in some Contracts,
SBL makes these Options available to all Owners and Participants. Owners and
Participants, however, should carefully review the Annuity Options with their
financial or tax advisers, and for Contracts used in connection with a Qualified
Plan, reference should be made to the terms of the particular plan and the
requirements of the Internal Revenue Code for pertinent limitations respecting
annuity payments and other matters.
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 due date of the third
annuity payment, 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 due date of the third annuity payment, 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
of the amount selected by the Owner will be made until Account Value is
exhausted. The final payment will be the amount remaining with SBL.
OPTION 7 -- DEPOSIT OPTION -- The amount due under the Contract on the
Annuity Commencement Date may be left on deposit with SBL for placement in its
General Account with interest at the rate of not less than 2 percent 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.
OPTION 9 -- PERIOD CERTAIN -- Periodic annuity payments will be made for a
stated period which may be five, ten, fifteen or twenty years, as elected. If
the Annuitant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary.
OPTION 10 -- JOINT AND CONTINGENT SURVIVOR OPTION -- Periodic annuity
payments will be made during the life of the primary Annuitant. Upon the death
of the primary Annuitant, payments will be made to the contingent Annuitant
during his or her life. If the contingent Annuitant is not living upon the death
of the primary Annuitant, no payments will be made to the contingent Annuitant.
It is possible under this Option for only one annuity payment to be made if both
Annuitants died prior to the second annuity payment due date, two if both died
prior to the third annuity payment due date, etc. AS IN THE CASE OF OPTIONS 1
AND 4, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
The contingent deferred sales charge, where applicable, will be deducted from
annuity payments under Annuity Options 5 through 9 and other non-life contingent
payment options mutually agreed upon with SBL, except that the contingent
deferred sales charge is waived if annuity payments extend over a period of at
least seven years (five years for Contracts issued prior to November 1, 1998)
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 may 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 3.5 percent. If the actual
investment performance of the particular Series selected is such that the net
investment return to Variflex is 3.5 percent per annum, payments will remain
constant. If the net investment return exceeds 3.5 percent, the payments will
increase and if the return is less than 3.5 percent, the payments will decline.
Use of a higher 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, Emerging Growth, Global Aggressive Bond, Equity
Income, Specialized Asset Allocation, Managed Asset Allocation, High Yield,
Social Awareness, Value and Small Cap 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 paid 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 3.5
percent. 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
INTRODUCTION
The Contract described in this Prospectus is designed for use by individuals
in retirement plans which may or may not be Qualified Plans under the provisions
of the Internal Revenue Code ("Code"). The ultimate effect of federal income
taxes on the amounts held under a Contract, on annuity payments, and on the
economic benefits to the Owner or Participant, the Annuitant, and the
Beneficiary or other payee will depend upon the type of retirement plan, if any,
for which the Contract is purchased, the tax and employment status of the
individuals involved and a number of other factors. The discussion contained
herein and in the Statement of Additional Information is general in nature and
is not intended to be an exhaustive discussion of all questions that might arise
in connection with a Contract. It is based upon SBL's understanding of the
present federal income tax laws as currently interpreted by the Internal Revenue
Service ("IRS"), and is not intended as tax advice. No representation is made
regarding the likelihood of continuation of the present federal income tax laws
or of the current interpretations by the IRS or the courts. Future legislation
may affect annuity contracts adversely. Moreover, no attempt has been made to
consider any applicable state or other laws. Because of the inherent complexity
of the tax laws and the fact that tax results will vary according to the
particular circumstances of the individual involved and, if applicable, the
Qualified Plan, a person should consult with a qualified tax adviser regarding
the purchase of a Contract, the selection of an Annuity Option under a Contract,
the receipt of annuity payments under a Contract or any other transaction
involving a Contract. SBL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS
OF, OR TAX CONSEQUENCES ARISING FROM, ANY CONTRACT OR ANY TRANSACTION INVOLVING
THE CONTRACTS.
TAX STATUS OF SBL AND THE SEPARATE ACCOUNT
GENERAL
SBL intends to be taxed as a life insurance company under Part I, Subchapter
L of the Code. Because the operations of the Separate Account form a part of
SBL, SBL will be responsible for any federal income taxes that become payable
with respect to the income of the Separate Account and its Series.
CHARGE FOR SBL TAXES
A charge may be made for any federal taxes incurred by SBL that are
attributable to the Separate Account, the Series or to the operations of SBL
with respect to the Contracts or attributable to payments, premiums, or
acquisition costs under the Contracts. SBL will review the question of a charge
to the Separate Account, the Series or the Contracts for SBL's federal taxes
periodically. Charges may become necessary if, among other reasons, the tax
treatment of SBL or of income and expenses under the Contracts is ultimately
determined to be other than what SBL currently believes it to be, if there are
changes made in the federal income tax treatment of variable annuities at the
insurance company level, or if there is a change in SBL's tax status.
DIVERSIFICATION STANDARDS
Each series of SBL Fund will be required to adhere to regulations adopted by
the Treasury Department pursuant to Section 817(h) of the Code prescribing asset
diversification requirements for investment companies whose shares are sold to
insurance company separate accounts funding variable contracts. Pursuant to
these regulations, on the last day of each calendar quarter (or on any day
within 30 days thereafter), no more than 55 percent of the total assets of a
series may be represented by any one investment, no more than 70 percent may be
represented by any two investments, no more than 80 percent may be represented
by any three investments, and no more than 90 percent may be represented by any
four investments. For purposes of Section 817(h), securities of a single issuer
generally are treated as one investment but obligations of the U.S. Treasury and
each U.S. Governmental agency or instrumentality generally are treated as
securities of separate issuers. The Separate Account, through the series of the
Fund, intends to comply with the diversification requirements of Section 817(h).
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contractowner's gross income. The IRS has stated in published rulings that a
variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." As of the date of this Prospectus, no such guidance has been
issued.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Contractowner or Participant has additional flexibility in
allocating purchase payments and Contract Values. These differences could result
in a Contractowner or Participant being treated as the owner of a pro rata
portion of the assets of the Separate Account. In addition, SBL does not know
what standards will be set forth, if any, in the regulations or rulings which
the Treasury Department has stated it expects to issue. SBL therefore reserves
the right to modify the Contract, as it deems appropriate, to attempt to prevent
a Contractowner or Participant from being considered the owner of a pro rata
share of the assets of the Separate Account. Moreover, in the event that
regulations or rulings are adopted, there can be no assurance that the Series
will be able to operate as currently described in the Prospectus, or that the
Fund will not have to change any series' investment objective or investment
policies.
INCOME TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs the taxation of annuities. In general, a
Contractowner or Participant is not taxed on increases in value under an annuity
contract until some form of distribution is made under the contract. However,
the increase in value may be subject to tax currently under certain
circumstances. See "Contracts Owned by Non-Natural Persons," page 30 and
"Diversification Standards," page 28. Withholding of federal income taxes on all
distributions may be required unless a recipient who is eligible elects not to
have any amounts withheld and properly notifies SBL of that election.
1. Surrenders or Withdrawals Prior to the Annuity Commencement Date
Code Section 72 provides that amounts received upon a total or partial
withdrawal (including systematic withdrawals) from a Contract prior to the
Annuity Commencement Date generally will be treated as gross income to the
extent that the cash value of the Contract immediately before the withdrawal
(determined without regard to any surrender charge in the case of a partial
withdrawal) exceeds the "investment in the contract." The "investment in the
contract" is that portion, if any, of purchase payments paid under a Contract
less any distributions received previously under the Contract that are excluded
from the recipient's gross income. The taxable portion is taxed at ordinary
income tax rates. For purposes of this rule, a pledge or assignment of a
contract is treated as a payment received on account of a partial withdrawal of
a Contract.
2. Surrenders or Withdrawals on or after the Annuity Commencement Date
Upon a complete surrender, the receipt is taxable to the extent that the cash
value of the Contract exceeds the investment in the Contract. The taxable
portion of such payments will be taxed at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment generally is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed at ordinary income rates. For variable annuity
payments, the taxable portion of each payment is determined by using a formula
known as the "excludable amount," which establishes the non-taxable portion of
each payment. The non-taxable portion is a fixed dollar amount for each payment,
determined by dividing the investment in the Contract by the number of payments
to be made. The remainder of each variable annuity payment is taxable. Once the
excludable portion of annuity payments to date equals the investment in the
Contract, the balance of the annuity payments will be fully taxable.
3. Penalty Tax on Certain Surrenders and Withdrawals
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10 percent of the portion of such
amount which is includable in gross income. However, the penalty tax is not
applicable to withdrawals: (i) made on or after the death of the owner (or where
the owner is not an individual, the death of the "primary annuitant," who is
defined as the individual the events in whose life are of primary importance in
affecting the timing and amount of the payout under the Contract); (ii)
attributable to the taxpayer's becoming totally disabled within the meaning of
Code Section 72(m)(7); (iii) which are part of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancies) of
the taxpayer and his or her beneficiary; (iv) from certain qualified plans; (v)
under a so-called qualified funding asset (as defined in Code Section 130(d));
(vi) under an immediate annuity contract; or (vii) which are purchased by an
employer on termination of certain types of qualified plans and which are held
by the employer until the employee separates from service.
If the penalty tax does not apply to a surrender or withdrawal as a result of
the application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year in which the modification occurs will be increased by an amount (determined
by the regulations) equal to the tax that would have been imposed but for item
(iii) above, plus interest for the deferral period, if the modification takes
place (a) before the close of the period which is five years from the date of
the first payment and after the taxpayer attains age 59 1/2, or (b) before the
taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
1. Distribution-at-Death Rules
In order to be treated as an annuity contract, a contract must provide the
following two distribution rules: (a) if any owner dies on or after the Annuity
Commencement Date, and before the entire interest in the Contract has been
distributed, the remainder of the owner's interest will be distributed at least
as quickly as the method in effect on the owner's death; and (b) if any owner
dies before the Annuity Commencement Date, the entire interest in the Contract
must generally be distributed within five years after the date of death, or, if
payable to a designated beneficiary, must be annuitized over the life of that
designated beneficiary or over a period not extending beyond the life expectancy
of that beneficiary, commencing within one year after the date of death of the
owner. If the sole designated beneficiary is the spouse of the deceased owner,
the Contract (together with the deferral of tax on the accrued and future income
thereunder) may be continued in the name of the spouse as owner.
Generally, for purposes of determining when distributions must begin under
the foregoing rules, where an owner is not an individual, the primary annuitant
is considered the owner. In that case, a change in the primary annuitant will be
treated as the death of the owner. Finally, in the case of joint owners, the
distribution-at-death rules will be applied by treating the death of the first
owner as the one to be taken into account in determining generally when
distributions must commence, unless the sole Beneficiary is the deceased owner's
spouse.
2. Gift of Annuity Contracts
Generally, gifts of non-tax qualified Contracts prior to the Annuity
Commencement Date will trigger tax on the gain on the Contract, with the donee
getting a stepped-up basis for the amount included in the donor's income. The 10
percent penalty tax and gift tax also may be applicable. This provision does not
apply to transfers between spouses or incident to a divorce.
3. Contracts Owned by Non-Natural Persons
If the Contract is held by a non-natural person (for example, a corporation)
the income on that Contract (generally the increase in net surrender value less
the purchase payments) is includable in taxable income each year. The rule does
not apply where the Contract is acquired by the estate of a decedent, where the
Contract is held by certain types of retirement plans, where the Contract is a
qualified funding asset for structured settlements, where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and in
the case of an immediate annuity. An annuity contract held by a trust or other
entity as agent for a natural person is considered held by a natural person.
4. Multiple Contract Rule
For purposes of determining the amount of any distribution under Code Section
72(e) (amounts not received as annuities) that is includable in gross income,
all Non-Qualified annuity contracts issued by the same insurer to the same
Contractowner during any calendar year are to be aggregated and treated as one
contract. Thus, any amount received under any such contract prior to the
contract's Annuity Commencement Date, such as a partial surrender, dividend, or
loan, will be taxable (and possibly subject to the 10 percent penalty tax) to
the extent of the combined income in all such contracts.
In addition, the Treasury Department has broad regulatory authority in
applying this provision to prevent avoidance of the purposes of this rule. It is
possible that, under this authority, the Treasury Department may apply this rule
to amounts that are paid as annuities (on and after the Annuity Commencement
Date) under annuity contracts issued by the same company to the same owner
during any calendar year. In this case, annuity payments could be fully taxable
(and possibly subject to the 10 percent penalty tax) to the extent of the
combined income in all such contracts and regardless of whether any amount would
otherwise have been excluded from income because of the "exclusion ratio" under
the contract.
5. Possible Tax Changes
In recent years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities, and President Clinton's
fiscal-year 1999 Budget proposal includes a provision that, adopted, would
impose new taxes on owners of variable annuities. There is always the
possibility that the tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, and judicial decisions).
Moreover, although unlikely, it is also possible that any legislative change
could be retroactive (that is, effective prior to the date of such change).
6. Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an Annuitant, Payee
or other Beneficiary who is not also the Owner, the selection of certain Annuity
Commencement Dates or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein. An Owner contemplating
any such transfer, assignment, selection or exchange should contact a competent
tax adviser with respect to the potential effects of such a transaction.
QUALIFIED CONTRACTS
The Contract may be used with Qualified Plans that meet the requirements of
Section 401, 403(b), 408 or 457 of the Code. The tax rules applicable to
participants in such Qualified Plans vary according to the type of plan and the
terms and conditions of the plan itself. No attempt is made herein to provide
more than general information about the use of the Contract with the various
types of Qualified Plans. These Qualified Plans may permit the purchase of the
Contracts to accumulate retirement savings under the plans. Adverse tax or other
legal consequences to the plan, to the participant or to both may result if this
Contract is assigned or transferred to any individual as a means to provide
benefit payments, unless the plan complies with all legal requirements
applicable to such benefits prior to transfer of the Contract. Contractowners,
Participants, Annuitants, and Beneficiaries, are cautioned that the rights of
any person to any benefits under such Qualified Plans may be subject to the
terms and conditions of the plans themselves or limited by applicable law,
regardless of the terms and conditions of the Contract issued in connection
therewith. For example, SBL may accept beneficiary designations and payment
instructions under the terms of the Contract without regard to any spousal
consents that may be required under the Employee Retirement Income Security Act
of 1974 (ERISA). Consequently, a Contractowner's Beneficiary designation or
elected payment option may not be enforceable.
The amounts that may be contributed to Qualified Plans are subject to
limitations that vary depending on the type of Plan. In addition, early
distributions from most Qualified Plans may be subject to penalty taxes, or in
the case of distributions of amounts contributed under salary reduction
agreements, could cause the Plan to be disqualified. Furthermore, distributions
from most Qualified Plans are subject to certain minimum distribution rules.
Failure to comply with these rules could result in disqualification of the Plan
or subject the Owner or Annuitant to penalty taxes. As a result, the minimum
distribution rules may limit the availability of certain Annuity Options to
certain Annuitants and their Beneficiaries. These requirements may not be
incorporated into SBL's Contract administration procedures. Owners, Participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law.
The following are brief descriptions of the various types of Qualified Plans
and the use of the Contract therewith:
1. Section 401
Code Section 401 permits employers to establish various types of retirement
plans (e.g., pension, profit sharing and 401(k) plans) for their employees. For
this purpose, self-employed individuals (proprietors or partners operating a
trade or business) are treated as employees and therefore eligible to
participate in such plans. Retirement plans established in accordance with
Section 401 may permit the purchase of Contracts to provide benefits thereunder.
In order for a retirement plan to be "qualified" under Code Section 401, it
must: (i) meet certain minimum standards with respect to participation, coverage
and vesting; (ii) not discriminate in favor of "highly compensated" employees;
(iii) provide contributions or benefits that do not exceed certain limitations;
(iv) prohibit the use of plan assets for purposes other than the exclusive
benefit of the employees and their beneficiaries covered by the plan; (v)
provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.
A retirement plan qualified under Code Section 401 may be funded by employer
contributions, employee contributions or a combination of both. Plan
participants are not subject to tax on employer contributions until such amounts
are actually distributed from the plan. Depending upon the terms of the
particular plan, employee contributions may be made on a pre-tax or after-tax
basis. In addition, plan participants are not taxed on plan earnings derived
from either employer or employee contributions until such earnings are
distributed.
Each employee's interest in a retirement plan qualified under Code Section
401 must generally be distributed or begin to be distributed not later than
April 1 of the calendar year following the later of the calendar year in which
the employee reaches age 70 1/2 or retires ("required beginning date"). Periodic
distributions must not extend beyond the life of the employee or the lives of
the employee and a designated beneficiary (or over a period extending beyond the
life expectancy of the employee or the joint life expectancy of the employee and
a designated beneficiary).
If an employee dies before reaching his or her required beginning date, the
employee's entire interest in the plan must generally be distributed within five
years of the employee's death. However, the five-year rule will be deemed
satisfied, if distributions begin before the close of the calendar year
following the year of the employee's death to a designated beneficiary and are
made over the life of the beneficiary (or over a period not extending beyond the
life expectancy of the beneficiary). If the designated beneficiary is the
employee's surviving spouse, distributions may be delayed until the employee
would have reached age 70 1/2.
If an employee dies after reaching his or her required beginning date, the
employee's interest in the plan must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
employee's death.
Annuity payments distributed from a retirement plan qualified under Code
Section 401 are taxable under Section 72 of the Code. Section 72 provides that
the portion of each payment attributable to contributions that were taxable to
the employee in the year made, if any, is excluded from gross income as a return
of the employee's investment. The portion so excluded is determined by dividing
the employee's investment in the plan by (1) the number of anticipated payments
determined under a table set forth in Section 72 of the Code or (2) in the case
of a contract calling for installment payments, the number of monthly annuity
payments under such contract. The portion of each payment in excess of the
exclusion amount is taxable as ordinary income. Once the employee's investment
has been recovered, the full annuity payment will be taxable. If the employee
should die prior to recovering his or her entire investment, the unrecovered
investment will be allowed as a deduction on the employee's final return. If the
employee made no contributions that were taxable when made, the full amount of
each annuity payment is taxable as ordinary income.
A "lump-sum" distribution from a retirement plan qualified under Code Section
401 is eligible for favorable tax treatment. A "lump-sum" distribution means the
distribution within one taxable year of the balance to the credit of the
employee which becomes payable: (i) on account of the employee's death, (ii)
after the employee attains age 59 1/2, (iii) on account of the employee's
termination of employment (in the case of a common law employee only) or (iv)
after the employee has become disabled (in the case of a self-employed person
only).
As a general rule, a lump-sum distribution is fully taxable as ordinary
income except for an amount equal to the employee's investment, if any, which is
recovered tax-free. However, special five-year averaging may be available,
provided the employee has reached age 59 1/2 and has not previously elected to
use income averaging. (Special five-year averaging has been repealed for
distributions after 1999.) Special ten-year averaging and capital-gains
treatment may be available to an employee who reached age 50 before 1986.
Distributions from a retirement plan qualified under Code Section 401 may be
eligible for a tax-free rollover to either another qualified retirement plan or
to an individual retirement account or annuity (IRA). See "Rollovers" on page
33.
2. Section 403(b)
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations specified in
Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, to exclude the amount of purchase payments from gross
income for tax purposes. The Contract may be purchased in connection with a
Section 403(b) annuity program.
Section 403(b) annuities must generally be provided under a plan which meets
certain minimum participation, coverage, and nondiscrimination requirements.
Section 403(b) annuities are generally subject to minimum distribution
requirements similar to those applicable to retirement plans qualified under
Section 401 of the Code. See "Section 401" on page 31.
A Section 403(b) annuity contract may be purchased with employer
contributions, employee contributions or a combination of both. An employee's
rights under a Section 403(b) contract must be nonforfeitable. Numerous
limitations apply to the amount of contributions that may be made to a Section
403(b) annuity contract. The applicable limit will depend upon, among other
things, whether the annuity contract is purchased with employer or employee
contributions.
Amounts used to purchase Section 403(b) annuities generally are excludable
from the taxable income of the employee. As a result, all distributions from
such annuities are normally taxable in full as ordinary income to the employee.
A Section 403(b) annuity contract must prohibit the distribution of employee
contributions (including earnings thereon) until the employee: (i) attains age
59 1/2, (ii) terminates employment; (iii) dies; (iv) becomes disabled; or (v)
incurs a financial hardship (earnings may not be distributed in the event of
hardship).
Distributions from a Section 403(b) annuity contract may be eligible for a
tax-free rollover to either another Section 403(b) annuity contract or to an
individual retirement account or annuity (IRA). See "Rollovers" on page 33.
3. Section 408 and Section 408A
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to establish individual retirement programs through the purchase of
Individual Retirement Annuities ("traditional IRAs"). The Contract may be
purchased as an IRA. The IRAs described in this paragraph are called
"traditional IRAs" to distinguish them from the new "Roth IRAs" which became
available in 1998. Roth IRAs are described below.
IRAs are subject to limitations on the amount that may be contributed, the
persons who may be eligible and on the time when distributions must commence.
Depending upon the circumstances of the individual, contributions to a
traditional IRA may be made on a deductible or non-deductible basis. IRAs may
not be transferred, sold, assigned, discounted or pledged as collateral for a
loan or other obligation. The annual premium for an IRA may not be fixed and may
not exceed $2,000 (except in the case of a rollover contribution). Any refund of
premium must be applied to the payment of future premiums or the purchase of
additional benefits.
Sale of the Contract for use with IRAs may be subject to special requirements
imposed by the Internal Revenue Service. Purchasers of the Contract for such
purposes will be provided with such supplementary information as may be required
by the Internal Revenue Service or other appropriate agency, and will have the
right to revoke the Contract under certain circumstances.
In general, traditional IRAs are subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code; however, the required beginning date for traditional IRAs is generally
the date that the Contractowner reaches age 70 1/2--the Contractowner's
retirement date, if any, will not affect his or her required beginning date. See
"Section 401" on page 31. Distributions from IRAs are generally taxed under Code
Section 72. Under these rules, a portion of each distribution may be excludable
from income. The amount excludable from the individual's income is the amount of
the distribution which bears the same ratio as the individual's nondeductible
contributions bears to the expected return under the IRA.
Distributions from a traditional IRA may be eligible for a tax-free rollover
to another traditional IRA. In certain cases, a distribution from a traditional
IRA may be eligible to be rolled over to a retirement plan qualified under Code
Section 401(a) or a Section 403(b) annuity contract. See "Rollovers" on page 33.
The Internal Revenue Service has not reviewed the Contract for qualification
as an IRA, and has not addressed in a ruling of general applicability whether a
death benefit provision such as the provision in the Contract comports with IRA
qualification requirements.
SIMPLE INDIVIDUAL RETIREMENT ANNUITIES. The Small Business Job Protection Act
of 1996 created a new retirement plan, the Savings Incentive Match Plan for
Employees of Small Employers (SIMPLE plans). Depending upon the type of SIMPLE
plan, employers may deposit the plan contributions into a single trust or into
SIMPLE Individual Retirement Annuities ("SIMPLE IRA") established by each
participant.
Information on eligibility to participate in an employer's SIMPLE Plan will
be included in the summary description of the plan furnished to the participants
by their employer. Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions. On a pre-tax basis, participants may
elect to contribute (through salary deferrals) up to $6,000 of their
compensation to a SIMPLE IRA. In addition, employers are required to make either
(1) a dollar-for-dollar matching contribution or (2) a nonelective contribution
to their account each year. Finally, participants may roll over or transfer
contributions to their SIMPLE IRA from another SIMPLE IRA.
In general, SIMPLE IRAs are subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code; however, the required beginning date for SIMPLE IRAs is generally the
date that the Contractowner reaches age 70 1/2--the Contractowner's retirement
date will not affect his or her required beginning date. Amounts used to
purchase SIMPLE IRAs generally are excludable from the taxable income of the
participant. As a result, all distributions from such annuities are normally
taxable in full as ordinary income to the participant.
Distributions from a SIMPLE IRA may be eligible for a tax-free rollover or
transfer to another SIMPLE IRA. However, a distribution from a SIMPLE IRA is
NEVER eligible to be rolled over to a retirement plan qualified under Code
Section 401(a) or a Section 403(b) annuity contract.
The Internal Revenue Service has not reviewed the Contract for qualification
as a SIMPLE IRA, and has not addressed in a ruling of general applicability
whether the death benefit provision such as the provision in the Contract
comports with SIMPLE IRA qualification requirements.
ROTH IRAS. Section 408A of the Code permits eligible individuals to establish
a Roth IRA, a new type of IRA which became available in 1998. The Contract may
be purchased as a Roth IRA. Contributions to a Roth IRA are not deductible, but
withdrawals that meet certain requirements are not subject to federal income
tax. Sale of the contract for use with Roth IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the Contract
for such purposes will be provided with such supplementary information as may be
required by the Internal Revenue Service or other appropriate agency, and will
have the right to revoke the Contract under certain circumstances. Unlike a
traditional IRA, Roth IRAs are not subject to minimum required distribution
rules during the Contractowner's life time. Generally, however, the amount in a
remaining Roth IRA must be distributed by the end of the fifth year after the
death of the Contractowner.
The Internal Revenue Service has not reviewed the Contract for qualification
as a Roth IRA and has not addressed in a ruling of general applicability whether
a death benefit provision such as the provision in the Contract comports with
Roth IRA qualification requirements.
4. Section 457
Section 457 of the Code permits employees of state and local governments and
units and agencies of state and local governments as well as tax-exempt
organizations described in Section 501(c)(3) of the Code to defer a portion of
their compensation without paying current taxes if those employees are
participants in an eligible deferred compensation plan. A Section 457 plan may
permit the purchase of Contracts to provide benefits thereunder.
Although a participant under a Section 457 plan may be permitted to direct or
choose methods of investment in the case of a tax-exempt employer sponsor, all
amounts deferred under the plan, and any income thereon, remain solely the
property of the employer and subject to the claims of its general creditors,
until paid to the participant. The assets of a Section 457 plan maintained by a
state or local government employer must be held in trust (or custodial account
or an annuity contract) for the exclusive benefit of plan participants, who will
be responsible for taxes upon distribution. A Section 457 plan must not permit
the distribution of a participant's benefits until the participant attains age
70 1/2, terminates employment or incurs an "unforeseeable emergency."
Section 457 plans are generally subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code. See "Section 401" on page 31. Since under a Section 457 plan,
contributions are generally excludable from the taxable income of the employee,
the full amount received will usually be taxable as ordinary income when annuity
payments commence or other distributions are made. Distributions from a Section
457 plan are not eligible for tax-free rollovers.
5. Rollovers
A "rollover" is the tax-free transfer of a distribution from one Qualified
Plan to another. Distributions which are rolled over are not included in the
employee's gross income until some future time.
If any portion of the balance to the credit of an employee in a Section 401
plan or Section 403(b) plan is paid to the employee in an "eligible rollover
distribution" and the employee transfers any portion of the amount received to
an "eligible retirement plan," then the amount so transferred is not includable
in income. An "eligible rollover distribution" generally means any distribution
that is not one of a series of periodic payments made for the life of the
distributee or for a specified period of at least ten years. In addition, a
required minimum distribution will not qualify as an eligible rollover
distribution. A rollover must be completed within 60 days after receipt of the
distribution.
In the case of a Section 401 plan, an "eligible retirement plan" will be
another retirement plan qualified under Code Section 401 or an individual
retirement account or annuity under Code Section 408. With respect to a Section
403(b) plan, an "eligible retirement plan" will be another Section 403(b) plan
or an individual retirement account or annuity described in Code Section 408.
A Section 401 plan and a Section 403(b) plan must generally provide a
participant receiving an eligible rollover distribution, the option to have the
distribution transferred directly to another eligible retirement plan.
The owner of an IRA may make a tax-free rollover of any portion of the IRA.
The rollover must be completed within 60 days of the distribution and generally
may only be made to another IRA. However, an individual may receive a
distribution from his or her IRA and within 60 days roll it over into a
retirement plan qualified under Code Section 401(a) if all of the funds in the
IRA are attributable to a rollover from a Section 401(a) plan. Similarly, a
distribution from an IRA may be rolled over to a Section 403(b) plan only if all
of the funds in the IRA are attributable to a rollover from a Section 403(b)
annuity.
Beginning in 1998 the owner of a traditional IRA may convert the traditional
IRA into a Roth IRA under certain circumstances. The conversion of a traditional
IRA to a Roth IRA will subject the amount of the converted traditional IRA to
federal income tax. If a traditional IRA is converted to a Roth IRA, the taxable
amount in the owner's traditional IRA will be considered taxable income for
federal income tax purposes for the year of the conversion. Generally, all
amounts in a traditional IRA are taxable except for the owner's prior
non-deductible contributions to the traditional IRA.
6. Tax Penalties
PREMATURE DISTRIBUTION TAX. Distributions from a Qualified Plan before the
participant reaches age 59 1/2 are generally subject to an additional tax equal
to 10 percent of the taxable portion of the distribution. The 10 percent penalty
tax does not apply to distributions: (i) made on or after the death of the
employee; (ii) attributable to the employee's disability; (iii) which are part
of a series of substantially equal periodic payments made (at least annually)
for the life (or life expectancy) of the employee or the joint lives (or joint
life expectancies) of the employee and a designated beneficiary and which begin
after the employee terminates employment; (iv) made to an employee after
termination of employment after reaching age 55; (v) made to pay for certain
medical expenses; (vi) that are exempt withdrawals of an excess contribution;
(vii) that are rolled over or transferred in accordance with Code requirements;
or (viii) that are transferred pursuant to a decree of divorce or separate
maintenance or written instrument incident to such a decree.
The exception to the 10 percent penalty tax described in item (iv) above is
not applicable to IRAs. However, distributions from an IRA to unemployed
individuals can be made without application of the 10 percent penalty tax to pay
health insurance premiums in certain cases. In addition, the 10 percent penalty
tax is generally not applicable to distributions from a Section 457 plan.
Starting January 1, 1998, there are two additional exceptions to the 10 percent
penalty tax on withdrawals from IRAs before age 59 1/2: withdrawals made to pay
"qualified" higher education expenses and withdrawals made to pay certain
"eligible first-time home buyer expenses."
MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan is
less than the minimum required distribution for the year, the participant is
subject to a 50 percent tax on the amount that was not properly distributed.
EXCESS DISTRIBUTION/ACCUMULATION TAX. The penalty tax of 15 percent which was
imposed (in addition to any ordinary income tax) on large plan distributions and
the "excess retirement accumulations" of an individual has been repealed
effective January 1, 1997.
7. Withholding
Periodic distributions (e.g., annuities and installment payments) from a
Qualified Plan that will last for a period of ten or more years are generally
subject to voluntary income tax withholding. The amount withheld on such
periodic distributions is determined at the rate applicable to wages. The
recipient of a periodic distribution may generally elect not to have withholding
apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than ten years) from a Qualified Plan (other than IRAs and
Section 457 plans) are generally subject to mandatory 20 percent income tax
withholding. However, no withholding is imposed if the distribution is
transferred directly to another eligible Qualified Plan. Nonperiodic
distributions from an IRA are subject to income tax withholding at a flat 10
percent rate. The recipient of such a distribution may elect not to have
withholding apply.
The above description of the federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contract offered by this
Prospectus is only a brief summary and is not intended as tax advice. The rules
governing the provisions of Qualified Plans are extremely complex and often
difficult to comprehend. Anything less than full compliance with the applicable
rules, all of which are subject to change, may have adverse tax consequences. A
prospective Contractowner considering adoption of a Qualified Plan and purchase
of a Contract in connection therewith should first consult a qualified and
competent tax adviser, with regard to the suitability of the Contract as an
investment vehicle for the Qualified Plan.
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.
SBL anticipates it will pay the selling broker-dealer or any national bank
that sells Variflex a sales commission or fee of not more than 6 percent 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 percent, on an annual basis, of the Contract
Values considered in connection with the bonus.
OTHER INFORMATION
VOTING OF SBL FUND SHARES
SBL is the legal owner of the shares of SBL Fund held by the Series of the
Separate Account. SBL will exercise voting rights attributable to the shares of
each series of the Fund held in the Series at any regular and special meetings
of the shareholders of the Fund on matters requiring shareholder voting under
the 1940 Act. In accordance with its view of presently applicable law, SBL will
exercise these voting rights based on instructions received from persons having
the voting interest in corresponding Series of the Separate Account. However, if
the 1940 Act or any regulations thereunder should be amended, or if the present
interpretation thereof should change, and as a result SBL determines that it is
permitted to vote the shares of the Fund in its own right, it may elect to do
so.
The person having the voting interest under a Contract is the Owner. Unless
otherwise required by applicable law, the number of shares of a particular
Series as to which voting instructions may be given to SBL is determined by
dividing a Contractowner's Contract Value in a Series on a particular date by
the net asset value per share of that Series as of the same date. Fractional
votes will be counted. The number of votes as to which voting instructions may
be given will be determined as of the date coincident with the date established
by the Fund for determining shareholders eligible to vote at the meeting of the
Fund. If required by the SEC, SBL reserves the right to determine in a different
fashion the voting rights attributable to the shares of the Fund. Voting
instructions may be cast in person or by proxy.
Voting rights attributable to the Contractowner's Contract Value in a Series
for which no timely voting instructions are received will be voted by SBL in the
same proportion as the voting instructions that are received in a timely manner
for all Contracts participating in that Series. SBL will also exercise the
voting rights from assets in each Series that are not otherwise attributable to
Contractowners, if any, in the same proportion as the voting instructions that
are received in a timely manner for all Contracts participating in that Series
and generally will exercise voting rights attributable to shares of the series
of the Fund held in its general account, if any, in the same proportion as votes
cast with respect to shares of the series of the Fund held by the Separate
Account and other separate accounts of Security Benefit, in the aggregate.
SUBSTITUTED SECURITIES
SBL reserves the right, subject to compliance with the law as then in effect,
to make additions to, deletions from, substitutions for, or combinations of the
securities that are held by the Separate Account or any Series or that the
Separate Account or any Series may purchase. If shares of any or all of the
series of the Fund should no longer be available for investment, or if, in the
judgment of SBL management, further investment in shares of any or all of the
series of the Fund should become inappropriate in view of the purposes of the
Contract, SBL may substitute shares of another series of the Fund or of a
different fund for shares already purchased, or to be purchased in the future
under the Contract. SBL may also purchase, through the Series, other securities
for other classes or contracts, or permit a conversion between classes of
contracts on the basis of requests made by Owners.
In connection with a substitution of any shares attributable to an Owner's
interest in a Series or the Separate Account, SBL will, to the extent required
under applicable law, provide notice, seek Owner approval, seek prior approval
of the SEC, and comply with the filing or other procedures established by
applicable state insurance regulators.
SBL also reserves the right to establish additional Series of the Separate
Account that would invest in a new series of the Fund or in shares of another
investment company, a series thereof, or other suitable investment vehicle. New
Series may be established in the sole discretion of SBL, and any new Series will
be made available to existing Owners on a basis to be determined by SBL. SBL may
also eliminate or combine one or more Series if, in its sole discretion,
marketing, tax, or investment conditions so warrant.
Subject to compliance with applicable law, SBL may transfer assets to its
General Account. SBL also reserves the right, subject to any required regulatory
approvals, to transfer assets of any Series of the Separate Account to another
separate account or Series.
In the event of any such substitution or change, SBL may, by appropriate
endorsement, make such changes in these and other contracts as may be necessary
or appropriate to reflect such substitution or change. If deemed by SBL to be in
the best interests of persons having voting rights under the Contracts, the
Separate Account may be operated as a management investment company under the
1940 Act or any other form permitted by law; it may be deregistered under that
Act in the event such registration is no longer required; or it may be combined
with other separate accounts of SBL or an affiliate thereof. Subject to
compliance with applicable law, SBL also may combine one or more Series and may
establish a committee, board, or other group to manage one or more aspects of
the operation of the Separate Account.
REPORTS TO OWNERS
A statement will be sent annually to each Contractowner or Participant
setting forth a summary of the transactions that occurred during the year, and
indicating the Contract Value as of the end of each year. In addition, the
statement will indicate the allocation of Contract Value among the General
Account and the Series and any other information required by law. Confirmations
will also be sent out upon purchase payments, transfers, loans, loan repayments,
and full and partial withdrawals. Certain transactions may be confirmed on a
quarterly basis. These transactions include purchases made automatically from
the Owner's bank account or pursuant to a salary reduction agreement, transfers
under the Dollar Cost Averaging and Asset Reallocation Options, systematic
withdrawals and annuity payments.
Each Contractowner will also receive an annual and semiannual report
containing financial statements for the Fund, which will include a list of the
portfolio securities of the Fund, as required by the 1940 Act, and/or such other
reports as may be required by federal securities laws.
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 percent the
first year to 0 percent 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.
THE GENERAL ACCOUNT
In addition to the fourteen 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 SBL has 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 as 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 20).
Annuity options available for Variable Annuities (see "Optional Annuity
Forms," page 26) are also available for Guaranteed Annuities as well as for
combined Variable and Guaranteed Annuities.
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 right to transfer among Series
during the Annuity Period (see "Allocation of Benefits," page 26) 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 percent 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 percent 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 from the General Account is not currently limited;
however, SBL reserves the right to limit them to no more frequently than 14 per
Contract Year. All of the Contract Value of the General Account may be
transferred at the final conversion prior to the Annuity Commencement Date.
FINANCIAL STATEMENTS
Consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries at December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997, and the financial statements of the
Separate Account at December 31, 1997 and for each of the two years in the
period ended December 31, 1997 are contained in the Statement of Additional
Information.
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
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX QUALIFIED RETIREMENT PLANS..... 6
Section 401............................................................. 6
Section 403(b).......................................................... 6
Section 408............................................................. 6
Section 457............................................................. 7
ASSIGNMENT................................................................ 7
DISTRIBUTION OF THE CONTRACTS............................................. 7
SAFEKEEPING OF VARIFLEX ACCOUNT ASSETS.................................... 7
STATE REGULATION.......................................................... 7
LEGAL MATTERS............................................................. 8
EXPERTS................................................................... 8
OTHER INFORMATION......................................................... 8
FINANCIAL STATEMENTS...................................................... 9
<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
NOVEMBER 1, 1998
RELATING TO THE PROSPECTUS DATED NOVEMBER 1, 1998,
AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME
(785) 431-3112
(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
November 1, 1998
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 November 1, 1998, by calling (785) 431-3112, 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................................................. 2
Group Contracts......................................................... 3
Performance Information................................................... 3
Limits on Purchase Payments Paid Under Tax-Qualified Retirement Plans..... 6
Section 401............................................................. 6
Section 403(b).......................................................... 6
Section 408............................................................. 6
Section 457............................................................. 7
Assignment................................................................ 7
Distribution of the Contracts............................................. 7
Safekeeping of Variflex Account Assets.................................... 7
State Regulation.......................................................... 7
Legal Matters............................................................. 7
Experts................................................................... 8
Other Information......................................................... 8
Financial Statements...................................................... 8
<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 specify 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
specified 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 as of the close of the Annuity Commencement Date (or for
Contracts issued prior to November 1, 1998, as of the end of the second day
preceding the Annuity Commencement Date). 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.
(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) as of the close of the
Annuity Commencement Date to determine the number of Annuity Units represented
by the first payment. This number of Annuity Units remains fixed during the
Annuity Period, unless Annuity Units are transferred among Series. 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 originally was set at $1.00. 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 Net Investment Factor
for 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 specified 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, and (b) is the value of a share of the underlying series of SBL Fund at
the end of the previous day.
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 or her Contract 4,000 Accumulation Units and that the value of
an Accumulation Unit 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 specified 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 day
preceding the date of the second annuity payment, that it was $5.17 at the end
of 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
$1.0639727137 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 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, LLC, 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. For Contracts
issued on or after November 1, 1998, SBL also reserves the right to terminate an
individual Contract or Participant Account if Account Value is less then $2,000
at any time after the first Contract Year and prior to the Annuity Commencement
Date. For Contracts issued prior to November 1, 1998, SBL may terminate a
Contract or Participant Account if the following conditions exist during the
accumulation period: (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 19, "Constraints on Distributions from Certain Section 403(b) Annuity
Contracts," page 23, and "Federal Tax Matters," page 26.)
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 Account, 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 yield, 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 and income other than investment income) 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, 1997, the yield of the Money
Market Series was 3.00% and the effective yield of the Series was 3.04%.
Quotations of yield for the Series, other than the Money Market Series, will
be based on all investment income per Accumulation Unit earned during a
particular 30-day period, less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the value of the Accumulation Unit on the last day of the period, according to
the following formula:
YIELD = 2[(a-b + 1)6 - 1]
---
cd
where a = net investment income earned during the period by the Series of the
Fund attributable to shares owned by the Series,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of Accumulation Units outstanding during
the period that were entitled to receive dividends, and
d = the maximum offering price per Accumulation Unit on the last day of
the period.
For the 30-day period ended December 31, 1997, the yield for the High Grade
Series was 6.19%.
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, 1997, respectively, the
average annual total return was 16.16%, 14.83% and 13.82% for the Growth Series;
13.99%, 11.00% and 12.77% for the Growth-Income Series (formerly the
"Income-Growth Series"); -5.83%, 9.09% and -0.78% for the Worldwide Equity
Series (formerly the High Yield Series); and -2.29%, 1.40% and 4.40% for the
High Grade Income Series. For the 1- and 5-year periods ended December 31, 1997
and the period between May 1, 1991 (Series date of inception) and December 31,
1997, respectively, the average annual total return was 10.17%, 10.51% and
10.79% for the Social Awareness Series. For the 1- and 5-year periods ended
December 31, 1997 and the period between October 1, 1992 (Series date of
inception) and December 31, 1997, respectively, the average annual total return
was 7.52%, 13.52% and 12.81% for the Emerging Growth Series. For the 1-year
period ended December 31, 1997 and the period between June 1, 1995 (Series date
of inception) and December 31, 1997, the average annual total return was -6.12%
and 3.67% for Global Aggressive Bond Series; -5.50% and 4.76% for Specialized
Asset Allocation Series; 6.02% and 8.36% for Managed Asset Allocation Series;
and 15.92% and 19.48% for Equity-Income Series. For the 1-year period ended
December 31, 1997 and the period between August 5, 1996 (underlying Series date
of inception) and December 31, 1997, respectively, the average annual total
return was .88% and 5.20% for the High Yield Series. For the period between May
1, 1997 (underlying Series date of inception) and December 31, 1997, the average
annual total return was 19.30% for Value Series. For the period between October
15, 1997 (underlying Series date of inception) and December 31, 1997, the
average annual total return was -12.60% for the Small Cap Series.
Absent deduction of the contingent deferred sales charge and the annual
administrative fee, the average annual total return for the stated periods above
would be 27.16%, 17.86% and 15.81% for the Growth Series; 24.99%, 14.26% and
14.67% for the Growth-Income Series; 5.17%, 12.02% and 8.75% for the Worldwide
Equity Series; 8.71%, 5.04% and 6.83% for the High Grade Income Series. For the
1- and 5-year periods ended December 31, 1997 and the period between May 1, 1991
(Series date of inception), and December 31, 1997, respectively, the average
annual total return would be 21.17%, 13.54% and 13.09% for the Social Awareness
Series. For the 1- and 5-year periods ended December 31, 1997 and the period
between October 1, 1992 (Series date of inception), and December 31, 1997,
respectively, the average annual total return would be 18.52%, 11.43% and 15.56%
for the Emerging Growth Series. For the 1-year period ended December 31, 1997,
and the period between June 1, 1995 (Series date of inception), and December 31,
1997, the average annual total return would be 4.17% and 9.02% for the Global
Aggressive Bond Series; 4.83% and 9.32% for the Specialized Asset Allocation
Series; 17.02% and 13.56% for the Managed Asset Allocation Series; and 26.92%
and 24.16% for Equity-Income Series. For the 1-year period ended December 31,
1997 and the period between August 5, 1996 (underlying Series date of inception)
and December 31, 1997, respectively, the average annual total return was 11.88%
and 13.03% for the High Yield Series. For the period between May 1, 1997
(underlying Series date of inception) and December 31, 1997, the average annual
total return was 29.29% for the Value Series. For the period between October 15,
1997 (underlying Series date of inception) and December 31, 1997, the average
annual total return was -4.40% for the Small Cap Series. The total return
figures set forth above would be lower if the contingent deferred sales charge
was deducted.
