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VARIFLEX ES VARIABLE ANNUITY
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY: MAILING ADDRESS:
SECURITY BENEFIT LIFE SECURITY BENEFIT LIFE
INSURANCE COMPANY INSURANCE COMPANY
700 SW HARRISON STREET P.O. BOX 750497
TOPEKA, KANSAS 66636-0001 TOPEKA, KANSAS 66675-0497
1-800-888-2461
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This Prospectus describes the Variflex ES Variable Annuity Contract
("Variflex ES Contract" or the "Contract"), a flexible purchase payment deferred
variable annuity contract, offered by Security Benefit Life Insurance Company
("Security Benefit"). The Contract is available for groups in connection with a
retirement plan qualified under Section 401, 403(b) or 457 of the Internal
Revenue Code. The Contract is designed to give you flexibility in planning for
retirement and other financial goals.
You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of Security Benefit called the Variflex
Separate Account, or to the General Account. Each Subaccount invests in a
corresponding Series of SBL Fund. The Subaccounts currently available under the
Contract are:
* Equity (formerly Growth) * Capital Growth
* Large Cap Value * Global Total Return
(formerly Growth-Income) * Managed Asset Allocation
* Money Market * Equity Income
* Global (formerly Worldwide Equity) * High Yield
* Diversified Income * Small Cap Value
(formerly High Grade Income * Social Awareness
* Large Cap Growth * Technology
* Enhanced Index * Mid Cap Value (formerly Value)
* International * Main Street Growth and Income
* Mid Cap Growth (formerly Mid Cap) * Small Cap Growth (formerly Small Cap)
* Global Strategic Income * Select 25
Amounts allocated to the General Account will accrue interest at rates that
are paid by Security Benefit as described in "The Fixed Account," page 22.
Contract Value in the Fixed Account is guaranteed by Security Benefit.
Amounts that you allocate to the Subaccounts under a Contract will vary based
on investment performance of the Subaccounts. No minimum amount of Contract
Value is guaranteed.
When you are ready to receive annuity payments, the Contract provides several
options for annuity payments. See "Annuity Options," page 21.
You may return the Contract according to the terms of its Free-Look Right.
See "Free-Look Right," page 5.
This Prospectus concisely sets forth information about the Contract and the
Separate Account that you should know before purchasing the Contract. The
"Statement of Additional Information" dated May 1, 2000, which has been filed
with the Securities and Exchange Commission, contains certain additional
information. The Statement of Additional Information, as it may be supplemented
from time to time, is incorporated by reference into this Prospectus and is
available at no charge by writing Security Benefit at 700 SW Harrison Street,
Topeka, Kansas 66636 or by calling 1-800-888-2461. The table of contents of the
Statement of Additional Information is set forth on page 33 of this Prospectus.
The SEC maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference and other
information regarding companies that file electronically with the SEC.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR SBL FUND. YOU
SHOULD READ THE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE CONTRACT IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE VALUE
OF YOUR CONTRACT WILL GO UP AND DOWN AND YOU COULD LOSE MONEY.