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 fiscal years ended 1997 through 1987, the total return for each
Series was the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Series...................... 27.16% 21.22% 35.11% (2.82)% 12.35% 9.83% 34.45% (10.90)% 33.31% 8.80% 5.01%
Growth-Income Series............... 24.99% 16.80% 28.52% (4.14)% 8.30% 4.99% 36.16% (5.60)% 26.86% 17.89% 2.42%
Money Market Series................ 3.89% 3.81% 4.14% 2.49% 1.35% 2.01% 4.39% 6.56% 7.74% 5.89% 5.19%
Worldwide Equity Series............ 5.17% 15.99% 9.55% 1.51% 30.06% (3.78)% 3.01%1 --- --- --- ---
High Grade Income Series........... 8.71% (1.90)% 17.17% (8.04)% 11.28% 6.16% 15.57% 5.40% 10.54% 5.91% 1.16%
Emerging Growth Series............. 18.52% 16.62% 18.02% (6.23)% 12.30% 24.40%2 --- --- --- --- ---
Global Aggressive Bond Series...... 4.17% 12.25% 6.90%3 --- --- --- --- --- --- --- ---
Specialized Asset Allocation Series 4.83% 12.88% 6.40%3 --- --- --- --- --- --- --- ---
Managed Asset Allocation Series.... 17.02% 11.35% 6.60%3 --- --- --- --- --- --- --- ---
Equity Income Series............... 26.92% 18.59% 16.20%3 --- --- --- --- --- --- --- ---
High Yield Series.................. 11.88% 6.10%4 --- --- --- --- --- --- --- --- ---
Social Awareness Series............ 21.17% 17.41% 26.25% (4.96)% 10.55% 15.00% 4.70%5 --- --- --- ---
Value Series....................... 29.29%5 --- --- --- --- --- --- --- --- --- ---
Small Cap Series................... (4.40)%6 --- --- --- --- --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
1. On May 1, 1991 the Worldwide Equity Series changed its investment objective 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. The
performance information set forth above reflects performance after the change in investment objective.
2. From October 1, 1992 to December 31, 1992.
3. From June 1, 1995 to December 31, 1995.
4. From August 5, 1996 to December 31, 1996.
5. From May 1, 1991 to December 31, 1991.
6. From May 1, 1997 to December 31, 1997.
7. From October 15, 1997 to December 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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. Any quotation of performance that pre-dates the
date of inception of the Variflex Separate Account (or a Subaccount thereof as
applicable) will be accompanied by average annual total return reflecting the
deduction of the applicable contingent deferred sales charge and other Variflex
fees and charges since the date of inception of the Separate Account or
Subaccount as applicable.
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 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.
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
SECTION 401
The applicable annual limits on purchase payments for a Contract used in
connection with a retirement plan that is qualified under Section 401 of the
Internal Revenue Code depend upon the type of plan. Total purchase payments on
behalf of a participant to all defined contribution plans maintained by an
employer are limited under Section 415(c) of the Internal Revenue Code to the
lesser of (a) $30,000, or (b) 25% of the participant's annual compensation.
Salary reduction contributions to a cash-or-deferred arrangement under a profit
sharing plan are subject to additional annual limits. Contributions to a defined
benefit pension plan are actuarially determined based upon the amount of
benefits the participants will receive under the plan formula. The maximum
annual benefit any individual may receive under an employer's defined benefit
plan is limited under Section 415(b) of the Internal Revenue Code. The limits
determined under Section 415(b) and (c) of the Internal Revenue Code are further
reduced for an individual who participates in a defined contribution plan and a
defined benefit plan maintained by the same employer. Rollover contributions are
not subject to the annual limitations described above.
SECTION 403(B)
Contributions to 403(b) annuities are excludable from an employee's gross
income if they do not exceed the smallest of the limits calculated under
Sections 402(g), 403(b)(2), and 415 of the Code. The applicable limit will
depend upon whether the annuities are purchased with employer or employee
contributions. Rollover contributions are not subject to these annual limits.
Section 402(g) generally limits an employee's salary reduction contributions
to a 403(b) annuity to $10,000 a year. The $10,000 limit will be reduced by
salary reduction contributions to other types of retirement plans. An employee
with at least 15 years of service for a "qualified employer" (i.e., an
educational organization, hospital, home health service agency, health and
welfare service agency, church or convention or association of churches)
generally may exceed the $10,000 limit by $3,000 per year, subject to an
aggregate limit of $15,000 for all years.
Section 403(b)(2) provides an overall limit on employer and employee salary
reduction contributions that may be made to a 403(b) annuity. Section 403(b)(2)
generally provides that the maximum amount of contributions an employee may
exclude from his or her gross income in any taxable year is equal to the excess,
if any, of:
(i) the amount determined by multiplying 20% of the employee's includable
compensation by the number of his or her years of service with the
employer, over
(ii) the total amount contributed to retirement plans sponsored by the
employer, that were excludable from his gross income in prior years.
Section 415(c) also provides an overall limit on the amount of employer and
employee salary reduction contributions to a Section 403(b) annuity that will be
excludable from an employee's gross income in a given year. The Section 415(c)
limit is the lesser of (i) $30,000, or (ii) 25% of the employee's annual
compensation.
SECTION 408
Premiums (other than rollover contributions) paid under a Contract used in
connection with an individual retirement annuity (IRA) that is described in
Section 408 of the Internal Revenue Code are subject to the limits on
contributions to IRA's under Section 219(b) of the Internal Revenue Code. Under
Section 219(b) of the Code, contributions (other than rollover contributions) to
an IRA are limited to the lesser of $2,000 per year or the Owner's annual
compensation. Spousal IRAs allow an Owner and his or her spouse to contribute up
to $2,000 to their respective IRAs so long as a joint tax return is filed and
joint income is $4,000 or more. The maximum amount the higher compensated spouse
may contribute for the year is the lesser of $2,000 or 100% of that spouse's
compensation. The maximum the lower compensated spouse may contribute is the
lesser of (i) $2,000 or (ii) 100% of that spouse's compensation plus the amount
by which the higher compensated spouse's compensation exceeds the amount the
higher compensated spouse contributes to his or her IRA. The extent to which an
Owner may deduct contributions to an IRA depends on the gross income of the
Owner and his or her spouse for the year and whether either participate in an
employer-sponsored retirement plan.
Premiums under a Contract used in connection with a simplified employee
pension plan described in Section 408 of the Internal Revenue Code are subject
to limits under Section 402(h) of the Internal Revenue Code. Section 402(h)
currently limits employer contributions and salary reduction contributions (if
permitted) under a simplified employee pension plan to the lesser of (a) 15% of
the compensation of the participant in the Plan, or (b) $30,000. Salary
reduction contributions, if any, are subject to additional annual limits.
SECTION 457
Contributions on behalf of an employee to a Section 457 plan generally are
limited to the lesser of (i) $8,000 or (ii) 33 1/3% of the employee's includable
compensation. The $8,000 limit is indexed for inflation (in $500 increments) for
tax years beginning after December 31, 1996; thus the dollar limit is adjusted
only when the sum of the inflation adjustments equals or exceeds $500. If the
employee participates in more than one Section 457 plan, the $8,000 limit
applies to contributions to all such programs. The $8,000 limit is reduced by
the amount of any salary reduction contribution the employee makes to a 403(b)
annuity, an IRA or a retirement plan qualified under Section 401. The Section
457 limit may be increased during the last three years ending before the
employee reaches his or her normal retirement age. In each of these last three
years, the plan may permit a "catch-up" amount in addition to the regular amount
to be deferred. The maximum combined amount which may be deferred in each of
these three years is $15,000 reduced by any amount excluded from the employee's
income for the taxable year as a contribution to another plan.
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.
The Variflex offering is continuous. During the years ended December 31,
1997, 1996 and 1995, SBL received contingent deferred sales charges from
Variflex as follows: $1,653,942, $1,285,380 and $1,182,820, 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 $6,875,000 per
loss.
STATE REGULATION
As a life 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.
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 consolidated financial statements of Security Benefit Life Insurance
Company and Subsidiaries at December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997 and the financial statements
of Variflex at December 31, 1997, and for each of the two years in the period
ended December 31, 1997, included in this Statement of Additional Information
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 the Prospectus and this
Statement of Additional Information relating to Variflex and the Variflex
Contracts are summaries only. For further information, reference is made to the
Registration Statement and the exhibits filed as part 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.
FINANCIAL STATEMENTS
The consolidated financial statements of Security Benefit Life Insurance
Company and Subsidiaries at December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, and the financial statements
of the Separate Account at December 31, 1997, and for each of the two years in
the period ended December 31, 1997, are set forth herein, starting on page 9.
The consolidated financial statements of SBL, which are included in this
Statement of Additional Information, should be considered only as bearing on the
ability of the Company to meet its obligations under the Contracts. They should
not be considered as bearing on the investment performance of the assets held in
the Separate Account.
<PAGE>
Variflex
Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
PAGE
Report of Independent Auditors........................................... 10
Audited Financial Statements
Balance Sheet.......................................................... 11
Statements of Operations and Changes in Net Assets..................... 13
Notes to Financial Statements.......................................... 15
<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 Account) as of
December 31, 1997, 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 Account'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, 1997 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, 1997,
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 6, 1998
<PAGE>
Variflex
Balance Sheet
December 31, 1997
(DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 27,703,230 shares at net asset
value of $29.39 per share (cost, $662,770)................... $ 814,198
Series B (Growth-Income Series) - 26,297,103 shares at net
asset value of $41.60 per share (cost, $874,010)............. 1,093,959
Series C (Money Market Series) - 5,420,257 shares at net asset
value of $12.53 per share (cost, $67,932).................... 67,916
Series D (Worldwide Equity Series) - 41,155,765 shares at net
asset value of $6.14 per share (cost, $245,440).............. 252,696
Series E (High Grade Income Series) - 9,617,282 shares at
net asset value of $12.25 per share (cost, $117,344)......... 117,812
Series J (Emerging Growth Series) - 8,803,313 shares at net
asset value of $21.33 per share (cost, $162,885)............. 187,775
Series K (Global Aggressive Bond Series) - 793,518 shares at
net asset value of $10.07 per share (cost, $8,585)........... 7,991
Series M (Specialized Asset Allocation Series) - 2,421,884
shares at net asset value of $12.29 per share (cost, $28,755) 29,765
Series N (Managed Asset Allocation Series) - 1,524,591 shares
at net asset value of $13.88 per share (cost, $19,040)....... 21,161
Series O (Equity Income Series) - 5,359,732 shares at net
asset value of $17.62 per share (cost, $79,723).............. 94,438
Series S (Social Awareness Series) - 3,524,589 shares at net
asset value of $22.25 per share (cost, $62,572).............. 78,422
----------
Total assets....................................................... $2,766,133
==========
<PAGE>
LIABILITIES AND NET ASSETS
Mortality guarantee payable $ 19
Net assets are represented by (NOTE 3):
------------------------------------
NUMBER UNIT
OF UNITS VALUE AMOUNT
------------------------------------
Growth Series:
Accumulation units....... 13,946,720 $58.19 $ 811,530
Annuity reserves......... 45,797 58.19 2,665 814,195
---------
Growth-Income Series:
Accumulation units....... 18,740,460 58.21 1,090,922
Annuity reserves......... 51,980 58.21 3,026 1,093,948
---------
Money Market Series:
Accumulation units....... 3,569,294 18.98 67,747
Annuity reserves......... 9,135 18.98 173 67,920
---------
Worldwide Equity Series:
Accumulation units....... 16,535,335 15.26 252,369
Annuity reserves......... 21,367 15.26 326 252,695
---------
High Grade Income Series:
Accumulation units....... 4,982,321 23.57 117,448
Annuity reserves......... 15,360 23.57 362 117,810
---------
Emerging Growth Series:
Accumulation units....... 8,757,387 21.37 187,134
Annuity reserves......... 29,936 21.37 640 187,774
---------
Global Aggressive
Bond Series:
Accumulation units....... 638,288 12.50 7,976
Annuity reserves......... 1,172 12.50 15 7,991
---------
Specialized Asset
Allocation Series:
Accumulation units....... 2,359,916 12.59 29,714
Annuity reserves......... 4,062 12.59 51 29,765
---------
Managed Asset
Allocation Series:
Accumulation units....... 1,516,831 13.89 21,075
Annuity reserves......... 6,167 13.89 86 21,161
---------
Equity Income Series:
Accumulation units....... 5,393,193 17.48 94,297
Annuity reserves......... 8,112 17.48 142 94,439
---------
Social Awareness Series:
Accumulation units....... 3,435,950 22.72 78,060
Annuity reserves......... 15,686 22.72 356 78,416
------------------------
Total liabilities and net
assets................... $2,766,133
==========
SEE ACCOMPANYING NOTES.
<PAGE>
Variflex
Statement of Operations and Changes in Net Assets
Year ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH- MONEY WORLDWIDE HIGH GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dividend distributions.................................. $ 4,540 $ 21,188 $ 5,040 $ 5,166 $ 7,354 $ 464
Expenses (NOTE 2):
Mortality and expense risk fee........................ (8,484) (12,034) (1,111) (3,086) (1,274) (1,958)
Administrative fee.................................... (438) (1,387) (118) (64) (249) (22)
-------------------------------------------------------------------------
Net investment income (loss)............................ (4,382) 7,767 3,811 2,016 5,831 (1,516)
Capital gains distributions............................. 42,445 52,576 --- 11,148 --- 3,999
Realized gain (loss) on investments..................... 71,222 51,243 (219) 13,977 (219) 16,556
Unrealized appreciation (depreciation) on investments... 51,354 106,904 (165) (15,631) 2,886 10,679
-------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.. 165,021 210,723 (384) 9,494 2,667 31,234
-------------------------------------------------------------------------
Net increase in net assets resulting from operations.... 160,639 218,490 3,427 11,510 8,498 29,718
Net assets at beginning of year......................... 591,591 886,931 90,466 223,249 109,990 128,768
Variable annuity deposits (NOTES 2 AND 3)............... 249,960 162,219 229,892 79,090 46,747 89,302
Terminations and withdrawals (NOTES 2 AND 3)............ (187,265) (173,157) (255,042) (60,994) (47,233) (59,424)
Annuity payments (NOTES 2 AND 3)........................ (705) (501) (828) (160) (191) (590)
Net mortality guarantee transfer........................ (25) (34) 5 --- (1) ---
-------------------------------------------------------------------------
Net assets at end of year............................... $814,195 $1,093,948 $ 67,920 $252,695 $117,810 $187,774
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SPECIALIZED MANAGED ASSET EQUITY SOCIAL
AGGRESSIVE ASSET ALLOCATION ALLOCATION INCOME AWARENESS
BOND SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions.................................. $ 650 $ 600 $ 263 $ 658 $ 125
Expenses (NOTE 2):
Mortality and expense risk fee........................ (92) (332) (184) (794) (769)
Administrative fee.................................... (21) (21) (15) (93) (36)
-----------------------------------------------------------------------
Net investment income (loss)............................ 537 247 64 (229) (680)
Capital gains distributions............................. 196 577 171 938 3,402
Realized gain (loss) on investments..................... 130 1,077 1,042 3,898 4,159
Unrealized appreciation (depreciation) on investments... (543) (756) 953 10,793 5,871
-----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.. (217) 898 2,166 15,629 13,432
-----------------------------------------------------------------------
Net increase in net assets resulting from operations.... 320 1,145 2,230 15,400 12,752
Net assets at beginning of year......................... 5,829 21,737 11,959 37,606 53,324
Variable annuity deposits (NOTES 2 AND 3)............... 6,637 12,513 11,907 54,189 22,273
Terminations and withdrawals (NOTES 2 AND 3)............ (4,783) (5,572) (4,928) (12,735) (9,858)
Annuity payments (NOTES 2 AND 3)........................ (12) (58) (6) (13) (31)
Net mortality guarantee transfer........................ --- --- (1) (8) (44)
=======================================================================
Net assets at end of year............................... $ 7,991 $29,765 $21,161 $94,439 $78,416
=======================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Variflex
Statement of Operations and Changes in Net Assets
Year ended December 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROWTH- MONEY WORLDWIDE HIGH GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dividend distributions.................................. $ 4,003 $ 17,133 $ 3,780 $ 6,404 $ 6,701 $ 202
Expenses (Note 2):
Mortality and expense risk fee........................ (6,014) (9,988) (1,246) (2,420) (1,368) (1,367)
Administrative fee.................................... (369) (1,399) (122) (69) (267) (22)
------------------------------------------------------------------------
Net investment income (loss)............................ (2,380) 5,746 2,412 3,915 5,066 (1,187)
Capital gains distributions............................. 24,782 82,844 --- 6,043 --- 4,663
Realized gain on investments............................ 29,813 41,904 785 7,793 459 11,087
Unrealized appreciation (depreciation) on investments... 40,511 (5,823) 488 10,720 (8,258) 2,657
------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.. 95,106 118,925 1,273 24,556 (7,799) 18,407
------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 92,726 124,671 3,685 28,471 (2,733) 17,220
Net assets at beginning of year......................... 436,043 745,482 78,686 167,450 116,344 87,329
Variable annuity deposits (NOTES 2 AND 3)............... 205,769 161,528 213,354 73,798 45,516 63,675
Terminations and withdrawals (NOTES 2 AND 3)............ (142,679) (144,272) (204,943) (46,433) (48,977) (39,303)
Annuity payments (NOTES 2 AND 3)........................ (255) (478) (316) (33) (161) (152)
Net mortality guarantee transfer........................ (13) --- --- (4) 1 (1)
========================================================================
Net assets at end of year............................... $ 591,591 $ 886,931 $ 90,466 $223,249 $109,990 $128,768
========================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SPECIALIZED MANAGED ASSET EQUITY SOCIAL
AGGRESSIVE ASSET ALLOCATION ALLOCATION INCOME AWARENESS
BOND SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions.................................. $ 650 $ 600 $ 263 $ 658 $ 125
Dividend distributions.................................. $ 385 $ 186 $ 57 $ 66 $ 206
Expenses (Note 2):
Mortality and expense risk fee........................ (49) (197) (110) (287) (539)
Administrative fee.................................... (10) (15) (9) (40) (29)
----------------------------------------------------------------------
Net investment income (loss)............................ 326 (26) (62) (261) (362)
Capital gains distributions............................. 64 86 12 4 1,068
Realized gain on investments............................ 165 381 182 1,234 2,212
Unrealized appreciation (depreciation) on investments... (60) 1,512 911 3,221 3,689
----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.. 169 1,979 1,105 4,459 6,969
----------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 495 1,953 1,043 4,198 6,607
Net assets at beginning of year......................... 2,188 9,689 5,590 9,755 35,596
Variable annuity deposits (NOTES 2 AND 3)............... 5,122 13,786 6,553 29,396 16,769
Terminations and withdrawals (NOTES 2 AND 3)............ (1,974) (3,686) (1,220) (5,738) (5,604)
Annuity payments (NOTES 2 AND 3)........................ (2) (2) (5) (3) (7)
Net mortality guarantee transfer........................ --- (3) (2) (2) (37)
======================================================================
Net assets at end of year............................... $ 5,829 $21,737 $11,959 $37,606 $53,324
======================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Variflex
Notes to Financial Statements
December 31, 1997 and 1996
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. Deposits received by the Account are
invested in the SBL Fund, a mutual fund not otherwise available to the public.
As directed by the owners, amounts deposited may be invested in shares of Series
A (Growth Series - emphasis on capital appreciation), Series B (Growth-Income
Series - emphasis on capital appreciation with secondary emphasis on income),
Series C (Money Market Series - emphasis on capital preservation while
generating interest income), Series D (Worldwide Equity Series - emphasis on
long-term capital growth through investment in foreign and domestic common
stocks and equivalents), Series E (High Grade Income Series - emphasis on
current income with security of principal), Series J (Emerging Growth Series -
emphasis on capital appreciation), Series K (Global Aggressive Bond Series -
emphasis on high current income with secondary emphasis on capital
appreciation), Series M (Specialized Asset Allocation Series - emphasis on high
total return consisting of capital appreciation and current income), Series N
(Managed Asset Allocation Series - emphasis on high level of total return),
Series O (Equity Income Series - emphasis on substantial dividend income and
capital appreciation), and Series S (Social Awareness Series - emphasis on
capital appreciation).
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company, LLC (SMC), a
limited liability company controlled by its members, SBL and Security Benefit
Group, Inc. (SBG), a wholly-owned subsidiary of SBL. SMC has engaged Lexington
Management Corporation to provide sub-advisory services for the Worldwide Equity
Series and Global Aggressive Bond Series, T. Rowe Price Associates, Inc. to
provide sub-advisory services for the Managed Asset Allocation Series and the
Equity Income Series and Meridian Investment Management Corporation to provide
sub-advisory services for 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:
1997 1996
--------------------------------------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
--------------------------------------------
(IN THOUSANDS)
Growth Series...................... $307,630 $207,603 $247,011 $161,782
Growth-Income Series............... 244,789 195,902 270,233 164,899
Money Market Series................ 242,657 264,823 122,800 112,293
Worldwide Equity Series............ 98,268 67,168 89,191 51,904
High Grade Income Series........... 56,168 51,013 55,000 53,555
Emerging Growth Series............. 96,572 64,801 70,096 42,400
Global Aggressive Bond Series...... 7,766 5,191 5,717 2,181
Specialized Asset Allocation Series 14,348 6,641 14,523 4,368
Managed Asset Allocation Series.... 12,903 5,696 6,962 1,693
Equity Income Series............... 57,331 15,190 30,483 7,088
Social Awareness Series............ 26,829 11,798 18,705 6,841
ANNUITY RESERVES
Annuity reserves relate to contracts that have matured and are in the payout
stage. Such reserves are computed on the basis of published mortality tables
using assumed interest rates that will provide reserves as prescribed by law. In
cases where the payout option selected is life contingent, SBL periodically
recalculates the required annuity reserves, and any resulting adjustment is
either charged or credited to SBL and not to the Account.
REINVESTMENT OF DIVIDENDS
Dividend and capital gains distributions paid by the mutual fund to the Account
are reinvested in additional shares of each respective Series. Dividend income
and capital gains distributions are recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES
Under current law, no federal income taxes are payable with respect to the
Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts an administrative fee of $30 per year for each contract, except for
certain contracts based on a minimum account value and the period of time the
contract has been in force. Mortality and expense risks assumed by SBL are
compensated for by a fee equivalent to an annual rate of 1.2% of the net 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 $1,653,942 and $1,285,380 during 1997 and 1996, respectively.
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
-----------------
1997 1996
-----------------
(IN THOUSANDS)
Growth Series:
Variable annuity deposits................................ 4,775 4,887
Terminations, withdrawals, annuity payments
and expense charges.................................... 3,713 3,508
Growth-Income Series:
Variable annuity deposits................................ 3,118 3,756
Terminations, withdrawals, annuity payments
and expense charges.................................... 3,368 3,412
Money Market Series:
Variable annuity deposits................................ 12,375 11,926
Terminations, withdrawals, annuity payments
and expense charges.................................... 13,751 11,446
Worldwide Equity Series:
Variable annuity deposits................................ 5,104 5,428
Terminations, withdrawals, annuity payments
and expense charges.................................... 3,932 3,434
High Grade Income Series:
Variable annuity deposits................................ 2,073 2,124
Terminations, withdrawals, annuity payments
and expense charges.................................... 2,147 2,314
Emerging Growth Series:
Variable annuity deposits................................ 4,688 3,810
Terminations, withdrawals, annuity payments
and expense charges.................................... 3,042 2,316
Global Aggressive Bond Series:
Variable annuity deposits................................ 548 455
Terminations, withdrawals, annuity payments
and expense charges.................................... 394 174
Specialized Asset Allocation Series:
Variable annuity deposits................................ 1,003 1,233
Terminations, withdrawals, annuity payments
and expense charges.................................... 450 333
Managed Asset Allocation Series:
Variable annuity deposits................................ 915 594
Terminations, withdrawals, annuity payments
and expense charges.................................... 399 112
Equity Income Series:
Variable annuity deposits................................ 3,498 2,346
Terminations, withdrawals, annuity payments
and expense charges.................................... 825 456
Social Awareness Series:
Variable annuity deposits................................ 1,099 939
Terminations, withdrawals, annuity payments
and expense charges.................................... 493 322
<PAGE>
Report of Independent Auditors
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security Benefit
Life Insurance Company and Subsidiaries (the Company) as of December 31, 1997
and 1996, and the related consolidated statements of income, changes in equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
February 6, 1998
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
DECEMBER 31
1997 1996
--------------------------
(IN THOUSANDS)
ASSETS
Investments:
Securities available-for-sale:
Fixed maturities............................... $1,650,324 $1,805,066
Equity securities.............................. 120,508 89,188
Fixed maturities held-to-maturity................ 452,411 528,045
Mortgage loans................................... 64,251 66,611
Real estate...................................... 3,056 4,000
Policy loans..................................... 85,758 106,822
Cash and cash equivalents........................ 30,896 8,310
Other invested assets............................ 42,395 40,531
--------------------------
Total investments.................................. 2,449,599 2,648,573
Accrued investment income.......................... 30,034 32,161
Accounts receivable................................ 6,278 4,256
Reinsurance recoverable............................ 408,096 92,197
Property and equipment, net........................ 19,669 18,592
Deferred policy acquisition costs.................. 159,441 216,918
Other assets....................................... 20,909 24,939
Separate account assets............................ 3,716,639 2,802,927
--------------------------
$6,810,665 $5,840,563
==========================
LIABILITIES AND EQUITY
Liabilities:
Policy reserves and annuity account values....... $2,439,713 $2,497,998
Policy and contract claims....................... 10,955 10,607
Other policyholder funds......................... 21,582 24,073
Accounts payable and accrued expenses............ 23,576 18,003
Income taxes payable:
Current........................................ 10,960 6,686
Deferred....................................... 58,261 54,847
Long-term debt and other borrowings.............. 65,000 65,000
Other liabilities................................ 29,098 11,990
Separate account liabilities..................... 3,716,639 2,793,911
--------------------------
Total liabilities.................................. 6,375,784 5,483,115
Equity:
Retained earnings................................ 409,432 357,927
Unrealized gain (loss) on securities
available-for-sale, net........................ 25,449 (479)
--------------------------
Total equity....................................... 434,881 357,448
==========================
$6,810,665 $5,840,563
==========================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Income
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
Revenues:
Insurance premiums and other
considerations.................. $ 24,640 $ 28,848 $ 49,608
Net investment income............. 184,975 194,783 182,012
Asset based fees.................. 72,025 55,977 40,652
Other product charges............. 9,163 10,470 10,412
Realized gains (losses) on
investments..................... 4,929 (244) 3,876
Other revenues.................... 21,389 24,391 22,164
-----------------------------------------
Total revenues...................... 317,121 314,225 308,724
Benefits and expenses:
Annuity and interest sensitive
life benefits:
Interest credited to account
balances.................... 102,640 108,705 113,700
Benefit claims in excess of
account balances............ 4,985 7,541 6,808
Traditional life insurance
benefits........................ 3,966 6,474 7,460
Supplementary contract payments... 9,660 11,121 11,508
Increase in traditional life
reserves........................ 7,050 8,580 13,212
Dividends to policyholders........ 1,608 2,374 2,499
Other benefits.................... 19,699 20,790 22,379
-----------------------------------------
Total benefits...................... 149,608 165,585 177,566
Commissions and other operating
expenses.......................... 56,933 52,044 48,305
Amortization of deferred policy
acquisition costs................. 26,179 25,930 26,628
Interest expense.................... 5,305 4,285 7
Restructuring expenses.............. 2,643 --- ---
Other expenses...................... 3,381 1,667 1,099
-----------------------------------------
Total benefits and expenses......... 244,049 249,511 253,605
-----------------------------------------
Income before income taxes.......... 73,072 64,714 55,119
Income taxes........................ 21,567 20,871 17,927
-----------------------------------------
Net income.......................... $ 51,505 $ 43,843 $ 37,192
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Equity
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
Retained earnings:
Beginning of year................. $357,927 $314,084 $276,892
Net income........................ 51,505 43,843 37,192
-----------------------------------------
End of year....................... 409,432 357,927 314,084
Unrealized gain (loss) on securities
available-for-sale, net:
Beginning of year............... (479) 11,607 (48,466)
Change in unrealized gain
(loss) on securities
available-for-sale, net....... 25,928 (12,086) 60,073
-----------------------------------------
End of year..................... 25,449 (479) 11,607
-----------------------------------------
Total equity........................ $434,881 $357,448 $325,691
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income.......................... $ 51,505 $ 43,843 $ 37,192
Adjustments to reconcile net income
to net cash provided by operating
activities:
Annuity and interest sensitive
life products:
Interest credited to account
balances.................. 102,640 108,705 113,700
Charges for mortality and
administration............ (10,582) (13,115) (16,585)
(Decrease) increase in traditional
life policy reserves............ (3,101) 10,697 2,142
Decrease (increase) in accrued
investment income............... 2,127 (1,538) (4,573)
Policy acquisition costs deferred. (37,999) (36,865) (33,021)
Policy acquisition costs amortized 26,179 25,930 26,628
Accrual of discounts on
investments..................... (2,818) (3,905) (3,421)
Amortization of premiums on
investments..................... 9,138 11,284 9,782
Depreciation and amortization..... 3,959 3,748 3,750
Other............................. (8,444) (3,379) (4,225)
-----------------------------------------
Net cash provided by operating
activities........................ 132,604 145,405 131,369
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities
available-for-sale............ 368,901 870,240 517,480
Fixed maturities
held-to-maturity.............. 124,013 58,874 59,873
Equity securities
available-for-sale............ 48,495 3,643 10,242
Mortgage loans.................. 3,739 12,545 23,248
Real estate..................... 946 2,935 3,173
Short-term investments.......... --- 20,069 229,871
Separate account assets......... 9,180 5,214 -
Other invested assets........... 7,865 6,224 22,839
-----------------------------------------
563,139 979,744 866,726
Acquisition of investments:
Fixed maturities
available-for-sale.............. (219,736) (936,376) (591,121)
Fixed maturities held-to-maturity. (1,188) (52,422) (125,276)
Equity securities
available-for-sale.............. (67,004) (68,222) (7,500)
Mortgage loans.................... (1,447) (4,538) (4,179)
Real estate....................... (712) (2,637) (1,511)
Short-term investments............ --- (19,070) (180,259)
Separate account assets........... --- --- (12,000)
Other invested assets............. (7,518) (3,712) (31,861)
Purchase of property and equipment (4,144) (1,879) (2,036)
Net increase in policy loans...... (8,654) (6,370) (8,058)
Net cash transferred per
coinsurance agreement........... (218,043) --- (16,295)
-----------------------------------------
Net cash provided by (used in)
investing activities.............. 34,693 (115,482) (113,370)
FINANCING ACTIVITIES
Issuance of long-term debt.......... --- 65,000 ---
Annuity and interest sensitive
life products:
Deposits credited to account
balances...................... 167,517 202,129 234,321
Withdrawals from account
balances...................... (312,228) (305,530) (251,647)
-----------------------------------------
Net cash used in financing
activities........................ (144,711) (38,401) (17,326)
-----------------------------------------
Increase (decrease) in cash and cash
equivalents....................... 22,586 (8,478) 673
Cash and cash equivalents at
beginning of year................. 8,310 16,788 16,115
=========================================
Cash and cash equivalents at end of
year.............................. $ 30,896 $ 8,310 $ 16,788
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest.......................... $ 5,307 $ 2,966 $ 120
=========================================
Income taxes...................... $ 27,920 $ 16,213 $ 11,551
=========================================
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of mortgage loans to real
estate owned...................... $ --- $ 844 $ ---
=========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Benefit Life Insurance Company (SBL or the Company) is a
Kansas-domiciled mutual life insurance company whose insurance operations are
licensed to sell insurance products in 50 states. The Company offers a
diversified portfolio comprised primarily of individual and group annuities and
mutual fund products through multiple distribution channels. In recent years,
the Company's new business activities have increasingly been concentrated in the
individual flexible premium variable annuity markets.
The Company intends to modify its organizational structure by forming a
Kansas mutual holding company to be named Security Benefit Mutual Holding
Company. The Company will convert to a stock life insurance company and continue
to operate under its current name. All capital stock shares of the reorganized
stock life insurance company will be issued to and owned by a newly created
intermediate stock holding company Security Benefit Corporation. Initially,
Security Benefit Mutual Holding Company will own all of the voting stock of
Security Benefit Corporation. Kansas law requires that Security Benefit Mutual
Holding Company hold at least 51% of the outstanding voting stock of the stock
life insurance company (except to the extent qualifying shares are required by
the Kansas Insurance Code to be held by directors of an insurance company
admitted and authorized to do business in Kansas). The conversion plan is
subject to approval of the Kansas Insurance Department and the policyholders of
the Company.
BASIS OF PRESENTATION
The consolidated financial statements include the operations and accounts of
Security Benefit Life Insurance Company and its wholly-owned subsidiaries,
including Security Benefit Group, Inc., First Security Benefit Life Insurance
and Annuity Company of New York, Security Management Company, LLC, Security
Distributors, Inc., Security Benefit Academy, Inc. and Creative Impressions,
Inc. Significant intercompany transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of consolidated financial statements requires management to
make estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
INVESTMENTS
Fixed maturities are classified as either held-to-maturity or
available-for-sale. Fixed maturities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accrual of discounts. Such amortization and accrual
on these securities are included in investment income. Fixed maturities not
classified as held-to-maturity are classified as available-for-sale.
Available-for-sale fixed maturities are stated at fair value with any unrealized
gain or loss, net of deferred policy acquisition costs (DPAC) and deferred
income taxes, reported as a separate component of equity. The DPAC offsets to
the unrealized gain or loss represent valuation adjustments or restatements of
DPAC that would have been required as a charge or credit to operations had such
unrealized amounts been realized. The amortized cost of fixed maturities
classified as available-for-sale is adjusted for amortization of premiums and
accrual of discounts. Premiums and discounts are recognized over the estimated
lives of the assets adjusted for prepayment activity.
Equity securities consisting of common stocks, mutual funds and nonredeemable
preferred stock are classified as available-for-sale and stated at fair value.
Mortgage loans and short-term investments are reported at amortized cost. Real
estate investments are carried at the lower of depreciated cost or estimated
realizable value. Policy loans are reported at unpaid principal. Investments
accounted for by the equity method include investments in, and advances to,
various joint ventures and partnerships. Realized gains and losses on sales of
investments are recognized in revenues on the specific identification method.
The operations of the Company are subject to risk resulting from interest
rate fluctuations to the extent that there is a difference between the amount of
the Company's interest-earning assets and the amount of interest-bearing
liabilities that are prepaid/withdrawn, mature or reprice in specified periods.
The principal objective of the Company's asset/liability management activities
is to provide maximum levels of net investment income while maintaining
acceptable levels of interest rate and liquidity risk and facilitating the
funding needs of the Company. The Company periodically may use derivative
financial instruments to modify its interest sensitivity to levels deemed to be
appropriate based on the Company's current economic outlook.
Such derivative financial instruments are for purposes other than trading and
classified as available-for-sale in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Accordingly, these instruments are stated at fair value
with the change in fair value reported as a separate component of equity.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits,
commissions and other policy-issue, underwriting and marketing costs that are
primarily related to the acquisition or renewal of traditional life insurance,
interest sensitive life and deferred annuity business have been deferred.
Traditional life insurance deferred policy acquisition costs are being
amortized in proportion to premium revenues over the premium-paying period of
the related policies using assumptions consistent with those used in computing
policy benefit reserves.
For interest sensitive life and deferred annuity business, deferred policy
acquisition costs are amortized in proportion to the present value (discounted
at the crediting rate) of expected gross profits from investment, mortality and
expense margins. That amortization is adjusted retrospectively when estimates of
current or future gross profits to be realized from a group of products are
revised.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers
certificates of deposits with original maturities of 90 days or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment, including home office real estate, furniture and
fixtures, and data processing hardware and related systems, are recorded at
cost, less accumulated depreciation. The provision for depreciation of property
and equipment is computed using the straight-line method over the estimated
lives of the related assets.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
balance sheets represent funds that are separately administered for the benefit
of contractholders who bear the investment risk. The separate account assets and
liabilities are carried at fair value. Revenues and expenses related to separate
account assets and liabilities, to the extent of benefits paid or provided to
the separate account contractholders, are excluded from the amounts reported in
the consolidated statements of income. Investment income and gains or losses
arising from separate accounts accrue directly to the contractholders and are,
therefore, not included in investment earnings in the accompanying statements of
income. Revenues to the Company from the separate accounts consist principally
of contract maintenance charges, administrative fees, and mortality and expense
risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES
Liabilities for future policy benefits for traditional life and reinsurance
products are computed using a net level premium method, including assumptions as
to investment yields, mortality and withdrawals, and other assumptions that
approximate expected experience.
Liabilities for future policy benefits for interest sensitive life and
deferred annuity products represent accumulated contract values without
reduction for potential surrender charges and deferred front-end contract
charges that are amortized over the life of the policy. Interest on accumulated
contract values is credited to contracts as earned. Crediting rates ranged from
3.8% to 7.25% during 1997, 3.5% to 7.25% during 1996 and 4% to 7.75% during
1995.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under that method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and income tax bases of assets and liabilities and are measured using
the enacted tax rates and laws. Deferred income tax expenses or credits
reflected in the Company's statements of income are based on the changes in
deferred tax assets or liabilities from period to period (excluding unrealized
gains and losses on securities available-for-sale).
RECOGNITION OF REVENUES
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these traditional products are
recognized as revenues when due. Revenues from interest sensitive life insurance
products and deferred annuities consist of policy charges for the cost of
insurance, policy administration charges and surrender charges assessed against
contractholder account balances during the period.
RESTRUCTURING EXPENSES
Restructuring expenses include costs relating to the mutual holding company
conversion and termination benefits provided to certain associates under an
early retirement program.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturities are based on quoted
market prices, if available. For fixed maturities not actively traded, fair
values are estimated using values obtained from independent pricing services or
estimated by discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments. The
fair values for equity securities are based on quoted market prices.
Mortgage loans and policy loans: Fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses based on market interest
rates for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for purposes of the calculations.
Investment-type contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming company
would realize from the business is calculated. Those amounts are then discounted
at a rate of return commensurate with the rate presently offered by the Company
on similar contracts.
Long-term debt: Fair values for long-term debt are estimated using discounted
cash flow analyses based on current borrowing rates for similar types of
borrowing arrangements.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses, and
fair values of the Company's portfolio of fixed maturities and equity securities
at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-------------------------------------------------------
AVAILABLE-FOR-SALE (IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies........ $ 214,088 $ 3,313 $ --- $ 217,401
Obligations of states and political subdivisions... 23,753 1,320 8 25,065
Special revenue and assessment..................... 255 45 --- 300
Corporate securities............................... 742,123 27,986 1,674 768,435
Mortgage-backed securities......................... 510,991 11,429 2,137 520,283
Asset-backed securities............................ 117,907 1,030 97 118,840
-------------------------------------------------------
Totals............................................. $1,609,117 $45,123 $ 3,916 $1,650,324
=======================================================
Equity securities.................................. $ 109,763 $11,220 $ 475 $ 120,508
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions... $ 74,802 $ 2,094 $ 30 $ 76,866
Corporate securities............................... 108,609 5,295 201 113,703
Mortgage-backed securities......................... 227,131 2,725 364 229,492
Asset-backed securities............................ 41,869 297 1 42,165
-------------------------------------------------------
Totals............................................. $ 452,411 $10,411 $ 596 $ 462,226
=======================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-------------------------------------------------------
AVAILABLE-FOR-SALE (IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies........ $ 173,884 $ 414 $ 1,431 $ 172,867
Obligations of states and political subdivisions... 23,244 361 705 22,900
Special revenue and assessment..................... 330 --- --- 330
Corporate securities............................... 863,124 13,758 18,651 858,231
Mortgage-backed securities......................... 627,875 9,091 9,308 627,658
Asset-backed securities............................ 122,523 832 275 123,080
-------------------------------------------------------
Totals............................................. $1,810,980 $24,456 $30,370 $1,805,066
=======================================================
Equity securities.................................. $ 86,991 $ 2,422 $ 225 $ 89,188
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions... $ 81,791 $ 463 $ 1,036 $ 81,218
Special revenue and assessment..................... 420 --- --- 420
Corporate securities............................... 128,487 2,003 1,830 128,660
Mortgage-backed securities......................... 264,155 2,121 1,347 264,929
Asset-backed securities............................ 53,192 382 97 53,477
-------------------------------------------------------
Totals............................................. $ 528,045 $ 4,969 $ 4,310 $ 528,704
=======================================================
</TABLE>
The change in the Company's unrealized gain (loss) on fixed maturities was
$56,277,000, $(51,773,000) and $220,048,000 during 1997, 1996 and 1995,
respectively; the corresponding amounts for equity securities were $8,588,000,
$1,595,000 and $1,034,000 during 1997, 1996 and 1995, respectively.
The amortized cost and fair value of fixed maturities at December 31, 1997,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------------------------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less................. $ 33,328 $ 33,578 $ --- $ ---
Due after one year through five years... 202,757 206,870 6,821 6,947
Due after five years through 10 years... 455,242 466,263 37,726 38,995
Due after 10 years...................... 288,892 304,490 138,864 144,627
Mortgage-backed securities.............. 510,991 520,283 227,131 229,492
Asset-backed securities................. 117,907 118,840 41,869 42,165
------------------------------------------------------
$1,609,117 $1,650,324 $452,411 $462,226
======================================================
</TABLE>
Major categories of net investment income for the years ended December 31,
1997, 1996 and 1995 are summarized as follows:
1997 1996 1995
-----------------------------------
(IN THOUSANDS)
Interest on fixed maturities.............. $167,646 $174,592 $165,684
Dividends on equity securities............ 7,358 5,817 1,309
Interest on mortgage loans ............... 6,017 6,680 7,876
Interest on policy loans.................. 6,282 6,372 5,927
Interest on short-term investments........ 2,221 1,487 2,625
Other..................................... (166) 4,199 2,740
-----------------------------------
Total investment income................... 189,358 199,147 186,161
Investment expenses....................... 4,383 4,364 4,149
-----------------------------------
Net investment income..................... $184,975 $194,783 $182,012
===================================
Proceeds from sales of fixed maturities and equity securities and related
realized gains and losses, including valuation adjustments, for the years ended
December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
----------------------------------
(IN THOUSANDS)
Proceeds from sales....................... $333,498 $393,189 $310,590
Gross realized gains...................... 11,889 9,407 5,901
Gross realized losses..................... 6,640 9,723 3,361
Net realized gains (losses) for the years ended December 31, 1997, 1996 and
1995 consist of the following:
1997 1996 1995
-------------------------------
(IN THOUSANDS)
Fixed maturities.............................. $ 861 $(1,329) $1,805
Equity securities............................. 4,388 1,013 735
Other......................................... (320) 72 1,336
-------------------------------
Total realized gains (losses)................. $4,929 $ (244) $3,876
===============================
There were no deferred losses at December 31, 1997, and $2.2 million at
December 31, 1996, resulting from terminated and expired futures contracts.
These are included in fixed maturities and amortized as an adjustment to net
investment income. There were no outstanding agreements to sell securities at
December 31, 1997 or 1996.
The composition of the Company's portfolio of fixed maturities by quality
rating at December 31, 1997 is as follows:
QUALITY RATING CARRYING AMOUNT %
------------------- --------------- -------
(IN THOUSANDS)
AAA $1,024,624 48.73%
AA 161,469 7.68
A 396,387 18.85
BBB 329,371 15.66
Noninvestment grade 190,884 9.08
---------- -------
$2,102,735 100.00%
========== =======
The Company has a diversified portfolio of commercial and residential
mortgage loans outstanding in 14 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1997 being in the states of Kansas (31%),
Iowa (16%) and Texas (14%).
3. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified,
noncontributory defined benefit pension plan sponsored by the Company and
certain of its affiliates. Benefits are based on years of service and an
employee's highest average compensation over a period of five consecutive years
during the last 10 years of service. The Company's policy has been to contribute
funds to the plan in amounts required to maintain sufficient plan assets to
provide for accrued benefits. In applying this general policy, the Company
considers, among other factors, the recommendations of its independent
consulting actuaries, the requirements of federal pension law and the
limitations on deductibility imposed by federal income tax law. The Company
records pension cost in accordance with the provisions of SFAS No. 87,
"Employers' Accounting for Pensions."
Pension cost for the plan for the years ended December 31, 1997, 1996 and
1995 is summarized below and includes termination benefit costs, a significant
portion of which were reflected as a reduction of the gain recognized upon the
sale of the block of life insurance business described in Note 4.
1997 1996 1995
----------------------------------
(IN THOUSANDS)
Service cost............................... $ 641 $ 670 $ 528
Interest cost.............................. 721 587 508
Actual return on plan assets............... (1,892) (1,064) (1,568)
Net amortization and deferral.............. 990 284 900
Termination benefits....................... 1,539 --- ---
----------------------------------
Net pension cost........................... $ 1,999 $ 477 $ 368
==================================
The funded status of the plan as of December 31, 1997 and 1996 was as
follows:
DECEMBER 31
1997 1996
----------------------
(IN THOUSANDS)
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (8,191) $(6,059)
Non-vested benefit obligation........................ (865) (202)
----------------------
Accumulated benefit obligation....................... (9,056) (6,261)
Excess of projected benefit obligation over
accumulated benefit obligation..................... (3,431) (2,961)
----------------------
Projected benefit obligation......................... (12,487) (9,222)
Plan assets, at fair market value...................... 11,279 10,085
----------------------
Plan assets greater than (less than) projected
benefit obligation................................... (1,208) 863
Unrecognized net loss.................................. 1,819 1,007
Unrecognized prior service cost........................ 642 700
Unrecognized net asset established at the date
of initial application............................... (1,657) (1,841)
----------------------
Net (accrued) prepaid pension cost..................... $ (404) $ 729
======================
Assumptions were as follows:
1997 1996 1995
--------------------
Weighted average discount rate........................... 7.25% 7.75% 7.5%
Weighted average rate of increase in compensation for
participants age 45 and older.......................... 4.5 4.5 4.5
Weighted average expected long-term return on plan assets 9.0 9.0 9.0
Compensation rates that vary by age for participants under age 45 were used
in determining the actuarial present value of the projected benefit obligation
in 1997. Plan assets are invested in a diversified portfolio of affiliated
mutual funds that invest in equity and debt securities.
In addition to the Company's defined benefit pension plan, the Company
provides certain medical and life insurance benefits to full-time employees who
have retired after the age of 55 with five years of service. The plan is
contributory, with retiree contributions adjusted annually and contains other
cost-sharing features such as deductibles and coinsurance. Contributions vary
based on the employee's years of service earned after age 40. The Company's
portion of the costs is frozen after 1996 with all future cost increases passed
on to the retirees. Retirees in the plan prior to July 1, 1993 are covered 100%
by the Company.
Retiree medical care and life insurance cost for the total plan for the years
ended December 31, 1997, 1996 and 1995 is summarized below and includes
termination benefit costs, a significant portion of which were reflected as a
reduction of the gain recognized upon the sale of the block of life insurance
business described in NOTE 4.
1997 1996 1995
-----------------------
(IN THOUSANDS)
Service cost.......................................... $155 $157 $151
Interest cost......................................... 291 280 305
Net amortization...................................... (32) --- ---
Termination benefits.................................. 372 --- ---
-----------------------
$786 $437 $456
=======================
The funded status of the plan as of December 31, 1997 and 1996 was as
follows:
1997 1996
---------------------
(IN THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees.............................................. $(2,595) $(2,498)
Active participants:
Retirement eligible................................... (666) (568)
Others................................................ (1,100) (1,023)
---------------------
(4,361) (4,089)
Unrecognized net gain................................... (692) (348)
---------------------
Accrued postretirement benefit cost..................... $(5,053) $(4,437)
=====================
The annual assumed rate of increase in the per capita cost of covered
benefits is 9% for 1997 and is assumed to decrease gradually to 5% for 2001 and
remain at that level thereafter. The health care cost trend rate has a
significant effect on the amount reported. For example, increasing the assumed
health care cost trend rates by one percentage point each year would increase
the accumulated postretirement benefit obligation as of December 31, 1997 by
$201,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1997 by $55,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25%, 7.75% and 7.5% at December 31, 1997, 1996 and 1995,
respectively.
The Company has a profit-sharing and savings plan for which substantially all
employees are eligible after one year of employment with the Company.
Contributions for profit sharing are based on a formula established by the Board
of Directors with pro rata allocation among employees based on salaries. The
savings plan is a tax-deferred, 401(k) retirement plan. Employees may contribute
up to 10% of their eligible compensation. The Company matches 50% of the first
6% of the employee contributions. Employee contributions are fully vested, and
Company contributions are vested over a five-year period. Company contributions
to the profit-sharing and savings plan charged to operations were $1,857,000,
$1,783,000 and $1,567,000 for 1997, 1996 and 1995, respectively.
4. REINSURANCE
The Company assumes and cedes reinsurance with other companies to provide for
greater diversification of business, allow management to control exposure to
potential losses arising from large risks, and provide additional capacity for
growth. The Company's maximum retention on any one life is $500,000. The Company
does not use financial or surplus relief reinsurance. Life insurance in force
ceded at December 31, 1997 and 1996 was $7.4 billion and $4 billion,
respectively.
Principal reinsurance transactions for the years ended December 31, 1997,
1996 and 1995 are summarized as follows:
1997 1996 1995
------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid................................ $33,872 $25,442 $5,305
==============================
Commissions received......................... $ 4,636 $ 4,669 $ 230
==============================
Claim recoveries............................. $14,581 $ 5,235 $3,089
==============================
In the accompanying financial statements, premiums, benefits, settlement
expenses and deferred policy acquisition costs are reported net of reinsurance
ceded; policy liabilities and accruals are reported gross of reinsurance ceded.
The Company remains liable to policyholders if the reinsurers are unable to meet
their contractual obligations under the applicable reinsurance agreements. To
minimize its exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of reinsurers. At December 31, 1997 and
1996, the Company had established a receivable totaling $408,096,000 and
$92,197,000 for reserve credits, reinsurance claims and other receivables from
its reinsurers. Substantially all of these receivables are collateralized by
assets of the reinsurers held in trust. The amount of reinsurance assumed is not
significant.
In 1997, the Company transferred, though a 100% coinsurance agreement, $318
million in policy reserves and claim liabilities reduced by a ceding commission
of $63 million and other related items. The agreement related to a block of
universal life and traditional life insurance business. The Company recorded a
pretax gain of $14,625,000 which is deferred in other liabilities and amortized
to income over the estimated life of the business transferred.
In prior years, the Company was involved in litigation arising out of its
participation from 1986 to 1990 in a reinsurance pool. The litigation related to
the pool manager and a reinsurance intermediary placing major medical business
in the pool without authorization. During 1993, the Company settled the major
medical portion of the pool's activity with no significant adverse effect on the
Company. The nonmajor medical business placed in the pool has experienced
significant losses. At December 31, 1997, the Company believes adequate
provision has been made for such losses.
5. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return. The
provision for income taxes includes current federal income tax expense or
benefit and deferred income tax expense or benefit due to temporary differences
between the financial reporting and income tax bases of assets and liabilities.
Such differences relate principally to liabilities for future policy benefits
and accumulated contract values, deferred compensation, deferred policy
acquisition costs, postretirement benefits, deferred selling commissions,
depreciation expense and unrealized gains (losses) on securities
available-for-sale.
Income tax expense consists of the following for the years ended December 31,
1997, 1996 and 1995:
1997 1996 1995
---------------------------------
(IN THOUSANDS)
Current..................................... $ 32,194 $12,528 $15,200
Deferred.................................... (10,627) 8,343 2,727
---------------------------------
$ 21,567 $20,871 $17,927
=================================
The provision for income taxes differs from the amount computed at the
statutory federal income tax rate due primarily to dividends received deductions
and tax credits.
Net deferred tax assets or liabilities consist of the following:
DECEMBER 31
1997 1996
-------------------
(IN THOUSANDS)
Deferred tax assets:
Future policy benefits.................................. $ 9,869 $20,487
Net unrealized depreciation on securities
available-for-sale.................................... --- 1,409
Guaranty fund assessments............................... 1,250 1,400
Employee benefits....................................... 6,487 4,852
Deferred gain on coinsurance agreement.................. 4,970 ---
Other................................................... 7,497 4,620
-------------------
Total deferred tax assets................................. 30,073 32,768
Deferred tax liabilities:
Deferred policy acquisition costs....................... 53,173 69,647
Net unrealized appreciation on securities
available-for-sale.................................... 18,115 ---
Deferred gain on investments............................ 8,378 10,446
Depreciation............................................ 1,935 2,061
Other................................................... 6,733 5,461
-------------------
Total deferred tax liabilities............................ 88,334 87,615
-------------------
Net deferred tax liabilities.............................. $58,261 $54,847
===================
6. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether recognized or not recognized in a company's balance sheet, for which it
is practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under all
insurance contracts are taken into consideration in the Company's overall
management of interest rate risk that minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings in excess of interest credited) to
be earned in the future on investment-type products or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Investments:
Mortgage loans................... $ 64,251 $ 66,454 $ 66,611 $ 69,004
Policy loans..................... 85,758 85,993 106,822 108,685
Liabilities:
Supplementary contracts
without life contingencies..... 29,890 30,189 33,225 33,803
Individual and group annuities... 1,894,605 1,713,509 1,942,697 1,767,692
Long-term debt................... 65,000 71,793 65,000 67,683
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment under several operating lease
agreements. Total expense for all operating leases amounted to $1,018,000,
$1,108,000 and $802,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company has aggregate future lease commitments at December 31,
1997 of $3,906,000 for noncancelable operating leases consisting of $1,158,000
in 1998, $1,026,000 in 1999, $940,000 in 2000, $782,000 in 2001. There are no
noncancelable lease commitments beyond 2001.
In 2001, under the terms of one of the operating leases, the Company has the
option to renew the lease for another five years, purchase the asset for
approximately $4.7 million, or return the asset to the lessor and pay a
termination charge of approximately $3.7 million.
In connection with its investments in low income housing partnerships, the
Company is committed to invest additional capital of $4,008,000 and $9,190,000
in 1998 and 1999, respectively.
Guaranty fund assessments are levied on the Company by life and health
guaranty associations in most states in which it is licensed to cover losses of
policyholders of insolvent or rehabilitated insurers. In some states, these
assessments can be partially recovered through a reduction in future premium
taxes. The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based on information from the
National Organization of Life and Health Guaranty Association and information
from the various state guaranty associations, the Company believes that it is
probable that these insolvencies will result in future assessments. The Company
regularly evaluates its reserve for these insolvencies and updates its reserve
based on the Company's interpretation of information recently received. The
associated costs for a particular insurance company can vary significantly based
on its premium volume by line of business in a particular state and its
potential for premium tax offset. The Company accrued no additional reserves for
these insolvencies in 1997. Additional accruals in the amount of $1,574,000 and
$2,302,000 were recorded during 1996 and 1995, respectively. At December 31,
1997, the Company has reserved $3,573,000 to cover current and estimated future
assessments, net of related premium tax credits.
8. LONG-TERM DEBT AND OTHER BORROWINGS
The Company has a $61.5 million line of credit facility from the Federal Home
Loan Bank of Topeka. Any borrowings in connection with this facility bear
interest at .1% over the Federal Funds rate. No amounts were outstanding at
December 31, 1997 and 1996.
In February 1996, the Company negotiated three separate $5 million advances
with the Federal Home Loan Bank of Topeka. The advances are due February 27,
1998, February 26, 1999 and February 28, 2001 and carry interest rates of 5.59%,
5.76% and 6.04%, respectively.
In May 1996, the Company issued $50 million of 8.75% surplus notes maturing
on May 15, 2016. The surplus notes were issued pursuant to Rule 144A under the
Securities Act of 1933. The surplus notes have repayment conditions and
restrictions whereby each payment of interest on or principal of the surplus
notes may be made only with the prior approval of the Kansas Insurance
Commissioner and only out of surplus funds that the Kansas Insurance
Commissioner determines to be available for such payment under the Kansas
Insurance Code.
9. RELATED PARTY TRANSACTIONS
The Company owns shares of mutual funds managed by Security Management
Company, LLC with net asset values totaling $85,950,000 and $60,559,000 at
December 31, 1997 and 1996, respectively.
10. ASSETS HELD IN SEPARATE ACCOUNTS
Separate account assets were as follows:
DECEMBER 31,
1997 1996
-------------------------
(IN THOUSANDS)
Premium and annuity considerations for the variable
annuity products and variable universal life
product for which the contractholder, rather
than the Company, bears the investment risk....... $3,716,639 $2,793,911
Assets of the separate accounts owned by the
Company, at fair value............................ --- 9,016
-------------------------
$3,716,639 $2,802,927
=========================
11. STATUTORY INFORMATION
The Company and its insurance subsidiary prepare statutory-basis financial
statements in accordance with accounting practices prescribed or permitted by
the Kansas and New York Insurance regulatory authorities, respectively.
Accounting practices used to prepare statutory-basis financial statements for
regulatory filings of life insurance companies differ in certain instances from
generally accepted accounting principles (GAAP). Prescribed statutory accounting
practices include a variety of publications of the National Association of
Insurance Commissioners, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed; such practices may differ from state to
state, may differ from company to company within a state and may change in the
future. Statutory capital and surplus of the insurance operations are
$382,005,000 and $286,689,000 at December 31, 1997 and 1996, respectively.
12. IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer systems were written using two digits rather
than four to define the applicable year. As a result, those computer systems
will not recognize the year 2000 which, if not corrected, could cause
disruptions of operations, including, among other things, an inability to
process transactions or engage in similar normal business activities.
The Company has completed an assessment of its systems which will need to be
modified or replaced to function properly in the year 2000. Based on this
assessment, the Company does not believe that the costs to complete such system
modifications or replacements will be material to the Company's financial
statements. The Company has been in the process of converting existing products
to a new administration system during the past few years, and all new products
during this conversion period have been placed on the new system.
The modification or replacement of the Company's computer systems not
currently year 2000 ready is estimated to be completed not later than March 31,
1999, which is prior to any anticipated impact on its operating systems. The
Company believes that with modifications to existing software and conversions to
new software, the year 2000 issue will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made or are not completed timely, the year 2000 issue could have a material
impact on the operations of the Company.
The Company has initiated formal communications with significant third
parties which provide the Company with information to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to solve their own year 2000 issues. There is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems.
However, third-party vendors of the Company's primary administrative systems
have represented to the Company that the systems are or will be year 2000 ready.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources and other factors. However, there
can be no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to convert
to year 2000 ready systems and similar uncertainties.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
b. Exhibits
(1) Resolution of the Board of Directors of Security Benefit
Life Insurance Company authorizing establishment of the
Separate Account
(2) Not Applicable
(3) (a) Service Facilities Agreement
(b) Variable Annuity Sales Agreement with Commission
Schedule(b)
(4) (a) Individual Contract (Form V6023 1-98)
(b) Individual Contract-Unisex (Form V6023 1-98U)
(c) Group Allocated Contract (Form GV6023 1-98)
(d) Group Allocated Contract-Unisex (Form GV6023 1-98U)
(e) Group Certificate (Form GVC6023 1-98)
(f) Group Certificate-Unisex (Form GVC6023 1-98U)
(g) Group Unallocated Contract (Form GV6317 2-88)(a)
(h) Loan Endorsement (Form V6047 L-3 1-97)(a)
(i) Group Loan Provision Certificate (Form GV6821 L-4
1-97)(a)
(j) Individual Stepped-Up Benefit Endorsement (Form V6050
3-96)(a)
(k) Group Stepped-Up Benefit Endorsement (Form V6050A
3-96)(a)
(l) Group Stepped-Up Benefit Certificate (Form V6050C
3-96)(a)
(m) Individual Withdrawal Charge Waiver (Form V6051
3-96)(a)
(n) Group Withdrawal Charge Waiver (Form GV6051 3-96)(a)
(o) Group Withdrawal Charge Waiver Certificate (Form
GV6051C 3-96)(a)
(p) Group and Individual IRA Endorsement (Form 4453C-5
R9-96)(a)
(q) SIMPLE IRA Endorsement (Form 4453C-5S 2-97)(a)
(r) TSA Endorsement (Form 6832A R9-96)(a)
(s) 457 Endorsement (Form V6054 2-98)(b)
(t) Roth IRA Endorsement (Form V6851 10-97)(b)
(5) (a) Group and Individual Application (Form V7567 1-98)(b)
(b) Group Enrollment (Form GV7581 1-98)(b)
(6) (a) Composite of Articles of Incorporation of SBL
(b) Bylaws of SBL
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedules of Computation of Performance
(14) Financial Data Schedules
(15) Powers of Attorney of Howard R. Fricke, Thomas R. Clevenger,
Sister Loretto Marie Colwell, John C. Dicus, Steven J.
Douglass, 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. 18 under the Securities Act of
1933 and Amendment No. 17 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (April 30, 1997).
(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 19 under the Securities Act of
1933 and Amendment No. 18 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (April 30, 1998).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
------------------ ------------------------------------
Howard R. Fricke* Chairman of the Board, Chief
Executive Officer and Director
Thomas R. Clevenger Director
P.O. Box 8514
Wichita, Kansas 67208
Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66606
John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603
Steven J. Douglass Director
3231 E. 6th Street
Topeka, Kansas 66607
William W. Hanna Director
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes, Jr. Director
818 Kansas Avenue
Topeka, Kansas 66612
Laird G. Noller Director
2245 Topeka 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
Kris A. Robbins* President and Chief Operating Officer
Donald J. Schepker* Senior Vice President, Chief
Financial Officer and Treasurer
Roger K. Viola* Senior Vice President, General
Counsel and Secretary
T. Gerald Lee* Senior Vice President and Chief
Administrative Officer
Malcolm E. Robinson* Senior Vice President and Assistant
to the President
Donald E. Caum* Senior Vice President and Chief
Marketing Officer
Richard K Ryan* Senior Vice President
James R. Schmank* Senior Vice President
Venette K. Davis* Senior Vice President - Market
Implementation
Amy J. Lee* Associate General Counsel, Vice
President and Assistant Secretary
*Located at 700 Harrison Street, Topeka, Kansas 66636.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor, Security Benefit Life Insurance Company ("SBL"), is
controlled by Security Benefit Corp. through the ownership of 700,000
of SBL's 700,010 issued and outstanding shares of common stock. One
share each of SBL's issued and outstanding common stock is owned by
each director of SBL, in accordance with the requirements of Kansas
law. Security Benefit Corp., is wholly-owned by Security Benefit
Mutual Holding Company ("SBMHC"), which in turn is controlled by SBL
policyholders. No one person holds more than approximately 0.0004% of
the voting power of SBMHC. The Registrant is a segregated asset
account of SBL.
The following chart indicates the persons controlled by or under
common control with Variflex or SBL:
PERCENT
OF VOTING
JURISDICTION OF SECURITIES
NAME INCORPORATION OWNED BY SBL
---- --------------- ------------
Security Benefit Mutual Holding Company Kansas ---
(Holding Company)
Security Benefit Corp. (Holding Company) Kansas ---
Security Benefit Life Insurance Company Kansas ---
(Mutual Life Insurance Company)
Security Benefit Group, Inc. Kansas 100%
(Holding Company)
Security Management Company, LLC Kansas 100%
(Mutual Funds Management Company)
Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal
Underwriter of Mutual Funds)
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 New York 100%
and 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, Variable Annuity
Account VIII, 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 Ultra Fund 34.0% SBL Fund 100%
Security Growth and Income Fund 40.2% Security Income Fund 16.2%
Security Equity Fund 14.0%
ITEM 27. NUMBER OF CONTRACTOWNERS
As of July 31, 1998, there were 101,539 owners of Variflex Qualified
Contracts and 17,510 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) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
his or her fiduciary duty as a director, PROVIDED that nothing
contained in this Article shall eliminate or limit the liability of
a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under the provisions of K.S.A. 17-6424 and
amendments thereto, or (d) for any transaction from which the
director derived an improper personal benefit. If the General
Corporation Code of the State of Kansas is amended after the filing
of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the General Corporation Code of the State of Kansas, as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Insofar as indemnification for a liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Depositor has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses
incurred or paid by a director, officer or controlling person of the
Depositor in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the Securities being registered, the Depositor will,
unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Security Distributors, Inc. ("SDI"), a subsidiary of SBL, acts as
distributor of the 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, SBL Variable Annuity Account VIII
(Variflex LS), SBL Variable Annuity Account VIII (Variflex
Signature), and Parkstone Variable Annuity Account. SDI also acts
as principal underwriter for the following management investment
companies for which Security Management Company, LLC, an
affiliate of SBL, acts as investment adviser: Security Equity
Fund, Security Income Fund, Security Growth and Income Fund,
Security Municipal Bond Fund and Security Ultra Fund.
(b) NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
------------------ --------------------
Richard K Ryan President and Director
John D. Cleland Vice President and Director
James R. Schmank Vice President and Director
Donald E. Caum Director
Mark E. Young Vice President and Director
Amy J. Lee Secretary
Brenda M. Harwood Treasurer
William G. Mancuso Regional Vice President
Susan L. Tully Regional Vice President
*700 Harrison, Topeka, Kansas 66636-0001
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by SBL at its
administrative offices--700 Harrison, 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.
(d) Depositor represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
rights assumed by the Depositor.
(e) SBL, sponsor of the unit investment trust, Variflex, hereby
represents that it is relying upon American Counsel of Life
Insurance, SEC No-Action Letter, [1988-1989 Transfer Binder] Fed.
Sec. L. Rep. (CCH) paragraph 78,904 (Nov. 28, 1988), and that it
has complied with the provisions of paragraphs (1) - (4) of such
no-action letter which are incorporated herein by reference.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485 for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf in the City of Topeka, and
State of Kansas on this 7th day of August, 1998.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman of the Board (The Depositor)
and Chief Executive Officer
By: ROGER K. VIOLA
Thomas R. Clevenger ---------------------------------------
Director Roger K. Viola, Senior Vice President,
General Counsel and Secretary as
Attorney-In-Fact for the Officers and
Sister Loretto Marie Colwell Directors Whose Names Appear Opposite
Director
VARIFLEX (The Registrant)
William W. Hanna
Director By: SECURITY BENEFIT LIFE INSURANCE COMPANY
(The Depositor)
John C. Dicus
Director By: HOWARD R. FRICKE
---------------------------------------
Howard R. Fricke, Chairman of the Board
Steven J. Douglass and Chief Executive Officer
Director
By: DONALD J. SCHEPKER
John E. Hayes, Jr. ---------------------------------------
Director Donald J. Schepker, Senior Vice
President, Chief Financial Officer and
Treasurer
Laird G. Noller
Director
(ATTEST): ROGER K. VIOLA
---------------------------------
Frank C. Sabatini Roger K. Viola, Senior Vice
Director President, General Counsel and
Secretary
Robert C. Wheeler
Director Date: August 7, 1998
<PAGE>
EXHIBIT INDEX
(1) Resolution of the Board of Directors of Security Benefit Life Insurance
Company authorizing establishment of the Separate Account
(2) None
(3) (a) Service Facilities Agreement
(b) None
(4) (a) Individual Contract (Form V6023 1-98)
(b) Individual Contract-Unisex (Form V6023 1-98U)
(c) Group Allocated Contract (Form GV6023 1-98)
(d) Group Allocated Contract-Unisex (Form GV6023 1-98U)
(e) Group Certificate (Form GVC6023 1-98)
(f) Group Certificate-Unisex (Form GVC6023 1-98U)
(g) None
(h) None
(i) None
(j) None
(k) None
(l) None
(m) None
(n) None
(o) None
(p) None
(q) None
(r) None
(s) None
(t) None
(5) (a) None
(b) None
(6) (a) Composite of Articles of Incorporation of SBL
(b) Bylaws of SBL
(7) None
(8) None
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) None
(12) None
(13) Schedules of Computation of Performance
(14) Financial Data Schedules
(15) Powers of Attorney
<PAGE>
Security Benefit Life Insurance Company
Executive Committee
January 31, 1984
Upon motion duly made and seconded, the following resolutions were
unanimously adopted regarding the establishment of VAA-V:
RESOLVED, that the Company shall establish a separate account in accordance
with and under the provisions of Sections 40-436 and 40-437 of the Kansas
Statutes Annotated, such separate account to be known as SBL Variable Annuity
Account V, or such other appropriate designation as may be approved by this
Executive Committee or the Board of Directors (hereinafter referred to as
"VAA-V"), and that hereafter VAA-V shall be deemed to and shall be
established as a separate account in accordance with and under the provisions
of said Sections 40-436 and 40-437 as heretofore or hereafter amended.
FURTHER RESOLVED, that retirement annuity contracts and group retirement
annuity contracts, in the general form and containing the terms and
conditions discussed at this meeting (and which shall provide that part or
all of the benefits and payments thereunder will reflect the investment
experience of Series A, B, C or D of SBL Fund, and are therefore called
"Variable Contracts") are hereby approved and adopted for use by the Company
wich such modifications therein as the appropriate officers of the Company
shall approve, such approval to be evidenced by either the signature or
facsimile signature of the President or Secretary of the Company.
FURTHER RESOLVED, that the appropriate officers of the Company be, and they
hereby are, authorized and directed to do any and all things necessary to:
(a) Register VAA-V as a unit investment trust under the Investment
Company Act of 1940, as amended;
(b) Register the Variable Contracts, in such amounts as the appropriate
officers of the Company shall from time to time deem necessary or in
an indefinite amount under the Securities Act of 1933; and
(c) Take all other action necessary to comply with the Investment Company
Act of 1940, the Securities Exchange Act of 1934 and the Securities
Act of 1933, including without limitation, the filing of an
application or applications for exemptions allowing the Company to
act as custodian of VAA-V, allowing the separate account to accept
shares under an open account arrangement without the use of stock
certificates, and allowing deductions by the Company of Actuarial
Risk Fees, administrative fees, transfer or allocation fees and
premium taxes, and for such other exemptions from the Investment
Company Act of 1940 as the appropriate officers of the Company or as
counsel shall deem necessary or advisable.
FURTHER RESOLVED, that the President of the Company, or in his absence, a
Vice President, be and each of them is hereby authorized, empowered and
directed to sign a form of Notification of Registration under the Investment
Company Act of 1940, and such Registration Statements as may be required by
the Investment Company Act of 1940 and the Securities Act of 1933, in the
name of VAA-V by the Company as sponsor and depositor, and that the
appropriate officers of the Company be, and they hereby are, fully
authorized, empowered and directed to execute and cause to be filed for and
on behalf of VAA-V and the Company said Notification of Registration and said
Registration Statements, and that the appropriate officers of the Company be,
and they hereby are, fully authorized and empowered to execute and cause to
be filed, for and on behalf of VAA-V and the Company, and the President and
each Vice President of the Company is hereby bully authorized and empowered
to execute in the name of VAA-V and the Company, such amendments to, and such
instruments, exhibits and documents in connection with, said Notification of
Registration and said Registration Statements, as they, or any of them, may,
upon advice of counsel, deem necessary or advisable.
FURTHER RESOLVED, that the appropriate officers of the Company be, and they
hereby are, authorized and directed, for and in the name of VAA-V and the
Company, to take any and all action which they deem necessary or advisable in
order to sell Variable Contracts and, if necessary, to effectuate the
registration or qualification of Variable Contracts under the insurance or
securities laws of any of the states of the United States of America, and
District of Columbia, and Commonwealth of Puerto Rico and in connection
therewith to execute, acknowledge, verify, deliver, file and publish all such
applications, reports, undertakings, resolutions and other papers and
instruments as may be required under such laws, and to take any and all
further action which said officers or counsel for the Company may deem
necessary or advisable in order to maintain such registration or
qualification for as long as said officers or counsel deem such to be in the
best interest of VAA-V and the Company.
FURTHER RESOLVED, that the President or a Vice President and the Secretary or
Assistant Secretary of the Company be, and they hereby are, authorized and
directed in the name of and on behalf of VAA-V and the Company to execute and
file irrevocable written consents on the part of VAA-V and the Company to be
used in such states of the United States of America and District of Columbia
and Commonwealth of Puerto Rico wherein such consents to service of process
may be required under the insurance or securities laws thereof in connection
with said registration or qualification of the Variable Contracts and to
appoint the appropriate state official, or such other person as may be
required or allowed by said insurance or securities laws, as agent for VAA-V
and for the Company for the purpose of receiving and accepting service of
process.
FURTHER RESOLVED, that to the extent permitted under the Investment Company
Act of 1940 and the Securities Act of 1933, all Variable Contracts shall
contain provisions that the owner may from time to time convert accumulation
units from one series to another series then available through VAA-V on a net
basis, under such terms and conditions as may be set forth in the Variable
Contracts.
FURTHER RESOLVED, that the appropriate officers of the Company be, and they
hereby are, authorized and directed to establish such procedures as they or
counsel for the Company may deem necessary under which the Company will
provide sales and administrative functions with respect to VAA-V and the
Variable Contracts issued in connection therewith.
ARCHIE R. DYKES LARRY D. ARMEL
- -------------------------------------- --------------------------------------
Archie Dykes - Acting Chairman Larry D. Armel - Secretary
<PAGE>
SERVICE FACILITIES AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of April, 1987, by and
between Security Distributors, Inc., and Security Benefit Life Insurance
Company, both Kansas corporations.
WITNESSETH:
WHEREAS, Security Distributors, Inc. is a wholly-owned subsidiary of Security
Management Company, which is a wholly-owned subsidiary of Security Benefit
Group, Inc., which in turn is a wholly-owned subsidiary of Security Benefit Life
Insurance Company; and
WHEREAS, one of the purposes of Security Distributors, Inc., is to act as a
broker/dealer and principal underwriter pursuant to the requirements of the
Securities Act of 1934 for the offering and selling of Variable Annuity
Contracts and Variable Life Insurance Policies to be issued by Security Benefit
Life Insurance Company for investment in the various SBL Variable Annuity and
Variable Life Separate Accounts; and
WHEREAS, because Security Benefit Life Insurance Company has facilities for the
handling of the recordkeeping and other related administrative duties of
Security Distributors, Inc. pertaining to the sale of Variable Annuity Contracts
and Variable Life Insurance Policies;
NOW, THEREFORE, IT IS MUTUALLY AGREED between Security Distributors, Inc. and
Security Benefit Life Insurance Company, both Kansas corporations, that for and
in consideration of the principal underwriting and broker/dealer services
rendered and to be rendered by Security Distributors, Inc. relating to Security
Benefit Life Insurance Company's Variable Annuity and Variable Life operations,
Security Benefit Life Insurance Company convenants and agrees that it will
furnish services and facilities to Security Distributors, Inc. as hereinafter
set forth:
1. Administrative and clerical personnel as may be needed from time to time to
properly carry out the functions and duties of Security Distributors, Inc.
relating to the Variable Annuity and Variable Life operations.
2. Maintain all books and records of Security Distributors, Inc. in connection
with persons offering and selling Variable Annuity Contracts and Variable
Life Insurance Policies funded by various separate accounts of Security
Benefit Life Insurance Company who are licensed as insurance agents of
Security Benefit Life Insurance Company and are also Registered
Representatives of independent broker/dealers which have Selling Agreements
with Security Distributors, Inc. Such books and records to be maintained
and preserved in conformity with the requirements of Rule 17(a)-3 and
17(a)-4 of the Securities Act of 1934 to the extent that such requirements
are applicable to Variable Annuity Contracts and Variable Life Insurance
Policies.
3. All such books and records are to be maintained and held by Security
Benefit Life Insurance Company on behalf of and as agent for Security
Distributors, Inc. and such books and records shall remain the sole
property of Security Distributors, Inc.
1
<PAGE>
4. Such books and records shall at all times be subject to inspection by the
Securities and Exchange Commission in accordance with Section 17(a) of the
Securities Act of 1934 and the National Association of Securities Dealers,
Inc.
5. It is further understood and agreed that the making of any payments by
Security Benefit Life Insurance Company to registered representatives of
independent broker/dealers which have Selling Agreements with Security
Distributors, Inc. are performed as purely as administerial service and
that the records in respect thereof are properly reflected on the books and
records maintained by or for Security Distributors, Inc.
6. Since the crediting of a payment made by a participant (applicant of owner)
of a Variable Annuity Contract or by an owner of a Variable Life Insurance
Policy on the books and records maintained by or for Security Distributors,
Inc. constitutes the sale of a security, and, therefore, a "transaction" as
that term is used in Rule 15(c) 1-4 under the Securities Act of 1934, a
confirmation for each such transaction will be sent to the participant at
or before the completion of the transaction, and such confirmation shall
reflect the facts of the transaction, and the form thereof will show that
it is being sent on behalf of Security Distributors, Inc. and acting in the
capacity of agent for Security Benefit Life Insurance Company.
7. Security Distributors, Inc. has and does assume full responsibility for the
securities activities of all persons associated with it who are engaged
directly or indirectly in the Variable Annuity and/or Variable Life
operation of Security Benefit Life Insurance Company, each such person
being a "person associate" of Security Distributors, Inc. as defined in
Section 3(a)-18 of the Securities Act of 1934, and, therefore, a person for
whom Security Distributors, Inc. has full responsibility in connection with
training, supervision and control as contemplated by Section 15(b)(5)(E) of
the Securities Act of 1934, provided, however, Security Distributors, Inc.
shall not be responsible for persons not associated with it that are
registered broker/dealers or who are offering or selling Variable Annuity
Contracts or Variable Life Policies and are affiliated and registered with
a broker/dealer for such purposes.
ANY CHANGES in this Agreement shall be mutually agreed to by both parties and
shall be in writing.
THIS AGREEMENT shall be in effect as of April 1, 1987, and shall remain in
effect until otherwise terminated by either party upon thirty (30) days written
notice to the other party at that party's last known address as reflected on the
records of the terminating party.
2
<PAGE>
IN WITNESS WHEREOF, the parties by their duly authorized officers have executed
this Agreement on this 1st day of April, 1987.
SECURITY BENEFIT LIFE INSURANCE COMPANY
By: ARCHIE R. DYKES
---------------------------------------------
Archie R. Dykes, President
ATTEST:
ROGER K. VIOLA
- -------------------------------------------------
Roger K. Viola, General Counsel and Secretary
SECURITY DISTRIBUTORS, INC.
By: WINSLOW H. ADAMS
---------------------------------------------
Winslow H. Adams, President
ATTEST:
BARBARA W. RANKIN
- -------------------------------------------------
Barbara W. Rankin, Secretary
3
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached application, Security
Benefit Life Insurance Company (the "Company") will pay the benefits of this
Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, THE OWNER MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*Purchase Payment may be made until the earlier of the Annuity Commencement
Date or termination of the Contract.
*A Death Benefit may be paid prior to the Annuity Commencement Date according
to the Contract provisions.
*Annuity Payments begin on the Annuity Commencement Date using the method
specified in this Contract.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
Form V6023 (1-98) BP 602311
<PAGE>
TABLE OF CONTENTS
PAGE
CONTRACT SPECIFICATIONS ............................................... 3
DEFINITIONS ........................................................... 4-6
GENERAL PROVISIONS .................................................... 7-9
The Contract ........................................................ 7
Compliance .......................................................... 7
Misstatement of Age or Sex .......................................... 7
Evidence of Survival ................................................ 7
Incontestability .................................................... 7
Assignment .......................................................... 7
Transfers ........................................................... 8
Claims of Creditors ................................................. 8
Nonforfeiture Values ................................................ 8
Participation ....................................................... 8
Statements .......................................................... 9
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS ....................... 9
Ownership ........................................................... 9
Joint Ownership ..................................................... 9
Annuitant ........................................................... 9
Primary and Secondary Beneficiaries ................................. 9
Ownership and Beneficiary Changes ................................... 9
PURCHASE PAYMENT PROVISIONS ........................................... 10
Flexible Purchase Payments .......................................... 10
Purchase Payment Limitations ........................................ 10
Purchase Payment Allocation ......................................... 10
Place of Payment .................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS ................................. 10-12
Contract Value ...................................................... 10
General Account Contract Value ...................................... 10
General Account Interest Crediting .................................. 11
Separate Account Contract Value ..................................... 11
Accumulation Unit Value ............................................. 11
Net Investment Factor ............................................... 11
Determining Accumulation Units ...................................... 12
Mortality and Expense Risk Charge ................................... 12
Premium Tax Expense ................................................. 12
Administrative Charge ............................................... 12
Mutual Fund Expenses ................................................ 12
WITHDRAWAL PROVISIONS ................................................. 12-14
Withdrawals ......................................................... 12, 13
Withdrawal Value .................................................... 13
Withdrawal Charges .................................................. 13
Free Withdrawals .................................................... 13
Systematic Withdrawals .............................................. 13, 14
Free Systematic Withdrawals ......................................... 14
Date of Request ..................................................... 14
Payment of Withdrawal Benefits ...................................... 14
DEATH BENEFIT PROVISIONS .............................................. 15, 16
Death Benefit ....................................................... 15
Proof of Death ...................................................... 15
Distribution Rules .................................................. 15, 16
ANNUITY PAYMENT PROVISIONS ............................................ 16-19
Annuity Commencement Date ........................................... 16
Change of Annuity Commencement Date ................................. 16
Annuity Start Amount ................................................ 16
Withdrawal Charges .................................................. 17
Annuity Tables ...................................................... 17
Annuity Payments .................................................... 17
Change of Annuity Option ............................................ 17
Fixed Annuity Payments .............................................. 17
Variable Annuity Payments ........................................... 18
Annuity Units ....................................................... 18
Net Investment Factor ............................................... 18
Alternate Annuity Option Rates ...................................... 18
Annuity Options ..................................................... 19
ANNUITY TABLES ........................................................ 20, 21
AMENDMENTS OR ENDORSEMENTS, IF ANY
-2- BP 602311
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John A. Doe CONTRACT NUMBER: Specimen
OWNER DATE OF BIRTH: 10-30-1956 CONTRACT DATE: 6-30-1996
JOINT OWNER NAME: Mary K. Doe ANNUITY COMMENCEMENT DATE: 7-1-2028*
JOINT OWNER DATE OF BIRTH: 7-18-1981 PLAN: Non-Qualified
ANNUITANT NAME: Betty M. Doe ASSIGNMENT: This Certificate may not
be assigned. See Assignment Provision
ANNUITANT DATE OF BIRTH: 5-13-1963 of this Certificate.
ANNUITANT'S SEX: Female
PRIMARY BENEFICIARY NAME:
Linda L. Doe
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT .............. $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .. $25
MINIMUM SYSTEMATIC WITHDRAWAL ......... $25
MAXIMUM PARTICIPANT AGE ............... 90
MORTALITY AND EXPENSE RISK CHARGE ..... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............. $30**
WITHDRAWAL CHARGES
Contract Year of Withdrawal ......... 1 2 3 4 5 6 7 8 9+
Withdrawal Charge ................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE ............ 10%
MINIMUM GUARANTEED RATE ............... 3%
ANNUITY OPTION ........................ Life with 10-Year Fixed Period Option*
SEPARATE ACCOUNT ...................... Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
*The Owner may select the Annuity Commencement Date and the Annuity Option. If
no Annuity Commencement Date or Annuity Option is selected by the Owner, they
will be assigned automatically.
**The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when a
Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative Fee
will be waived during a Contract Year if: (1) Contract Value on that Contract
Anniversary (or in the event of a full Withdrawal, upon the date of such
Withdrawal) is $25,000 or more; and (2) the Contract has been in force eight
Contract Years or more.
V6023A (1-98) -3- SBL73
<PAGE>
- --------------------------------------------------------------------------------
DEFINTIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the Separate
Account Contract Value prior to the Annuity Commencement Date. It is also used
to compute the Variable Annuity Payments for Annuity Options 5 and 6.
ANNUITANT
The Annuitant is the person named by the Owner on whose life the Annuity
Payments depend for Annuity Options 1 through 4 and 8. The Annuitant receives
Annuity Payments under this Contract. Please see "Annuitant" provisions on page
9.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making Annuity
Payments. The Annuity Option is set prior to the Annuity Commencement Date.
Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Owner. The Annuity
Commencement date is shown on Page 3. Please see "Annuity Commencement Date" on
page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity Payments
for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account. Such
transfers are made automatically on a periodic basis by the Company at the
written request of the Owner. The Company reserves the right to discontinue,
modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison Street,
Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins and the date the Company uses
to determine the date the Contract becomes incontestable. The Contract Date is
shown on page 3. Please see "Incontestability" on page 7.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account at
a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The Company
will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Owner or Joint Owner, the Designated Beneficiary will be
the first person on the following list who is alive on the date of death:
1. Owner;
2. Joint Owner;
3. Primary Beneficiary;
4. Secondary Beneficiary;
5. Annuitant; and
6. the Owner's estate if no one listed above is alive.
V6023B (1-98) -4- BP 602321
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
DESIGNATED BENEFICIARY (Continued)
The Designated Beneficiary receives a death benefit upon the death of the Owner
prior to the Annuity Commencement Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 9 and "Death Benefit Provisions" on pages 15 and
16.
GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the Minimum
Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in the entire Contract
with the Owner. The Joint Owner, if any, is named on page 3. Please see "Joint
Ownership" provisions on page 9.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or corporation.
OWNER
The Owner is the person who possesses all rights under the Contract. The Owner
is named on page 3. Please see "Ownership" provisions on page 9.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be charged
against this Contract. When Premium Tax is assessed after the Purchase Payment
is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and applied to the Contract.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good order
at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT
The Separate Account, shown on page 3 is a separate account established and
maintained by the Company under Kansas law. The Separate Account is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 as Unit Investment Trust. It was established by the Company to support
variable annuity contracts. The Company owns the assets of the Separate Account
and maintains them apart from the assets of its general account and its other
separate accounts. The assets held in the Separate Account equal to the reserves
and other Contract liabilities with respect to the Separate Account may not be
charged with liabilities arising from any other business the Company may
conduct.
-5- BP 602321
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the Separate
Account are credited to, or charged against, the Separate Account without regard
to the income, gains or losses from the Company's general account or its other
separate accounts. The Separate Account is divided into Series shown on page 3.
Income and realized and unrealized gains and losses from assets in each Series
are credited to, or charged against, the Series without regard to income, gains
or losses in the other Series. The Company has the right to transfer to its
general account any assets of the Separate Account that are in excess of the
reserves and other Contract liabilities with respect to the Separate Account.
The value of the assets in the Separate Account on each Valuation Date is
determined as of the end of each Valuation Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to the
regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or purchased
by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts of
the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the Separate
Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account or a
Series, the Company will notify the Owner of the change. The Company will not
change the investment policy of any Series in any material respect without
complying with the filing and other procedures of the insurance regulators of
the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all share of
the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's Home
Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the next
Valuation Date.
V6023C (1-98) -6- BP 602331
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this Contract,
the attached Application, and any Amendments, Endorsements or Riders to the
Contract. All statements made in the Application will, in the absence of fraud,
as ruled by a court of competent jurisdiction, be deemed representations and not
warranties. The Company will use no statement made by or on behalf of the Owner
or the Annuitant to void this Contract unless it is in the written Application.
Any change in the Contract can be made only with the written consent of the
President, a Vice President, or the Secretary of the Company.
The Purchase Payment(s) and the Application must be acceptable to the Company
under its rules and practices. If they are not, the Company's liability shall be
limited to a return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the provisions of this
Contract or comply with or give the Owner the benefit of any federal or state
statute, rule or regulation. This includes, but is not limited to, requirements
for annuity contracts under the Internal Revenue Code or the laws of any state.
The Company will provide the Owner with a copy of any such change and will also
file such a change with the insurance regulatory officials of the state in which
the Contract is delivered.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, payments shall be
adjusted, when allowed by law, to the amount which would have been provided for
the correct age or sex. Proof of the age of an Annuitant may be required at any
time, in a form suitable to the Company. If payments have already commenced and
the misstatement has caused an underpayment, the full amount due will be paid
with the next scheduled payment. If the misstatement has caused an overpayment,
the amount due will be deducted from one or more future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a given
date, proof that the payee is living may be required by the Company. Such proof
must be in a form accepted by the Company, and may be required prior to making
the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in force for two years
from the Contract Date during the life of the Owner.
ASSIGNMENT
Please refer to page 3 to see if this Contract may be assigned. If it may be
assigned, no Assignment under this Contract is binding unless Received by the
Company in writing. The Company assumes no responsibility for the validity,
legality, or tax consequences of any Assignment. The Assignment will be subject
to any payment made or other action taken by the Company before the Assignment
is Received by the Company. Once filed, the right of the Owner, Annuitant and
Beneficiary are subject to the Assignment. Any claim is subject to proof of
interest of the assignee.
-7- BP 602331
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS
The Owner may Transfer Contract Value among the General Account and Series
subject to the following.
The Owner may make only 14 transfers per Contract Year. Transfers are not
allowed within 30 days of the Annuity Commencement Date. Automatic Transfers are
not included in the 14 transfers allowed per Contract Year. After the Annuity
Commencement Date, for Annuity Options 1 through 4, 7 and 8, the Owner may
Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject to
Transfer; (2) waive or limit the number of Transfers allowed each Contract Year;
and (3) suspend Transfers. Transfers must be at least $500.00 or, if less, the
remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer request
is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the prior
Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of the
Valuation Period in which the Transfer is effected. The Company will effect a
Transfer from the General Account on the basis of General Account Contract Value
as of the end of the Valuation Period in which the Transfer is effected.
The Company reserves the right to delay Transfers from the General Account for
up to 6 months as required by most states. The Company will notify you if there
will be a delay.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Owner to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company does
not expect dividends to become payable on this Contract. At the end of each
Contract Year the Company will determine the Contract's dividend, if any. The
Owner may choose to have it: (1) added to Contract Value; or (2) paid in cash.
If no choice is made, any dividend will be added to Contract Value.