DATE: MAY 1, 2000, AS SUPPLEMENTED JANUARY 8, 2001
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TABLE OF CONTENTS
Page
DEFINITIONS.............................................................. 4
SUMMARY.................................................................. 5
PURPOSE OF THE CONTRACT............................................... 5
THE SEPARATE ACCOUNT AND SBL FUND..................................... 5
FIXED ACCOUNT......................................................... 5
PURCHASE PAYMENTS..................................................... 5
CONTRACT BENEFITS..................................................... 5
FREE-LOOK RIGHT....................................................... 5
CHARGES AND DEDUCTIONS................................................ 5
Contingent Deferred Sales Charge.................................... 5
Mortality and Expense Risk Charge................................... 6
Administration Charge............................................... 6
Premium Tax Charge.................................................. 6
Other Expenses...................................................... 6
CONTACTING SECURITY BENEFIT........................................... 6
EXPENSE TABLE............................................................ 6
CONTRACTUAL EXPENSES.................................................. 7
ANNUAL SEPARATE ACCOUNT EXPENSES...................................... 7
ANNUAL MUTUAL FUND EXPENSES........................................... 7
EXAMPLES.............................................................. 8
CONDENSED FINANCIAL INFORMATION.......................................... 9
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND... 11
SECURITY BENEFIT LIFE INSURANCE COMPANY............................... 11
PUBLISHED RATINGS..................................................... 11
SEPARATE ACCOUNT...................................................... 11
SBL FUND............................................................ 11
Series A (Equity Series)............................................ 12
Series B (Large Cap Value Series)................................... 12
Series C (Money Market Series)...................................... 12
Series D (Global Series)............................................ 12
Series E (Diversified Income Series)................................ 12
Series G (Large Cap Growth Series).................................. 12
Series H (Enhanced Index Series).................................... 12
Series I (International Series)..................................... 12
Series J (Mid Cap Growth Series).................................... 12
Series K (Global Strategic Income Series)........................... 12
Series L (Capital Growth Series).................................... 13
Series M (Global Total Return Series)............................... 13
Series N (Managed Asset Allocation Series).......................... 13
Series O (Equity Income Series)..................................... 13
Series P (High Yield Series)........................................ 13
Series Q (Small Cap Value Series)................................... 13
Series S (Social Awareness Series).................................. 13
Series T (Technology Series)........................................ 13
Series V (Mid Cap Value Series)..................................... 13
Series W (Main Street Growth and Income(R)Series)................... 13
Series X (Small Cap Growth Series).................................. 13
Series Y (Select 25 Series)......................................... 13
The Investment Adviser.............................................. 13
THE CONTRACT............................................................. 14
GENERAL............................................................... 14
APPLICATION FOR A CONTRACT............................................ 14
PURCHASE PAYMENTS..................................................... 14
ALLOCATION OF PURCHASE PAYMENTS....................................... 14
DOLLAR COST AVERAGING OPTION.......................................... 15
ASSET REALLOCATION OPTION............................................. 15
TRANSFERS OF CONTRACT VALUE........................................... 16
CONTRACT VALUE........................................................ 16
DETERMINATION OF CONTRACT VALUE....................................... 16
FULL AND PARTIAL WITHDRAWALS.......................................... 17
SYSTEMATIC WITHDRAWALS................................................ 17
FREE-LOOK RIGHT....................................................... 18
DEATH BENEFIT......................................................... 18
CHARGES AND DEDUCTIONS................................................... 19
CONTINGENT DEFERRED SALES CHARGE...................................... 19
MORTALITY AND EXPENSE RISK CHARGE..................................... 19
ADMINISTRATION CHARGE................................................. 20
PREMIUM TAX CHARGE.................................................... 20
OTHER CHARGES......................................................... 20
VARIATIONS IN CHARGES................................................. 20
GUARANTEE OF CERTAIN CHARGES.......................................... 20
SBL FUND EXPENSES..................................................... 20
ANNUITY PERIOD........................................................... 20
GENERAL............................................................... 20
ANNUITY OPTIONS....................................................... 21
Option 1--Life Income............................................... 21
Option 2--Life Income with Guaranteed Payments of
5, 10, 15 or 20 Years............................................. 21
Option 3--Life with Installment Refund Option....................... 21
Option 4--Joint and Last Survivor................................... 22
Option 5--Payments for a Specified Period........................... 22
Option 6--Payments of a Specified Amount............................ 22
Option 7--Period Certain............................................ 22
Option 8--Joint and Contingent Survivor Option...................... 22
Value of Variable Annuity Payments: Assumed Interest Rate........... 22
SELECTION OF AN OPTION................................................ 22