V6023D (1-98) -8- BP 602341
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
STATEMENTS
At least once each Contract Year the Owner shall be sent a statement including
the current Contract Value and any other information required by law. The Owner
may send a written request for a statement at other intervals. The Company may
charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
During the Owner's lifetime, all rights and privileges under the Contract may be
exercised only by the Owner. If the purchaser names someone other than himself
or herself as Owner, the purchaser has no rights in the Contract. No Owner may
be older than age 90 on the Contract Date.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the Owner and Joint Owner
share an undivided interest in the entire Contract as joint tenants with rights
of survivorship. When an Owner and Joint Owner have been named, the Company will
honor only requests for changes and the exercise of other Ownership rights made
by both the Owner and Joint Owner. When a Joint Owner is named, all references
to "Owner" throughout this Contract should be construed to mean both the Owner
and Joint Owner, except for the "Statements" provision above and the "Death
Benefit Provisions" on pages 15 and 16.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Commencement Date. The request for this change must be made in
writing and Received by the Company at least 30 days prior to the Annuity
Commencement Date. No Annuitant may be named who is older than the Maximum
Annuitant Age shown on page 3 on the Contract Date. When the Annuitant dies
prior to the Annuity Commencement Date, the Owner must name a new Annuitant
within 30 days or, if sooner, by the Annuity Commencement Date, except where the
Owner is a Nonnatural Person. If a new Annuitant is not named, the Owner becomes
the Annuitant.
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named on page 3. The Owner may change any Beneficiary
as described in "Ownership and Beneficiary Changes" below. If the Primary
Beneficiary dies prior to the Owner, the Secondary Beneficiary becomes the
Primary Beneficiary. Unless the Owner directs otherwise, when there are two or
more Primary Beneficiaries, they will receive equal shares.
OWNERSHIP AND BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Owner may name a new Owner,
a new Primary Beneficiary or a new Secondary Beneficiary. Any new choise of
Owner, Primary Beneficiary or Secondary Beneficiary will revoke any prior
choice. Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date the written request is signed,
whether or not the Owner is living at the time the change is recorded. A new
choice of Primary Beneficiary or Secondary Beneficiary will not apply to any
payment made or action taken by the Company prior to the time it was recorded.
The Company may require the Contract be returned so these changes may be made.
-9- BP 602341
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Contract becomes in force on the Contract Date. The Owner is not required to
continue Purchase Payments in the amount or frequency originally planned. The
Owner may: (1) increase or decrease the amount of Purchase Payments, subject to
any Contract limits; or (2) change the frequency of Purchase Payments. A change
in frequency or amount of Purchase Payments does not require a written request.
If no Purchase Payment is received during the 180-day period beginning on the
Contract Date, the Contract will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is shown
on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series. The
allocations may be a whole dollar amount or whole percentage. However, no less
than $25 per Purchase Payment may be allocated to any Account. The Owner may
change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at its
Home Office. Purchase Payments after the initial Purchase Payment are applied as
of the end of the Valuation Period during which they are Received by the
Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of: (1) the Separate
Account Contract Value; and (2) the General Account Contract Value. At any time
after the first Contract Year and before the Annuity Commencement Date, the
Company reserves the right to pay to the Owner the Contract Value as a lump sum
if it is below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the first
Purchase Payment allocated under the Contract to the General Account:
PLUS:
1. any other Purchase Payments allocated under the Contract to the General
Account;
2. any Transfers from the Separate Account to the General Account; and
3. any interest credited to the General Account.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the General
Account;
2. any Transfers from the General Account to the Separate Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under Annuity
Options 5 and 6.
V6023E (1-98) -10- BP 602351
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an annual
rate at least equal to the Minimum Guaranteed Rate shown on page 3. Also, the
Company may in its sole judgment credit Current Interest at a rate in excess of
the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated or
Transferred to the General Account during one period at a different rate than
amounts allocated or Transferred to the General Account in another period.
Therefore, at any time, portions of General Account Contract Value may be
earning Current Interest at different rates based upon the period during which
such portions were allocated or Transferred to the General Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for this
Contract.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which the
Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation Period
is determined by dividing (1) by (2) and subtracting (3) from the result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions paid
by the Series' underlying mutual fund that is not included in the net
asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs under
the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as of
the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge which
is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and losses
from each Series are credited to or charged against the Series without regard to
the gains or losses in the Company or other Series.
-11- BP 602351
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to a Series under this Contract is
found by dividing; (1) the amount allocated to the Series; by (2) the
Accumulation Unit Value for the Series as of the end of the Valuation Period
during which the amount is applied under the Contract. The number of
Accumulation Units allocated to a Series under the Contract will not change as a
result of investment experience. Events that change the number of Accumulation
Units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from the
Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page 3.
This charge will be computed and deducted from each Series on each Valuation
Date. This charge is factored into the Accumulation Unit and Annuity Unit Values
on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on page
3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value the Annual Administrative Fee in the
amount and manner shown on page 3. No Annual Administrative Fee is deducted on
or after the Annuity Commencement Date if one of Annuity Options 1 through 4, 7
or 8 is chosen. The Annual Administrative Fee and other charges may be waived or
reduced uniformly on all Contracts issued under certain plans or arrangements
which are expected to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in shares of a mutual fund. The net asset value per share of
each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses are
not deducted from the assets of a Series, but are paid by the underlying funds.
The Owner indirectly bears a pro rata share of such fees and expenses. An
underlying fund's fees and expenses are not specified or fixed under the terms
of this Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while the
Owner is living. This provision is subject to any federal or state Withdrawal
restrictions.
Upon the Owner's request for a full Withdrawal, the Company will pay the
Withdrawal Value in a lump sum, and the Contract will terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Owner must apply: (a) while this Contract is in force; and (b) prior to
the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
V6023F (1-98) -12- BP 602361
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page 3,
"Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Copmany; (2) any Anual Adminsitrative Fee; and
(3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments. The
amount of the charge is based on the Contract Year in which the Withdrawal is
made. See the Withdrawal Charges shown on page 3. For the purpose of determining
the Withdrawal Charges, Purchase Payments are withdrawn before Earnings on a
first in first out basis. The Withdrawal Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to the
Series and the General Account in the same proportion as the Withdrawal is
allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the first
Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the Valuation
Date the Withdrawal request is Received by the Company. The Free Withdrawal
amount is applied only to the first Withdrawal in a Contract Year. A Free
Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried from
one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract in
substantially equal amounts made while the Owner is living prior to the Annuity
Commencement Date.
Systematic Withdrawals are available after the first Contract Year. Systematic
Withdrawals are available, however, during the first Contract Year if Contract
Value is $40,000 or more on the date the Systematic Withdrawal request is
Received by the Company.
-13- BP 602361
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Owner must make the request in
writing. Systematic Withdrawals are subject to any applicable Withdrawal Charge,
except as discussed under "Free Systematic Withdrawals," below. The Minimum
Systematic Withdrawal amount is shown on page 3. The Owner must choose the type
of payment and its frequency. The Systematic Withdrawal request must state the
allocations for deducting the Withdrawals from each Account. If no allocation is
specified, the Withdrawals will be deducted from the Accounts in the order
described on page 3, "Method for Deduction." The payment type may be: (1) a
percentage of Contract Value; (2) a specified dollar amount; (3) over a fixed
period of time; (4) all earnings in the Contract; or (5) based upon the life
expectancy of the Owner or the Owner and a Beneficiary. The payment frequency
may be: (1) monthly; (2) quarterly; (3) semiannually; or (4) annually.
Systematic Withdrawals may be stopped or changed by the Owner upon proper
written request Received by the Company at least 30 days in advance of the
requested date of termination or change. The Company reserves the right to stop,
modify or suspend Systematic Withdrawals at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The Amount
of Free Systematic Withdrawals available is a Contract Year is as follows: an
amount equal to the Free Withdrawal Percentage shown on page 3, times the
Contract Value on the Valuation Date the First Systematic Withdrawal Request in
such Contract Year is Received by the Company. Systematic Withdrawals are not
available in any Contract Year in which a Free Withdrawal has been made.
Systematic Withdrawals that exceed the Free Systematic Withdrawal amount will
incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on the
basis of Accumulation Unit Value determined as of the end of the Valuation
Period in which all the required information is Received by the Company. The
Company will effect a Systematic Withdrawal of Separate Account Contract Value
on the basis if Accumulation Unit Value determined as of the end of the
Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is not
reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from the
General Account for up to six months as required by most states. The Company
will notify you if there will be a delay.
V6023G (1-98) -14- BP 602371
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Owner dies prior to the Annuity Commencement Date, a Death Benefit will
be paid to the Designated Beneficiary when due Proof of Death and instructions
regarding payment are Received by the Company. If an Owner is a Nonnatural
Person, then the Death Benefit will be paid in the event of the death of the
Annuitant or any Joint Owner that is a natural person prior to the Annuity
Commencement Date. Further, if an Owner is a Nonnatural Person, the amount of
the Death Benefit is based on the age of the Annuitant or any Joint Owner that
is a natural person on the Contract Date.
If the age of each Owner was 75 or younger on the Contract Date, the Death
Benefit will be the greatest of: (1) the sum of all Purchase Payments, less any
Premium Taxes due or paid by the Company and less the sum of all partial
Withdrawals; (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit described
below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an exact
multiple of six and occurs prior to the oldest Owner reaching age 76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of any Owner on the Contract Date was 76 or older, the Death Benefit
will be the greater of: (1) the sum of all Purchase Payments, less any premium
taxes due or paid by the Company and less the sum of all partial Withdrawals; or
(2) the Contract Value on the date due Proof of Death and instructions regarding
payment are Received by the Company, less any Premium Taxes due or paid by the
Company.
If a lump sum payment is requested, the payment will be made in accordance with
any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death;
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding of
death;
3. written statement by a medical doctor who attended the deceased Owner; or
4. any proof accepted by the Company.
DISTRIBUTION RULES
The entire Death Benefit with any interest shall be paid within 5 years after
the death of any Owner, except as provided below. In the event that the
Designated Beneficiary elects an Annuity Option, the length of time for the
payment period may be longer than 5 years if: (1) the Designated Beneficiary is
a natural person; (2) the Death Benefit is paid out under Annuity Options 1
through 8; (3) payments are made over a period that does not exceed the life or
life expectancy of the Designated Beneficiary; and (4) Annuity Payments begin
within one year of the death of the Owner. If the deceased Owner's spouse is the
sole Designated Beneficiary, the spouse shall become the sole Owner of the
Contract. He or she may elect to: (1) keep the Contract in force until the
sooner of the spouse's death or the Annuity Commencement Date; or (2) receive
the Death Benefit.
-15- BP 602371
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DISTRIBUTION RULES (Continued)
If any Owner dies after the Annuity Commencement Date, Annuity Payments shall
continue to be paid at least as rapidly as under the method of payment being
used as of the date of the Owner's death.
If the Owner is a Nonnatural Person, the distribution rules set forth above
apply in the event of the death of, or a change in, the Annuitant. This Contract
is deemed to incorporate any provision of Section 72(s) of the Internal Revenue
Code of 1986, as amended (the "Code"), or any successor provision. This Contract
is also deemed to incorporate any other provision of the Code deemed necessary
by the Company, in its sole judgment, to qualify this Contract as an annuity.
The application of the distribution rules will be made in accordance with Code
Section 72(s), or any successor provision, as interpreted by the Company in its
sole judgment.
The foregoing distribution rules do not apply to a Contract which is: (1)
provided under a plan described in Code section 401(a); (2) described in Code
section 403(b); (3) an individual retirement annuity or provided under an
individual retirement account or annuity; or (4) otherwise exempt from the Code
Section 72(s) distribution rules.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Owner may choose the Annuity Commencement Date at the time of application.
The Annuity Commencement Date may not be prior to the third Contract
Anniversary. If no Annuity Commencement Date is chosen, the Company will use the
later of: (1) the oldest Annuitant's sixty-fifth birthday; or (2) the tenth
Contract Anniversary, but in no event later than the oldest Annuitant's 95th
birthday. The Annuity Commencement Date must be prior to the oldest Annuitant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to the
Annuitant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Owner may change the Annuity Commencement Date. A request for the change
must be made in writing. The written request must be Received by the Company at
least 30 days prior to the new Annuity Commencement Date as well as 30 days
prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on page
19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of the Annuity Options 1 through 4, 7 or 8 is chosen, a pro rata
Administrative Fee. Unless otherwise directed by the Owner, Annuity Start Amount
derived from General Account Contract Value will be applied to purchase a Fixed
Annuity Option; that derived from Separate Account Contract Value will be
applied to purchase a Variable Annuity Option.
V6023H (1-98) -16- BP 602381
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under Annuity
Options 1 through 4 and 8; or (2) those made under annuity Options 5 through 7
that provide for payments over a period of at least 7 years. Withdrawal Charges
are applied to annuity payments under Annuity Options 5 through 7 that provide
for payments over a period of less than 7 years. See "Withdrawal Provisions" on
pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon the
1983 Table "A" mortality table. The amount of each Annuity Payment for Annuity
Options 1 through 4 and 8 will depend on the Annuitant's sex and age on the
Annuity Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed minimum
amount for each monthly Annuity Payment per $1,000 of Annuity Start Amount for
Annuity Options 1 through 4, 7 and 8. Tables A and B are based upon the 1983
Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options 1
through 4 and 8 is determined by reference to the 1983 Table "A" mortality table
and an assumed interest rate of 3.5% per year and, for Option 7, by reference to
Table C below.
Tables A and B assume 1900 as the year of birth of the Annuitant. To use Tables
A and B for an Annuitant born after 1900, the actual age is reduced by 0.1
(one-tenth) of a year for each year the year of birth exceeds 1900. For an
Annuitant with a birth year prior to 1900, the actual age is increased in a like
manner. The actual age (in completed months) reduced or increased becomes the
"adjusted age of the Annuitant." The guaranteed payout rate is then found by
interpolating the Annuitant's adjusted age between the ages shown in the Tables.
On request the Company will furnish the amount of monthly Annuity Payment per
$1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age and sex are not used
to calculate Annuity Payments. Annuity Payments for options 5 and 6 are computed
without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose any form of Annuity
Option that is allowed by the Company. The Owner may choose an Annuity Option by
written request. This request must be Received by the Company at least 30 days
prior to the Annuity Commencement Date. Several Annuity Options are listed on
page 19. No Annuity Option can be selected that requires the Company to make
periodic payments of less than $50. If no Annuity Option is chosen prior to the
Annuity Commencement Date, the Company will use Life with 10-Year Fixed Period
Option. Each Annuity Option allows for making Annuity Payments annually,
semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Owner may change the Annuity Option
chosen. The Owner must request the change in writing. This request must be
Received by the Company at least 30 days prior to the Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are the
guaranteed minimum for each Annuity Payment for Annuity Options 1 through 4, 7
and 8.
-17- BP 602381
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first Annuity
Payment for Annuity Options 1 through 4, 7 and 8 are determined as discussed on
page 17. The amount of each Annuity Payment after the first for these options is
computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement Date.
The number of Annuity Units for the Series then remains constant, unless a
Transfer of Annuity Units is made. After the first Annuity Payment, the dollar
amount of each subsequent Annuity Payment is equal to the number of Annuity
Units times the Annuity Unit Value for the Series on the due date of the Annuity
Payment.
The Annuity Unit value for each Series was first set at $1.00. The Annuity Unit
Value for any subsequent Valuation Date is equal to a) times (b) times (c),
where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate is
reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation Period
is determined by dividing (1) by (2) and subtracting (3) from the result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions paid
by the Series' underlying mutual fund that is not included in the net
asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and losses
from each Series are credited or charged against the Series without regard to
the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
V6023I (1-98) -18- BP 602391
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1 LIFE OPTION: This option provides payments for the life of the
Annuitant. Table A shows some of the guaranteed rates for this
option.
OPTION 2 LIFE WITH FIXED PERIOD OPTION: This option provides payments for
the life of the Annuitant. A fixed period of 5, 10, 15 or 20
years may be chosen. Payments will be made to the end of this
period even if the Annuitant dies prior to the end of the period.
If the Annuitant dies before receiving all the payments during
the fixed period, the remaining payments will be made to the
Designated Beneficiary. Table A shows some of the guaranteed
rates for this option.
OPTION 3 LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides
payments for the life of the Annuitant with a period certain
determined by dividing the Annuity Start Amount by the amount of
the first payment. A fixed number of payments will be made even
if the Annuitant dies. If the Annuitant dies before receiving the
fixed number of payments, any remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed
rates for this option.
OPTION 4 JOINT AND LAST SURVIVOR OPTION: This option provides payments for
the life of the Annuitant and Joint Annuitant. Payments will be
made as long as either is living. Table B shows some of the
guaranteed rates for this option.
OPTION 5 FIXED PERIOD OPTIONS: This option provides payments for a fixed
number of years between 5 and 20. The amount of each payment is
determined by dividing Contract Value on the Valuation Date the
payment is made by the number of remaining payments. If the
Contract Value is held in the General Account, then the amount of
the payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate
is guaranteed to be no less than the Guaranteed Rate shown on
page 3. If the Contract Value is held in the Separate Account,
then the amount of the payments will vary as a result of the
investment performance of the Series chosen. If all the
Annuitants die before receiving the fixed number of payments, any
remaining payments will be made to the Designated Beneficiary.
OPTION 6 FIXED PAYMENT OPTION: This option provides a fixed payment
amount. This amount is paid until the amount applied, including
daily interest adjustments, is paid. If the Contract Value is
held in the General Account, then the number of payments will
vary as a result of the interest rate (as adjusted periodically)
credited on the General Account. This rate is guaranteed to be no
less than the Guaranteed Rate shown on page 3. If the Contract
Value is held in the Separate Account, then the number of
payments will vary as a result of the investment performance of
the Series chosen. If all the Annuitants die before receiving all
the payments, any remaining payments will be made to the
Designated Beneficiary.
OPTION 7 PERIOD CERTAIN OPTION: This option provides payments for a fixed
period of 5, 10, 15 or 20 years. Payments will be made until the
end of this period. If the Annuitant dies prior to the end of the
period, the remaining payments will be made to the Designated
Beneficiary. Table C shows some of the guaranteed rates for this
option.
OPTION 8 JOINT AND CONTINGENT SURVIVOR OPTION: This option provides
payments for the life of the primary Annuitant. Payments will be
made to the primary Annuitant as long as he or she is living.
Upon the death of the primary Annuitant, payments will be made to
the contingent Annuitant as long as he or she is living. If the
contingent Annuitant is not living upon the death of the primary
Annuitant, no further payments will be made. Table B shows some
of the guaranteed rates for this option.
-19- BP 602391
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two
Adjusted Age Option One Life with Fixed Period Option Three
of Annuitant Life Only 5 10 15 20 Unit Refund
- --------------------------------------------------------------------------------
MALE
55 4.70 4.68 4.62 4.53 4.39 4.42
56 4.80 4.78 4.72 4.61 4.45 4.50
57 4.91 4.89 4.82 4.69 4.51 4.58
58 5.03 5.00 4.92 4.78 4.58 4.67
59 5.15 5.12 5.03 4.87 4.64 4.76
60 5.28 5.25 5.14 4.96 4.71 4.86
61 5.42 5.39 5.26 5.06 4.78 4.96
62 5.57 5.53 5.39 5.16 4.84 5.07
63 5.74 5.69 5.52 5.26 4.90 5.19
64 5.91 5.85 5.66 5.36 4.96 5.30
65 6.10 6.03 5.81 5.46 5.02 5.43
66 6.29 6.21 5.96 5.56 5.08 5.56
67 6.50 6.41 6.11 5.66 5.13 5.70
68 6.73 6.62 6.28 5.76 5.18 5.85
69 6.97 6.84 6.44 5.86 5.23 6.00
70 7.23 7.07 6.61 5.96 5.27 6.16
71 7.51 7.32 6.78 6.05 5.31 6.33
72 7.80 7.58 6.96 6.14 5.34 6.51
73 8.12 7.85 7.14 6.23 5.37 6.70
74 8.45 8.14 7.32 6.31 5.40 6.90
75 8.82 8.44 7.49 6.38 5.42 7.11
FEMALE
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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.
V6023J (1-98) -20- BP 6023A1
<PAGE>
ANNUITY TABLES (continued)
- --------------------------------------------------------------------------------
TABLE B
SETTLEMENT OPTIONS FOUR AND EIGHT
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF MALE ANNUITANT
FEMALE ANNUITANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.64 3.73 3.77 3.81 3.86 3.90
60 3.80 3.95 4.01 4.03 4.18 4.25
62 3.86 4.04 4.11 4.20 4.33 4.42
65 3.95 4.17 4.26 4.38 4.56 4.70
70 4.07 4.37 4.50 4.69 4.99 5.25
75 4.16 4.53 4.70 4.97 5.44 5.88
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 C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000
OF AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000
OF AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 YEARS 7 YEARS 10 YEARS 15 YEARS 20 YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.91 13.38 9.83 7.10 5.75
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.
-21- BP 6023A1
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*Purchase Payments may be made until the earlier of the Annuity Commencement
Date or termination of the Contract.
*A Death Benefit may be paid prior to the Annuity Commencement Date according
to the Contract provisions.
*Annuity Payments begin on the Annuity Commencement Date using the method as
specified in this Contract.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 602314
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached application, Security
Benefit Life Insurance Company (the "Company") will pay the benefits of this
Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, THE OWNER MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*Purchase Payments may be made until the earlier of the Annuity Commencement
Date or termination of the Contract.
*A Death Benefit may be paid prior to the Annuity Commencement Date according to
the Contract provisions.
*Annuity Payments begin on the Annuity Commencement Date using the method
specified in this Contract.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
Form V6023 (1-98)U BP 602301
<PAGE>
TABLE OF CONTENTS
Page
CONTRACT SPECIFICATIONS ............................................... 3
DEFINITIONS ........................................................... 4-6
GENERAL PROVISIONS .................................................... 7-9
The Contract ........................................................ 7
Compliance .......................................................... 7
Misstatement of Age ................................................. 7
Evidence of Survival ................................................ 7
Incontestability .................................................... 7
Assignment .......................................................... 7
Transfers ........................................................... 8
Claims of Creditors ................................................. 8
Nonforfeiture Values ................................................ 8
Participation ....................................................... 8
Statements .......................................................... 9
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS ....................... 9
Ownership ........................................................... 9
Joint Ownership ..................................................... 9
Annuitant ........................................................... 9
Primary and Secondary Beneficiaries ................................. 9
Ownership and Beneficiary Changes ................................... 9
PURCHASE PAYMENT PROVISIONS ........................................... 10
Flexible Purchase Payments .......................................... 10
Purchase Payment Limitations ........................................ 10
Purchase Payment Allocation ......................................... 10
Place of Payment .................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS ................................. 10-12
Contract Value ...................................................... 10
General Account Contract Value ...................................... 10
General Account Interest Crediting .................................. 11
Separate Account Contract Value ..................................... 11
Accumulation Unit Value ............................................. 11
Net Investment Factor ............................................... 11
Determining Accumulation Units ...................................... 12
Mortality and Expense Risk Charge ................................... 12
Premium Tax Expense ................................................. 12
Administrative Charge ............................................... 12
Mutual Fund Expenses ................................................ 12
WITHDRAWAL PROVISIONS ................................................. 12-14
Withdrawals ......................................................... 12, 13
Withdrawal Value .................................................... 13
Withdrawal Charges .................................................. 13
Free Withdrawals .................................................... 13
Systematic Withdrawals .............................................. 13, 14
Free Systematic Withdrawals ......................................... 14
Date of Request ..................................................... 14
Payment of Withdrawal Benefits ...................................... 14
DEATH BENEFIT PROVISIONS .............................................. 15, 16
Death Benefit ....................................................... 15
Proof of Death ...................................................... 15
Distribution Rules .................................................. 15, 16
ANNUITY PAYMENT PROVISIONS ............................................ 16-19
Annuity Commencement Date ........................................... 16
Change of Annuity Commencement Date ................................. 16
Annuity Start Amount ................................................ 16
Withdrawal Charges .................................................. 17
Annuity Tables ...................................................... 17
Annuity Payments .................................................... 17
Change of Annuity Option ............................................ 17
Fixed Annuity Payments .............................................. 17
Variable Annuity Payments ........................................... 18
Annuity Units ....................................................... 18
Net Investment Factor ............................................... 18
Alternate Annuity Option Rates ...................................... 18
Annuity Options ..................................................... 19
ANNUITY TABLES ........................................................ 20, 21
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 602301
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John A. Doe CONTRACT NUMBER: Specimen
OWNER DATE OF BIRTH: 10-30-1956 CONTRACT DATE: 6-30-1996
JOINT OWNER NAME: Mary K. Doe ANNUITY COMMENCEMENT DATE: 7-1-2028*
JOINT OWNER DATE OF BIRTH: 7-18-1981 PLAN: Non-Qualified
ANNUITANT NAME: Betty M. Doe ASSIGNMENT: This Certificate may not
be assigned. See Assignment Provision
ANNUITANT DATE OF BIRTH: 5-13-1963 of this Certificate.
ANNUITANT'S SEX: Female
PRIMARY BENEFICIARY NAME:
Linda L. Doe
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT .............. $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .. $25
MINIMUM SYSTEMATIC WITHDRAWAL ......... $25
MAXIMUM PARTICIPANT AGE ............... 90
MORTALITY AND EXPENSE RISK CHARGE ..... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............. $30**
WITHDRAWAL CHARGES
Contract Year of Withdrawal ......... 1 2 3 4 5 6 7 8 9+
Withdrawal Charge ................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE ............ 10%
MINIMUM GUARANTEED RATE ............... 3%
ANNUITY OPTION ........................ Life with 10-Year Fixed Period Option*
SEPARATE ACCOUNT ...................... Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
*The Owner may select the Annuity Commencement Date and the Annuity Option. If
no Annuity Commencement Date or Annuity Option is selected by the Owner, they
will be assigned automatically.
**The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when a
Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative Fee
will be waived during a Contract Year if: (1) Contract Value on that Contract
Anniversary (or in the event of a full Withdrawal, upon the date of such
Withdrawal) is $25,000 or more; and (2) the Contract has been in force eight
Contract Years or more.
V6023A (1-98) -3- SBL73
<PAGE>
- --------------------------------------------------------------------------------
DEFINTIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the Separate
Account Contract Value prior to the Annuity Commencement Date. It is also used
to compute the Variable Annuity Payments for Annuity Options 5 and 6.
ANNUITANT
The Annuitant is the person named by the Owner on whose life the Annuity
Payments depend for Annuity Options 1 through 4 and 8. The Annuitant receives
Annuity Payments under this Contract. Please see "Annuitant" provisions on page
9.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making Annuity
Payments. The Annuity Option is set prior to the Annuity Commencement Date.
Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Owner. The Annuity
Commencement date is shown on Page 3. Please see "Annuity Commencement Date" on
page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity Payments
for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account. Such
transfers are made automatically on a periodic basis by the Company at the
written request of the Owner. The Company reserves the right to discontinue,
modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison Street,
Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins and the date the Company uses
to determine the date the Contract becomes incontestable. The Contract Date is
shown on page 3. Please see "Incontestability" on page 7.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account at
a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The Company
will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Owner or Joint Owner, the Designated Beneficiary will be
the first person on the following list who is alive on the date of death:
1. Owner;
2. Joint Owner;
3. Primary Beneficiary;
4. Secondary Beneficiary;
5. Annuitant; and
6. the Owner's estate if no one listed above is alive.
V6023B (1-98) -4- BP 602321
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
DESIGNATED BENEFICIARY (Continued)
The Designated Beneficiary receives a death benefit upon the death of the Owner
prior to the Annuity Commencement Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 9 and "Death Benefit Provisions" on pages 15 and
16.
GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the Minimum
Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in the entire Contract
with the Owner. The Joint Owner, if any, is named on page 3. Please see "Joint
Ownership" provisions on page 9.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or corporation.
OWNER
The Owner is the person who possesses all rights under the Contract. The Owner
is named on page 3. Please see "Ownership" provisions on page 9.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be charged
against this Contract. When Premium Tax is assessed after the Purchase Payment
is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and applied to the Contract.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good order
at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT
The Separate Account, shown on page 3 is a separate account established and
maintained by the Company under Kansas law. The Separate Account is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 as Unit Investment Trust. It was established by the Company to support
variable annuity contracts. The Company owns the assets of the Separate Account
and maintains them apart from the assets of its general account and its other
separate accounts. The assets held in the Separate Account equal to the reserves
and other Contract liabilities with respect to the Separate Account may not be
charged with liabilities arising from any other business the Company may
conduct.
-5- BP 602321
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the Separate
Account are credited to, or charged against, the Separate Account without regard
to the income, gains or losses from the Company's general account or its other
separate accounts. The Separate Account is divided into Series shown on page 3.
Income and realized and unrealized gains and losses from assets in each Series
are credited to, or charged against, the Series without regard to income, gains
or losses in the other Series. The Company has the right to transfer to its
general account any assets of the Separate Account that are in excess of the
reserves and other Contract liabilities with respect to the Separate Account.
The value of the assets in the Separate Account on each Valuation Date is
determined as of the end of each Valuation Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to the
regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or purchased
by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts of
the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the Separate
Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account or a
Series, the Company will notify the Owner of the change. The Company will not
change the investment policy of any Series in any material respect without
complying with the filing and other procedures of the insurance regulators of
the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all shares of
the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's Home
Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the next
Valuation Date.
V6023C (1-98)U -6- BP 6023N1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this Contract,
the attached Application, and any Amendments, Endorsements or Riders to the
Contract. All statements made in the Application will, in the absence of fraud,
as ruled by a court of competent jurisdiction, be deemed representations and not
warranties. The Company will use no statement made by or on behalf of the Owner
or the Annuitant to void this Contract unless it is in the written Application.
Any change in the Contract can be made only with the written consent of the
President, a Vice President, or the Secretary of the Company.
The Purchase Payment(s) and the Application must be acceptable to the Company
under its rules and practices. If they are not, the Company's liability shall be
limited to a return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the provisions of this
Contract or comply with or give the Owner the benefit of any federal or state
statute, rule or regulation. This includes, but is not limited to, requirements
for annuity contracts under the Internal Revenue Code or the laws of any state.
The Company will provide the Owner with a copy of any such change and will also
file such a change with the insurance regulatory officials of the state in which
the Contract is delivered.
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, payments shall be adjusted, when
allowed by law, to the amount which would have been provided for the correct
age. Proof of the age of an Annuitant may be required at any time, in a form
suitable to the Company. If payments have already commenced and the misstatement
has caused an underpayment, the full amount due will be paid with the next
scheduled payment. If the misstatement has caused an overpayment, the amount due
will be deducted from one or more future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a given
date, proof that the payee is living may be required by the Company. Such proof
must be in a form accepted by the Company, and may be required prior to making
the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in force for two years
from the Contract Date during the life of the Owner.
ASSIGNMENT
Please refer to page 3 to see if this Contract may be assigned. If it may be
assigned, no Assignment under this Contract is binding unless Received by the
Company in writing. The Company assumes no responsibility for the validity,
legality, or tax consequences of any Assignment. The Assignment will be subject
to any payment made or other action taken by the Company before the Assignment
is Received by the Company. Once filed, the rights of the Owner, Annuitant and
Beneficiary are subject to the Assignment. Any claim is subject to proof of
interest of the assignee.
-7- BP 6023N1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS
The Owner may Transfer Contract Value among the General Account and Series
subject to the following.
The Owner may make only 14 transfers per Contract Year. Transfers are not
allowed within 30 days of the Annuity Commencement Date. Automatic Transfers are
not included in the 14 transfers allowed per Contract Year. After the Annuity
Commencement Date, for Annuity Options 1 through 4, 7 and 8, the Owner may
Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject to
Transfer; (2) waive or limit the number of Transfers allowed each Contract Year;
and (3) suspend Transfers. Transfers must be at least $500.00 or, if less, the
remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer request
is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the prior
Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of the
Valuation Period in which the Transfer is effected. The Company will effect a
Transfer from the General Account on the basis of General Account Contract Value
as of the end of the Valuation Period in which the Transfer is effected.
The Company reserves the right to delay Transfers from the General Account for
up to 6 months as required by most states. The Company will notify you if there
will be a delay.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Owner to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company does
not expect dividends to become payable on this Contract. At the end of each
Contract Year the Company will determine the Contract's dividend, if any. The
Owner may choose to have it: (1) added to Contract Value; or (2) paid in cash.
If no choice is made, any dividend will be added to Contract Value.
V6023D (1-98) -8- BP 602341
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
STATEMENTS
At least once each Contract Year the Owner shall be sent a statement including
the current Contract Value and any other information required by law. The Owner
may send a written request for a statement at other intervals. The Company may
charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
During the Owner's lifetime, all rights and privileges under the Contract may be
exercised only by the Owner. If the purchaser names someone other than himself
or herself as Owner, the purchaser has no rights in the Contract. No Owner may
be older than age 90 on the Contract Date.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the Owner and Joint Owner
share an undivided interest in the entire Contract as joint tenants with rights
of survivorship. When an Owner and Joint Owner have been named, the Company will
honor only requests for changes and the exercise of other Ownership rights made
by both the Owner and Joint Owner. When a Joint Owner is named, all references
to "Owner" throughout this Contract should be construed to mean both the Owner
and Joint Owner, except for the "Statements" provision above and the "Death
Benefit Provisions" on pages 15 and 16.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Commencement Date. The request for this change must be made in
writing and Received by the Company at least 30 days prior to the Annuity
Commencement Date. No Annuitant may be named who is older than the Maximum
Annuitant Age shown on page 3 on the Contract Date. When the Annuitant dies
prior to the Annuity Commencement Date, the Owner must name a new Annuitant
within 30 days or, if sooner, by the Annuity Commencement Date, except where the
Owner is a Nonnatural Person. If a new Annuitant is not named, the Owner becomes
the Annuitant.
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named on page 3. The Owner may change any Beneficiary
as described in "Ownership and Beneficiary Changes" below. If the Primary
Beneficiary dies prior to the Owner, the Secondary Beneficiary becomes the
Primary Beneficiary. Unless the Owner directs otherwise, when there are two or
more Primary Beneficiaries, they will receive equal shares.
OWNERSHIP AND BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Owner may name a new Owner,
a new Primary Beneficiary or a new Secondary Beneficiary. Any new choise of
Owner, Primary Beneficiary or Secondary Beneficiary will revoke any prior
choice. Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date the written request is signed,
whether or not the Owner is living at the time the change is recorded. A new
choice of Primary Beneficiary or Secondary Beneficiary will not apply to any
payment made or action taken by the Company prior to the time it was recorded.
The Company may require the Contract be returned so these changes may be made.
-9- BP 602341
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Contract becomes in force on the Contract Date. The Owner is not required to
continue Purchase Payments in the amount or frequency originally planned. The
Owner may: (1) increase or decrease the amount of Purchase Payments, subject to
any Contract limits; or (2) change the frequency of Purchase Payments. A change
in frequency or amount of Purchase Payments does not require a written request.
If no Purchase Payment is received during the 180-day period beginning on the
Contract Date, the Contract will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is shown
on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series. The
allocations may be a whole dollar amount or whole percentage. However, no less
than $25 per Purchase Payment may be allocated to any Account. The Owner may
change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at its
Home Office. Purchase Payments after the initial Purchase Payment are applied as
of the end of the Valuation Period during which they are Received by the
Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of: (1) the Separate
Account Contract Value; and (2) the General Account Contract Value. At any time
after the first Contract Year and before the Annuity Commencement Date, the
Company reserves the right to pay to the Owner the Contract Value as a lump sum
if it is below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the first
Purchase Payment allocated under the Contract to the General Account:
PLUS:
1. any other Purchase Payments allocated under the Contract to the General
Account;
2. any Transfers from the Separate Account to the General Account; and
3. any interest credited to the General Account.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the General
Account;
2. any Transfers from the General Account to the Separate Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under Annuity
Options 5 and 6.
V6023E (1-98) -10- BP 602351
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an annual
rate at least equal to the Minimum Guaranteed Rate shown on page 3. Also, the
Company may in its sole judgment credit Current Interest at a rate in excess of
the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated or
Transferred to the General Account during one period at a different rate than
amounts allocated or Transferred to the General Account in another period.
Therefore, at any time, portions of General Account Contract Value may be
earning Current Interest at different rates based upon the period during which
such portions were allocated or Transferred to the General Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for this
Contract.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which the
Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation Period
is determined by dividing (1) by (2) and subtracting (3) from the result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions paid
by the Series' underlying mutual fund that is not included in the net
asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs under
the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as of
the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge which
is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and losses
from each Series are credited to or charged against the Series without regard to
the gains or losses in the Company or other Series.
-11- BP 602351
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to a Series under this Contract is
found by dividing; (1) the amount allocated to the Series; by (2) the
Accumulation Unit Value for the Series as of the end of the Valuation Period
during which the amount is applied under the Contract. The number of
Accumulation Units allocated to a Series under the Contract will not change as a
result of investment experience. Events that change the number of Accumulation
Units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from the
Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page 3.
This charge will be computed and deducted from each Series on each Valuation
Date. This charge is factored into the Accumulation Unit and Annuity Unit Values
on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on page
3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value the Annual Administrative Fee in the
amount and manner shown on page 3. No Annual Administrative Fee is deducted on
or after the Annuity Commencement Date if one of Annuity Options 1 through 4, 7
or 8 is chosen. The Annual Administrative Fee and other charges may be waived or
reduced uniformly on all Contracts issued under certain plans or arrangements
which are expected to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in shares of a mutual fund. The net asset value per share of
each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses are
not deducted from the assets of a Series, but are paid by the underlying funds.
The Owner indirectly bears a pro rata share of such fees and expenses. An
underlying fund's fees and expenses are not specified or fixed under the terms
of this Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while the
Owner is living. This provision is subject to any federal or state Withdrawal
restrictions.
Upon the Owner's request for a full Withdrawal, the Company will pay the
Withdrawal Value in a lump sum, and the Contract will terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Owner must apply: (a) while this Contract is in force; and (b) prior to
the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
V6023F (1-98) -12- BP 602361
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page 3,
"Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Copmany; (2) any Anual Adminsitrative Fee; and
(3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments. The
amount of the charge is based on the Contract Year in which the Withdrawal is
made. See the Withdrawal Charges shown on page 3. For the purpose of determining
the Withdrawal Charges, Purchase Payments are withdrawn before Earnings on a
first in first out basis. The Withdrawal Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to the
Series and the General Account in the same proportion as the Withdrawal is
allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the first
Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the Valuation
Date the Withdrawal request is Received by the Company. The Free Withdrawal
amount is applied only to the first Withdrawal in a Contract Year. A Free
Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried from
one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract in
substantially equal amounts made while the Owner is living prior to the Annuity
Commencement Date.
Systematic Withdrawals are available after the first Contract Year. Systematic
Withdrawals are available, however, during the first Contract Year if Contract
Value is $40,000 or more on the date the Systematic Withdrawal request is
Received by the Company.
-13- BP 602361
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Owner must make the request in
writing. Systematic Withdrawals are subject to any applicable Withdrawal Charge,
except as discussed under "Free Systematic Withdrawals," below. The Minimum
Systematic Withdrawal amount is shown on page 3. The Owner must choose the type
of payment and its frequency. The Systematic Withdrawal request must state the
allocations for deducting the Withdrawals from each Account. If no allocation is
specified, the Withdrawals will be deducted from the Accounts in the order
described on page 3, "Method for Deduction." The payment type may be: (1) a
percentage of Contract Value; (2) a specified dollar amount; (3) over a fixed
period of time; (4) all earnings in the Contract; or (5) based upon the life
expectancy of the Owner or the Owner and a Beneficiary. The payment frequency
may be: (1) monthly; (2) quarterly; (3) semiannually; or (4) annually.
Systematic Withdrawals may be stopped or changed by the Owner upon proper
written request Received by the Company at least 30 days in advance of the
requested date of termination or change. The Company reserves the right to stop,
modify or suspend Systematic Withdrawals at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The Amount
of Free Systematic Withdrawals available is a Contract Year is as follows: an
amount equal to the Free Withdrawal Percentage shown on page 3, times the
Contract Value on the Valuation Date the First Systematic Withdrawal Request in
such Contract Year is Received by the Company. Systematic Withdrawals are not
available in any Contract Year in which a Free Withdrawal has been made.
Systematic Withdrawals that exceed the Free Systematic Withdrawal amount will
incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on the
basis of Accumulation Unit Value determined as of the end of the Valuation
Period in which all the required information is Received by the Company. The
Company will effect a Systematic Withdrawal of Separate Account Contract Value
on the basis if Accumulation Unit Value determined as of the end of the
Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is not
reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from the
General Account for up to six months as required by most states. The Company
will notify you if there will be a delay.
V6023G (1-98) -14- BP 602371
<PAGE>
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DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Owner dies prior to the Annuity Commencement Date, a Death Benefit will
be paid to the Designated Beneficiary when due Proof of Death and instructions
regarding payment are Received by the Company. If an Owner is a Nonnatural
Person, then the Death Benefit will be paid in the event of the death of the
Annuitant or any Joint Owner that is a natural person prior to the Annuity
Commencement Date. Further, if an Owner is a Nonnatural Person, the amount of
the Death Benefit is based on the age of the Annuitant or any Joint Owner that
is a natural person on the Contract Date.
If the age of each Owner was 75 or younger on the Contract Date, the Death
Benefit will be the greatest of: (1) the sum of all Purchase Payments, less any
Premium Taxes due or paid by the Company and less the sum of all partial
Withdrawals; (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit described
below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an exact
multiple of six and occurs prior to the oldest Owner reaching age 76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of any Owner on the Contract Date was 76 or older, the Death Benefit
will be the greater of: (1) the sum of all Purchase Payments, less any premium
taxes due or paid by the Company and less the sum of all partial Withdrawals; or
(2) the Contract Value on the date due Proof of Death and instructions regarding
payment are Received by the Company, less any Premium Taxes due or paid by the
Company.
If a lump sum payment is requested, the payment will be made in accordance with
any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death;
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding of
death;
3. written statement by a medical doctor who attended the deceased Owner; or
4. any proof accepted by the Company.
DISTRIBUTION RULES
The entire Death Benefit with any interest shall be paid within 5 years after
the death of any Owner, except as provided below. In the event that the
Designated Beneficiary elects an Annuity Option, the length of time for the
payment period may be longer than 5 years if: (1) the Designated Beneficiary is
a natural person; (2) the Death Benefit is paid out under Annuity Options 1
through 8; (3) payments are made over a period that does not exceed the life or
life expectancy of the Designated Beneficiary; and (4) Annuity Payments begin
within one year of the death of the Owner. If the deceased Owner's spouse is the
sole Designated Beneficiary, the spouse shall become the sole Owner of the
Contract. He or she may elect to: (1) keep the Contract in force until the
sooner of the spouse's death or the Annuity Commencement Date; or (2) receive
the Death Benefit.
-15- BP 602371
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DISTRIBUTION RULES (Continued)
If the Owner is a Nonnatural Person, the distribution rules set forth above
apply in the event of the death of, or a change in, the Annuitant. This Contract
is deemed to incorporate any provision of Section 72(s) of the Internal Revenue
Code of 1986, as amended (the "Code"), or any successor provision. This Contract
is also deemed to incorporate any other provision of the Code deemed necessary
by the Company, in its sole judgment, to qualify this Contract as an annuity.
The application of the distribution rules will be made in accordance with Code
Section 72(s), or any successor provision, as interpreted by the Company in its
sole judgment.
The foregoing distribution rules do not apply to a Contract which is: (1)
provided under a plan described in Code section 401(a); (2) described in Code
section 403(b); (3) an individual retirement annuity or provided under an
individual retirement account or annuity; or (4) otherwise exempt from the Code
Section 72(s) distribution rules.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Owner may choose the Annuity Commencement Date at the time of application.
The Annuity commencement Date may not be prior to the third Contract
Anniversary. If no Annuity Commencement Date is chosen, the Company will use the
later of: (1) the oldest Annuitant's sixty-fifth birthday; or (2) the tenth
Contract Anniversary, but in no event later than the oldest Annuitant's 95th
birthday. The Annuity Commencement Date must be prior to the oldest Annuitant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to the
Annuitant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Owner may change the Annuity Commencement Date. A request for the change
must be made in writing. The written request must be Received by the Company at
least 30 days prior to the new Annuity Commencement Date as well as 30 days
prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on page
19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of Annuity Options 1 through 4, 7 or 8 is chosen, a pro rata
Administrative Fee. Unless otherwise directed by the Owner, Annuity Start Amount
derived from General Account Contract Value will be applied to purchase a Fixed
Annuity Option; that derived from Separate Account Contract Value will be
applied to purchase a Variable Annuity Option.