THE FIXED ACCOUNT........................................................ 22
INTEREST.............................................................. 23
DEATH BENEFIT......................................................... 23
CONTRACT CHARGES...................................................... 23
TRADITIONAL GENERAL ACCOUNT OPTION.................................... 23
DCA PLUS ACCOUNT OPTION............................................... 24
PAYMENTS FROM THE FIXED ACCOUNT....................................... 24
MORE ABOUT THE CONTRACT.................................................. 24
DESIGNATION AND CHANGE OF BENEFICIARY................................. 24
DIVIDENDS............................................................. 24
PAYMENTS FROM THE SEPARATE ACCOUNT.................................... 24
PROOF OF AGE AND SURVIVAL............................................. 25
MISSTATEMENTS......................................................... 25
LOANS................................................................. 25
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS...................... 25
FEDERAL TAX MATTERS...................................................... 26
INTRODUCTION.......................................................... 26
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT............... 26
General............................................................. 26
Charge for Security Benefit Taxes................................... 26
Diversification Standards........................................... 27
QUALIFIED PLANS....................................................... 27
Section 401......................................................... 28
Section 403(b)...................................................... 29
Section 457......................................................... 29
Rollovers........................................................... 29
Tax Penalties....................................................... 30
Withholding......................................................... 30
OTHER INFORMATION........................................................ 30
VOTING OF SBL FUND SHARES............................................. 30
SUBSTITUTION OF INVESTMENTS........................................... 30
CHANGES TO COMPLY WITH LAW AND AMENDMENTS............................. 31
REPORTS TO OWNERS..................................................... 31
TELEPHONE TRANSFER PRIVILEGES......................................... 31
LEGAL PROCEEDINGS..................................................... 32
LEGAL MATTERS......................................................... 32
PERFORMANCE INFORMATION.................................................. 32
ADDITIONAL INFORMATION................................................... 33
REGISTRATION STATEMENT................................................ 33
FINANCIAL STATEMENTS.................................................. 33
STATEMENT OF ADDITIONAL INFORMATION...................................... 33
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YOU MAY NOT BE ABLE TO PURCHASE THE CONTRACT IN YOUR STATE. YOU SHOULD NOT
CONSIDER THIS PROSPECTUS TO BE AN OFFERING IF THE CONTRACT MAY NOT BE LAWFULLY
OFFERED IN YOUR STATE. YOU SHOULD ONLY RELY UPON INFORMATION CONTAINED IN THIS
PROSPECTUS OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
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DEFINITIONS
Various terms commonly used in this Prospectus are defined as follows:
ACCUMULATION PERIOD -- The period commencing on the Contract Date and ending
on the Annuity Commencement Date or, if earlier, when you terminate the
Contract, either through a full withdrawal, payment of charges, or payment of
the death benefit proceeds.
ACCUMULATION UNIT -- A unit of measure used to calculate Contract Value.
ANNUITANT -- The person that you designate to receive annuity payments. If
you designate Joint Annuitants, "Annuitant" means both Annuitants unless
otherwise stated.
ANNUITY -- A series of periodic income payments made by Security Benefit to
an Annuitant, Joint Annuitant, or Beneficiary during the period specified in the
Annuity Option.
ANNUITY COMMENCEMENT DATE -- The date when annuity payments are to begin.
ANNUITY OPTIONS -- Options under the Contract that prescribe the provisions
under which a series of annuity payments is made.
ANNUITY PERIOD -- The period beginning on the Annuity Commencement Date
during which annuity payments are made.
AUTOMATIC INVESTMENT PROGRAM -- A program pursuant to which purchase payments
are automatically paid from your bank account on a specified day of each month
or a salary reduction agreement.
CONTRACT -- A certificate is issued by Security Benefit to Participants under
a Group Allocated Contract as evidence of your benefits under the contract.
Certificates under Group Allocated Contracts are referred to herein as the
"Contract" or the "Contracts."
CONTRACT DATE -- The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that your initial purchase payment is credited to the Contract.
CONTRACT DEBT -- The unpaid loan balance including loan interest.
CONTRACTOWNER OR OWNER -- The person in whose name the Contract is issued.
CONTRACT VALUE -- The total value of your Contract, which includes amounts
allocated to the Subaccounts and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
CONTRACT YEAR -- Each twelve-month period measured from the Contract Date.
DESIGNATED BENEFICIARY -- The person having the right to the death benefit,
if any, payable upon the death of the Participant during the Accumulation
Period. The Designated Beneficiary is the first person on the following list who
is alive on the date of death of the Participant: the Primary Beneficiary; the
Secondary Beneficiary; or if neither of the above is alive, the Participant's
estate.
FIXED ACCOUNT -- An account that is part of Security Benefit's General
Account to which you may allocate all or a portion of your Contract Value to be
held for accumulation at fixed rates of interest (which may not be less than 3
percent) declared periodically by Security Benefit.
GENERAL ACCOUNT -- All assets of Security Benefit other than those allocated
to the Separate Account or to any other separate account of Security Benefit.