V6023H (1-98)U -16- BP 6023M1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under Annuity
Options 1 through 4 and 8; or (2) those made under annuity Options 5 through 7
that provide for payments over a period of at least 7 years. Withdrawal Charges
are applied to annuity payments under Annuity Options 5 through 7 that provide
for payments over a period of less than 7 years. See "Withdrawal Provisions" on
pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon the
1983 Table "A" mortality table. The amount of each Annuity Payment for Annuity
Options 1 through 4 and 8 will depend on the Annuitant's age on the Annuity
Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed minimum
amount for each monthly Annuity Payment per $1,000 of Annuity Start Amount for
Annuity Options 1 through 4, 7 and 8. Tables A and B are based upon the 1983
Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options 1
through 4 and 8 is determined by reference to the 1983 Table "A" mortality table
and an assumed interest rate of 3.5% per year and, for Option 7, by reference to
Table C below.
Tables A and B assume 1900 as the year of birth of the Annuitant. To use Tables
A and B for an Annuitant born after 1900, the actual age is reduced by 0.1
(one-tenth) of a year for each year the year of birth exceeds 1900. For an
Annuitant with a birth year prior to 1900, the actual age is increased in a like
manner. The actual age (in completed months) reduced or increased becomes the
"adjusted age of the Annuitant." The guaranteed payout rate is then found by
interpolating the Annuitant's adjusted age between the ages shown in the Tables.
On request the Company will furnish the amount of monthly Annuity Payment per
$1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age are not used to
calculate Annuity Payments. Annuity Payments for options 5 and 6 are computed
without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose any form of Annuity
Option that is allowed by the Company. The Owner may choose an Annuity Option by
written request. This request must be Received by the Company at least 30 days
prior to the Annuity Commencement Date. Several Annuity Options are listed on
page 19. No Annuity Option can be selected that requires the Company to make
periodic payments of less than $50. If no Annuity Option is chosen prior to the
Annuity Commencement Date, the Company will use Life with 10-Year Fixed Period
Option. Each Annuity Option allows for making Annuity Payments annually,
semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Owner may change the Annuity Option
chosen. The Owner must request the change in writing. This request must be
Received by the Company at least 30 days prior to the Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are the
guaranteed minimum for each Annuity Payment for Annuity Options 1 through 4, 7
and 8.
-17- BP 6023M1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first Annuity
Payment for Annuity Options 1 through 4, 7 and 8 are determined as discussed on
page 17. The amount of each Annuity Payment after the first for these options is
computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement Date.
The number of Annuity Units for the Series then remains constant, unless a
Transfer of Annuity Units is made. After the first Annuity Payment, the dollar
amount of each subsequent Annuity Payment is equal to the number of Annuity
Units times the Annuity Unit Value for the Series on the due date of the Annuity
Payment.
The Annuity Unit value for each Series was first set at $1.00. The Annuity Unit
Value for any subsequent Valuation Date is equal to a) times (b) times (c),
where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate is
reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation Period
is determined by dividing (1) by (2) and subtracting (3) from the result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions paid
by the Series' underlying mutual fund that is not included in the net
asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and losses
from each Series are credited or charged against the Series without regard to
the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
V6023I (1-98) -18- BP 602391
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1 LIFE OPTION: This option provides payments for the life of the
Annuitant. Table A shows some of the guaranteed rates for this
option.
OPTION 2 LIFE WITH FIXED PERIOD OPTION: This option provides payments for
the life of the Annuitant. A fixed period of 5, 10, 15 or 20
years may be chosen. Payments will be made to the end of this
period even if the Annuitant dies prior to the end of the period.
If the Annuitant dies before receiving all the payments during
the fixed period, the remaining payments will be made to the
Designated Beneficiary. Table A shows some of the guaranteed
rates for this option.
OPTION 3 LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides
payments for the life of the Annuitant with a period certain
determined by dividing the Annuity Start Amount by the amount of
the first payment. A fixed number of payments will be made even
if the Annuitant dies. If the Annuitant dies before receiving the
fixed number of payments, any remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed
rates for this option.
OPTION 4 JOINT AND LAST SURVIVOR OPTION: This option provides payments for
the life of the Annuitant and Joint Annuitant. Payments will be
made as long as either is living. Table B shows some of the
guaranteed rates for this option.
OPTION 5 FIXED PERIOD OPTIONS: This option provides payments for a fixed
number of years between 5 and 20. The amount of each payment is
determined by dividing Contract Value on the Valuation Date the
payment is made by the number of remaining payments. If the
Contract Value is held in the General Account, then the amount of
the payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate
is guaranteed to be no less than the Guaranteed Rate shown on
page 3. If the Contract Value is held in the Separate Account,
then the amount of the payments will vary as a result of the
investment performance of the Series chosen. If all the
Annuitants die before receiving the fixed number of payments, any
remaining payments will be made to the Designated Beneficiary.
OPTION 6 FIXED PAYMENT OPTION: This option provides a fixed payment
amount. This amount is paid until the amount applied, including
daily interest adjustments, is paid. If the Contract Value is
held in the General Account, then the number of payments will
vary as a result of the interest rate (as adjusted periodically)
credited on the General Account. This rate is guaranteed to be no
less than the Guaranteed Rate shown on page 3. If the Contract
Value is held in the Separate Account, then the number of
payments will vary as a result of the investment performance of
the Series chosen. If all the Annuitants die before receiving all
the payments, any remaining payments will be made to the
Designated Beneficiary.
OPTION 7 PERIOD CERTAIN OPTION: This option provides payments for a fixed
period of 5, 10, 15 or 20 years. Payments will be made until the
end of this period. If the Annuitant dies prior to the end of the
period, the remaining payments will be made to the Designated
Beneficiary. Table C shows some of the guaranteed rates for this
option.
OPTION 8 JOINT AND CONTINGENT SURVIVOR OPTION: This option provides
payments for the life of the primary Annuitant. Payments will be
made to the primary Annuitant as long as he or she is living.
Upon the death of the primary Annuitant, payments will be made to
the contingent Annuitant as long as he or she is living. If the
contingent Annuitant is not living upon the death of the primary
Annuitant, no further payments will be made. Table B shows some
of the guaranteed rates for this option.
-19- BP 602391
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two
Adjusted Age Option One Life with Fixed Period Option Three
of Annuitant Life Only 5 10 15 20 Unit Refund
- --------------------------------------------------------------------------------
MALE
55 4.70 4.68 4.62 4.53 4.39 4.42
56 4.80 4.78 4.72 4.61 4.45 4.50
57 4.91 4.89 4.82 4.69 4.51 4.58
58 5.03 5.00 4.92 4.78 4.58 4.67
59 5.15 5.12 5.03 4.87 4.64 4.76
60 5.28 5.25 5.14 4.96 4.71 4.86
61 5.42 5.39 5.26 5.06 4.78 4.96
62 5.57 5.53 5.39 5.16 4.84 5.07
63 5.74 5.69 5.52 5.26 4.90 5.19
64 5.91 5.85 5.66 5.36 4.96 5.30
65 6.10 6.03 5.81 5.46 5.02 5.43
66 6.29 6.21 5.96 5.56 5.08 5.56
67 6.50 6.41 6.11 5.66 5.13 5.70
68 6.73 6.62 6.28 5.76 5.18 5.85
69 6.97 6.84 6.44 5.86 5.23 6.00
70 7.23 7.07 6.61 5.96 5.27 6.16
71 7.51 7.32 6.78 6.05 5.31 6.33
72 7.80 7.58 6.96 6.14 5.34 6.51
73 8.12 7.85 7.14 6.23 5.37 6.70
74 8.45 8.14 7.32 6.31 5.40 6.90
75 8.82 8.44 7.49 6.38 5.42 7.11
FEMALE
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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.
V6023J (1-98) -20- BP 6023A1
<PAGE>
ANNUITY TABLES (continued)
- --------------------------------------------------------------------------------
TABLE B
SETTLEMENT OPTIONS FOUR AND EIGHT
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF MALE ANNUITANT
FEMALE ANNUITANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.64 3.73 3.77 3.81 3.86 3.90
60 3.80 3.95 4.01 4.03 4.18 4.25
62 3.86 4.04 4.11 4.20 4.33 4.42
65 3.95 4.17 4.26 4.38 4.56 4.70
70 4.07 4.37 4.50 4.69 4.99 5.25
75 4.16 4.53 4.70 4.97 5.44 5.88
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 C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000
OF AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000
OF AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 YEARS 7 YEARS 10 YEARS 15 YEARS 20 YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.91 13.38 9.83 7.10 5.75
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.
-21- BP 6023A1
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*Purchase Payments may be made until the earlier of the Annuity Commencement
Date or termination of the Contract.
*A Death Benefit may be paid prior to the Annuity Commencement Date according to
the Contract provisions.
*Annuity Payments begin on the Annuity Commencement Date using the method as
specified in this Contract.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 602304
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached Enrollment Form,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, THE OWNER MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided in this Contract.
*Individual allocations are maintained for Participants.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
GV6023 (1-98) BP 6023B1
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
CONTRACT SPECIFICATIONS................................................. 3
DEFINITIONS............................................................. 4-6
GENERAL PROVISIONS...................................................... 7-9
The Contract.......................................................... 7
Certificates.......................................................... 7
Plan Provisions....................................................... 7
Change of Contract.................................................... 7
Future Participants................................................... 7
Misstatement of Age or Sex............................................ 7
Evidence of Survival.................................................. 7
Assignment............................................................ 7
Transfers............................................................. 8
Claims of Creditors................................................... 9
Nonforfeiture Values.................................................. 9
Participation......................................................... 9
Statements............................................................ 9
BENEFICIARY PROVISIONS.................................................. 9
Primary and Secondary Beneficiaries................................... 9
Beneficiary Changes................................................... 9
PURCHASE PAYMENT PROVISIONS............................................. 10
Flexible Purchase Payments............................................ 10
Purchase Payment Limitations.......................................... 10
Purchase Payment Allocation........................................... 10
Place of Payment...................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS................................... 10-12
Contract Value........................................................ 10
General Account Contract Value........................................ 10
General Account Interest Crediting.................................... 11
Separate Account Contract Value....................................... 11
Accumulation Unit Value............................................... 11
Net Investment Factor................................................. 11
Determining Accumulation Units........................................ 12
Mortality and Expense Risk Charge..................................... 12
Premium Tax Expense................................................... 12
Administrative Charge................................................. 12
Mutual Fund Expenses.................................................. 12
WITHDRAWAL PROVISIONS................................................... 12-14
Withdrawals........................................................... 12, 13
Withdrawal Value...................................................... 13
Withdrawal Charges.................................................... 13
Free Withdrawals...................................................... 13
Systematic Withdrawals................................................ 13, 14
Free Systematic Withdrawals........................................... 14
Date of Request....................................................... 14
Payment of Withdrawal Benefits........................................ 14
DEATH BENEFIT PROVISIONS................................................ 15
Death Benefit......................................................... 15
Proof of Death........................................................ 15
ANNUITY PAYMENT PROVISIONS.............................................. 16-19
Annuity Commencement Date............................................. 16
Change of Annuity Commencement Date................................... 16
Annuity Start Amount.................................................. 16
Withdrawal Charges.................................................... 16
Annuity Tables........................................................ 16, 17
Annuity Payments...................................................... 17
Change of Annuity Option.............................................. 17
Fixed Annuity Payments................................................ 17
Variable Annuity Payments............................................. 17
Annuity Units......................................................... 17, 18
Net Investment Factor................................................. 18
Alternate Annuity Option Rates........................................ 18
Annuity Options....................................................... 19
ANNUITY TABLES.......................................................... 20
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 6023B1
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER: ABC Employer
CONTRACT NUMBER: Specimen
CONTRACT DATE: 6-30-1996
ASSIGNMENT: This Policy may not be assigned.
See Assignment Provision of your Policy.
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT ................ $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .... $25
MINIMUM SYSTEMATIC WITHDRAWAL ........... $25
MAXIMUM PARTICIPANT AGE ................. 90
MORTALITY AND EXPENSE RISK CHARGE ....... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............... $30*
WITHDRAWAL CHARGES
Contract Year of Withdrawal ........... 1 2 3 4 5 6 7 8 9 +
Withdrawal Charge ..................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE .............. 10%
MINIMUM GUARANTEED RATE ................. 3%
SEPARATE ACCOUNT ........................ Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
The General Account is the last Account charged.
*The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when
a Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative
Fee will be waived during a Contract Year if: (1) Contract Value on that
Contract Anniversary (or in the event of a full Withdrawal, upon the date of
such Withdrawal) is $25,000 or more; and (2) the Contract has been in force
eight Contract Years or more.
GV6023A (1-98) -3- SBL155
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Commencement Date. It is
also used to compute the Variable Annuity Payments for Annuity Options 5 and
6.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Commencement
Date. Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Participant. Please see
"Annuity Commencement Date" on page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account.
Such transfers are made automatically on a periodic basis by the Company at
the written request of the Participant. The Company reserves the right to
discontinue, modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison
Street, Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Participant's Certificate begins. The
Contract Date is shown on page 3 of each certificate.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account
at a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The
Company will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Participant, the Designated Beneficiary will be the
first person on the following list who is alive on the date of death:
1. Primary Beneficiary;
2. Secondary Beneficiary; and
3. the Participant's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Participant prior to the Annuity Commencement Date. Please see "Beneficiary
Provisions" on page 9 and "Death Benefit Provisions" on page 15.
GV6023B (1-98) -4- BP 6023C1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the
Minimum Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Employer or other entity that makes application for the Contract.
PLAN
The employer-sponsored retirement plan, annuity purchase arrangement, or
deferred compensation program for which the Contract is used.
PARTICPANT
A person for whom or with respect to whom Purchase Payments are made under
the Contract.
PARTICIPANT ACCOUNT
An individual account which is established for a Participant to record the
Contract Value for the Participant.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company for allocation to the
Participant Account.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT
The Separate Account, shown on page 3 is a separate account established and
maintained by the Company under Kansas law. The Separate Account is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as a Unit Investment Trust. It was established by the
Company to support variable annuity contracts. The Company owns the assets of
the Separate Account and maintains them apart from the assets of its general
account and its other separate accounts. The assets held in the Separate
Account equal to the reserves and other Contract liabilities with respect to
the Separate Account may not be charged with liabilities arising from any
other business the Company may conduct.
-5- BP 6023C1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Series shown on page 3. Income and realized and unrealized gains and losses
from assets in each Series are credited to, or charged against, the Series
without regard to income, gains or losses in the other Series. The Company
has the right to transfer to its general account any assets of the Separate
Account that are in excess of the reserves and other Contract liabilities
with respect to the Separate Account. The value of the assets in the Separate
Account on each Valuation Date is determined as of the end of each Valuation
Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to
the regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account
or a Series, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Series in any material respect
without complying with the filing and other procedures of the insurance
regulators of the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all shares
of the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
GV6023C (1-98) -6- BP 6023D1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the Enrollment Form, and any Amendments, Endorsements or Riders to
the Contract. All statements made in the Enrollment Form will, in the absence
of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Participant to void this Contract unless it
is in the written Enrollment Form. Any change in the Contract can be made
only with the written consent of the President, a Vice President, or the
Secretary of the Company.
The Purchase Payment(s) and the Enrollment Form must be acceptable to the
Company under its rules and practices. If they are not, the Company's
liability shall be limited to a return of the Purchase Payment(s).
CERTIFICATES
The Company will issue certificates to Participants. Each certificate will
set forth the benefits to which the Participant is entitled under the
Contract. Certificates are for information only and are not part of the
Contract.
PLAN PROVISIONS
The Contract is subject to the provisions of the Plan. To the extent provided
by the Plan, any rights that may be exercised by a Participant under the
Contract may instead by exercised by the Owner or a Plan representative.
CHANGE OF CONTRACT
The Company reserves the right to make any change to the provisions of the
Contract to comply with or give the Participant the benefit of any federal or
state statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered. In addition, upon
at least 30 days written notice to the Owner, the Company may make other
changes to this Contract that will apply only to individuals who become
Participants after the effective date of such change. All such changes will
be subject to any applicable regulatory requirements.
FUTURE PARTICIPANTS
The Company may in its discretion curtail or prohibit new Participants under
the Contract upon written notice to the Owner.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Participant has been misstated, payments shall be
adjusted, when allowed by law, to the amount which would have been provided
for the correct age or sex. Proof of the age of the Participant may be
required at any time, in a form suitable to the Company. If payments have
already commenced and the misstatement has caused an underpayment, the full
amount due will be paid with the next scheduled payment. If the misstatement
has caused an overpayment, the amount due will be deducted from one or more
future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
ASSIGNMENT
This Contract cannot be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation. The benefits,
values, and rights under the Contract are not subject to any creditor claims
to the fullest extent permitted by law. The Contract and its rights cannot be
transferred to anyone other than the Company, except as provided under the
Plan or under a domestic relations order properly issued by a court of
competent jurisdiction and that complies with ERISA, if applicable. To the
extent permitted by the Internal Revenue Code and applicable law, the Company
will make a Full or Partial Withdrawal payable to a third party upon the
Participant's request.
-7- BP 6023D1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS
The Participant may Transfer Contract Value among the General Account and
Series subject to the following.
The Participant may make only 14 transfers per Contract Year. Transfers are
not allowed within 30 days of the Annuity Commencement Date. Automatic
Transfers are not included in the 14 transfers allowed per Contract Year.
After the Annuity Commencement Date, for Annuity Options 1 through 4, 7 and
8, the Participant may Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject
to Transfer; (2) waive or limit the number of Transfers allowed each Contract
Year; and (3) suspend Transfers. Transfers must be at least $500.00 or, if
less, the remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer
request is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the
prior Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of
the Valuation Period in which the Transfer is effected. The Company will
effect a Transfer from the General Account on the basis of General Account
Contract Value as of the end of the Valuation Period in which the Transfer is
effected.
The Company reserves the right to delay Transfers from the General Account
for up to 6 months as required by most states. The Company will notify you if
there will be a delay.
GV6023D (1-98) -8- BP 6023E1
<PAGE>
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GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Participant to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company
does not expect dividends to become payable on this Contract. At the end of
each Contract Year the Company will determine the Contract's dividend, if
any. The Participant may choose to have it: (1) added to Contract Value; or
(2) paid in cash. If no choice is made, any dividend will be added to
Contract Value.
STATEMENTS
At least once each Contract Year the Participant shall be sent a statement
including the current Contract Value and any other information required by
law. The Participant may send a written request for a statement at other
intervals. The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named by the Participant. The Participant may
change any Beneficiary as described in "Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Participant, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Participant directs otherwise,
when there are two or more Primary Beneficiaries, they will receive equal
shares.
BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Participant may name a
new Primary Beneficiary or a new Secondary Beneficiary. Any new choice of
Primary Beneficiary or Secondary Beneficiary will revoke any prior choice.
Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date of written request is signed,
whether or not the Participant is living at the time the change is recorded.
A new choice of Primary Beneficiary or Secondary Beneficiary will not apply
to any payment made or action taken by the Company prior to the time it was
recorded. The Company may require the Certificate be returned so these
changes may be made.
-9- BP 6023E1
<PAGE>
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PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Participant Account becomes in force on the Contract Date. The
Participant is not required to continue Purchase Payments in the amount or
frequency originally planned. The Participant may: (1) increase or decrease
the amount of Purchase Payments, subject to any Contract limits; or (2)
change the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request. If no Purchase Payment
is received during the 180-day period beginning on the Contract Date, the
Participant Account will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is
shown on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series.
The allocations may be whole dollar amount or whole percentage. However, no
less than $25 per Purchase Payment may be allocated to any Account. The
Participant may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of the following amounts
allocated to a Participant Account: (1) the Separate Account Contract Value;
and (2) the General Account Contract Value. At any time after the first
Contract Year and before the Annuity Commencement Date, the Company reserves
the right to pay to the Participant the Contract Value as a lump sum if it is
below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the
first Purchase Payment allocated under the Participant Account to the General
Account:
PLUS:
1. any other Purchase Payments allocated under the Participant Account to
the General Account;
2. any Transfers from the Separate Account Contract Value to the General
Account; and
3. any interest credited to the General Account Contract Value.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the
General Account Contract Value;
2. any Transfers from the General Account Contract Value to the Separate
Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract
Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under
Annuity Options 5 and 6.
GV6023E (1-98) -10- BP 6023F1
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an
annual rate at least equal to the Minimum Guaranteed Rate shown on page 3.
Also, the Company may in its sole judgment credit Current Interest at a rate
in excess of the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated
or Transferred to the General Account during one period at a different rate
than amounts allocated or Transferred to the General Account in another
period. Therefore, at any time, portions of General Account Contract Value
may be earning Current Interest at different rates based upon the period
during which such portions were allocated or Transferred to the General
Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for the
Participant Account.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs
under the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
of the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited to or charged against the Series without
regard to the gains or losses in the Company or other Series.
-11- BP 6023F1
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to or deducted from a Series under
the Participant Account is found by dividing: (1) the amount allocated to or
deducted from the Series; by (2) the Accumulation Unit Value for the Series
as of the end of the Valuation Period during which the amount is allocated to
or deducted from Contract Value. The number of Accumulation Units allocated
to a Series under the Contract will not change as a result of investment
experience. Events that change the number of Accumulation units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from
the Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Series on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Value on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on
page 3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value for each Participant Account the
Annual Administrative Fee in the amount and manner shown on page 3. No Annual
Administrative Fee is deducted on or after the Annuity Commencement Date if
one of Annuity Options 1 through 4, 7 or 8 is chosen. The Annual
Administrative Fee and other charges may be waived or reduced uniformly on
all Contracts issued under certain plans or arrangements which are expected
to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in share of a mutual fund. The net asset value per share
of each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses
are not deducted from the assets of a Series, but are paid by the underlying
funds. The Participant indirectly bears a pro rata share of such fees and
expenses. An underlying fund's fees and expenses are not specified or fixed
under the terms of the Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while
the Participant is living. This provision is subject to any federal or state
Withdrawal restrictions.
Upon the Participant's request for a full Withdrawal, the Company will pay
the Withdrawal Value in a lump sum, and the Participant Account will
terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Participant must apply: (a) while this Contract is in force; and (b)
prior to the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
GV6023F (1-98) -12- BP 6023G1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page
3, "Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Company; (2) any Annual Administrative Fee;
and (3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments.
The amount of the charge is based on the Contract Year in which the
Withdrawal is made. See the Withdrawal Charges shown on page 3. For the
purpose of determining the Withdrawal Charges, Purchase Payments are
withdrawn before Earnings on a first in first out basis. The Withdrawal
Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to
the Series and the General Account in the same proportion as the Withdrawal
is allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the
first Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the
Valuation Date the Withdrawal request is Received by the Company. The Free
Withdrawal amount is applied only to the first Withdrawal in a Contract Year.
A Free Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried
from one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract
in substantially equal amounts made while the Participant is living prior to
the Annuity Commencement Date.
Systematic Withdrawals are available after the first Contract Year.
Systematic Withdrawals are available, however, during the first Contract Year
if Contract Value is $40,000 or more on the date the Systematic Withdrawal
request is Received by the Company.
-13- BP 6023G1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Owner must make the request in
writing. Systematic Withdrawals are subject to any applicable Withdrawal
Charge, except as discussed under "Free Systematic Withdrawals," below. The
Minimum Systematic Withdrawal amount is shown on page 3. The Participant must
choose the type of payment and its frequency. The Systematic Withdrawal
request must state the allocations for deducting the Withdrawals from each
Account. If no allocation is specified, the Withdrawals will be deducted from
the Accounts in the order described on page 3, "Method for Deductions." The
payment type may be: (1) a percentage of Contract Value; (2) a specified
dollar amount; (3) over a fixed period of time; (4) all earnings in the
Contract; or (5) based upon the life expectancy of the Owner or the Owner and
Beneficiary. The payment frequency may be: (1) monthly; (2) quarterly; (3)
semiannually; or (4) annually. Systematic Withdrawals may be stopped or
changed by the Owner upon proper written request Received by the Company at
least 30 days in advance of the requested date of termination or change. The
Company reserves the right to stop, modify or suspend Systematic Withdrawals
at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The
amount of Free Systematic Withdrawals available in a Contract Year is as
follows: an amount equal to the Free Withdrawal Percentage shown on page 3,
times the Contract Value on the Valuation Date the First Systematic
Withdrawal Request in such Contract Year is Received by the Company.
Systematic Withdrawals are not available in any Contract Year in which a Free
Withdrawal has been made. Systematic Withdrawals that exceed the Free
Systematic Withdrawal amount will incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined as of the end of the
Valuation Period in which all the required information is Received by the
Company. The Company will effect a Systematic Withdrawal of Separate Account
Contract Value on the basis of Accumulation Unit Value determined as of the
end of the Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from
the General Account for up to six months as required by most states. The
Company will notify you if there will be a delay.
GV6023G (1-98) -14- BP 6023H1
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Participant dies prior to the Annuity Commencement Date, a Death
Benefit will be paid to the Designated Beneficiary when due Proof of Death
and instructions regarding payment are Received by the Company.
If the age of each Participant was 75 or younger on the Contract Date, the
Death Benefit will be the greatest of: (1) the sum of all Purchase Payments,
less any Premium Taxes due or paid by the Company and less the sum of all
partial Withdrawals; (2) the Contract Value on the date due Proof of Death
and instructions regarding payment are Received by the Company, less any
Premium Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit
described below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an
exact multiple of six and occurs prior to the oldest Owner reaching age
76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of the Participant on the Contract Date was 76 or older, the Death
Benefit will be the greater of: (1) the sum of all Purchase Payments, less
any premium taxes due or paid by the Company and less the sum of all partial
Withdrawals; or (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased
Participant; or
4. any proof accepted by the Company.
-15- BP 6023H1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Participant may choose the Annuity Commencement Date at the time of
application. The Annuity Commencement Date may not be prior to the third
Contract Anniversary. If no Annuity Commencement Date is chosen, the Company
will use the later of: (1) the Participant's sixty-fifth birthday; or (2) the
tenth Contract Anniversary, but in no event later than the Participant's 95th
birthday. The Annuity Commencement Date must be prior to the Participant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to
the Participant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Participant may change the Annuity Commencement Date. A request for the
change must be made in writing. The written request must be Received by the
Company at least 30 days prior to the new Annuity Commencement Date as well
as 30 days prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on
page 19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of the Annuity Options 1 through 4, 7 or 8 is chosen, a pro
rata Administrative Fee. Unless otherwise directed by the Participant,
Annuity Start Amount derived from General Account Contract Value will be
applied to purchase a Fixed Annuity Option; that derived from Separate
Account Contract Value will be applied to purchase a Variable Annuity Option.
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under
Annuity Options 1 through 4 and 8; or (2) those made under annuity Options 5
through 7 that provide for payments over a period of at least 7 years.
Withdrawal Charges are applied to annuity payments under Annuity Options 5
through 7 that provide for payments over a period of less than 7 years. See
"Withdrawal Provisions" on pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon
the 1983 Table "A" mortality table. The amount of each Annuity Payment for
Annuity Options 1 through 4, 7 and 8 will depend on the Participant's sex and
age on the Annuity Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed
minimum amount for each monthly Annuity Payment per $1,000 of Annuity Start
Amount for Annuity Options 1 through 4, 7 and 8. Tables A and B are based
upon the 1983 Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options
1 through 4 and 8 is determined by reference to the 1983 Table "A" mortality
table and an assumed interest rate of 3.5% per year and, for Option 7, by
reference to Table C below.
GV6023H (1-98) -16- BP 6023I1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY TABLES (Continued)
Tables A and B assume 1900 as the year of birth of the Participant. To use
Tables A and B for a Participant born after 1900, the actual age is reduced
by 0.1 (one-tenth) of a year for each year the year of birth exceeds 1900.
For a Participant with a birth year prior to 1900, the actual age is
increased in a like manner. The actual age (in completed months) reduced or
increased becomes the "adjusted age of the Participant." The guaranteed
payout rate is then found by interpolating the Participant's adjusted age
between the ages shown in the Tables. On request the Company will furnish the
amount of monthly Annuity Payment per $1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age and sex are not
used to calculate Annuity Payments. Annuity Payments for options 5 and 6 are
computed without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3 of each certificate. The Participant
may choose any form of Annuity Option that is allowed by the Company. The
Participant may choose an Annuity Option by written request. This request
must be Received by the Company at least 30 days prior to the Annuity
Commencement Date. Several Annuity Options are listed on page 19. No Annuity
Option can be selected that requires the Company to make periodic payments of
less than $50. If no Annuity Option is chosen prior to the Annuity
Commencement Date, the Company will use Life with 10-Year Fixed Period
Option. Each Annuity Option allows for making Annuity Payments annually,
semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Participant may change the
Annuity Option chosen. The Participant must request the change in writing.
This request must be Received by the Company at least 30 days prior to the
Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are
the guaranteed minimum for each Annuity Payment for Annuity Options 1 through
4, 7 and 8.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first
Annuity Payment for Annuity Options 1 through 4, 7 and 8 are determined as
discussed above. The amount of each Annuity Payment after the first for these
options is computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement
Date. The number of Annuity Units for the Series then remains constant,
unless a Transfer of Annuity Units is made. After the first Annuity Payment,
the dollar amount of each subsequent Annuity Payment is equal to the number
of Annuity Units times the Annuity Unit Value for the Series on the due date
of the Annuity Payment.
-17- BP 6023I1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Continued)
The Annuity Unit Value for each Series was first set at $1.00. The Annuity
Unit Value for any subsequent Valuation Date is equal to (a) times (b) times
(c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited or charged against the Series without
regard to the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
GV6023I (1-98) -18- BP 6023J1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE OPTION: This option provides payments for the life of the Participant.
Table A shows some of the guaranteed rates for this option.
OPTION 2
LIFE WITH FIXED PERIOD OPTION: This option provides payments for the life of
the Participant. A fixed period of 5, 10, 15 or 20 years may be chosen.
Payments will be made to the end of this period even if the Participant dies
prior to the end of the period. If the Participant dies before receiving all
the payments during the fixed period, the remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed rates for
this option.
OPTION 3
LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides payments
for the life of the Participant, with a period certain determined by dividing
the Annuity Start Amount by the amount of the first payment. A fixed number
of payments will be made even if the Participant dies. If the Participant
dies before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary. Table A shows some of the
guaranteed rates for this option.
OPTION 4
JOINT AND LAST SURVIVOR OPTION: This option provides payments for the life of
the Participant and a second person. Payments will be made as long as either
is living. Table B shows some of the guaranteed rates for this option.
OPTION 5
FIXED PERIOD OPTIONS: This option provides payments for a fixed number of
years between 5 and 20. The amount of each payment is determined by dividing
Contract Value on the Valuation Date the payment is made by the number of
remaining payments. If the Contract Value is held in the General Account,
then the amount of the payments will vary as a result of the interest rate
(as adjusted periodically) credit on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the amount of the
payments will vary as a result of the investment performance of the Series
chosen. If Participant dies before receiving the fixed number of payments,
any remaining payments will be made to the Designated Beneficiary.
OPTION 6
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied, including daily interest
adjustments, is paid. If the Contract Value is held in the General Account,
then the number of payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the number of payments
will vary as a result of the investment performance of the Series chosen. If
the Participant dies before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 7
PERIOD CERTAIN OPTION: This option provides payments for a fixed period of 5,
10, 15 or 20 years. Payments will be made until the end of this period. If
Participant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary. Table C shows some of the guaranteed
rates for this option.
OPTION 8
JOINT AND CONTINGENT SURVIVOR OPTION: This option provides payments for the
life of the Participant. Payments will be made to the Participant as long as
he or she is living. Upon the death of the Participant, payments will be made
to the contingent Annuitant named by the Participant as long as he or she is
living. If the contingent Annuitant is not living upon the death of the
Participant, no further payments will be made. Table B shows some of the
guaranteed rates for this option.
-19- BP 6023J1
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two Option
Adjusted Life with Fixed Period Three
Age of Option One 5 10 15 20 Unit
Participant Life Only Years Years Years Years Refund
- --------------------------------------------------------------------------------
UNISEX
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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 OPTIONS FOUR
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF SECONDARY PARTICIPANT
PRIMARY PARTICIPANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.56 3.66 3.71 3.76 3.83 3.88
60 3.66 3.84 3.90 3.99 4.12 4.21
62 3.71 3.90 3.98 4.09 4.25 4.37
65 3.76 3.99 4.09 4.23 4.45 4.62
70 3.83 4.12 4.25 4.45 4.79 5.10
75 3.88 4.21 4.37 4.62 5.10 5.60
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined from Table A or B by multiplying the monthly
payments by 11.812854, 5.9572233, and 2.9914201 respectively.
- --------------------------------------------------------------------------------
TABLE C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 7 10 15 20
YEARS YEARS YEARS YEARS YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.11 13.38 9.83 7.10 5.75
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.
GV6023J (1-98) -20- BP 6023K
<PAGE>
A BRIEF DESCRIPTION OF THE CONTRACT
This is a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided in this Contract.
*Individual allocations are maintained for Participants.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 6023B4
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached Enrollment Form,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, THE OWNER MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided in this Contract.
*Individual allocations are maintained for Participants.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
GV6023 (1-98)U BP 6023P1
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
CONTRACT SPECIFICATIONS................................................. 3
DEFINITIONS............................................................. 4-6
GENERAL PROVISIONS...................................................... 7-9
The Contract.......................................................... 7
Certificates.......................................................... 7
Plan Provisions....................................................... 7
Change of Contract.................................................... 7
Future Participants................................................... 7
Misstatement of Age................................................... 7
Evidence of Survival.................................................. 7
Assignment............................................................ 7
Transfers............................................................. 8
Claims of Creditors................................................... 9
Nonforfeiture Values.................................................. 9
Participation......................................................... 9
Statements............................................................ 9
BENEFICIARY PROVISIONS.................................................. 9
Primary and Secondary Beneficiaries................................... 9
Beneficiary Changes................................................... 9
PURCHASE PAYMENT PROVISIONS............................................. 10
Flexible Purchase Payments............................................ 10
Purchase Payment Limitations.......................................... 10
Purchase Payment Allocation........................................... 10
Place of Payment...................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS................................... 10-12
Contract Value........................................................ 10
General Account Contract Value........................................ 10
General Account Interest Crediting.................................... 11
Separate Account Contract Value....................................... 11
Accumulation Unit Value............................................... 11
Net Investment Factor................................................. 11
Determining Accumulation Units........................................ 12
Mortality and Expense Risk Charge..................................... 12
Premium Tax Expense................................................... 12
Administrative Charge................................................. 12
Mutual Fund Expenses.................................................. 12
WITHDRAWAL PROVISIONS................................................... 12-14
Withdrawals........................................................... 12, 13
Withdrawal Value...................................................... 13
Withdrawal Charges.................................................... 13
Free Withdrawals...................................................... 13
Systematic Withdrawals................................................ 13, 14
Free Systematic Withdrawals........................................... 14
Date of Request....................................................... 14
Payment of Withdrawal Benefits........................................ 14
DEATH BENEFIT PROVISIONS................................................ 15
Death Benefit......................................................... 15
Proof of Death........................................................ 15
ANNUITY PAYMENT PROVISIONS.............................................. 16-19
Annuity Commencement Date............................................. 16
Change of Annuity Commencement Date................................... 16
Annuity Start Amount.................................................. 16
Withdrawal Charges.................................................... 16
Annuity Tables........................................................ 16, 17
Annuity Payments...................................................... 17
Change of Annuity Option.............................................. 17
Fixed Annuity Payments................................................ 17
Variable Annuity Payments............................................. 17
Annuity Units......................................................... 17, 18
Net Investment Factor................................................. 18
Alternate Annuity Option Rates........................................ 18
Annuity Options....................................................... 19
ANNUITY TABLES.......................................................... 20
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 6023P1
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER: ABC Employer
CONTRACT NUMBER: Specimen
CONTRACT DATE: 6-30-1996
ASSIGNMENT: This Policy may not be assigned.
See Assignment Provision of your Policy.
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT ................ $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .... $25
MINIMUM SYSTEMATIC WITHDRAWAL ........... $25
MAXIMUM PARTICIPANT AGE ................. 90
MORTALITY AND EXPENSE RISK CHARGE ....... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............... $30*
WITHDRAWAL CHARGES
Contract Year of Withdrawal ........... 1 2 3 4 5 6 7 8 9 +
Withdrawal Charge ..................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE .............. 10%
MINIMUM GUARANTEED RATE ................. 3%
SEPARATE ACCOUNT ........................ Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
The General Account is the last Account charged.
*The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when
a Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative
Fee will be waived during a Contract Year if: (1) Contract Value on that
Contract Anniversary (or in the event of a full Withdrawal, upon the date of
such Withdrawal) is $25,000 or more; and (2) the Contract has been in force
eight Contract Years or more.
GV6023A (1-98) -3- SBL155
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Commencement Date. It is
also used to compute the Variable Annuity Payments for Annuity Options 5 and
6.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Commencement
Date. Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Participant. Please see
"Annuity Commencement Date" on page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account.
Such transfers are made automatically on a periodic basis by the Company at
the written request of the Participant. The Company reserves the right to
discontinue, modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison
Street, Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Participant's Certificate begins. The
Contract Date is shown on page 3 of each certificate.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account
at a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The
Company will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Participant, the Designated Beneficiary will be the
first person on the following list who is alive on the date of death:
1. Primary Beneficiary;
2. Secondary Beneficiary; and
3. the Participant's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Participant prior to the Annuity Commencement Date. Please see "Beneficiary
Provisions" on page 9 and "Death Benefit Provisions" on page 15.
GV6023B (1-98) -4- BP 6023C1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the
Minimum Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Employer or other entity that makes application for the Contract.
PLAN
The employer-sponsored retirement plan, annuity purchase arrangement, or
deferred compensation program for which the Contract is used.
PARTICPANT
A person for whom or with respect to whom Purchase Payments are made under
the Contract.
PARTICIPANT ACCOUNT
An individual account which is established for a Participant to record the
Contract Value for the Participant.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company for allocation to the
Participant Account.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT
The Separate Account, shown on page 3 is a separate account established and
maintained by the Company under Kansas law. The Separate Account is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as a Unit Investment Trust. It was established by the
Company to support variable annuity contracts. The Company owns the assets of
the Separate Account and maintains them apart from the assets of its general
account and its other separate accounts. The assets held in the Separate
Account equal to the reserves and other Contract liabilities with respect to
the Separate Account may not be charged with liabilities arising from any
other business the Company may conduct.
-5- BP 6023C1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Series shown on page 3. Income and realized and unrealized gains and losses
from assets in each Series are credited to, or charged against, the Series
without regard to income, gains or losses in the other Series. The Company
has the right to transfer to its general account any assets of the Separate
Account that are in excess of the reserves and other Contract liabilities
with respect to the Separate Account. The value of the assets in the Separate
Account on each Valuation Date is determined as of the end of each Valuation
Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to
the regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account
or a Series, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Series in any material respect
without complying with the filing and other procedures of the insurance
regulators of the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all shares
of the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
GV6023C (1-98)U -6- BP 6023R1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the Enrollment Form, and any Amendments, Endorsements or Riders to
the Contract. All statements made in the Enrollment Form will, in the absence
of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Participant to void this Contract unless it
is in the written Enrollment Form. Any change in the Contract can be made
only with the written consent of the President, a Vice President, or the
Secretary of the Company.
The Purchase Payment(s) and the Enrollment Form must be acceptable to the
Company under its rules and practices. If they are not, the Company's
liability shall be limited to a return of the Purchase Payment(s).
CERTIFICATES
The Company will issue certificates to Participants. Each certificate will
set forth the benefits to which the Participant is entitled under the
Contract. Certificates are for information only and are not part of the
Contract.
PLAN PROVISIONS
The Contract is subject to the provisions of the Plan. To the extent provided
by the Plan, any rights that may be exercised by a Participant under the
Contract may instead by exercised by the Owner or a Plan representative.
CHANGE OF CONTRACT
The Company reserves the right to make any change to the provisions of the
Contract to comply with or give the Participant the benefit of any federal or
state statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered. In addition, upon
at least 30 days written notice to the Owner, the Company may make other
changes to this Contract that will apply only to individuals who become
Participants after the effective date of such change. All such changes will
be subject to any applicable regulatory requirements.
FUTURE PARTICIPANTS
The Company may in its discretion curtail or prohibit new Participants under
the Contract upon written notice to the Owner.
MISSTATEMENT OF AGE
If the age of the Participant has been misstated, payments shall be adjusted,
when allowed by law, to the amount which would have been provided for the
correct age. Proof of the age of the Participant may be required at any time,
in a form suitable to the Company. If payments have already commenced and the
misstatement has caused an underpayment, the full amount due will be paid
with the next scheduled payment. If the misstatement has caused an
overpayment, the amount due will be deducted from one or more future
payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
ASSIGNMENT
This Contract cannot be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation. The benefits,
values, and rights under the Contract are not subject to any creditor claims
to the fullest extent permitted by law. The Contract and its rights cannot be
transferred to anyone other than the Company, except as provided under the
Plan or under a domestic relations order properly issued by a court of
competent jurisdiction and that complies with ERISA, if applicable. To the
extent permitted by the Internal Revenue Code and applicable law, the Company
will make a Full or Partial Withdrawal payable to a third party upon the
Participant's request.
-7- BP 6023R1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS
The Participant may Transfer Contract Value among the General Account and
Series subject to the following.
The Participant may make only 14 transfers per Contract Year. Transfers are
not allowed within 30 days of the Annuity Commencement Date. Automatic
Transfers are not included in the 14 transfers allowed per Contract Year.
After the Annuity Commencement Date, for Annuity Options 1 through 4, 7 and
8, the Participant may Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject
to Transfer; (2) waive or limit the number of Transfers allowed each Contract
Year; and (3) suspend Transfers. Transfers must be at least $500.00 or, if
less, the remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer
request is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the
prior Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of
the Valuation Period in which the Transfer is effected. The Company will
effect a Transfer from the General Account on the basis of General Account
Contract Value as of the end of the Valuation Period in which the Transfer is
effected.
The Company reserves the right to delay Transfers from the General Account
for up to 6 months as required by most states. The Company will notify you if
there will be a delay.
GV6023D (1-98) -8- BP 6023E1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Participant to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company
does not expect dividends to become payable on this Contract. At the end of
each Contract Year the Company will determine the Contract's dividend, if
any. The Participant may choose to have it: (1) added to Contract Value; or
(2) paid in cash. If no choice is made, any dividend will be added to
Contract Value.
STATEMENTS
At least once each Contract Year the Participant shall be sent a statement
including the current Contract Value and any other information required by
law. The Participant may send a written request for a statement at other
intervals. The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named by the Participant. The Participant may
change any Beneficiary as described in "Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Participant, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Participant directs otherwise,
when there are two or more Primary Beneficiaries, they will receive equal
shares.
BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Participant may name a
new Primary Beneficiary or a new Secondary Beneficiary. Any new choice of
Primary Beneficiary or Secondary Beneficiary will revoke any prior choice.
Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date of written request is signed,
whether or not the Participant is living at the time the change is recorded.
A new choice of Primary Beneficiary or Secondary Beneficiary will not apply
to any payment made or action taken by the Company prior to the time it was
recorded. The Company may require the Certificate be returned so these
changes may be made.
-9- BP 6023E1
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Participant Account becomes in force on the Contract Date. The
Participant is not required to continue Purchase Payments in the amount or
frequency originally planned. The Participant may: (1) increase or decrease
the amount of Purchase Payments, subject to any Contract limits; or (2)
change the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request. If no Purchase Payment
is received during the 180-day period beginning on the Contract Date, the
Participant Account will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is
shown on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series.
The allocations may be whole dollar amount or whole percentage. However, no
less than $25 per Purchase Payment may be allocated to any Account. The
Participant may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
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CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of the following amounts
allocated to a Participant Account: (1) the Separate Account Contract Value;
and (2) the General Account Contract Value. At any time after the first
Contract Year and before the Annuity Commencement Date, the Company reserves
the right to pay to the Participant the Contract Value as a lump sum if it is
below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the
first Purchase Payment allocated under the Participant Account to the General
Account:
PLUS:
1. any other Purchase Payments allocated under the Participant Account to
the General Account;
2. any Transfers from the Separate Account Contract Value to the General
Account; and
3. any interest credited to the General Account Contract Value.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the
General Account Contract Value;
2. any Transfers from the General Account Contract Value to the Separate
Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract
Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under
Annuity Options 5 and 6.
GV6023E (1-98) -10- BP 6023F1
<PAGE>
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CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an
annual rate at least equal to the Minimum Guaranteed Rate shown on page 3.
Also, the Company may in its sole judgment credit Current Interest at a rate
in excess of the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated
or Transferred to the General Account during one period at a different rate
than amounts allocated or Transferred to the General Account in another
period. Therefore, at any time, portions of General Account Contract Value
may be earning Current Interest at different rates based upon the period
during which such portions were allocated or Transferred to the General
Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for the
Participant Account.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs
under the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
of the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited to or charged against the Series without
regard to the gains or losses in the Company or other Series.