GROUP ALLOCATED CONTRACT -- A master agreement between the Contractowner and
Security Benefit.
HOME OFFICE -- The Annuity Administration Department of Security Benefit,
P.O. Box 750497, Topeka, Kansas 66675-0497.
PARTICIPANT -- A Participant under a Qualified Plan.
PLAN -- The document or agreement defining the retirement benefits and those
who are eligible to receive them. The Plan is not part of the Variflex ES
Contract and Security Benefit is not a party to the Plan.
PURCHASE PAYMENT -- An amount paid to Security Benefit as consideration for
the Contract.
SBL FUND -- An open-end management investment company commonly referred to as
a mutual fund.
SEPARATE ACCOUNT -- The Variflex Separate Account. A separate account of
Security Benefit that consists of twenty-two accounts, referred to as
Subaccounts, each of which invests in a corresponding Series of SBL Fund.
SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of SBL Fund. Currently, twenty-two Subaccounts
are available under the Contract.
VALUATION DATE -- Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUATION PERIOD -- A period used in measuring the investment experience of
each Subaccount of the Separate Account. The Valuation Period begins at the
close of one Valuation Date and ends at the close of the next succeeding
Valuation Date.
WITHDRAWAL VALUE -- The amount you will receive upon full withdrawal of the
Contract. It is equal to Contract Value less any Contract Debt, any applicable
withdrawal charges, a pro rata administration charge, and any uncollected
premium taxes.
SUMMARY
This summary provides a brief overview of the more significant aspects of the
Contract. Further detail is provided in this Prospectus, the Statement of
Additional Information, and the Contract. Unless the context indicates
otherwise, the discussion in this summary and the remainder of the Prospectus
relate to the portion of the Contract involving the Separate Account. The Fixed
Account is briefly described under "The Fixed Account," page 22, and in the
Contract.
PURPOSE OF THE CONTRACT -- The group flexible purchase payment deferred
variable annuity contract ("Contract") described in this Prospectus is designed
to give you flexibility in planning for retirement and other financial goals.
You may purchase a Contract on a group basis in connection with a retirement
plan qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended. These plans are sometimes referred to in this Prospectus as
"Qualified Plans."
THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently
divided into twenty-two accounts referred to as Subaccounts. See "Separate
Account," page 11. Each Subaccount invests exclusively in shares of a
corresponding Series of SBL Fund (the "Fund"). The Series of SBL Fund, each of
which has a different investment objective or objectives, are as follows: Equity
Series, Large Cap Value Series, Money Market Series, Global Series, Diversified
Income Series, Large Cap Growth Series, Enhanced Index Series, International
Series, Mid Cap Growth Series, Global Strategic Income Series, Capital Growth
Series, Global Total Return Series, Managed Asset Allocation Series, Equity
Income Series, High Yield Series, Small Cap Value Series, Social Awareness
Series, Technology Series, Mid Cap Value Series, Main Street Growth and
Income(R) Series, Small Cap Growth Series and Select 25 Series. See "SBL Fund,"
page 11.
You may allocate all or part of your purchase payments to the Subaccounts.
Amounts that you allocate to the Subaccounts will increase or decrease in dollar
value depending on the investment performance of the Series of SBL Fund in which
such Subaccount invests. You bear the investment risk for amounts allocated to a
Subaccount.
FIXED ACCOUNT -- You may allocate all or part of your purchase payments to
the Fixed Account, which is part of Security Benefit's General Account. Amounts
that you allocate to the Fixed Account earn interest at rates determined at the
discretion of Security Benefit and guaranteed to be at least an effective annual
rate of 3 percent. See "The Fixed Account," page 22.
PURCHASE PAYMENTS -- The minimum purchase payment is $500, or if you elect an
Automatic Investment Program, is $25. See "Purchase Payments," page 14.
CONTRACT BENEFITS -- You may transfer Contract Value among the Subaccounts
and to and from the Fixed Account, subject to certain restrictions as described
in "The Contract," page 14 and "The Fixed Account," page 22.
At any time before the Annuity Commencement Date, you may surrender a
Contract for its Withdrawal Value, and may make partial withdrawals, including
systematic withdrawals, from Contract Value, subject to certain restrictions
described in "The Fixed Account," page 22 and any restrictions imposed by the
Plan. See "Full and Partial Withdrawals," page 17 and "Federal Tax Matters,"
page 26 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 Participant attaining age 59 1/2.
The Contract provides for a death benefit upon the death of the Participant
prior to the Annuity Commencement Date. The death benefit will vary depending on
the Contract's investment results and the age of the Participant on the Contract
Date. Security Benefit will pay the death benefit proceeds to the beneficiary
upon receipt of due proof of the Participant's death and instructions regarding
payment.
The Contract provides for several Annuity Options on either a variable basis,
a fixed basis, or both. Security Benefit guarantees annuity payments under the
fixed Annuity Options. See "Annuity Period," page 20.
FREE-LOOK RIGHT -- You may return the Contract within the Free-Look Period,
which is generally a ten-day period beginning when you receive the Contract. In
this event, Security Benefit will refund to you purchase payments allocated to
the Fixed Account plus the Contract Value in the Subaccounts plus any charges
deducted from Contract Value in the Subaccounts. Security Benefit will refund
purchase payments allocated to the Subaccounts rather than the Contract Value in
those states where it is required to do so.
CHARGES AND DEDUCTIONS -- Security Benefit does not deduct 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. If you withdraw Contract Value, Security
Benefit may deduct a contingent deferred sales charge (which may also be
referred to as a withdrawal charge). The withdrawal charge will be waived on
withdrawals to the extent that total withdrawals in a Contract Year, including
systematic withdrawals, do not exceed the Free Withdrawal amount defined as
follows. The Free Withdrawal amount is equal in the first Contract Year to 10
percent of purchase payments made during the year and, in any subsequent
Contract Year, to 10 percent of Contract Value as of the first day of that
Contract Year. The withdrawal charge generally applies to the portion of
withdrawals in a Contract Year that exceeds the Free Withdrawal amount for that
Contract Year. For the purpose of determining any withdrawal charge, Security
Benefit deems withdrawals to be made first from purchase payments and then from
earnings. The amount of the charge will depend on the number of years the
purchase payment has been credited under the Contract according to the following
schedule:
------------------------- -------------------------
AGE OF PURCHASE PAYMENT
IN YEARS WITHDRAWAL CHARGE
------------------------- -------------------------
1 5%
2 5%
3 5%
4 5%
5 5%
6 and later 0%
------------------------- -------------------------
The amount of the withdrawal charge assessed against your Contract will never
exceed 5 percent of purchase payments paid under the Contract. In addition, no
withdrawal charge will be assessed upon: (1) payment of death benefit proceeds;
or (2) annuity options that provide for payments for life or a period of at
least 5 years. See "Contingent Deferred Sales Charge," page 19, for a discussion
of other circumstances under which Security Benefit waives the withdrawal
charge.
MORTALITY AND EXPENSE RISK CHARGE. Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks equal to an
annual rate of 1.0 percent of each Subaccount's average daily net assets. See
"Mortality and Expense Risk Charge," page 19.
ADMINISTRATION CHARGE. Security Benefit deducts from Contract Value an
administration charge of $15 on each anniversary of the Contract Date. See
"Administration Charge," page 20.
PREMIUM TAX CHARGE. Security Benefit assesses a premium tax charge to
reimburse itself for any premium taxes that it incurs with respect to this
Contract. This charge will usually be deducted on annuitization or upon full
withdrawal if a premium tax was incurred by Security Benefit and is not
refundable. Partial withdrawals, including systematic withdrawals, may be
subject to a premium tax charge if a premium tax is incurred on the withdrawal
by Security Benefit and is not refundable. Security Benefit reserves the right
to deduct such taxes when due or anytime thereafter. Premium tax rates currently
range from 0 percent to 3.5 percent. See "Premium Tax Charge," page 20.
OTHER EXPENSES. Security Benefit pays the operating expenses of the Separate
Account. Investment advisory fees and operating expenses of SBL Fund are paid by
the Fund and are reflected in the net asset value of the Fund shares. For a
description of these charges and expenses, see the Prospectus for SBL Fund.
CONTACTING SECURITY BENEFIT -- You should direct all written requests,
notices, and forms required by the Contract and any questions or inquiries to
Security Benefit Life Insurance Company, P.O. Box 750497, Topeka, Kansas
66675-0497 or by phone by calling (785) 431-3112 or 1-800-888-2461, extension
3112.