-11- BP 6023F1
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to or deducted from a Series under
the Participant Account is found by dividing: (1) the amount allocated to or
deducted from the Series; by (2) the Accumulation Unit Value for the Series
as of the end of the Valuation Period during which the amount is allocated to
or deducted from Contract Value. The number of Accumulation Units allocated
to a Series under the Contract will not change as a result of investment
experience. Events that change the number of Accumulation units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from
the Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Series on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Value on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on
page 3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value for each Participant Account the
Annual Administrative Fee in the amount and manner shown on page 3. No Annual
Administrative Fee is deducted on or after the Annuity Commencement Date if
one of Annuity Options 1 through 4, 7 or 8 is chosen. The Annual
Administrative Fee and other charges may be waived or reduced uniformly on
all Contracts issued under certain plans or arrangements which are expected
to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in share of a mutual fund. The net asset value per share
of each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses
are not deducted from the assets of a Series, but are paid by the underlying
funds. The Participant indirectly bears a pro rata share of such fees and
expenses. An underlying fund's fees and expenses are not specified or fixed
under the terms of the Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while
the Participant is living. This provision is subject to any federal or state
Withdrawal restrictions.
Upon the Participant's request for a full Withdrawal, the Company will pay
the Withdrawal Value in a lump sum, and the Participant Account will
terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Participant must apply: (a) while this Contract is in force; and (b)
prior to the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
GV6023F (1-98) -12- BP 6023G1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page
3, "Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Company; (2) any Annual Administrative Fee;
and (3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments.
The amount of the charge is based on the Contract Year in which the
Withdrawal is made. See the Withdrawal Charges shown on page 3. For the
purpose of determining the Withdrawal Charges, Purchase Payments are
withdrawn before Earnings on a first in first out basis. The Withdrawal
Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to
the Series and the General Account in the same proportion as the Withdrawal
is allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the
first Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the
Valuation Date the Withdrawal request is Received by the Company. The Free
Withdrawal amount is applied only to the first Withdrawal in a Contract Year.
A Free Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried
from one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract
in substantially equal amounts made while the Participant is living prior to
the Annuity Commencement Date.
Systematic Withdrawals are available after the first Contract Year.
Systematic Withdrawals are available, however, during the first Contract Year
if Contract Value is $40,000 or more on the date the Systematic Withdrawal
request is Received by the Company.
-13- BP 6023G1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Owner must make the request in
writing. Systematic Withdrawals are subject to any applicable Withdrawal
Charge, except as discussed under "Free Systematic Withdrawals," below. The
Minimum Systematic Withdrawal amount is shown on page 3. The Participant must
choose the type of payment and its frequency. The Systematic Withdrawal
request must state the allocations for deducting the Withdrawals from each
Account. If no allocation is specified, the Withdrawals will be deducted from
the Accounts in the order described on page 3, "Method for Deductions." The
payment type may be: (1) a percentage of Contract Value; (2) a specified
dollar amount; (3) over a fixed period of time; (4) all earnings in the
Contract; or (5) based upon the life expectancy of the Owner or the Owner and
Beneficiary. The payment frequency may be: (1) monthly; (2) quarterly; (3)
semiannually; or (4) annually. Systematic Withdrawals may be stopped or
changed by the Owner upon proper written request Received by the Company at
least 30 days in advance of the requested date of termination or change. The
Company reserves the right to stop, modify or suspend Systematic Withdrawals
at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The
amount of Free Systematic Withdrawals available in a Contract Year is as
follows: an amount equal to the Free Withdrawal Percentage shown on page 3,
times the Contract Value on the Valuation Date the First Systematic
Withdrawal Request in such Contract Year is Received by the Company.
Systematic Withdrawals are not available in any Contract Year in which a Free
Withdrawal has been made. Systematic Withdrawals that exceed the Free
Systematic Withdrawal amount will incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined as of the end of the
Valuation Period in which all the required information is Received by the
Company. The Company will effect a Systematic Withdrawal of Separate Account
Contract Value on the basis of Accumulation Unit Value determined as of the
end of the Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from
the General Account for up to six months as required by most states. The
Company will notify you if there will be a delay.
GV6023G (1-98) -14- BP 6023H1
<PAGE>
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DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Participant dies prior to the Annuity Commencement Date, a Death
Benefit will be paid to the Designated Beneficiary when due Proof of Death
and instructions regarding payment are Received by the Company.
If the age of each Participant was 75 or younger on the Contract Date, the
Death Benefit will be the greatest of: (1) the sum of all Purchase Payments,
less any Premium Taxes due or paid by the Company and less the sum of all
partial Withdrawals; (2) the Contract Value on the date due Proof of Death
and instructions regarding payment are Received by the Company, less any
Premium Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit
described below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an
exact multiple of six and occurs prior to the oldest Owner reaching age
76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of the Participant on the Contract Date was 76 or older, the Death
Benefit will be the greater of: (1) the sum of all Purchase Payments, less
any premium taxes due or paid by the Company and less the sum of all partial
Withdrawals; or (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased
Participant; or
4. any proof accepted by the Company.
-15- BP 6023H1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Participant may choose the Annuity Commencement Date at the time of
application. The Annuity Commencement Date may not be prior to the third
Contract Anniversary. If no Annuity Commencement Date is chosen, the Company
will use the later of: (1) the Participant's sixty-fifth birthday; or (2) the
tenth Contract Anniversary, but in no event later than the Participant's 95th
birthday. The Annuity Commencement Date must be prior to the Participant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to
the Participant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Participant may change the Annuity Commencement Date. A request for the
change must be made in writing. The written request must be Received by the
Company at least 30 days prior to the new Annuity Commencement Date as well
as 30 days prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on
page 19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of the Annuity Options 1 through 4, 7 or 8 is chosen, a pro
rata Administrative Fee. Unless otherwise directed by the Participant,
Annuity Start Amount derived from General Account Contract Value will be
applied to purchase a Fixed Annuity Option; that derived from Separate
Account Contract Value will be applied to purchase a Variable Annuity Option.
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under
Annuity Options 1 through 4 and 8; or (2) those made under annuity Options 5
through 7 that provide for payments over a period of at least 7 years.
Withdrawal Charges are applied to annuity payments under Annuity Options 5
through 7 that provide for payments over a period of less than 7 years. See
"Withdrawal Provisions" on pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon
the 1983 Table "A" mortality table. The amount of each Annuity Payment for
Annuity Options 1 through 4, 7 and 8 will depend on the Participant's age on
the Annuity Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed
minimum amount for each monthly Annuity Payment per $1,000 of Annuity Start
Amount for Annuity Options 1 through 4, 7 and 8. Tables A and B are based
upon the 1983 Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options
1 through 4 and 8 is determined by reference to the 1983 Table "A" mortality
table and an assumed interest rate of 3.5% per year and, for Option 7, by
reference to Table C below.
GV6023H (1-98)U -16- BP 6023Q1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY TABLES (Continued)
Tables A and B assume 1900 as the year of birth of the Participant. To use
Tables A and B for a Participant born after 1900, the actual age is reduced
by 0.1 (one-tenth) of a year for each year the year of birth exceeds 1900.
For a Participant with a birth year prior to 1900, the actual age is
increased in a like manner. The actual age (in completed months) reduced or
increased becomes the "adjusted age of the Participant." The guaranteed
payout rate is then found by interpolating the Participant's adjusted age
between the ages shown in the Tables. On request the Company will furnish the
amount of monthly Annuity Payment per $1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age are not used to
calculate Annuity Payments. Annuity Payments for options 5 and 6 are computed
without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Participant may choose any form of
Annuity Option that is allowed by the Company. The Participant may choose an
Annuity Option by written request. This request must be Received by the
Company at least 30 days prior to the Annuity Commencement Date. Several
Annuity Options are listed on page 19. No Annuity Option can be selected that
requires the Company to make periodic payments of less than $50. If no
Annuity Option is chosen prior to the Annuity Commencement Date, the Company
will use Life with 10-Year Fixed Period Option. Each Annuity Option allows
for making Annuity Payments annually, semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Participant may change the
Annuity Option chosen. The Participant must request the change in writing.
This request must be Received by the Company at least 30 days prior to the
Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are
the guaranteed minimum for each Annuity Payment for Annuity Options 1 through
4, 7 and 8.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first
Annuity Payment for Annuity Options 1 through 4, 7 and 8 are determined as
discussed above. The amount of each Annuity Payment after the first for these
options is computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement
Date. The number of Annuity Units for the Series then remains constant,
unless a Transfer of Annuity Units is made. After the first Annuity Payment,
the dollar amount of each subsequent Annuity Payment is equal to the number
of Annuity Units times the Annuity Unit Value for the Series on the due date
of the Annuity Payment.
-17- BP 6023Q1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Continued)
The Annuity Unit Value for each Series was first set at $1.00. The Annuity
Unit Value for any subsequent Valuation Date is equal to (a) times (b) times
(c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited or charged against the Series without
regard to the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
GV6023I (1-98) -18- BP 6023J1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE OPTION: This option provides payments for the life of the Participant.
Table A shows some of the guaranteed rates for this option.
OPTION 2
LIFE WITH FIXED PERIOD OPTION: This option provides payments for the life of
the Participant. A fixed period of 5, 10, 15 or 20 years may be chosen.
Payments will be made to the end of this period even if the Participant dies
prior to the end of the period. If the Participant dies before receiving all
the payments during the fixed period, the remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed rates for
this option.
OPTION 3
LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides payments
for the life of the Participant, with a period certain determined by dividing
the Annuity Start Amount by the amount of the first payment. A fixed number
of payments will be made even if the Participant dies. If the Participant
dies before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary. Table A shows some of the
guaranteed rates for this option.
OPTION 4
JOINT AND LAST SURVIVOR OPTION: This option provides payments for the life of
the Participant and a second person. Payments will be made as long as either
is living. Table B shows some of the guaranteed rates for this option.
OPTION 5
FIXED PERIOD OPTIONS: This option provides payments for a fixed number of
years between 5 and 20. The amount of each payment is determined by dividing
Contract Value on the Valuation Date the payment is made by the number of
remaining payments. If the Contract Value is held in the General Account,
then the amount of the payments will vary as a result of the interest rate
(as adjusted periodically) credit on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the amount of the
payments will vary as a result of the investment performance of the Series
chosen. If Participant dies before receiving the fixed number of payments,
any remaining payments will be made to the Designated Beneficiary.
OPTION 6
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied, including daily interest
adjustments, is paid. If the Contract Value is held in the General Account,
then the number of payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the number of payments
will vary as a result of the investment performance of the Series chosen. If
the Participant dies before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 7
PERIOD CERTAIN OPTION: This option provides payments for a fixed period of 5,
10, 15 or 20 years. Payments will be made until the end of this period. If
Participant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary. Table C shows some of the guaranteed
rates for this option.
OPTION 8
JOINT AND CONTINGENT SURVIVOR OPTION: This option provides payments for the
life of the Participant. Payments will be made to the Participant as long as
he or she is living. Upon the death of the Participant, payments will be made
to the contingent Annuitant named by the Participant as long as he or she is
living. If the contingent Annuitant is not living upon the death of the
Participant, no further payments will be made. Table B shows some of the
guaranteed rates for this option.
-19- BP 6023J1
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two Option
Adjusted Life with Fixed Period Three
Age of Option One 5 10 15 20 Unit
Participant Life Only Years Years Years Years Refund
- --------------------------------------------------------------------------------
UNISEX
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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 OPTIONS FOUR
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF SECONDARY PARTICIPANT
PRIMARY PARTICIPANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.56 3.66 3.71 3.76 3.83 3.88
60 3.66 3.84 3.90 3.99 4.12 4.21
62 3.71 3.90 3.98 4.09 4.25 4.37
65 3.76 3.99 4.09 4.23 4.45 4.62
70 3.83 4.12 4.25 4.45 4.79 5.10
75 3.88 4.21 4.37 4.62 5.10 5.60
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined from Table A or B by multiplying the monthly
payments by 11.812854, 5.9572233, and 2.9914201 respectively.
- --------------------------------------------------------------------------------
TABLE C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 7 10 15 20
YEARS YEARS YEARS YEARS YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.11 13.38 9.83 7.10 5.75
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.
GV6023J (1-98) -20- BP 6023K
<PAGE>
A BRIEF DESCRIPTION OF THE CONTRACT
This is a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits provided as provided in this Contract.
*Individual allocations are maintained for Participants.
*This Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 6023P4
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CERTIFICATE
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached Enrollment Form,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CERTIFICATE CAREFULLY. It describes the terms of a legal
Contract between the Owner and the Company. The Certificate's table of contents
is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE PARTICIPANT IS NOT SATISFIED WITH THIS CERTIFICATE, THE
PARTICIPANT MAY RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF
RECEIPT. IT MAY BE RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF
RETURNED, THIS CERTIFICATE SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE
COMPANY WILL REFUND ANY PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL
ACCOUNT AND WILL REFUND SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE
RETURNED CERTIFICATE IS RECEIVED BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a Certificate under a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided under the Contract.
*Individual allocations are maintained for Participants.
*The Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
GVC6023 (1-98) BP 6023S1
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
CONTRACT SPECIFICATIONS................................................. 3
DEFINITIONS............................................................. 4-6
GENERAL PROVISIONS...................................................... 7-9
The Contract.......................................................... 7
Certificates.......................................................... 7
Plan Provisions....................................................... 7
Change of Contract.................................................... 7
Future Participants................................................... 7
Misstatement of Age or Sex............................................ 7
Evidence of Survival.................................................. 7
Assignment............................................................ 7
Transfers............................................................. 8
Claims of Creditors................................................... 9
Nonforfeiture Values.................................................. 9
Participation......................................................... 9
Statements............................................................ 9
BENEFICIARY PROVISIONS.................................................. 9
Primary and Secondary Beneficiaries................................... 9
Beneficiary Changes................................................... 9
PURCHASE PAYMENT PROVISIONS............................................. 10
Flexible Purchase Payments............................................ 10
Purchase Payment Limitations.......................................... 10
Purchase Payment Allocation........................................... 10
Place of Payment...................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS................................... 10-12
Contract Value........................................................ 10
General Account Contract Value........................................ 10
General Account Interest Crediting.................................... 11
Separate Account Contract Value....................................... 11
Accumulation Unit Value............................................... 11
Net Investment Factor................................................. 11
Determining Accumulation Units........................................ 12
Mortality and Expense Risk Charge..................................... 12
Premium Tax Expense................................................... 12
Administrative Charge................................................. 12
Mutual Fund Expenses.................................................. 12
WITHDRAWAL PROVISIONS................................................... 12-14
Withdrawals........................................................... 12, 13
Withdrawal Value...................................................... 13
Withdrawal Charges.................................................... 13
Free Withdrawals...................................................... 13
Systematic Withdrawals................................................ 13, 14
Free Systematic Withdrawals........................................... 14
Date of Request....................................................... 14
Payment of Withdrawal Benefits........................................ 14
DEATH BENEFIT PROVISIONS................................................ 15
Death Benefit......................................................... 15
Proof of Death........................................................ 15
ANNUITY PAYMENT PROVISIONS.............................................. 16-19
Annuity Commencement Date............................................. 16
Change of Annuity Commencement Date................................... 16
Annuity Start Amount.................................................. 16
Withdrawal Charges.................................................... 16
Annuity Tables........................................................ 16, 17
Annuity Payments...................................................... 17
Change of Annuity Option.............................................. 17
Fixed Annuity Payments................................................ 17
Variable Annuity Payments............................................. 17
Annuity Units......................................................... 17, 18
Net Investment Factor................................................. 18
Alternate Annuity Option Rates........................................ 18
Annuity Options....................................................... 19
ANNUITY TABLES.......................................................... 20
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 6023S1
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
PARTICIPANT NAME: John A. Doe CONTRACT NUMBER: Specimen
PARTICIPANT DATE OF BIRTH: 10-30-1956 CERTIFICATE NUMBER: Specimen
PARTICIPANT'S GENDER Male CONTRACT DATE: 6-30-1996
OWNER: ABC Employer ANNUITY COMMENCEMENT DATE: 7-1-2028*
PRIMARY BENEFICIARY NAME: PLAN: Qualified
Linda L. Doe
ASSIGNMENT: This Certificate may not
be assigned. See Assignment Provision
of this Certificate.
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT ................ $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .... $25
MINIMUM SYSTEMATIC WITHDRAWAL ........... $25
MAXIMUM PARTICIPANT AGE ................. 90
MORTALITY AND EXPENSE RISK CHARGE ....... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............... $30*
WITHDRAWAL CHARGES
Contract Year of Withdrawal ........... 1 2 3 4 5 6 7 8 9 +
Withdrawal Charge ..................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE .............. 10%
MINIMUM GUARANTEED RATE ................. 3%
SEPARATE ACCOUNT ........................ Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
The General Account is the last Account charged.
*The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when
a Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative
Fee will be waived during a Contract Year if: (1) Contract Value on that
Contract Anniversary (or in the event of a full Withdrawal, upon the date of
such Withdrawal) is $25,000 or more; and (2) the Contract has been in force
eight Contract Years or more.
GVC6023A (1-98) -3- SBL158
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Commencement Date. It is
also used to compute the Variable Annuity Payments for Annuity Options 5 and
6.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Commencement
Date. Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Participant. Please see
"Annuity Commencement Date" on page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account.
Such transfers are made automatically on a periodic basis by the Company at
the written request of the Participant. The Company reserves the right to
discontinue, modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison
Street, Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Participant's Certificate begins. The
Contract Date is shown on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account
at a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The
Company will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Participant, the Designated Beneficiary will be the
first person on the following list who is alive on the date of death:
1. Primary Beneficiary;
2. Secondary Beneficiary; and
3. the Participant's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Participant prior to the Annuity Commencement Date. Please see "Beneficiary
Provisions" on page 9 and "Death Benefit Provisions" on page 15.
GVC6023B (1-98) -4- BP 6023T1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the
Minimum Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Employer or other entity that makes application for the Contract.
PLAN
The employer-sponsored retirement plan, annuity purchase arrangement, or
deferred compensation program for which the Contract is used.
PARTICPANT
A person for whom or with respect to whom Purchase Payments are made under
the Contract.
PARTICIPANT ACCOUNT
An individual account which is established for a Participant to record the
Contract Value for the Participant.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company for allocation to the
Participant Account.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT The Separate Account, shown on page 3 is a separate account
established and maintained by the Company under Kansas law. The Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a Unit Investment Trust. It was established
by the Company to support variable annuity contracts. The Company owns the
assets of the Separate Account and maintains them apart from the assets of
its general account and its other separate accounts. The assets held in the
Separate Account equal to the reserves and other Contract liabilities with
respect to the Separate Account may not be charged with liabilities arising
from any other business the Company may conduct.
-5- BP 6023T1
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (Continued)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Series shown on page 3. Income and realized and unrealized gains and losses
from assets in each Series are credited to, or charged against, the Series
without regard to income, gains or losses in the other Series. The Company
has the right to transfer to its general account any assets of the Separate
Account that are in excess of the reserves and other Contract liabilities
with respect to the Separate Account. The value of the assets in the Separate
Account on each Valuation Date is determined as of the end of each Valuation
Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to
the regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account
or a Series, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Series in any material respect
without complying with the filing and other procedures of the insurance
regulators of the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all shares
of the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
GVC6023C (1-98) -6- BP 6023U1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the Enrollment Form, and any Amendments, Endorsements or Riders to
the Contract. All statements made in the Enrollment Form will, in the absence
of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Participant to void this Contract unless it
is in the written Enrollment Form. Any change in the Contract can be made
only with the written consent of the President, a Vice President, or the
Secretary of the Company.
The Purchase Payment(s) and the Enrollment Form must be acceptable to the
Company under its rules and practices. If they are not, the Company's
liability shall be limited to a return of the Purchase Payment(s).
CERTIFICATES
The Company will issue certificates to Participants. Each certificate will
set forth the benefits to which the Participant is entitled under the
Contract. Certificates are for information only and are not part of the
Contract.
PLAN PROVISIONS
The Contract is subject to the provisions of the Plan. To the extent provided
by the Plan, any rights that may be exercised by a Participant under the
Contract may instead by exercised by the Owner or a Plan representative.
CHANGE OF CONTRACT
The Company reserves the right to make any change to the provisions of the
Contract to comply with or give the Participant the benefit of any federal or
state statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered. In addition, upon
at least 30 days written notice to the Owner, the Company may make other
changes to this Contract that will apply only to individuals who become
Participants after the effective date of such change. All such changes will
be subject to any applicable regulatory requirements.
FUTURE PARTICIPANTS
The Company may in its discretion curtail or prohibit new Participants under
the Contract upon written notice to the Owner.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Participant has been misstated, payments shall be
adjusted, when allowed by law, to the amount which would have been provided
for the correct age or sex. Proof of the age of the Participant may be
required at any time, in a form suitable to the Company. If payments have
already commenced and the misstatement has caused an underpayment, the full
amount due will be paid with the next scheduled payment. If the misstatement
has caused an overpayment, the amount due will be deducted from one or more
future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
ASSIGNMENT
This Contract cannot be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation. The benefits,
values, and rights under the Contract are not subject to any creditor claims
to the fullest extent permitted by law. The Contract and its rights cannot be
transferred to anyone other than the Company, except as provided under the
Plan or under a domestic relations order properly issued by a court of
competent jurisdiction and that complies with ERISA, if applicable. To the
extent permitted by the Internal Revenue Code and applicable law, the Company
will make a Full or Partial Withdrawal payable to a third party upon the
Participant's request.
-7- BP 6023U1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
TRANSFERS
The Participant may Transfer Contract Value among the General Account and
Series subject to the following.
The Participant may make only 14 transfers per Contract Year. Transfers are
not allowed within 30 days of the Annuity Commencement Date. Automatic
Transfers are not included in the 14 transfers allowed per Contract Year.
After the Annuity Commencement Date, for Annuity Options 1 through 4, 7 and
8, the Participant may Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject
to Transfer; (2) waive or limit the number of Transfers allowed each Contract
Year; and (3) suspend Transfers. Transfers must be at least $500.00 or, if
less, the remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer
request is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the
prior Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of
the Valuation Period in which the Transfer is effected. The Company will
effect a Transfer from the General Account on the basis of General Account
Contract Value as of the end of the Valuation Period in which the Transfer is
effected.
The Company reserves the right to delay Transfers from the General Account
for up to 6 months as required by most states. The Company will notify you if
there will be a delay.
GVC6023D (1-98) -8- BP 6023V1
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Participant to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company
does not expect dividends to become payable on this Contract. At the end of
each Contract Year the Company will determine the Contract's dividend, if
any. The Participant may choose to have it: (1) added to Contract Value; or
(2) paid in cash. If no choice is made, any dividend will be added to
Contract Value.
STATEMENTS
At least once each Contract Year the Participant shall be sent a statement
including the current Contract Value and any other information required by
law. The Participant may send a written request for a statement at other
intervals. The Company may charge a reasonable fee for such statements.
- --------------------------------------------------------------------------------
BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named by the Participant. The Participant may
change any Beneficiary as described in "Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Participant, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Participant directs otherwise,
when there are two or more Primary Beneficiaries, they will receive equal
shares.
BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Participant may name a
new Primary Beneficiary or a new Secondary Beneficiary. Any new choice of
Primary Beneficiary or Secondary Beneficiary will revoke any prior choice.
Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date of written request is signed,
whether or not the Participant is living at the time the change is recorded.
A new choice of Primary Beneficiary or Secondary Beneficiary will not apply
to any payment made or action taken by the Company prior to the time it was
recorded. The Company may require the Certificate be returned so these
changes may be made.
-9- BP 6023V1
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE PAYMENTS
The Participant Account becomes in force on the Contract Date. The
Participant is not required to continue Purchase Payments in the amount or
frequency originally planned. The Participant may: (1) increase or decrease
the amount of Purchase Payments, subject to any Contract limits; or (2)
change the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request. If no Purchase Payment
is received during the 180-day period beginning on the Contract Date, the
Participant Account will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is
shown on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series.
The allocations may be whole dollar amount or whole percentage. However, no
less than $25 per Purchase Payment may be allocated to any Account. The
Participant may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of the following amounts
allocated to a Participant Account: (1) the Separate Account Contract Value;
and (2) the General Account Contract Value. At any time after the first
Contract Year and before the Annuity Commencement Date, the Company reserves
the right to pay to the Participant the Contract Value as a lump sum if it is
below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the
first Purchase Payment allocated under the Participant Account to the General
Account:
PLUS:
1. any other Purchase Payments allocated under the Participant Account to
the General Account;
2. any Transfers from the Separate Account Contract Value to the General
Account; and
3. any interest credited to the General Account Contract Value.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the
General Account Contract Value;
2. any Transfers from the General Account Contract Value to the Separate
Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract
Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under
Annuity Options 5 and 6.
GVC6023E (1-98) -10- BP 6023W1
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an
annual rate at least equal to the Minimum Guaranteed Rate shown on page 3.
Also, the Company may in its sole judgment credit Current Interest at a rate
in excess of the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated
or Transferred to the General Account during one period at a different rate
than amounts allocated or Transferred to the General Account in another
period. Therefore, at any time, portions of General Account Contract Value
may be earning Current Interest at different rates based upon the period
during which such portions were allocated or Transferred to the General
Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for the
Participant Account.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs
under the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
of the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited to or charged against the Series without
regard to the gains or losses in the Company or other Series.
-11- BP 6023W1
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
- --------------------------------------------------------------------------------
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to or deducted from a Series under
the Participant Account is found by dividing: (1) the amount allocated to or
deducted from the Series; by (2) the Accumulation Unit Value for the Series
as of the end of the Valuation Period during which the amount is allocated to
or deducted from Contract Value. The number of Accumulation Units allocated
to a Series under the Contract will not change as a result of investment
experience. Events that change the number of Accumulation units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from
the Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Series on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Value on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on
page 3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value for each Participant Account the
Annual Administrative Fee in the amount and manner shown on page 3. No Annual
Administrative Fee is deducted on or after the Annuity Commencement Date if
one of Annuity Options 1 through 4, 7 or 8 is chosen. The Annual
Administrative Fee and other charges may be waived or reduced uniformly on
all Contracts issued under certain plans or arrangements which are expected
to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in share of a mutual fund. The net asset value per share
of each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses
are not deducted from the assets of a Series, but are paid by the underlying
funds. The Participant indirectly bears a pro rata share of such fees and
expenses. An underlying fund's fees and expenses are not specified or fixed
under the terms of the Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while
the Participant is living. This provision is subject to any federal or state
Withdrawal restrictions.
Upon the Participant's request for a full Withdrawal, the Company will pay
the Withdrawal Value in a lump sum, and the Participant Account will
terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Participant must apply: (a) while this Contract is in force; and (b)
prior to the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
GVC6023F (1-98) -12- BP 6023X1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page
3, "Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Company; (2) any Annual Administrative Fee;
and (3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments.
The amount of the charge is based on the Contract Year in which the
Withdrawal is made. See the Withdrawal Charges shown on page 3. For the
purpose of determining the Withdrawal Charges, Purchase Payments are
withdrawn before Earnings on a first in first out basis. The Withdrawal
Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to
the Series and the General Account in the same proportion as the Withdrawal
is allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the
first Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the
Valuation Date the Withdrawal request is Received by the Company. The Free
Withdrawal amount is applied only to the first Withdrawal in a Contract Year.
A Free Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried
from one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract
in substantially equal amounts made while the Participant is living prior to
the Annuity Commencement Date.
Systematic Withdrawals are available after the first Contract Year.
Systematic Withdrawals are available, however, during the first Contract Year
if Contract Value is $40,000 or more on the date the Systematic Withdrawal
request is Received by the Company.
-13- BP 6023X1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Participant must make the
request in writing. Systematic Withdrawals are subject to any applicable
Withdrawal Charge, except as discussed under "Free Systematic Withdrawals,"
below. The Minimum Systematic Withdrawal amount is shown on page 3. The
Participant must choose the type of payment and its frequency. The Systematic
Withdrawal request must state the allocations for deducting the Withdrawals
from each Account. If no allocation is specified, the Withdrawals will be
deducted from the Accounts in the order described on page 3, "Method for
Deductions." The payment type may be: (1) a percentage of Contract Value; (2)
a specified dollar amount; (3) over a fixed period of time; (4) all earnings
in the Contract; or (5) based upon the life expectancy of the Participant or
the Participant and a Beneficiary. The payment frequency may be: (1) monthly;
(2) quarterly; (3) semiannually; or (4) annually. Systematic Withdrawals may
be stopped or changed by the Participant upon proper written request Received
by the Company at least 30 days in advance of the requested date of
termination or change. The Company reserves the right to stop, modify or
suspend Systematic Withdrawals at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The
amount of Free Systematic Withdrawals available in a Contract Year is as
follows: an amount equal to the Free Withdrawal Percentage shown on page 3,
times the Contract Value on the Valuation Date the First Systematic
Withdrawal Request in such Contract Year is Received by the Company.
Systematic Withdrawals are not available in any Contract Year in which a Free
Withdrawal has been made. Systematic Withdrawals that exceed the Free
Systematic Withdrawal amount will incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined as of the end of the
Valuation Period in which all the required information is Received by the
Company. The Company will effect a Systematic Withdrawal of Separate Account
Contract Value on the basis of Accumulation Unit Value determined as of the
end of the Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from
the General Account for up to six months as required by most states. The
Company will notify you if there will be a delay.
GVC6023G (1-98) -14- BP 6023Y1
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Participant dies prior to the Annuity Commencement Date, a Death
Benefit will be paid to the Designated Beneficiary when due Proof of Death
and instructions regarding payment are Received by the Company.
If the age of each Participant was 75 or younger on the Contract Date, the
Death Benefit will be the greatest of: (1) the sum of all Purchase Payments,
less any Premium Taxes due or paid by the Company and less the sum of all
partial Withdrawals; (2) the Contract Value on the date due Proof of Death
and instructions regarding payment are Received by the Company, less any
Premium Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit
described below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an
exact multiple of six and occurs prior to the Participant reaching age
76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of the Participant on the Contract Date was 76 or older, the Death
Benefit will be the greater of: (1) the sum of all Purchase Payments, less
any premium taxes due or paid by the Company and less the sum of all partial
Withdrawals; or (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased
Participant; or
4. any proof accepted by the Company.
-15- BP 6023Y1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Participant may choose the Annuity Commencement Date at the time of
application. The Annuity Commencement Date may not be prior to the third
Contract Anniversary. If no Annuity Commencement Date is chosen, the Company
will use the later of: (1) the Participant's sixty-fifth birthday; or (2) the
tenth Contract Anniversary, but in no event later than the Participant's 95th
birthday. The Annuity Commencement Date must be prior to the Participant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to
the Participant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Participant may change the Annuity Commencement Date. A request for the
change must be made in writing. The written request must be Received by the
Company at least 30 days prior to the new Annuity Commencement Date as well
as 30 days prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on
page 19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of the Annuity Options 1 through 4, 7 or 8 is chosen, a pro
rata Administrative Fee. Unless otherwise directed by the Participant,
Annuity Start Amount derived from General Account Contract Value will be
applied to purchase a Fixed Annuity Option; that derived from Separate
Account Contract Value will be applied to purchase a Variable Annuity Option.
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under
Annuity Options 1 through 4 and 8; or (2) those made under annuity Options 5
through 7 that provide for payments over a period of at least 7 years.
Withdrawal Charges are applied to annuity payments under Annuity Options 5
through 7 that provide for payments over a period of less than 7 years. See
"Withdrawal Provisions" on pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon
the 1983 Table "A" mortality table. The amount of each Annuity Payment for
Annuity Options 1 through 4, 7 and 8 will depend on the Participant's sex and
age on the Annuity Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed
minimum amount for each monthly Annuity Payment per $1,000 of Annuity Start
Amount for Annuity Options 1 through 4, 7 and 8. Tables A and B are based
upon the 1983 Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options
1 through 4 and 8 is determined by reference to the 1983 Table "A" mortality
table and an assumed interest rate of 3.5% per year and, for Option 7, by
reference to Table C below.
GVC6023H (1-98) -16- BP 6023Z1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY TABLES (Continued)
Tables A and B assume 1900 as the year of birth of the Participant. To use
Tables A and B for a Participant born after 1900, the actual age is reduced
by 0.1 (one-tenth) of a year for each year the year of birth exceeds 1900.
For a Participant with a birth year prior to 1900, the actual age is
increased in a like manner. The actual age (in completed months) reduced or
increased becomes the "adjusted age of the Participant." The guaranteed
payout rate is then found by interpolating the Participant's adjusted age
between the ages shown in the Tables. On request the Company will furnish the
amount of monthly Annuity Payment per $1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age and sex are not
used to calculate Annuity Payments. Annuity Payments for options 5 and 6 are
computed without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Participant may choose any form of
Annuity Option that is allowed by the Company. The Participant may choose an
Annuity Option by written request. This request must be Received by the
Company at least 30 days prior to the Annuity Commencement Date. Several
Annuity Options are listed on page 19. No Annuity Option can be selected that
requires the Company to make periodic payments of less than $50. If no
Annuity Option is chosen prior to the Annuity Commencement Date, the Company
will use Life with 10-Year Fixed Period Option. Each Annuity Option allows
for making Annuity Payments annually, semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Participant may change the
Annuity Option chosen. The Participant must request the change in writing.
This request must be Received by the Company at least 30 days prior to the
Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are
the guaranteed minimum for each Annuity Payment for Annuity Options 1 through
4, 7 and 8.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first
Annuity Payment for Annuity Options 1 through 4, 7 and 8 are determined as
discussed above. The amount of each Annuity Payment after the first for these
options is computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement
Date. The number of Annuity Units for the Series then remains constant,
unless a Transfer of Annuity Units is made. After the first Annuity Payment,
the dollar amount of each subsequent Annuity Payment is equal to the number
of Annuity Units times the Annuity Unit Value for the Series on the due date
of the Annuity Payment.
-17- BP 6023Z1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Continued)
The Annuity Unit Value for each Series was first set at $1.00. The Annuity
Unit Value for any subsequent Valuation Date is equal to (a) times (b) times
(c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited or charged against the Series without
regard to the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
GVC6023I (1-98) -18- BP 623AA1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE OPTION: This option provides payments for the life of the Participant.
Table A shows some of the guaranteed rates for this option.
OPTION 2
LIFE WITH FIXED PERIOD OPTION: This option provides payments for the life of
the Participant. A fixed period of 5, 10, 15 or 20 years may be chosen.
Payments will be made to the end of this period even if the Participant dies
prior to the end of the period. If the Participant dies before receiving all
the payments during the fixed period, the remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed rates for
this option.
OPTION 3
LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides payments
for the life of the Participant, with a period certain determined by dividing
the Annuity Start Amount by the amount of the first payment. A fixed number
of payments will be made even if the Participant dies. If the Participant
dies before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary. Table A shows some of the
guaranteed rates for this option.
OPTION 4
JOINT AND LAST SURVIVOR OPTION: This option provides payments for the life of
the Participant and a second person. Payments will be made as long as either
is living. Table B shows some of the guaranteed rates for this option.
OPTION 5
FIXED PERIOD OPTIONS: This option provides payments for a fixed number of
years between 5 and 20. The amount of each payment is determined by dividing
Contract Value on the Valuation Date the payment is made by the number of
remaining payments. If the Contract Value is held in the General Account,
then the amount of the payments will vary as a result of the interest rate
(as adjusted periodically) credit on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the amount of the
payments will vary as a result of the investment performance of the Series
chosen. If Participant dies before receiving the fixed number of payments,
any remaining payments will be made to the Designated Beneficiary.
OPTION 6
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied, including daily interest
adjustments, is paid. If the Contract Value is held in the General Account,
then the number of payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the number of payments
will vary as a result of the investment performance of the Series chosen. If
the Participant dies before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 7
PERIOD CERTAIN OPTION: This option provides payments for a fixed period of 5,
10, 15 or 20 years. Payments will be made until the end of this period. If
Participant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary. Table C shows some of the guaranteed
rates for this option.
OPTION 8
JOINT AND CONTINGENT SURVIVOR OPTION: This option provides payments for the
life of the Participant. Payments will be made to the Participant as long as
he or she is living. Upon the death of the Participant, payments will be made
to the contingent Annuitant named by the Participant as long as he or she is
living. If the contingent Annuitant is not living upon the death of the
Participant, no further payments will be made. Table B shows some of the
guaranteed rates for this option.
-19- BP 623AA1
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two Option
Adjusted Life with Fixed Period Three
Age of Option One 5 10 15 20 Unit
Participant Life Only Years Years Years Years Refund
- --------------------------------------------------------------------------------
UNISEX
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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 OPTIONS FOUR
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF SECONDARY PARTICIPANT
PRIMARY PARTICIPANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.56 3.66 3.71 3.76 3.83 3.88
60 3.66 3.84 3.90 3.99 4.12 4.21
62 3.71 3.90 3.98 4.09 4.25 4.37
65 3.76 3.99 4.09 4.23 4.45 4.62
70 3.83 4.12 4.25 4.45 4.79 5.10
75 3.88 4.21 4.37 4.62 5.10 5.60
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined from Table A or B by multiplying the monthly
payments by 11.812854, 5.9572233, and 2.9914201 respectively.
- --------------------------------------------------------------------------------
TABLE C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 7 10 15 20
YEARS YEARS YEARS YEARS YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.11 13.38 9.83 7.10 5.75
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.
GVC6023J (1-98) -20- BP 623BB
<PAGE>
A BRIEF DESCRIPTION OF THE CONTRACT
This is a Certificate under a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided under the Contract.
*Individual allocations are maintained for Participants.
*The Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 6023S4
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CERTIFICATE
THE COMPANY'S PROMISE
In consideration of the Purchase Payments and the attached Enrollment Form,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CERTIFICATE CAREFULLY. It describes the terms of a legal
Contract between the Owner and the Company. The Certificate's table of contents
is on page 2.
RIGHT TO CANCEL
IF FOR ANY REASON THE PARTICIPANT IS NOT SATISFIED WITH THIS CERTIFICATE, THE
PARTICIPANT MAY RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF
RECEIPT. IT MAY BE RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF
RETURNED, THIS CERTIFICATE SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE
COMPANY WILL REFUND ANY PURCHASE PAYMENTS MADE AND ALLOCATED TO THE GENERAL
ACCOUNT AND WILL REFUND SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE
RETURNED CERTIFICATE IS RECEIVED BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a Certificate under a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided under the Contract.
*Individual allocations are maintained for Participants.
*The Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
GVC6023 (1-98)U BP 623MM1
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TABLE OF CONTENTS
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PAGE
CONTRACT SPECIFICATIONS................................................. 3
DEFINITIONS............................................................. 4-6
GENERAL PROVISIONS...................................................... 7-9
The Contract.......................................................... 7
Certificates.......................................................... 7
Plan Provisions....................................................... 7
Change of Contract.................................................... 7
Future Participants................................................... 7
Misstatement of Age................................................... 7
Evidence of Survival.................................................. 7
Assignment............................................................ 7
Transfers............................................................. 8
Claims of Creditors................................................... 9
Nonforfeiture Values.................................................. 9
Participation......................................................... 9
Statements............................................................ 9
BENEFICIARY PROVISIONS.................................................. 9
Primary and Secondary Beneficiaries................................... 9
Beneficiary Changes................................................... 9
PURCHASE PAYMENT PROVISIONS............................................. 10
Flexible Purchase Payments............................................ 10
Purchase Payment Limitations.......................................... 10
Purchase Payment Allocation........................................... 10
Place of Payment...................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS................................... 10-12
Contract Value........................................................ 10
General Account Contract Value........................................ 10
General Account Interest Crediting.................................... 11
Separate Account Contract Value....................................... 11
Accumulation Unit Value............................................... 11
Net Investment Factor................................................. 11
Determining Accumulation Units........................................ 12
Mortality and Expense Risk Charge..................................... 12
Premium Tax Expense................................................... 12
Administrative Charge................................................. 12
Mutual Fund Expenses.................................................. 12
WITHDRAWAL PROVISIONS................................................... 12-14
Withdrawals........................................................... 12, 13
Withdrawal Value...................................................... 13
Withdrawal Charges.................................................... 13
Free Withdrawals...................................................... 13
Systematic Withdrawals................................................ 13, 14
Free Systematic Withdrawals........................................... 14
Date of Request....................................................... 14
Payment of Withdrawal Benefits........................................ 14
DEATH BENEFIT PROVISIONS................................................ 15
Death Benefit......................................................... 15
Proof of Death........................................................ 15
ANNUITY PAYMENT PROVISIONS.............................................. 16-19
Annuity Commencement Date............................................. 16
Change of Annuity Commencement Date................................... 16
Annuity Start Amount.................................................. 16
Withdrawal Charges.................................................... 16
Annuity Tables........................................................ 16, 17
Annuity Payments...................................................... 17
Change of Annuity Option.............................................. 17
Fixed Annuity Payments................................................ 17
Variable Annuity Payments............................................. 17
Annuity Units......................................................... 17, 18
Net Investment Factor................................................. 18
Alternate Annuity Option Rates........................................ 18
Annuity Options....................................................... 19
ANNUITY TABLES.......................................................... 20
AMENDMENTS OR ENDORSEMENTS, if any
-2- BP 623MM1
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VARIABLE ANNUITY CONTRACT SPECIFICATIONS
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PARTICIPANT NAME: John A. Doe CONTRACT NUMBER: Specimen
PARTICIPANT DATE OF BIRTH: 10-30-1956 CERTIFICATE NUMBER: Specimen
PARTICIPANT'S GENDER Male CONTRACT DATE: 6-30-1996
OWNER: ABC Employer ANNUITY COMMENCEMENT DATE: 7-1-2028*
PRIMARY BENEFICIARY NAME: PLAN: Qualified
Linda L. Doe
ASSIGNMENT: This Certificate may not
be assigned. See Assignment Provision
of this Certificate.
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INITIAL PURCHASE PAYMENT ................ $500
MINIMUM SUBSEQUENT PURCHASE PAYMENTS .... $25
MINIMUM SYSTEMATIC WITHDRAWAL ........... $25
MAXIMUM PARTICIPANT AGE ................. 90
MORTALITY AND EXPENSE RISK CHARGE ....... 1.20% Annually
ANNUAL ADMINISTRATIVE FEE ............... $30*
WITHDRAWAL CHARGES
Contract Year of Withdrawal ........... 1 2 3 4 5 6 7 8 9 +
Withdrawal Charge ..................... 8% 7% 6% 5% 4% 3% 2% 1% 0%
FREE WITHDRAWAL PERCENTAGE .............. 10%
MINIMUM GUARANTEED RATE ................. 3%
SEPARATE ACCOUNT ........................ Variflex
SEPARATE ACCOUNT SERIES:
1 Money Market Series 8 Specialized Asset Allocation Series
2 High Grade Income Series 9 Growth Series
3 High Yield Series 10 Value Series
4 Global Aggressive Bond Series 11 Worldwide Equity Series
5 Growth-Income Series 12 Social Awareness Series
6 Equity Income Series 13 Emerging Growth Series
7 Managed Asset Allocation Series 14 Small Cap Series
METHOD FOR DEDUCTIONS:
Deductions for the Annual Administrative Fee, Premium Taxes, and any
unallocated partial Withdrawals, including Systematic Withdrawals, will be
made sequentially from the Contract Value in the order of the Series listed
above. The value of each Account will be depleted before the next is charged.
The General Account is the last Account charged.
*The Annual Administrative Fee is deducted at each Contract Anniversary. A pro
rata fee is deducted: (1) upon a full Withdrawal of Contract Value; (2) when
a Contract has been in force for less than a full contract year; (3) upon the
Annuity Commencement Date if one of Annuity Options 1 through 4, 7 or 8 is
chosen; and (4) upon payment of a death benefit. The Annual Administrative
Fee will be waived during a Contract Year if: (1) Contract Value on that
Contract Anniversary (or in the event of a full Withdrawal, upon the date of
such Withdrawal) is $25,000 or more; and (2) the Contract has been in force
eight Contract Years or more.
GVC6023A (1-98) -3- SBL158
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DEFINITIONS
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ACCOUNT
An Account is one of the Series or the General Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to compute the
Separate Account Contract Value prior to the Annuity Commencement Date. It is
also used to compute the Variable Annuity Payments for Annuity Options 5 and
6.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the basis for making
Annuity Payments. The Annuity Option is set prior to the Annuity Commencement
Date. Please see "Annuity Options" on page 19.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date on which Annuity Payments are
scheduled to begin. This date may be changed by the Participant. Please see
"Annuity Commencement Date" on page 16.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute Variable Annuity
Payments for Annuity Options 1 through 4, 7 and 8.
AUTOMATIC TRANSFERS
Automatic Transfers are Transfers among the Series and the General Account.
Such transfers are made automatically on a periodic basis by the Company at
the written request of the Participant. The Company reserves the right to
discontinue, modify or suspend Automatic Transfers.
COMPANY
The Company is Security Benefit Life Insurance Company, 700 SW Harrison
Street, Topeka, Kansas 66636-0001.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the Contract Date.
CONTRACT DATE
The Contract Date is the date the Participant's Certificate begins. The
Contract Date is shown on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on the General Account
at a rate that exceeds the Minimum Guaranteed Rate shown on page 3. The
Company will declare the rate of Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Participant, the Designated Beneficiary will be the
first person on the following list who is alive on the date of death:
1. Primary Beneficiary;
2. Secondary Beneficiary; and
3. the Participant's estate if no one listed above is alive.
The Designated Beneficiary receives a death benefit upon the death of the
Participant prior to the Annuity Commencement Date. Please see "Beneficiary
Provisions" on page 9 and "Death Benefit Provisions" on page 15.
GVC6023B (1-98) -4- BP 6023T1
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DEFINITIONS (Continued)
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GENERAL ACCOUNT
The General Account is part of the Company's general account. The Company
manages the general account and guarantees that it will credit interest on
General Account Contract Value at an annual rate at least equal to the
Minimum Guaranteed Rate. This Rate is shown on page 3.
HOME OFFICE
The address of the Company's Home Office is Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or
corporation.
OWNER
The Employer or other entity that makes application for the Contract.
PLAN
The employer-sponsored retirement plan, annuity purchase arrangement, or
deferred compensation program for which the Contract is used.
PARTICPANT
A person for whom or with respect to whom Purchase Payments are made under
the Contract.
PARTICIPANT ACCOUNT
An individual account which is established for a Participant to record the
Contract Value for the Participant.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental entity will be
charged against this Contract. When Premium Tax is assessed after the
Purchase Payment is applied, it will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company for allocation to the
Participant Account.
RECEIVED BY THE COMPANY
The phrase "Received by the Company" means receipt by the Company in good
order at its Home Office, 700 SW Harrison Street, Topeka, Kansas 66636-0001.
SEPARATE ACCOUNT The Separate Account, shown on page 3 is a separate account
established and maintained by the Company under Kansas law. The Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a Unit Investment Trust. It was established
by the Company to support variable annuity contracts. The Company owns the
assets of the Separate Account and maintains them apart from the assets of
its general account and its other separate accounts. The assets held in the
Separate Account equal to the reserves and other Contract liabilities with
respect to the Separate Account may not be charged with liabilities arising
from any other business the Company may conduct.
-5- BP 6023T1
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DEFINITIONS (Continued)
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SEPARATE ACCOUNT (Continued)
Income and realized and unrealized gains and losses from assets in the
Separate Account are credited to, or charged against, the Separate Account
without regard to the income, gains or losses from the Company's general
account or its other separate accounts. The Separate Account is divided into
Series shown on page 3. Income and realized and unrealized gains and losses
from assets in each Series are credited to, or charged against, the Series
without regard to income, gains or losses in the other Series. The Company
has the right to transfer to its general account any assets of the Separate
Account that are in excess of the reserves and other Contract liabilities
with respect to the Separate Account. The value of the assets in the Separate
Account on each Valuation Date is determined as of the end of each Valuation
Date.
SERIES
The Separate Account is divided into Series which invest in shares of mutual
funds. Each Series may invest its assets in a separate class or series of a
designated mutual fund or funds. The Series are shown on page 3. Subject to
the regulatory requirements then in force, the Company reserves the right to:
1. change or add designated mutual funds or other investment vehicles;
2. add, remove or combine Series;
3. add, delete or make substitutions for securities that are held or
purchased by the Separate Account or any Series;
4. operate the Separate Account as a management investment company;
5. combine the assets of the Separate Account with other Separate Accounts
of the Company or an affiliate thereof;
6. restrict or eliminate any voting rights of the Owner with respect to the
Separate Account or other persons who have voting rights as to the
Separate Account; and
7. terminate and liquidate any Series.
If any of these changes result in a material change to the Separate Account
or a Series, the Company will notify the Owner of the change. The Company
will not change the investment policy of any Series in any material respect
without complying with the filing and other procedures of the insurance
regulators of the state of issue.
SERIES NET ASSET VALUE
The Series Net Asset Value is equal to: (1) the net asset value of all shares
of the underlying mutual fund held by the Series; plus (2) any cash or other
assets; less (3) all liabilities of the Series.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and the Company's
Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one Valuation Date to the
next Valuation Date.
GVC6023C (1-98)U -6- BP 623NN1
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GENERAL PROVISIONS
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THE CONTRACT
The entire Contract between the Owner and the Company consists of this
Contract, the Enrollment Form, and any Amendments, Endorsements or Riders to
the Contract. All statements made in the Enrollment Form will, in the absence
of fraud, as ruled by a court of competent jurisdiction, be deemed
representations and not warranties. The Company will use no statement made by
or on behalf of the Owner or the Participant to void this Contract unless it
is in the written Enrollment Form. Any change in the Contract can be made
only with the written consent of the President, a Vice President, or the
Secretary of the Company.
The Purchase Payment(s) and the Enrollment Form must be acceptable to the
Company under its rules and practices. If they are not, the Company's
liability shall be limited to a return of the Purchase Payment(s).
CERTIFICATES
The Company will issue certificates to Participants. Each certificate will
set forth the benefits to which the Participant is entitled under the
Contract. Certificates are for information only and are not part of the
Contract.
PLAN PROVISIONS
The Contract is subject to the provisions of the Plan. To the extent provided
by the Plan, any rights that may be exercised by a Participant under the
Contract may instead by exercised by the Owner or a Plan representative.
CHANGE OF CONTRACT
The Company reserves the right to make any change to the provisions of the
Contract to comply with or give the Participant the benefit of any federal or
state statute, rule or regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal Revenue Code or the
laws of any state. The Company will provide the Owner with a copy of any such
change and will also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered. In addition, upon
at least 30 days written notice to the Owner, the Company may make other
changes to this Contract that will apply only to individuals who become
Participants after the effective date of such change. All such changes will
be subject to any applicable regulatory requirements.
FUTURE PARTICIPANTS
The Company may in its discretion curtail or prohibit new Participants under
the Contract upon written notice to the Owner.
MISSTATEMENT OF AGE
If the age of the Participant has been misstated, payments shall be adjusted,
when allowed by law, to the amount which would have been provided for the
correct age. Proof of the age of the Participant may be required at any time,
in a form suitable to the Company. If payments have already commenced and the
misstatement has caused an underpayment, the full amount due will be paid
with the next scheduled payment. If the misstatement has caused an
overpayment, the amount due will be deducted from one or more future
payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee being alive on a
given date, proof that the payee is living may be required by the Company.
Such proof must be in a form accepted by the Company, and may be required
prior to making the payments.
ASSIGNMENT
This Contract cannot be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation. The benefits,
values, and rights under the Contract are not subject to any creditor claims
to the fullest extent permitted by law. The Contract and its rights cannot be
transferred to anyone other than the Company, except as provided under the
Plan or under a domestic relations order properly issued by a court of
competent jurisdiction and that complies with ERISA, if applicable. To the
extent permitted by the Internal Revenue Code and applicable law, the Company
will make a Full or Partial Withdrawal payable to a third party upon the
Participant's request.
-7- BP 623NN1
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GENERAL PROVISIONS (Continued)
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TRANSFERS
The Participant may Transfer Contract Value among the General Account and
Series subject to the following.
The Participant may make only 14 transfers per Contract Year. Transfers are
not allowed within 30 days of the Annuity Commencement Date. Automatic
Transfers are not included in the 14 transfers allowed per Contract Year.
After the Annuity Commencement Date, for Annuity Options 1 through 4, 7 and
8, the Participant may Transfer Contract Value only among Series.
The Company reserves the right to: (1) limit the amount that may be subject
to Transfer; (2) waive or limit the number of Transfers allowed each Contract
Year; and (3) suspend Transfers. Transfers must be at least $500.00 or, if
less, the remaining balance in the General Account or a Series.
The total dollar amount that may be Transferred from the General Account in a
Contract Year is limited to the greatest of:
1. $5,000;
2. 1/3 of the General Account Contract Value on the date the Transfer
request is Received by the Company; or
3. 120% of the dollar amount Transferred from the General Account in the
prior Contract Year.
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. In any
Contract Year following a Contract Year during which such limits were waived,
the total dollar amount that may be Transferred 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
Contract Year; or
b. the maximum total dollar amount that would have been allowed in the
prior Contract Year under the Transfer provisions above absent the
waiver.
The Company will effect a Transfer to or from a Series on the basis of
Accumulation Unit Value (or Annuity Unit Value) determined as of the end of
the Valuation Period in which the Transfer is effected. The Company will
effect a Transfer from the General Account on the basis of General Account
Contract Value as of the end of the Valuation Period in which the Transfer is
effected.
The Company reserves the right to delay Transfers from the General Account
for up to 6 months as required by most states. The Company will notify you if
there will be a delay.
GVC6023D (1-98) -8- BP 6023V1
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GENERAL PROVISIONS (Continued)
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CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors of the Participant to the extent allowed by law.
NONFORFEITURE VALUES
The Death Benefits, Withdrawal Values and Annuity Payout Values will at least
equal the minimum required by law.
PARTICIPATION
The Company pays dividends on some of its contracts. However, the Company
does not expect dividends to become payable on this Contract. At the end of
each Contract Year the Company will determine the Contract's dividend, if
any. The Participant may choose to have it: (1) added to Contract Value; or
(2) paid in cash. If no choice is made, any dividend will be added to
Contract Value.
STATEMENTS
At least once each Contract Year the Participant shall be sent a statement
including the current Contract Value and any other information required by
law. The Participant may send a written request for a statement at other
intervals. The Company may charge a reasonable fee for such statements.
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BENEFICIARY PROVISIONS
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PRIMARY AND SECONDARY BENEFICIARIES
The Primary Beneficiary is named by the Participant. The Participant may
change any Beneficiary as described in "Beneficiary Changes" below. If the
Primary Beneficiary dies prior to the Participant, the Secondary Beneficiary
becomes the Primary Beneficiary. Unless the Participant directs otherwise,
when there are two or more Primary Beneficiaries, they will receive equal
shares.
BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Participant may name a
new Primary Beneficiary or a new Secondary Beneficiary. Any new choice of
Primary Beneficiary or Secondary Beneficiary will revoke any prior choice.
Any change must be made in writing and recorded at the Home Office. The
change will become effective as of the date of written request is signed,
whether or not the Participant is living at the time the change is recorded.
A new choice of Primary Beneficiary or Secondary Beneficiary will not apply
to any payment made or action taken by the Company prior to the time it was
recorded. The Company may require the Certificate be returned so these
changes may be made.
-9- BP 6023V1
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PURCHASE PAYMENT PROVISIONS
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FLEXIBLE PURCHASE PAYMENTS
The Participant Account becomes in force on the Contract Date. The
Participant is not required to continue Purchase Payments in the amount or
frequency originally planned. The Participant may: (1) increase or decrease
the amount of Purchase Payments, subject to any Contract limits; or (2)
change the frequency of Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request. If no Purchase Payment
is received during the 180-day period beginning on the Contract Date, the
Participant Account will automatically terminate.
PURCHASE PAYMENT LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by the Company. The Minimum Subsequent Purchase Payment amount is
shown on page 3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments may be allocated among the General Account and the Series.
The allocations may be whole dollar amount or whole percentage. However, no
less than $25 per Purchase Payment may be allocated to any Account. The
Participant may change the allocations by written notice to the Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to the Company at
its Home Office. Purchase Payments after the initial Purchase Payment are
applied as of the end of the Valuation Period during which they are Received
by the Company.
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CONTRACT VALUE AND EXPENSE PROVISIONS
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CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of the following amounts
allocated to a Participant Account: (1) the Separate Account Contract Value;
and (2) the General Account Contract Value. At any time after the first
Contract Year and before the Annuity Commencement Date, the Company reserves
the right to pay to the Participant the Contract Value as a lump sum if it is
below $2,000.
GENERAL ACCOUNT CONTRACT VALUE
On any Valuation Date, the General Account Contract Value is equal to the
first Purchase Payment allocated under the Participant Account to the General
Account:
PLUS:
1. any other Purchase Payments allocated under the Participant Account to
the General Account;
2. any Transfers from the Separate Account Contract Value to the General
Account; and
3. any interest credited to the General Account Contract Value.
LESS:
1. any Withdrawals and applicable Withdrawal Charges deducted from the
General Account Contract Value;
2. any Transfers from the General Account Contract Value to the Separate
Account;
3. any applicable Premium Taxes;
4. any Annual Administrative Fee deducted from General Account Contract
Value;
5. any General Account Contract Value which is applied to any of Annuity
Options 1 through 4, 7 and 8; and
6. any Annuity Payments made from General Account Contract Value under
Annuity Options 5 and 6.
GVC6023E (1-98) -10- BP 6023W1
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CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
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GENERAL ACCOUNT INTEREST CREDITING
The Company shall credit interest on General Account Contract Value at an
annual rate at least equal to the Minimum Guaranteed Rate shown on page 3.
Also, the Company may in its sole judgment credit Current Interest at a rate
in excess of the Minimum Guaranteed Rate.
The Company may credit Current Interest on Contract Value that was allocated
or Transferred to the General Account during one period at a different rate
than amounts allocated or Transferred to the General Account in another
period. Therefore, at any time, portions of General Account Contract Value
may be earning Current Interest at different rates based upon the period
during which such portions were allocated or Transferred to the General
Account.
SEPARATE ACCOUNT CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value is the sum of the
then current value of the Accumulation Units allocated to each Series for the
Participant Account.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Series was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1)
multiplied by (2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor on the Valuation Date with respect to which
the Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where;
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or the Subaccounts; operations of the Company with respect to
the Contract; or the payment of the premiums or acquisition costs
under the Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
of the end of the prior Valuation Period.
3. is the daily factor representing the Mortality and Expense Risk Charge
which is deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited to or charged against the Series without
regard to the gains or losses in the Company or other Series.
-11- BP 6023W1
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CONTRACT VALUE AND EXPENSE PROVISIONS (Continued)
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DETERMINING ACCUMULATION UNITS
The number of Accumulation Units allocated to or deducted from a Series under
the Participant Account is found by dividing: (1) the amount allocated to or
deducted from the Series; by (2) the Accumulation Unit Value for the Series
as of the end of the Valuation Period during which the amount is allocated to
or deducted from Contract Value. The number of Accumulation Units allocated
to a Series under the Contract will not change as a result of investment
experience. Events that change the number of Accumulation units are:
1. Purchase Payments that are applied to the Series;
2. Contract Value that is Transferred into or out of the Series;
3. Withdrawals and any applicable Withdrawal Charges that are deducted from
the Series;
4. Premium Taxes that are deducted from the Series; and
5. Annual Administrative Fees that are deducted from the Series.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct the Mortality and Expense Risk Charge shown on page
3. This charge will be computed and deducted from each Series on each
Valuation Date. This charge is factored into the Accumulation Unit and
Annuity Unit Value on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when due or any time
thereafter. Any applicable Premium Taxes will be deducted as described on
page 3.
ADMINISTRATIVE CHARGE
The Company will deduct from Contract Value for each Participant Account the
Annual Administrative Fee in the amount and manner shown on page 3. No Annual
Administrative Fee is deducted on or after the Annuity Commencement Date if
one of Annuity Options 1 through 4, 7 or 8 is chosen. The Annual
Administrative Fee and other charges may be waived or reduced uniformly on
all Contracts issued under certain plans or arrangements which are expected
to result in administrative cost savings.
MUTUAL FUND EXPENSES
Each Series invests in share of a mutual fund. The net asset value per share
of each underlying fund reflects the deduction of any investment advisory and
administration fees and other expenses of the fund. These fees and expenses
are not deducted from the assets of a Series, but are paid by the underlying
funds. The Participant indirectly bears a pro rata share of such fees and
expenses. An underlying fund's fees and expenses are not specified or fixed
under the terms of the Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full or partial Withdrawal of Contract Value is allowed at any time while
the Participant is living. This provision is subject to any federal or state
Withdrawal restrictions.
Upon the Participant's request for a full Withdrawal, the Company will pay
the Withdrawal Value in a lump sum, and the Participant Account will
terminate.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the Company in writing or
under other methods allowed by the Company, if any.
2. The Participant must apply: (a) while this Contract is in force; and (b)
prior to the Annuity Commencement Date.
3. The amount Withdrawn must be at least $25, except upon a full Withdrawal.
GVC6023F (1-98) -12- BP 6023X1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
WITHDRAWALS (Continued)
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, the partial
Withdrawal will be deducted from the Accounts in the order described on page
3, "Method for Deductions."
WITHDRAWAL VALUE
The Withdrawal Value at any time will be the Contract Value less: (1) any
Premium Taxes due or paid by the Company; (2) any Annual Administrative Fee;
and (3) any Withdrawal Charges.
WITHDRAWAL CHARGES
If part or all of the Contract Value is Withdrawn, Withdrawal Charges may be
applied at the time of Withdrawal. The Withdrawal Charge is applied to the
lesser of: (1) the amount withdrawn; or (2) the amount of Purchase Payments.
The amount of the charge is based on the Contract Year in which the
Withdrawal is made. See the Withdrawal Charges shown on page 3. For the
purpose of determining the Withdrawal Charges, Purchase Payments are
withdrawn before Earnings on a first in first out basis. The Withdrawal
Charge will not be assessed against:
1. any Free Withdrawal amounts;
2. any Free Systematic Withdrawal amounts;
3. any amounts remaining after all Purchase Payments are withdrawn;
4. payments under Annuity Options 1 through 4 and 8;
5. payments under Annuity Options 5 through 7 provided that Annuity Payments
are made for at least 7 years.
The Withdrawal Charge will be assessed against Contract Value allocated to
the Series and the General Account in the same proportion as the Withdrawal
is allocated.
FREE WITHDRAWALS
A Free Withdrawal is a Withdrawal amount which is not subject to Withdrawal
Charges. One Free Withdrawal may be made in each Contract Year after the
first Contract Year. The Maximum Free Withdrawal amount is equal to the Free
Withdrawal Percentage shown on page 3, times the Contract Value on the
Valuation Date the Withdrawal request is Received by the Company. The Free
Withdrawal amount is applied only to the first Withdrawal in a Contract Year.
A Free Withdrawal is not available in any Contract Year that Free Systematic
Withdrawals have been made. Unused Free Withdrawal amounts are not carried
from one Contract Year to the next.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from the Contract
in substantially equal amounts made while the Participant is living prior to
the Annuity Commencement Date.
Systematic Withdrawals are available after the first Contract Year.
Systematic Withdrawals are available, however, during the first Contract Year
if Contract Value is $40,000 or more on the date the Systematic Withdrawal
request is Received by the Company.
-13- BP 6023X1
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS (Continued)
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS (Continued)
In order to start Systematic Withdrawals, the Participant must make the
request in writing. Systematic Withdrawals are subject to any applicable
Withdrawal Charge, except as discussed under "Free Systematic Withdrawals,"
below. The Minimum Systematic Withdrawal amount is shown on page 3. The
Participant must choose the type of payment and its frequency. The Systematic
Withdrawal request must state the allocations for deducting the Withdrawals
from each Account. If no allocation is specified, the Withdrawals will be
deducted from the Accounts in the order described on page 3, "Method for
Deductions." The payment type may be: (1) a percentage of Contract Value; (2)
a specified dollar amount; (3) over a fixed period of time; (4) all earnings
in the Contract; or (5) based upon the life expectancy of the Participant or
the Participant and a Beneficiary. The payment frequency may be: (1) monthly;
(2) quarterly; (3) semiannually; or (4) annually. Systematic Withdrawals may
be stopped or changed by the Participant upon proper written request Received
by the Company at least 30 days in advance of the requested date of
termination or change. The Company reserves the right to stop, modify or
suspend Systematic Withdrawals at any time.
FREE SYSTEMATIC WITHDRAWALS
Free Systematic Withdrawals are not subject to a Withdrawal Charge. The
amount of Free Systematic Withdrawals available in a Contract Year is as
follows: an amount equal to the Free Withdrawal Percentage shown on page 3,
times the Contract Value on the Valuation Date the First Systematic
Withdrawal Request in such Contract Year is Received by the Company.
Systematic Withdrawals are not available in any Contract Year in which a Free
Withdrawal has been made. Systematic Withdrawals that exceed the Free
Systematic Withdrawal amount will incur a Withdrawal Charge.
DATE OF REQUEST
The Company will effect a Withdrawal of Separate Account Contract Value on
the basis of Accumulation Unit Value determined as of the end of the
Valuation Period in which all the required information is Received by the
Company. The Company will effect a Systematic Withdrawal of Separate Account
Contract Value on the basis of Accumulation Unit Value determined as of the
end of the Valuation Period during which such Withdrawal is scheduled.
PAYMENT OF WITHDRAWAL BENEFITS
The Company reserves the right to suspend a Transfer or delay payment of a
Withdrawal from the Separate Account for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which: (a) disposal of securities
held in the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly value the net assets of the Separate
Account; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits to protect owners of securities.
Rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions set forth above exist.
The Company further reserves the right to delay payment of a Withdrawal from
the General Account for up to six months as required by most states. The
Company will notify you if there will be a delay.
GVC6023G (1-98) -14- BP 6023Y1
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Participant dies prior to the Annuity Commencement Date, a Death
Benefit will be paid to the Designated Beneficiary when due Proof of Death
and instructions regarding payment are Received by the Company.
If the age of each Participant was 75 or younger on the Contract Date, the
Death Benefit will be the greatest of: (1) the sum of all Purchase Payments,
less any Premium Taxes due or paid by the Company and less the sum of all
partial Withdrawals; (2) the Contract Value on the date due Proof of Death
and instructions regarding payment are Received by the Company, less any
Premium Taxes due or paid by the Company; or (3) the Stepped-Up Death Benefit
described below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary that is both an
exact multiple of six and occurs prior to the Participant reaching age
76; plus
2. any Purchase Payments received since the applicable sixth Contract
Anniversary; less
3. any reductions caused by Withdrawals since the applicable sixth Contract
Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of the Participant on the Contract Date was 76 or older, the Death
Benefit will be the greater of: (1) the sum of all Purchase Payments, less
any premium taxes due or paid by the Company and less the sum of all partial
Withdrawals; or (2) the Contract Value on the date due Proof of Death and
instructions regarding payment are Received by the Company, less any Premium
Taxes due or paid by the Company.
If a lump sum payment is requested, the payment will be made in accordance
with any laws and regulations that govern the payment of Death Benefits.
PROOF OF DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as to the finding
of death;
3. written statement by a medical doctor who attended the deceased
Participant; or
4. any proof accepted by the Company.
-15- BP 6023Y1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY COMMENCEMENT DATE
The Participant may choose the Annuity Commencement Date at the time of
application. The Annuity Commencement Date may not be prior to the third
Contract Anniversary. If no Annuity Commencement Date is chosen, the Company
will use the later of: (1) the Participant's sixty-fifth birthday; or (2) the
tenth Contract Anniversary, but in no event later than the Participant's 95th
birthday. The Annuity Commencement Date must be prior to the Participant's
95th birthday.
The Annuity Commencement Date is the date the first payment will be made to
the Participant under any of the Annuity Options.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Participant may change the Annuity Commencement Date. A request for the
change must be made in writing. The written request must be Received by the
Company at least 30 days prior to the new Annuity Commencement Date as well
as 30 days prior to the previous Annuity Commencement Date.
ANNUITY START AMOUNT
The Annuity Start Amount is applied to one of the Annuity Options listed on
page 19. The Annuity Start Amount is: (1) the Contract Value on the Annuity
Commencement Date; less (2) any Premium Taxes due or paid by the Company; and
less (3) if one of the Annuity Options 1 through 4, 7 or 8 is chosen, a pro
rata Administrative Fee. Unless otherwise directed by the Participant,
Annuity Start Amount derived from General Account Contract Value will be
applied to purchase a Fixed Annuity Option; that derived from Separate
Account Contract Value will be applied to purchase a Variable Annuity Option.
WITHDRAWAL CHARGES
Withdrawal Charges are not applied to: (1) Annuity payments made under
Annuity Options 1 through 4 and 8; or (2) those made under annuity Options 5
through 7 that provide for payments over a period of at least 7 years.
Withdrawal Charges are applied to annuity payments under Annuity Options 5
through 7 that provide for payments over a period of less than 7 years. See
"Withdrawal Provisions" on pages 12-14.
ANNUITY TABLES
The Annuity Payments under Annuity Options 1 through 4 and 8 are based upon
the 1983 Table "A" mortality table. The amount of each Annuity Payment for
Annuity Options 1 through 4, 7 and 8 will depend on the Participant's age on
the Annuity Commencement Date.
For Fixed Annuity Payments, Tables A through C below show the guaranteed
minimum amount for each monthly Annuity Payment per $1,000 of Annuity Start
Amount for Annuity Options 1 through 4, 7 and 8. Tables A and B are based
upon the 1983 Table "A" mortality table and an interest rate of 3% per year.
For Variable Annuity Payments, the first Annuity Payment for Annuity Options
1 through 4 and 8 is determined by reference to the 1983 Table "A" mortality
table and an assumed interest rate of 3.5% per year and, for Option 7, by
reference to Table C below.
GVC6023H (1-98)U -16- BP 623CC1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY TABLES (Continued)
Tables A and B assume 1900 as the year of birth of the Participant. To use
Tables A and B for a Participant born after 1900, the actual age is reduced
by 0.1 (one-tenth) of a year for each year the year of birth exceeds 1900.
For a Participant with a birth year prior to 1900, the actual age is
increased in a like manner. The actual age (in completed months) reduced or
increased becomes the "adjusted age of the Participant." The guaranteed
payout rate is then found by interpolating the Participant's adjusted age
between the ages shown in the Tables. On request the Company will furnish the
amount of monthly Annuity Payment per $1,000 applied for any age.
For Annuity Options 5 through 7, annuity rates based on age are not used to
calculate Annuity Payments. Annuity Payments for options 5 and 6 are computed
without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Participant may choose any form of
Annuity Option that is allowed by the Company. The Participant may choose an
Annuity Option by written request. This request must be Received by the
Company at least 30 days prior to the Annuity Commencement Date. Several
Annuity Options are listed on page 19. No Annuity Option can be selected that
requires the Company to make periodic payments of less than $50. If no
Annuity Option is chosen prior to the Annuity Commencement Date, the Company
will use Life with 10-Year Fixed Period Option. Each Annuity Option allows
for making Annuity Payments annually, semiannually, quarterly or monthly.
CHANGE OF ANNUITY OPTION
Prior to the Annuity Commencement Date, the Participant may change the
Annuity Option chosen. The Participant must request the change in writing.
This request must be Received by the Company at least 30 days prior to the
Annuity Commencement Date.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown on the Tables are
the guaranteed minimum for each Annuity Payment for Annuity Options 1 through
4, 7 and 8.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the guaranteed minimum first
Annuity Payment for Annuity Options 1 through 4, 7 and 8 are determined as
discussed above. The amount of each Annuity Payment after the first for these
options is computed by means of Annuity Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first Annuity Payment by
the Annuity Unit Value for the selected Series on the Annuity Commencement
Date. The number of Annuity Units for the Series then remains constant,
unless a Transfer of Annuity Units is made. After the first Annuity Payment,
the dollar amount of each subsequent Annuity Payment is equal to the number
of Annuity Units times the Annuity Unit Value for the Series on the due date
of the Annuity Payment.
-17- BP 623CC1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Continued)
The Annuity Unit Value for each Series was first set at $1.00. The Annuity
Unit Value for any subsequent Valuation Date is equal to (a) times (b) times
(c), where:
(a) is the Annuity Unit Value on the immediately preceding Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate of 3.5% per year
used to determine the Annuity Payment amounts. The assumed interest rate
is reflected in the Annuity Tables.
NET INVESTMENT FACTOR
The Net Investment Factor for any Series as of the end of any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the
result, where:
1. is equal to:
a. the net asset value per share of the mutual fund held in the Series,
found as of the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
paid by the Series' underlying mutual fund that is not included in
the net asset value per share; plus or minus
c. a per share charge or credit for any taxes reserved for, which the
Company deems to have resulted from the operation of the Separate
Account or Series; the operations of the Company with respect to the
Contract; or the payment of premium or acquisition costs under the
Contract.
2. is the net asset value per share of the Series' underlying mutual fund as
found as of the end of the prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge which is
deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily basis and pay such
dividends once a month. The Net Investment Factor allows for the monthly
reinvestment of these daily dividends. As described above, the gains and
losses from each Series are credited or charged against the Series without
regard to the gains or losses in the Company or other Series.
ALTERNATE ANNUITY OPTION RATES
The Company may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of the guaranteed rates shown in the Annuity Tables.
GVC6023I (1-98) -18- BP 623AA1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (Continued)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE OPTION: This option provides payments for the life of the Participant.
Table A shows some of the guaranteed rates for this option.
OPTION 2
LIFE WITH FIXED PERIOD OPTION: This option provides payments for the life of
the Participant. A fixed period of 5, 10, 15 or 20 years may be chosen.
Payments will be made to the end of this period even if the Participant dies
prior to the end of the period. If the Participant dies before receiving all
the payments during the fixed period, the remaining payments will be made to
the Designated Beneficiary. Table A shows some of the guaranteed rates for
this option.
OPTION 3
LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option provides payments
for the life of the Participant, with a period certain determined by dividing
the Annuity Start Amount by the amount of the first payment. A fixed number
of payments will be made even if the Participant dies. If the Participant
dies before receiving the fixed number of payments, any remaining payments
will be made to the Designated Beneficiary. Table A shows some of the
guaranteed rates for this option.
OPTION 4
JOINT AND LAST SURVIVOR OPTION: This option provides payments for the life of
the Participant and a second person. Payments will be made as long as either
is living. Table B shows some of the guaranteed rates for this option.
OPTION 5
FIXED PERIOD OPTIONS: This option provides payments for a fixed number of
years between 5 and 20. The amount of each payment is determined by dividing
Contract Value on the Valuation Date the payment is made by the number of
remaining payments. If the Contract Value is held in the General Account,
then the amount of the payments will vary as a result of the interest rate
(as adjusted periodically) credit on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the amount of the
payments will vary as a result of the investment performance of the Series
chosen. If Participant dies before receiving the fixed number of payments,
any remaining payments will be made to the Designated Beneficiary.
OPTION 6
FIXED PAYMENT OPTION: This option provides a fixed payment amount. This
amount is paid until the amount applied, including daily interest
adjustments, is paid. If the Contract Value is held in the General Account,
then the number of payments will vary as a result of the interest rate (as
adjusted periodically) credited on the General Account. This rate is
guaranteed to be no less than the Guaranteed Rate shown on page 3. If the
Contract Value is held in the Separate Account, then the number of payments
will vary as a result of the investment performance of the Series chosen. If
the Participant dies before receiving all the payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 7
PERIOD CERTAIN OPTION: This option provides payments for a fixed period of 5,
10, 15 or 20 years. Payments will be made until the end of this period. If
Participant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary. Table C shows some of the guaranteed
rates for this option.
OPTION 8
JOINT AND CONTINGENT SURVIVOR OPTION: This option provides payments for the
life of the Participant. Payments will be made to the Participant as long as
he or she is living. Upon the death of the Participant, payments will be made
to the contingent Annuitant named by the Participant as long as he or she is
living. If the contingent Annuitant is not living upon the death of the
Participant, no further payments will be made. Table B shows some of the
guaranteed rates for this option.
-19- BP 623AA1
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
TABLE A
SETTLEMENT OPTIONS ONE, TWO, AND THREE
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
Option Two Option
Adjusted Life with Fixed Period Three
Age of Option One 5 10 15 20 Unit
Participant Life Only Years Years Years Years Refund
- --------------------------------------------------------------------------------
UNISEX
55 4.25 4.25 4.22 4.18 4.11 4.10
56 4.34 4.33 4.30 4.25 4.17 4.17
57 4.42 4.41 4.38 4.32 4.23 4.24
58 4.52 4.50 4.47 4.40 4.30 4.31
59 4.61 4.60 4.56 4.48 4.37 4.39
60 4.72 4.70 4.66 4.57 4.44 4.48
61 4.83 4.81 4.76 4.66 4.51 4.56
62 4.95 4.93 4.86 4.75 4.58 4.66
63 5.07 5.05 4.98 4.85 4.65 4.75
64 5.21 5.18 5.10 4.95 4.72 4.86
65 5.35 5.32 5.22 5.05 4.79 4.97
66 5.51 5.47 5.36 5.16 4.86 5.08
67 5.67 5.63 5.50 5.26 4.93 5.20
68 5.85 5.80 5.65 5.37 5.00 5.33
69 6.04 5.98 5.80 5.49 5.06 5.47
70 6.25 6.18 5.96 5.60 5.12 5.61
71 6.47 6.39 6.14 5.71 5.18 5.76
72 6.71 6.62 6.31 5.83 5.23 5.93
73 6.97 6.86 6.50 5.94 5.28 6.10
74 7.26 7.12 6.69 6.04 5.32 6.28
75 7.56 7.39 6.89 6.14 5.35 6.48
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 OPTIONS FOUR
MINIMUM MONTHLY INSTALLMENTS PER $1,000 OF AMOUNT APPLIED
ADJUSTED AGE OF ADJUSTED AGE OF SECONDARY PARTICIPANT
PRIMARY PARTICIPANT 55 60 62 65 70 75
- --------------------------------------------------------------------------------
55 3.56 3.66 3.71 3.76 3.83 3.88
60 3.66 3.84 3.90 3.99 4.12 4.21
62 3.71 3.90 3.98 4.09 4.25 4.37
65 3.76 3.99 4.09 4.23 4.45 4.62
70 3.83 4.12 4.25 4.45 4.79 5.10
75 3.88 4.21 4.37 4.62 5.10 5.60
Values not shown will be provided upon request. Annual, semiannual, or quarterly
installments can be determined from Table A or B by multiplying the monthly
payments by 11.812854, 5.9572233, and 2.9914201 respectively.
- --------------------------------------------------------------------------------
TABLE C
SETTLEMENT OPTION SEVEN
MINIMUM MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR FIXED ANNUITY PAYMENTS
MINIMUM INITIAL MONTHLY INSTALLMENT PER $1,000 OF
AMOUNT APPLIED FOR VARIABLE ANNUITY PAYMENTS
PERIOD CERTAIN
5 7 10 15 20
YEARS YEARS YEARS YEARS YEARS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT 17.91 13.16 9.61 6.87 5.51
VARIABLE ANNUITY PAYMENT 18.11 13.38 9.83 7.10 5.75
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.
GVC6023J (1-98) -20- BP 623BB
<PAGE>
A BRIEF DESCRIPTION OF THE CONTRACT
This is a Certificate under a GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACT.
*In return for Purchase Payments, the Company will pay the annuity and other
benefits as provided under the Contract.
*Individual allocations are maintained for Participants.
*The Contract is Participating.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
BP 623MM4
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
(The Corporation was originally incorporated under the name of "The
National Council of The Knights and Ladies of Security" which was
later changed to "The Security Benefit Association." Its original
Articles of Incorporation were filed with the Kansas Secretary of
State on February 22, 1892. At a meeting of the Board of Directors of
the Corporation, held on March 3, 1998, having been first duly noticed
and called, the following amended and restated Articles of
Incorporation were duly approved. The amended and restated Articles of
Incorporation were also approved by the policyholders of the
Corporation at a special meeting held on May 4, 1998)
FIRST.
The name of this Corporation shall be SECURITY BENEFIT LIFE INSURANCE COMPANY.
SECOND.
The purposes of the Corporation are:
(a) To engage in the business of an insurer pursuant to the Kansas
Insurance Code as authorized by its Certificate of Authority, including without
limitation, to make insurance upon the lives of persons and every insurance
appertaining thereto or connected therewith, and to grant, purchase or dispose
of annuities; to make insurance on the health of individuals, against accidental
personal injury, disablement or death, and against loss, liability or expense on
account thereof; and to provide benefits for its policy holders in the case of
illness or injury; and
(b) To engage in any lawful act or activity for which corporations may be
organized under the Kansas General Corporation Code.
THIRD.
The address of its registered office in the State of Kansas is 700 SW Harrison
Street, Topeka, Shawnee County, Kansas, 66636; and the name of its resident
agent at such address is Security Benefit Life Insurance Company.
FOURTH.
The Corporation is authorized to issue 1,000,000 shares of common stock with a
par value of $10.00 per share.
FIFTH
(a) No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director, PROVIDED that nothing contained in this Article shall eliminate or
limit the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under the provisions of K.S.A. 17-6424 and amendments thereto, or (d)
for any transaction from which the director derived an improper personal
benefit. If the General Corporation Code of the State of Kansas is amended after
the filing of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Code of the State of Kansas,
as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SIXTH.
The Board of Directors of the Corporation may adopt, amend and repeal the
Bylaws of the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name at Topeka, Kansas,
on this 7th day of July, 1998.
HOWARD R. FRICKE
------------------------------
Howard R. Fricke
Chief Executive Officer
ATTEST:
ROGER K. VIOLA
- ------------------------------
Roger K. Viola, Secretary
<PAGE>
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
The foregoing instrument was acknowledged before me this 7th day of July,
1998, by Howard R. Fricke and Roger K. Viola, chief executive officer and
secretary, respectively, of Security Benefit Life Insurance Company, a Kansas
corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal at Topeka, Kansas, on this 7th day of July, 1998.
ANNETTE E. CRIPPS
------------------------------
Notary Public
My Appointment Expires: July 8, 2001
Approved for filing.
KATHLEEN SEBELIUS
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Kathleen Sebelius
Commissioner of Insurance
Date: July 16, 1998
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
KNIGHTS & LADIES OF SECURITY - FEBRUARY 22, 1892
SECURITY BENEFIT ASSOCIATION - SEPTEMBER 24, 1919
SECURITY BENEFIT LIFE INSURANCE COMPANY - JANUARY 2, 1950
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
SECURITY BENEFIT LIFE INSURANCE COMPANY
ARTICLE I - OFFICES
1. The home office and principal place of business of the Corporation shall be
700 SW Harrison, Topeka, Shawnee County, Kansas, 66636. The Corporation may
also establish branch offices at such other places as the board of
directors may from time to time determine.
ARTICLE II - MEETINGS OF STOCKHOLDERS
1. PLACE OF MEETINGS. All meetings of stockholders shall be held at either the
home office of the Corporation or any other place within or without the
State of Kansas designated by the board of directors pursuant to authority
hereinafter granted to said board.
2. ANNUAL MEETINGS. The annual meetings of stockholders shall be held at such
date and time as are designated by the board of directors.
3. NOTICE OF MEETINGS. Notice of all meetings of stockholders, whether annual
or special, shall be given in writing to the stockholders entitled to vote.
The notice shall be given by the secretary, assistant secretary, or other
persons charged with that duty. If there is no such officer, or if he or
she neglects or refuses this duty, notice may be given by any director.
Notice of any meeting of stockholders shall be given to each stockholder
entitled to notice not less than ten (10) nor more than sixty (60) days
before a meeting. Notice of any meeting of stockholders shall specify the
place, the day, and the hour of the meeting and the general nature of the
business to be transacted. A notice may be given to a stockholder either
personally, or by mail, or other means of written communication, charges
prepaid, addressed to the stockholder at his or her address appearing on
the books of the Corporation or given by the stockholder to the Corporation
for the purpose of notice.
4. SPECIAL MEETINGS. Special meetings of stockholders, for any purpose or
purposes whatsoever, may be called at any time by the Chief Executive
Officer or by the board of directors or by stockholders holding a majority
of the voting power of the corporation.
5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to
time by the vote of a majority of the stockholders who are either present
in person or represented by proxy thereat, but in the absence of a quorum
no other business may be transacted at any such meeting.
When any stockholders' meeting, either annual or special, is adjourned for
forty-five (45) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall
not be necessary to give any notice of the time and place of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which such adjournment is taken.
6. CONSENT TO STOCKHOLDERS' MEETINGS. The transactions of any meeting of
stockholders, however called and noticed, shall be valid as though had at a
meeting duly held after regular call and notice if a quorum be present
either in person or by proxy, and if, either before or after the meeting,
each of the stockholders entitled to vote, not present in person or by
proxy, sign a written waiver of notice, or a consent to the holding of such
a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the Corporation records or made a
part of the minutes of the meeting.
Any action which may be taken at a meeting of the stockholders, may be
taken without a meeting if authorized by a writing signed by all of the
holders of shares who would be entitled to vote at a meeting for such
purpose, and filed with the secretary of the Corporation.
7. VOTING RIGHTS; CUMULATIVE VOTING. Only persons in whose names shares
entitled to vote stand on the stock records of the Corporation on the day
of any meeting of stockholders, unless some other day be fixed by the board
of directors for the determination of stockholders of record, then on such
other day, shall be entitled to vote at such meeting.
Every stockholder shall have one vote for each share of stock owned, except
that, with respect to the election of directors, each stockholder shall
have the right to cast as many votes in the aggregate as shall equal the
number of shares of stock held by such stockholder, multiplied by the
number of directors to be elected, and each stockholder may cast the whole
number of votes for one candidate or may divide his votes among two or more
candidates.
8. QUORUM. The presence in person or by proxy of the holders of a majority of
the shares entitled to vote at any meeting shall constitute a quorum for
the transaction of business.
9. PROXIES. Every stockholder entitled to vote or execute consents shall have
the right to do so either in person or by an agent or agents authorized by
a written proxy executed by such stockholder or his or her duly authorized
agent and filed with the secretary of the Corporation; provided that no
such proxy shall be valid after the expiration of three years from the date
of its execution unless the stockholder executing it specifies therein the
length of time for which such proxy is to continue in force. Any proxy duly
executed is not revoked, and continues in full force and effect, until an
instrument revoking it, or a duly executed proxy bearing a later date, is
filed with the secretary.
10. CONDUCT OF MEETING. The Chairman of the Board shall preside as Chairman at
all meetings of the stockholders. The Chairman shall conduct each such
meeting in a businesslike and fair manner, but shall not be obligated to
follow any technical, formal or parliamentary rules or principles of
procedure. The Chairman's rulings on procedural matters shall be conclusive
and binding on all stockholders. Without limiting the generality of the
foregoing, the Chairman shall have all the powers usually vested in the
Chairman of a meeting of stockholders.
ARTICLE III - BOARD OF DIRECTORS
1. Subject to the limitations of the Articles of Incorporation and of these
bylaws, and of any statutory provisions as to action to be authorized or
approved by stockholders, the management of all the affairs, property and
business of the Corporation shall be vested in and exercised by, or under
the direction of, the board of directors. The number of directors shall be
fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the entire board, but shall consist of not less than 5
directors nor more than 15 directors. The board of directors may from time
to time appoint an executive committee and other committees with such
powers as it may see fit, subject to such conditions as may be prescribed
by the board. All committees so appointed shall report their acts and
doings to the board of directors at its next meeting. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member.
2. The directors now in office shall continue to hold office for the remainder
of the terms for which they were severally elected.
3. At each annual meeting of stockholders there shall be elected not less than
one-fifth nor more than one-third of the members of the board of directors
to serve for not more than five years nor more than three years
respectively.
4. The board of directors shall, prior to any annual meeting, nominate
candidates for each vacancy in the board to be filled at such annual
meeting.
5. Should the board of directors fail to nominate candidates for vacancies in
the board of directors to be filled at the annual meeting as provided in
Section 4 hereof, then and in such case, vacancies to be filled at the
annual meeting may be filled by the stockholders.
6. Any vacancy in the board occurring in the interim between annual meetings
of stockholders shall be filled by the remaining members thereof until the
next annual meeting of stockholders, at which time a successor shall be
elected to fill the unexpired term.
7. The annual meeting of the board of directors for the purpose of electing
officers and for the transaction of such other business as may come before
the meeting shall be held as soon as possible following adjournment of the
annual meeting of the stockholders at the place of such annual meeting of
the stockholders. Notice of such annual meeting of the board of directors
need not be given. The board of directors from time to time may by
resolution provide for the holding of regular meetings and fix the place
(which may be within or without the State of Kansas) and the date and hour
of such meetings. Notice of regular meetings need not be given, provided,
however, that if the board of directors shall fix or change the time or
place of any regular meeting, notice of such action shall be mailed
promptly, or sent by telephone, including a voice messaging system or other
system or technology designed to record and communicate messages,
telegraph, facsimile, electronic mail or other electronic means to each
director who shall not have been present at the meeting at which such
action was taken, addressed to him or her at his or her usual place of
business, or shall be delivered to him or her personally. Notice of such
action need not be given to any director who attends the first regular
meeting after such action is taken without protesting the lack of notice to
him or her, prior to or at the commencement of such meeting, or to any
director who submits a signed waiver of notice, whether before or after
such meeting.
8. Regular and special meetings of the board of directors may be held at such
place or places within or without the state of Kansas as the board of
directors may from time to time designate. Special meetings of the board of
directors may be called at any time by the president or by any three
directors. The Secretary shall give notice of each special meeting by
mailing the same at least two days before the meeting or by telegraphing
the same at least one day before the meeting to each director, but such
notice may be waived by any director. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special
meeting. The number of directors necessary to constitute a quorum shall be
not less than five; except that if the board of directors consists of nine
members or less, a majority may constitute a quorum.
9. The fee to be paid to the directors for their services shall be fixed by
resolution of the board.
10. Any director may be removed at any time upon the affirmative vote of the
holders of a majority of the combined voting power of the then outstanding
stock of the Corporation entitled to vote generally in the election of
directors. Any vacancy in the board of directors caused by any such removal
may be filled at such meeting by the stockholders entitled to vote for the
election of the director so removed.
ARTICLE IV - OFFICERS
1. The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Treasurer, a Secretary, an
Actuary, and such other officers as may be appointed by the board of
directors. Any two or more offices may be held by the same person, except
the offices of President and Secretary. All officers of the Corporation,
except appointed officers, shall be elected annually by the board of
directors at the first meeting of the board of directors held after each
annual meeting of the stockholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Vacancies may be filled or new offices filled at any
meeting of the board of directors. Each officer shall hold office until his
successor shall have been duly elected or appointed and shall have
qualified, or until his death, or until he shall have resigned or shall
have been removed in the manner hereinafter provided.
Any officer elected or appointed by the board of directors may be removed
by the board of directors whenever in its judgment the best interest of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
2. The Chairman of the Board shall preside at all meetings of stockholders or
directors and shall perform such other duties as shall be assigned to him
by the board of directors. In the absence of the Chairman of the Board, the
President shall preside over meetings of stockholders or directors.
3. The President shall be Chief Executive Officer of the Corporation, unless
the Chairman of the Board is so designated, and he shall perform such other
duties as are incident to the office of the President or are properly
assigned to him by the board of directors.
4. The Vice Presidents shall have such powers and discharge such duties as may
be assigned to them from time to time by the board of directors.
5. The Treasurer shall have charge and custody of and be responsible for all
funds and securities of the Corporation; shall disburse the funds of the
Corporation in payments of just demands against it or as may be ordered by
the board of directors, and in general perform all the duties incident to
the office of treasurer and such other duties as may from time to time be
assigned to him by the board of directors. The Assistant Treasurer, if any,
may sign in place of the Treasurer with the same force and effect as the
Treasurer is authorized to sign.
6. The Secretary shall keep the minutes of meetings of the stockholders and of
the board of directors, see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; shall be
custodian of the corporate records and seal of the Corporation, and in
general perform all duties incident to the office of secretary and such
other duties as may from time to time be assigned to him by the board of
directors. The Assistant Secretary, if any, may sign and attest documents
with the same force and effect as the Secretary is authorized to sign and
attest.
7. The Actuary shall have general supervision over all computations relating
to premium rates, policy dividends, reserves and surrender values,
preparation of the annual statement of the Corporation, perform such other
duties as are incident to his office and such other duties as may from time
to time be assigned to him by the board of directors. In absence or
inability of the Actuary, his duties may be performed by an Associate
Actuary or by an Assistant Actuary.
8. The salaries of the officers shall be fixed from time to time by the board
of directors, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the Corporation.
9. The Corporation shall indemnify every person, his heirs, executors or
administrators, who is or was a director, officer, or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer or employee of another business entity, to the full
extent permitted or authorized by the laws of the state of Kansas, as now
in effect and as hereafter amended, against any liability, judgment, fine,
amount paid in settlement, cost or expense (including attorney's fees)
asserted or threatened against and incurred by such person in his capacity
as or arising out of his status as a director, officer, or employee of the
Corporation or, if serving at the request of the Corporation as a director,
officer or employee of another business entity. The indemnification
provided by this bylaw provision shall not be exclusive of any other rights
to which those indemnified may be entitled under any other bylaw or under
any agreement, vote of stockholders or disinterested directors or
otherwise, and shall not limit in any way any right which the Corporation
may have to make different or further indemnifications with respect to the
same or different persons or classes of persons.
ARTICLE V - SEAL
1. The corporate seal of the Corporation shall consist of two concentric
circles between which shall be the name of the Corporation and in the
center of which shall be inscribed the year of its incorporation.
ARTICLE VI - FRATERNAL CERTIFICATES
1. The gross premium payable with respect to each fraternal certificate issued
by the Corporation shall be the sum designated prior to transformation of
the Corporation from a fraternal benefit society to a mutual life insurance
company as home office premium plus a collection charge equal to the sum
paid prior to such transformation as subordinate council dues or collection
fee. Provided, however, that the annual collection charge payable with
respect to each fraternal certificate shall not in any case exceed $2.40.
2. The gross premium for each fraternal certificate shall become due and
payable, without notice, on the first day of the calendar month following
the period for which prior payment has been made. The first calendar month
following the period for which payment has been made shall be allowed as a
grace period during which the certificate shall remain in full force and
effect. If the gross premium for any certificate is not paid when due or
within the grace period, such certificate shall be in default and all
rights and benefits thereunder shall be forfeited, without notice, except
as may otherwise be provided by the terms of such certificate.
3. Every fraternal certificate which shall become in default on account of
nonpayment of gross premiums may be reinstated at any time within sixty
days after the date of such default by payment in full of the gross
premiums in arrears, provided the insured under such certificate is in
sound mental and physical condition on the date of such payment. Any
payment of gross premiums made for the purpose of effecting reinstatement
under the provisions of this section shall constitute a representation by
the insured making such payment that he or she is in sound mental and
physical condition; and the receipt and retention of such payment shall not
effect reinstatement of the certificate if the insured is not in sound
mental and physical condition.
4. Every fraternal certificate which shall become in default on account of
nonpayment of gross premiums, and which shall not have been reinstated
within sixty days after the date of such default, may be reinstated only in
accordance with and as permitted by the rules and regulations for
reinstatement prescribed by the board of directors.
5. Any person or corporation may be appointed as a beneficiary in a fraternal
certificate, except as eligibility with respect to beneficiaries may be
restricted by the laws of the state in which the certificate was first
delivered to the insured.
6. The owner of a fraternal certificate in force may at any time change the
beneficiary by filing a satisfactory written notice therefor with the
Corporation at its home office. The fraternal certificate need not be
presented for endorsement except upon written request of the Corporation. A
change of beneficiary shall not be effective until it has been recorded by
the Corporation at its home office. After such recordation, the change
shall relate back to and take effect as of the date the owner signed said
written request, whether or not the insured be living at the time of such
recordation, but without prejudice to the Corporation on account of any
payment made by it before receipt of such written request at its home
office. If there be more than one beneficiary the interest of any deceased
beneficiary shall pass to the survivor or survivors, unless otherwise
directed by the owner and recorded at the home office. If no designated
beneficiary survives the insured, the amount payable under the certificate
shall be paid in a lump sum to the executors or administrators of the
insured.
7. Whenever the age of an insured in a fraternal certificate has been
understated in his or her application for insurance, and the correct age
was within the age limits of the Corporation, the amount of the death
benefit payable under such certificate shall be such as the premiums paid
would have purchased at the correct age according to the Corporation's
premium rates in force on the issue date of the certificate. If the correct
age of the insured was not within the age limits of the Corporation, the
liability of the Corporation under his or her certificate shall be the
premiums paid thereon. If the age has been overstated in the application,
no additional amount of insurance or other values shall be granted on
account of any excess premium paid, but such excess premium shall be
returned without interest.
8. That part of the gross premium designated prior to transformation of the
Corporation from a fraternal benefit insurer to a mutual insurer as home
office premium shall, with respect to fraternal certificates issued on the
pure assessment plan, be payable in accordance with the following premium
table:
<PAGE>
PREMIUMS PER $1,000 OF INSURANCE
AGE NEAREST AGE NEAREST
BIRTHDAY MONTHLY ANNUAL BIRTHDAY MONTHLY ANNUAL
16 $1.15 $13.25 49 $3.25 $ 37.45
17 1.20 13.50 50 3.40 39.25
18 1.20 13.80 51 3.60 41.10
19 1.20 14.10 52 3.75 43.10
20 1.25 14.40 53 3.95 45.30
21 1.30 14.75 54 4.15 47.55
22 1.30 15.10 55 4.35 50.00
23 1.35 15.45 56 4.60 52.65
24 1.40 15.80 57 4.85 55.45
25 1.40 16.20 58 5.10 58.45
26 1.45 16.65 59 5.40 61.65
27 1.50 17.10 60 5.70 65.05
28 1.50 17.55 61 6.00 67.25
29 1.55 18.05 62 6.40 71.10
30 1.60 18.55 63 6.80 75.30
31 1.65 19.10 64 7.20 79.85
32 1.70 19.70 65 7.65 84.70
33 1.75 20.30 66 8.15 89.95
34 1.80 20.95 67 8.65 95.60
35 1.90 21.65 68 9.25 101.70
36 1.95 22.40 69 9.85 108.30
37 2.00 23.15 70 10.55 115.45
38 2.10 24.00 71 11.30 123.15
39 2.15 24.85 72 12.15 131.55
40 2.25 25.80 73 13.00 140.60
41 2.30 26.80 74 14.00 150.50
42 2.40 27.85 75 15.10 161.20
43 2.50 28.95 76 16.25 172.85
44 2.60 30.15 77 17.55 185.55
45 2.70 31.45 78 19.00 199.35
46 2.85 32.80 79 20.60 214.45
47 2.95 34.25 80 and over 22.35 230.90
48 3.10 35.90
<PAGE>
The premium rates as stated in said table shall be based upon the attained
age nearest birthday of the insured as of July 1, 1935. Each insured under
a pure assessment fraternal certificate shall, after premiums in accordance
with the above table have been paid for three full years, be entitled to
the nonforfeiture options of extended term insurance, paid up insurance or
certificate loans to the extent of the tabular reserve to the credit of
such certificate.
9. Any insured under a pure assessment fraternal certificate may, in lieu of
making premium payments in accordance with the premium table specified in
the preceding section, elect to continue to make monthly payments upon his
certificate at the rate paid for the month of January, 1935. In the event
of such election, the certificate upon which such payment is made shall
automatically be reduced to such face amount of whole life insurance (with
the reserve thereon computed according to the American Experience Table of
Mortality with an interest assumption of 4%) as the payment actually made
would purchase at the rates specified in said premium table for the
attained age nearest birthday of the insured as of July 1, 1935. The
payment by any insured for the month of July, 1935, and subsequent months
at the rate paid by such insured for the month of January, 1935, shall be
considered an election by such insured to reduce the amount of his
certificate and continue the same in force for such reduced face amount.
Each insured who elects to continue to make monthly payments upon his
certificate at the rate paid for the month of January, 1935, shall, after
such payments have been made for three full years, be entitled to the
nonforfeiture options of extended term insurance, paid up insurance or
certificate loans to the extent of the tabular reserve to the credit of
such certificate.
10. Every fraternal certificate issued prior to January 1, 1938, which contains
nonforfeiture provisions is, with respect to such provisions, hereby
amended as follows:
In the event the owner does not within sixty days after the due
date of any premium in default elect in writing any of the other
available nonforfeiture options, the insurance will be
automatically continued in force as nonparticipating extended
term insurance in accordance with the extended term insurance
provision of the certificate: Provided, however, that the
insurance under a certificate which does not contain an extended
term insurance provision will be automatically continued in force
as nonparticipating paid up insurance in accordance with the paid
up insurance provision of the certificate.
11. The owner of each fraternal certificate in good standing prior to the
transformation of the corporation from a fraternal benefit society to a
mutual life insurance company or at the time of conversion from a mutual
life insurance company to a stock life insurance company shall have the
right after such transformation or conversion to transfer the insurance
evidenced by such certificate to the stock life plan in the manner provided
by law. The Corporation shall not have the right to levy an assessment
against the owner of such transferred insurance or impose a lien against
the reserve standing to the credit thereof.
12. The right and power heretofore existing in the Corporation to levy an
assessment in addition to the gross premiums payable with respect to each
fraternal certificate is hereby irrevocably waived.
13. The term "fraternal certificate," wherever the same appears in these
bylaws, shall mean and apply to all beneficiary certificates issued by the
Corporation prior to its transformation from a fraternal benefit society to
a mutual life insurance company.
ARTICLE VII - AMENDMENTS
1. These bylaws may be amended, changed or repealed by a majority of the board
of directors at any regular or special meeting of the board. They may also
be amended, changed or repealed at any annual or special meeting of the
stockholders by a majority vote of the stockholders.
<PAGE>
[SBG LOGO]
- --------------------------------------------------------------------------------
Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
August 14, 1998
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66636-0001
Dear Sir/Madam:
This letter is with reference to the Registration Statement of Variflex of which
Security Benefit Life Insurance Company (hereinafter "SBL") is the Depositor.
Said Registration Statement is being filed with the Securities and Exchange
Commission for the purpose of registering the variable annuity contracts issued
by SBL and the interests Variflex under such variable annuity contracts which
will be sold pursuant to an indefinite registration.
I have examined the Articles of Incorporation and Bylaws of SBL, minutes of the
meetings of its Board of Directors and other records, and pertinent provisions
of the Kansas insurance laws, together with applicable certificates of public
officials and other documents which I have deemed relevant. Based on the
foregoing, it is my opinion that:
1. SBL is duly organized and validly existing as a stock life insurance company
under the laws of Kansas.
2. Variflex has been validly created as a Separate Account in accordance with
the pertinent provisions of the insurance laws of Kansas.
3. SBL has the power, and has validly and legally exercised it, to create and
issue the variable annuity contracts which are administered within and by
means of Variflex.
4. The amount of variable annuity contracts to be sold pursuant to the
indefinite registration, when issued, will represent binding obligations of
SBL in accordance with their terms providing said contracts were issued for
the considerations set forth therein and evidenced by appropriate policies
and certificates.
I hereby consent to the inclusion in the Registration Statement of my foregoing
opinion.
Respectfully submitted,
AMY J. LEE
Amy J. Lee
Associate General Counsel and Vice President
Security Benefit Life Insurance Company
<PAGE>
Item 24.b. Exhibit (10)
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 6, 1998, with respect to the consolidated
financial statements of Security Benefit Life Insurance Company and Subsidiaries
and the financial statements of Variflex included in the Registration Statement
on Form N-4 No. 2-89328 and the related Statement of Additional Information
accompanying the Prospectus of Variflex.
Ernst & Young LLP
Kansas City, Missouri
August 14, 1998
<PAGE>
Item 24.b Exhibit (13)
GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,161.60
(1+T)1 = 1.16160
1+T = 1.16160
T = .16160
5 Years
1000 (1+T)5 = 1,996.30
((1+T)5)1/5 = (1.99630)1/5
1+T = 1.1483
T = .1483
10 Years
1000 (1+T)10 = 3,648.40
((1+T)10)1/10 = (3.64840)1/10
1+T = 1.1382
T = .1382
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 4,543.82
((1+T)13.56)1/13.56 = (4.54382)1/13.56
1+T = 1.1181
T = .1181
<PAGE>
GROWTH-INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,139.88
(1+T)1 = 1.13988
1+T = 1.13988
T = .1399
5 Years
1000 (1+T)5 = 1,685.41
((1+T)5)1/5 = (1.68541)1/5
1+T = 1.1100
T = .1100
10 Years
1000 (1+T)10 = 3,327.39
((1+T)10)1/10 = (3.32739)1/10
1+T = 1.1277
T = .1277
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 4,880.76
((1+T)13.56)1/13.56 = (4.88076)1/13.56
1+T = 1.1240
T = .1240
<PAGE>
MONEY MARKET SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 928.90
(1+T)1 = .9289
1+T = .9289
T = (.0711)
5 Years
1000 (1+T)5 = 968.76
((1+T)5)1/5 = (.96876)1/5
1+T = .9937
T = (.0063)
10 Years
1000 (1+T)10 = 1,158.40
((1+T)10)1/10 = (1.1584)1/10
1+T = 1.0148
T = .0148
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 1,350.74
((1+T)13.56)1/13.56 = (1.3507)1/13.56
1+T = 1.0224
T = .0224
<PAGE>
MONEY MARKET YIELD
Money Market Series (Series C) as of December 31, 1997
CALCULATION OF WEEKLY ADMINISTRATION FEE FACTOR:
118,118.89 Total 1997 Administrative Fee from Statement of Operations =
91,987,746.38 C-Fund Average Assets
0.001284072 X 7/365 = .00002462604 Weekly Administrative Fee Factor
CALCULATION OF CHANGE IN UNIT VALUE:
( Unrounded Unrounded)
( Price Price )
(12-31-XX - 12-24-XX ) 18.97498949560 - 18.96360836750
(--------------------------) = --------------------------------- = .00060015625
( Unrounded Price ) 18.96360836750
( 12-24-XX )
ANNUALIZED YIELD:
365/7 (.00060015625 - .00002462604) = 3.00%
EFFECTIVE YIELD:
(1 + .00057553021)365/7 - 1 = 3.05%
<PAGE>
WORLDWIDE EQUITY SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 941.69
(1+T)1 = .94169
1+T = .94169
T = (.0583)
5 Years
1000 (1+T)5 = 1,545.22
((1+T)5)1/5 = (1.54522)1/5
1+T = 1.0909
T = .0909
10 Years
1000 (1+T)10 = 925.06
((1+T)10)1/10 = (.92506)1/10
1+T = .9922
T = (.0078)
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 959.20
((1+T)13.56)1/13.56 = (.95920)1/13.56
1+T = .9969
T = (.0031)
<PAGE>
HIGH GRADE INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 977.14
(1+T)1 = .97714
1+T = .97714
T = (.0229)
5 Years
1000 (1+T)5 = 1,072.17
((1+T)5)1/5 = (1.07217)1/5
1+T = 1.0140
T = .0140
10 Years
1000 (1+T)10 = 1,538.78
((1+T)10)1/10 = (1.53878)1/10
1+T = 1.0440
T = .0440
12.67 Years (From Date of Inception April 30, 1985)
1000 (1+T)12.67 = 1,801.54
((1+T)12.67)1/12.67 = (1.80154)1/12.67
1+T = 1.0476
T = .0476
<PAGE>
EMERGING GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,075.24
(1+T)1 = 1.07524
1+T = 1.07524
T = .0752
5 Years
1000 (1+T)5 = 1,885.16
((1+T)5)1/5 = (1.88516)1/5
1+T = 1.1352
T = .1352
5.25 Years (From Date of Inception October 1, 1992)
1000 (1+T)5.25 = 1,883.13
((1+T)5.25)1/5.25 = (1.88313)1/5.25
1+T = 1.1281
T = .1281
GLOBAL AGGRESSIVE BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 938.82
(1+T)1 = .93882
1+T = .93882
T = (.0612)
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,097.70
((1+T)2.58)1/2.58 = (1.09770)1/2.58
1+T = 1.0367
T = .0367
<PAGE>
SPECIALIZED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 944.97
(1+T)1 = .94497
1+T = .94497
T = (.055)
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,127.55
((1+T)2.58)1/2.58 = (1.12755)1/2.58
1+T = 1.0476
T = .0476
MANAGED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,060.17
(1+T)1 = 1.06017
1+T = 1.06017
T = .0602
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,230.44
((1+T)2.58)1/2.58 = (1.23044)1/2.58
1+T = 1.0836
T = .0836
<PAGE>
EQUITY INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,159.24
(1+T)1 = 1.15924
1+T = 1.15924
T = .1592
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,583.84
((1+T)2.58)1/2.58 = (1.58384)1/2.58
1+T = 1.1948
T = .1948
HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,008.76
(1+T)1 = 1.0088
1+T = 1.0088
T = .0088
1.40 Years (from date of inception August 5, 1996)
1000 (1+T)1.40 = (1,073.58)1.40
((1+T)1.40)1/1.40 = (1.07358)1/1.40
1+T = 1.0520
T = .0520
<PAGE>
SOCIAL AWARENESS SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
1 Year
1000 (1+T)1 = 1,101.74
(1+T)1 = 1.10174
1+T = 1.10174
T = .1017
5 Years
1000 (1+T)5 = 1,647.89
((1+T)5)1/5 = (1.64789)1/5
1+T = 1.1051
T = .1051
6.67 Years (From Date of Inception May 1, 1991)
1000 (1+T)6.67 = 1,980.13
((1+T)6.67)1/6.67 = (1.98013)1/6.67
1+T = 1.1079
T = .1079
VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
.67 Year (from date of inception May 1, 1997)
1000 (1+T).67 = (1,192.95).67
(1+T).67)1/.67 = (1.19295).67
1+T = 1.3013
T = .3013
SMALL CAP SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
.21 Year (from date of inception October 15, 1997)
1000 (1+T).21 = (874.00).21
(1+T).21)1/.21 = (.87400).21
1+T = .5266
T = (.4734)
<PAGE>
GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,271.63
(1+T)1 = 1.2716
1+T = 1.2716
T = .2716
5 Years
1000 (1+T)5 = 2,273.94
((1+T)5)1/5 = (2.2739)1/5
1+T = 1.1786
T = .1786
10 Years
1000 (1+T)10 = 4,339.30
((1+T)10)1/10 = (4.3393)1/10
1+T = 1.1581
T = .1581
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 5,744.32
((1+T)13.56)1/13.56 = (5.7443)1/13.56
1+T = 1.1376
T = .1376
16 Years (From January 1, 1982)
1000 (1+T)16 = 7,789.83
((1+T)16)1/16 = (7.7898)1/16
1+T = 1.1369
T = .1369
<PAGE>
GROWTH-INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,249.89
(1+T)1 = 1.2499
1+T = 1.2499
T = .2499
5 Years
1000 (1+T)5 = 1,947.81
((1+T)5)1/5 = (1.9478)1/5
1+T = 1.1426
T = .1426
10 Years
1000 (1+T)10 = 3,931.13
((1+T)10)1/10 = (3.9311)1/10
1+T = 1.1467
T = .1467
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 5,965.16
((1+T)13.56)1/13.56 = (5.9652)1/13.56
1+T = 1.1408
T = .1408
16 Years (From January 1, 1982)
1000 (1+T)16 = 7,169.95
((1+T)16)1/16 = (7.1700)1/16
1+T = 1.1310
T = .1310
<PAGE>
MONEY MARKET SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,038.88
(1+T)1 = 1.0389
1+T = 1.0389
T = .0389
5 Years
1000 (1+T)5 = 1,166.67
((1+T)5)1/5 = (1.1667)1/5
1+T = 1.0313
T = .0313
10 Years
1000 (1+T)10 = 1,510.35
((1+T)10)1/10 = (1.5104)1/10
1+T = 1.0421
T = .0421
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 1,876.40
((1+T)13.56)1/13.56 = (1.8764)1/13.56
1+T = 1.0475
T = .0475
16 Years (From January 1, 1982)
1000 (1+T)16 = 2,285.54
((1+T)16)1/16 = (2.2855)1/16
1+T = 1.0530
T = .0530
<PAGE>
WORLDWIDE EQUITY SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,051.69
(1+T)1 = 1.0517
1+T = 1.0517
T = .0517
5 Years
1000 (1+T)5 = 1,764.62
((1+T)5)1/5 = (1.7646)1/5
1+T = 1.1202
T = .1202
10 Years
1000 (1+T)10 = 1,346.87
((1+T)10)1/10 = (1.3469)1/10
1+T = 1.0302
T = .0302
13.56 Years (From June 8, 1984)
1000 (1+T)13.56 = 1,522.95
((1+T)13.56)1/13.56 = (1.5230)1/13.56
1+T = 1.0315
T = .0315
<PAGE>
HIGH GRADE INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,087.14
(1+T)1 = 1.0871
1+T = .0871
T = .0871
5 Years
1000 (1+T)5 = 1,277.66
((1+T)5)1/5 = (1.2777)1/5
1+T = .0504
T = .0504
10 Years
1000 (1+T)10 = 1,935.96
((1+T)10)1/10 = (1.9360)1/10
1+T = 1.0683
T = .0683
12.67 Years (From Date of Inception April 30, 1985)
1000 (1+T)12.67 = 2,358.00
((1+T)12.67)1/12.67 = (2.3580)1/12.67
1+T = 1.0700
T = .0700
<PAGE>
EMERGING GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,185.24
(1+T)1 = 1.1852
1+T = 1.1852
T = .1852
5 Years
1000 (1+T)5 = 1,717.85
((1+T)5)1/5 = (1.7178)1/5
1+T = 1.1143
T = .1143
5.25 Years (From Date of Inception October 1, 1992)
1000 (1+T)5.25 = 2,137.00
((1+T)5.25)1/5.25 = (2.1370)1/5.25
1+T = 1.1556
T = .1556
<PAGE>
GLOBAL AGGRESSIVE BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,041.67
(1+T)1 = 1.0417
1+T = 1.0417
T = .0417
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,250.00
((1+T)2.58)1/2.58 = (1.2500)1/2.58
1+T = 1.0902
T = .0902
SPECIALIZED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,048.29
(1+T)1 = 1.0483
1+T = 1.0483
T = .0483
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,259.00
((1+T)2.58)1/2.58 = (1.2590)1/2.58
1+T = 1.0932
T = .0932
<PAGE>
MANAGED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,170.18
(1+T)1 = 1.1702
1+T = 1.1702
T = .1702
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,389.00
((1+T)2.58)1/2.58 = (1.3890)1/2.58
1+T = 1.1356
T = .1356
EQUITY INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,269.23
(1+T)1 = 1.2692
1+T = 1.2692
T = .2692
2.58 Years (From Date of Inception June 1, 1995)
1000 (1+T)2.58 = 1,749.00
((1+T)2.58)1/2.58 = (1.7490)1/2.58
1+T = 1.2416
T = .2416
<PAGE>
HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,118.80
(1+T)1 = (1.11880)
1+T = 1.11880
T = .1188
1.40 Years (from date of inception August 5, 1996)
1000 (1+T)1.40 = 1,187.00
((1+T)1.40)1/1.40 = ((1.18700)1.40)1/1.40
1+T = 1.1303
T = .1303
<PAGE>
SOCIAL AWARENESS SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
1 Year
1000 (1+T)1 = 1,211.73
(1+T)1 = 1.2117
1+T = 1.2117
T = .2117
5 Years
1000 (1+T)5 = 1,887.04
((1+T)5)1/5 = (1.8870)1/5
1+T = 1.1354
T = .1354
6.67 Years (From Date of Inception May 1, 1991)
1000 (1+T)6.67 = 2,272.00
((1+T)6.67)1/6.67 = (2.2720)1/6.67
1+T = 1.1309
T = .1309
<PAGE>
VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
.67 Year (from date of inception May 1, 1997)
1000 (1+T).67 = 1,292.90.67
(1+T).67)1/.67 = ((1.29290).67)1/.67
1+T = .4674
T = .4674
SMALL CAP SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
(WITHOUT CONTINGENT DEFERRED SALES CHARGE AND ADMINISTRATIVE FEE)
.21 Year (from date of inception October 15, 1997)
1000 (1+T).21 = (956.00).21
(1+T).21)1/.21 = ((.95600).21)1/.21
1+T = .8071
T = (.1929)
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES A (GROWTH)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,271.63 - 1,000 271.63 / 1,000 = 27.16%
1996 1,212.19 - 1,000 212.19 / 1,000 = 21.22%
1995 1,351.11 - 1,000 351.11 / 1,000 = 35.11%
1994 971.83 - 1,000 (28.17) / 1,000 = (2.82)%
1993 1,123.49 - 1,000 123.49 / 1,000 = 12.35%
1992 1,098.28 - 1,000 98.28 / 1,000 = 9.83%
1991 1,344.49 - 1,000 344.49 / 1,000 = 34.45%
1990 891.00 - 1,000 (109.00) / 1,000 = (10.90)%
1989 1,333.10 - 1,000 331.10 / 1,000 = 33.11%
1988 1,087.99 - 1,000 87.99 / 1,000 = 8.80%
1987 1,050.14 - 1,000 50.14 / 1,000 = 5.01%
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES B (GROWTH-INCOME)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,249.89 - 1,000 249.89 / 1,000 = 24.99%
1996 1,168.00 - 1,000 168.00 / 1,000 = 16.80%
1995 1,285.21 - 1,000 285.21 / 1,000 = 28.52%
1994 958.60 - 1,000 (41.40) / 1,000 = (4.14)%
1993 1,082.97 - 1,000 82.97 / 1,000 = 8.30%
1992 1,049.88 - 1,000 49.88 / 1,000 = 4.99%
1991 1,361.55 - 1,000 361.55 / 1,000 = 36.16%
1990 944.02 - 1,000 (55.98) / 1,000 = (5.60)%
1989 1,268.61 - 1,000 268.61 / 1,000 = 26.86%
1988 1,178.93 - 1,000 178.93 / 1,000 = 17.89%
1987 1,024.20 - 1,000 24.20 / 1,000 = 2.42%
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES C (MONEY MARKET)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,038.88 - 1,000 38.88 / 1,000 = 3.89%
1996 1,038.09 - 1,000 38.09 / 1,000 = 3.81%
1995 1,041.44 - 1,000 41.44 / 1,000 = 4.14%
1994 1,024.88 - 1,000 24.88 / 1,000 = 2.49%
1993 1,013.53 - 1,000 13.53 / 1,000 = 1.35%
1992 1,020.08 - 1,000 20.08 / 1,000 = 2.01%
1991 1,043.88 - 1,000 43.88 / 1,000 = 4.39%
1990 1,065.60 - 1,000 65.60 / 1,000 = 6.56%
1989 1,077.44 - 1,000 77.44 / 1,000 = 7.74%
1988 1,058.92 - 1,000 58.92 / 1,000 = 5.89%
1987 1,051.93 - 1,000 51.93 / 1,000 = 5.19%
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES D (WORLD WIDE EQUITY)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,051.69 - 1,000 51.69 / 1,000 = 5.17%
1996 1,159.87 - 1,000 159.87 / 1,000 = 15.99%
1995 1,095.45 - 1,000 95.45 / 1,000 = 9.55%
1994 1,015.11 - 1,000 15.11 / 1,000 = 1.51%
1993 1,300.58 - 1,000 300.58 / 1,000 = 30.06%
1992 962.18 - 1,000 (37.82) / 1,000 = (3.78)%
1991* 1,030.96 - 1,000 30.96 / 1,000 = 3.01%
*From May 1, 1991 to December 31, 1991.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES E (HIGH GRADE INCOME)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,087.14 - 1,000 87.14 / 1,000 = 8.71%
1996 981.00 - 1,000 (19.00) / 1,000 = (1.90)%
1995 1,171.70 - 1,000 171.70 / 1,000 = 17.17%
1994 919.59 - 1,000 (80.41) / 1,000 = (8.04)%
1993 1,112.80 - 1,000 112.80 / 1,000 = 11.28%
1992 1,061.60 - 1,000 61.60 / 1,000 = 6.16%
1991 1,155.69 - 1,000 155.69 / 1,000 = 15.57%
1990 1,054.00 - 1,000 54.00 / 1,000 = 5.40%
1989 1,105.43 - 1,000 105.43 / 1,000 = 10.54%
1988 1,059.11 - 1,000 59.11 / 1,000 = 5.91%
1987 1,011.63 - 1,000 11.63 / 1,000 = 1.16%
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES J (EMERGING GROWTH)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,185.25 - 1,000 185.25 / 1,000 = 18.52%
1996 1,166.24 - 1,000 166.24 / 1,000 = 16.62%
1995 1,180.15 - 1,000 180.15 / 1,000 = 18.02%
1994 937.72 - 1,000 (62.28) / 1,000 = (6.23)%
1993 1,122.99 - 1,000 122.99 / 1,000 = 12.30%
1992* 1,244.00 - 1,000 244.00 / 1,000 = 24.40%
*From October 1, 1992 to December 31, 1992.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES K (GLOBAL AGGRESSIVE BOND)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,041.67 - 1,000 41.67 / 1,000 = 4.17%
1996 1,122.54 - 1,000 122.54 / 1,000 = 12.25%
1995* 1,069.00 - 1,000 69.00 / 1,000 = 6.90%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES M (SPECIALIZED ASSET ALLOCATION)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,048.29 - 1,000 48.29 / 1,000 = 4.83%
1996 1,128.76 - 1,000 128.76 / 1,000 = 12.88%
1995* 1,064.00 - 1,000 64.00 / 1,000 = 6.40%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES N (MANAGED ASSET ALLOCATION)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,170.18 - 1,000 170.18 / 1,000 = 17.02%
1996 1,113.51 - 1,000 113.51 / 1,000 = 11.35%
1995* 1,066.00 - 1,000 66.00 / 1,000 = 6.60%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES O (EQUITY INCOME)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,269.23 - 1,000 269.23 / 1,000 = 26.92%
1996 1,185.89 - 1,000 185.89 / 1,000 = 18.59%
1995* 1,162.00 - 1,000 162.00 / 1,000 = 16.20%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES P (HIGH YIELD)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 $1,118.76 - $1,000 $118.76 / $1,000 = 11.88%
1996* 1,061.00 - 1,000 61.00 / 1,000 = 6.10%
*From August 5, 1996 to December 31, 1996.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES S (SOCIAL AWARENESS)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997 1,211.73 - 1,000 211.73 / 1,000 = 21.17%
1996 1,174.08 - 1,000 174.08 / 1,000 = 17.41%
1995 1,262.45 - 1,000 262.45 / 1,000 = 26.25%
1994 950.41 - 1,000 (49.59) / 1,000 = (4.96)%
1993 1,105.48 - 1,000 105.48 / 1,000 = 10.55%
1992 1,149.95 - 1,000 149.95 / 1,000 = 15.00%
1991* 1,047.00 - 1,000 47.00 / 1,000 = 4.70%
*From May 1, 1991 to December 31, 1991.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES V (VALUE)
Quotation of Total Return for the period of January 1, 1987 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997* $1,292.95 - $1,000 $292.95 / $1,000 = 29.30%
*From May 1, 1997 to December 31, 1997.
<PAGE>
VARIFLEX
NON-STANDARDIZED TOTAL RETURN
SERIES X (SMALL CAP)
Quotation of Total Return for the period of January 1, 1997 to December 31,
1997.
Initial Investment = $1,000
Increase
Ending Initial (Decrease) Initial % Increase
Value Value in Value Value (Decrease)
------ ------- ---------- ------- ----------
1997* $956.00 - $1,000 $(44) / $1,000 = (4.4)%
*From October 15, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 001
<NAME> SERIES A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 662,770
<INVESTMENTS-AT-VALUE> 814,198
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 814,198
<PAYABLE-FOR-SECURITIES> 814,195
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3
<TOTAL-LIABILITIES> 814,198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 13,993
<SHARES-COMMON-PRIOR> 12,930
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,354
<NET-ASSETS> 814,198
<DIVIDEND-INCOME> 4,540
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (8,922)
<NET-INVESTMENT-INCOME> (4,382)
<REALIZED-GAINS-CURRENT> 113,667
<APPREC-INCREASE-CURRENT> 51,354
<NET-CHANGE-FROM-OPS> 160,639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,775
<NUMBER-OF-SHARES-REDEEMED> 3,707
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,068
<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> 703,033
<PER-SHARE-NAV-BEGIN> 45.75
<PER-SHARE-NII> (.33)
<PER-SHARE-GAIN-APPREC> 12.77
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 58.19
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 002
<NAME> SERIES B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 874,013
<INVESTMENTS-AT-VALUE> 1,093,960
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,093,960
<PAYABLE-FOR-SECURITIES> 1,093,948
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12
<TOTAL-LIABILITIES> 1,093,960
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 18,792
<SHARES-COMMON-PRIOR> 19,042
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106,904
<NET-ASSETS> 1,093,960
<DIVIDEND-INCOME> 21,188
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (13,420)
<NET-INVESTMENT-INCOME> 7,768
<REALIZED-GAINS-CURRENT> 103,819
<APPREC-INCREASE-CURRENT> 106,904
<NET-CHANGE-FROM-OPS> 218,491
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,118
<NUMBER-OF-SHARES-REDEEMED> 3,361
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (243)
<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> 996,769
<PER-SHARE-NAV-BEGIN> 46.58
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> 11.22
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 58.21
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 003
<NAME> SERIES C
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 167,932
<INVESTMENTS-AT-VALUE> 67,916
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,916
<PAYABLE-FOR-SECURITIES> 67,920
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (4)
<TOTAL-LIABILITIES> 67,916
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,578
<SHARES-COMMON-PRIOR> 4,954
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (165)
<NET-ASSETS> 67,916
<DIVIDEND-INCOME> 5,040
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,229)
<NET-INVESTMENT-INCOME> 3,811
<REALIZED-GAINS-CURRENT> (219)
<APPREC-INCREASE-CURRENT> (165)
<NET-CHANGE-FROM-OPS> 3,427
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,375
<NUMBER-OF-SHARES-REDEEMED> 13,747
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,372)
<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> 91,988
<PER-SHARE-NAV-BEGIN> 18.26
<PER-SHARE-NII> .89
<PER-SHARE-GAIN-APPREC> (.17)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.98
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 004
<NAME> SERIES D
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 224,267
<INVESTMENTS-AT-VALUE> 252,696
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 252,696
<PAYABLE-FOR-SECURITIES> 252,696
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 252,696
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 16,557
<SHARES-COMMON-PRIOR> 15,384
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (15,631)
<NET-ASSETS> 252,696
<DIVIDEND-INCOME> 5,166
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (3,150)
<NET-INVESTMENT-INCOME> 2,016
<REALIZED-GAINS-CURRENT> 25,125
<APPREC-INCREASE-CURRENT> (15,631)
<NET-CHANGE-FROM-OPS> 11,510
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,104
<NUMBER-OF-SHARES-REDEEMED> 3,929
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,175
<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> 251,257
<PER-SHARE-NAV-BEGIN> 14.51
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> .62
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.26
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 005
<NAME> SERIES E
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 117,344
<INVESTMENTS-AT-VALUE> 117,812
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 117,812
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 117,812
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 4,998
<SHARES-COMMON-PRIOR> 5,072
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,886
<NET-ASSETS> 117,812
<DIVIDEND-INCOME> 7,354
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,523)
<NET-INVESTMENT-INCOME> 5,831
<REALIZED-GAINS-CURRENT> (219)
<APPREC-INCREASE-CURRENT> 2,886
<NET-CHANGE-FROM-OPS> 8,498
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,073
<NUMBER-OF-SHARES-REDEEMED> 2,144
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (71)
<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> 105,518
<PER-SHARE-NAV-BEGIN> 21.68
<PER-SHARE-NII> 1.16
<PER-SHARE-GAIN-APPREC> .73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.57
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 006
<NAME> SERIES S
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 62,574
<INVESTMENTS-AT-VALUE> 78,422
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78,422
<PAYABLE-FOR-SECURITIES> 78,416
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 78,422
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,452
<SHARES-COMMON-PRIOR> 2,846
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,871
<NET-ASSETS> 78,422
<DIVIDEND-INCOME> 125
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (805)
<NET-INVESTMENT-INCOME> (680)
<REALIZED-GAINS-CURRENT> 7,561
<APPREC-INCREASE-CURRENT> 5,871
<NET-CHANGE-FROM-OPS> 12,752
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,099
<NUMBER-OF-SHARES-REDEEMED> 1,399
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (300)
<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> 66,295
<PER-SHARE-NAV-BEGIN> 18.74
<PER-SHARE-NII> (.22)
<PER-SHARE-GAIN-APPREC> 4.20
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.72
<EXPENSE-RATIO> (.02)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 007
<NAME> SERIES J
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 162,885
<INVESTMENTS-AT-VALUE> 187,775
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 187,775
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 187,775
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,787
<SHARES-COMMON-PRIOR> 7,141
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,679
<NET-ASSETS> 187,775
<DIVIDEND-INCOME> 464
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,980)
<NET-INVESTMENT-INCOME> (1,516)
<REALIZED-GAINS-CURRENT> 20,555
<APPREC-INCREASE-CURRENT> 10,679
<NET-CHANGE-FROM-OPS> 29,718
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,688
<NUMBER-OF-SHARES-REDEEMED> 3,035
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,653
<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> 162,165
<PER-SHARE-NAV-BEGIN> 18.03
<PER-SHARE-NII> (.19)
<PER-SHARE-GAIN-APPREC> 3.53
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.37
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 008
<NAME> SERIES K
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 8,586
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,991
<PAYABLE-FOR-SECURITIES> 7,991
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<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 7,991
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 639
<SHARES-COMMON-PRIOR> 486
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (543)
<NET-ASSETS> 7,991
<DIVIDEND-INCOME> 650
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<OTHER-INCOME> 0
<EXPENSES-NET> (113)
<NET-INVESTMENT-INCOME> 537
<REALIZED-GAINS-CURRENT> 326
<APPREC-INCREASE-CURRENT> (543)
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 548
<NUMBER-OF-SHARES-REDEEMED> 393
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<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 7,646
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> .95
<PER-SHARE-GAIN-APPREC> (.45)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.50
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 009
<NAME> SERIES M
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 28,756
<INVESTMENTS-AT-VALUE> 29,765
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,765
<PAYABLE-FOR-SECURITIES> 29,765
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 29,765
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 1,523
<SHARES-COMMON-PRIOR> 1,811
<ACCUMULATED-NII-CURRENT> 0
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<ACCUM-APPREC-OR-DEPREC> (756)
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<DIVIDEND-INCOME> 600
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (353)
<NET-INVESTMENT-INCOME> 247
<REALIZED-GAINS-CURRENT> 1,654
<APPREC-INCREASE-CURRENT> (756)
<NET-CHANGE-FROM-OPS> 1,145
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,003
<NUMBER-OF-SHARES-REDEEMED> 445
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 558
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 27,493
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 12.59
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 010
<NAME> SERIES N
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 19,041
<INVESTMENTS-AT-VALUE> 21,161
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,161
<PAYABLE-FOR-SECURITIES> 21,161
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 21,161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,523
<SHARES-COMMON-PRIOR> 1,007
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 953
<NET-ASSETS> 21,161
<DIVIDEND-INCOME> 263
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (199)
<NET-INVESTMENT-INCOME> 64
<REALIZED-GAINS-CURRENT> 1,213
<APPREC-INCREASE-CURRENT> 953
<NET-CHANGE-FROM-OPS> 2,230
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 914
<NUMBER-OF-SHARES-REDEEMED> 398
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 516
<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> 15,213
<PER-SHARE-NAV-BEGIN> 11.87
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.97
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.89
<EXPENSE-RATIO> (.01)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000740583
<NAME> VARIFLEX
<SERIES>
<NUMBER> 011
<NAME> SERIES O
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 79,723
<INVESTMENTS-AT-VALUE> 94,438
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,438
<PAYABLE-FOR-SECURITIES> 94,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (1)
<TOTAL-LIABILITIES> 94,438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 5,401
<SHARES-COMMON-PRIOR> 2,729
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,793
<NET-ASSETS> 94,438
<DIVIDEND-INCOME> 658
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (887)
<NET-INVESTMENT-INCOME> (229)
<REALIZED-GAINS-CURRENT> 4,836
<APPREC-INCREASE-CURRENT> 10,793
<NET-CHANGE-FROM-OPS> 15,400
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,498
<NUMBER-OF-SHARES-REDEEMED> 825
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,673
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 13.78
<PER-SHARE-NII> (.06)
<PER-SHARE-GAIN-APPREC> 3.76
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.48
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
THOMAS R. CLEVENGER
-------------------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
SISTER LORETTO MARIE COLWELL
-------------------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
JOHN C. DICUS
-------------------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Steven J. Douglass, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any VARIFLEX SEPARATE 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 3rd day of March, 1998.
STEVEN J. DOUGLASS
-------------------------------------------
Steven J. Douglass
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint James R. Schmank and
Roger K. Viola, and each of them, my true and lawful attorneys, each with full
power and authority for me and in my name and behalf to sign Registration
Statements, any amendments thereto and any applications for exemptive relief
filed pursuant to the Investment Company Act of 1940 or the Securities Act of
1933, as amended, and any instrument or document filed as part thereof, or in
connection therewith or in any way related thereto, in connection with Variable
Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE INSURANCE
COMPANY and any VARIFLEX SEPARATE 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 3rd day of March, 1998.
HOWARD R. FRICKE
-------------------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
W. W. HANNA
-------------------------------------------
W. W. Hanna
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
JOHN E. HAYES, JR.
-------------------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
LAIRD G. NOLLER
-------------------------------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
FRANK C. SABATINI
-------------------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
<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 VARIFLEX SEPARATE 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 3rd day of March, 1998.
ROBERT C. WHEELER
-------------------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 3rd day of March, 1998.
ANNETTE E. CRIPPS
-------------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- --------------------------------