EXPENSE TABLE
The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly and indirectly if you allocate Contract
Value to the Subaccounts. The table reflects any contractual charges, expenses
of the Separate Account, and charges and expenses of SBL Fund. The table does
not reflect premium taxes that may be imposed by various jurisdictions. See
"Premium Tax Charge," page 20. The information contained in the table is not
generally applicable to amounts allocated to the Fixed Account.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 19. For a more complete description of SBL Fund's costs
and expenses, see the SBL Fund Prospectus, which accompanies this Prospectus.
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CONTRACTUAL EXPENSES
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Sales Load on Purchase Payments ........................................ None
Contingent Deferred Sales Charge (as a percentage of
amount withdrawn attributable to purchase payments) .................. 5%(1)
Transfer Fee (per transfer) ............................................ None
Annual Administration Charge ........................................... $15
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ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of each Subaccount's average daily net assets)
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Annual Mortality and Expense Risk Charge ............................... 1.00%
Total Separate Account Annual Expenses ................................. 1.00%
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ANNUAL SBL FUND EXPENSES (as a percentage of each Series' average daily net assets)
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ESTIMATED TOTAL MUTUAL
BROKERAGE PLAN FUND EXPENSES
ADVISORY DISTRIBUTION OTHER (AFTER EXPENSE
FEE(2) (12B-1)FEES(3) EXPENSES(4) REIMBURSEMENTS)(5)
Equity (Series A).......... 0.75% 0.01% 0.06% 0.82%
Large Cap Value (Series B). 0.75% 0.02% 0.07% 0.84%
Money Market (Series C).... 0.50% 0.00% 0.07% 0.57%
Global (Series D).......... 1.00% 0.00% 0.21% 1.21%
Diversified Income
(Series E)............... 0.75% 0.00% 0.07% 0.82%
Large Cap Growth (Series G) 1.00% 0.00% 0.36% 1.36%
Enhanced Index (Series H).. 0.75% 0.00% 0.29% 1.04%
International (Series I)... 1.10% 0.00% 1.15% 2.25%
Mid Cap Growth (Series J).. 0.75% 0.01% 0.07% 0.83%
Global Strategic Income
(Series K)............... 0.75% 0.00% 0.87% 1.62%
Capital Growth (Series L).. 1.00% 0.00% 0.36% 1.36%
Global Total Return
(Series M)............... 1.00% 0.00% 0.36% 1.36%
Managed Asset Allocation
(Series N) .............. 1.00% 0.00% 0.17% 1.17%
Equity Income (Series O)... 1.00% 0.00% 0.09% 1.09%
High Yield Series
(Series P)............... 0.75% 0.00% 0.11% 0.86%
Small Cap Value (Series Q). 1.00% 0.00% 0.36% 1.36%
Social Awareness (Series S) 0.75% 0.01% 0.07% 0.83%
Technology (Series T)...... 1.00% 0.00% 0.95% 1.95%
Mid Cap Value (Series V)... 0.75% 0.02% 0.09% 0.86%
Main Street Growth and
Income(R) (Series W)..... 1.00% 0.00% 0.22% 1.22%
Small Cap Growth (Series X) 1.00% 0.00% 0.33% 1.33%
Select 25 (Series Y)....... 0.75% 0.01% 0.22% 0.98%
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1. The amount of the contingent deferred sales charge is determined by reference to the
number of years the purchase payment has remained credited under the Contract. A free
withdrawal is available in each Contract Year equal to (1) 10 percent of purchase
payments in the first Contract Year, and (2) 10 percent of Contract Value at the
beginning of the Contract Year in each subsequent Contract Year. See "Full and Partial
Withdrawals," page 17 and "Contingent Deferred Sales Charge," page 19 for more
information.
2. During the fiscal year ended December 31, 1999, the Investment Adviser waived the
advisory fees of Series P and Series X. The Investment Adviser ceased waiving the
advisory fee of Series X effective December 1, 1999. There can be no assurance that
the Investment Adviser will continue to waive Series P's advisory fee. Expense
information for Series P and X has been restated to reflect the fees that would have
been applicable had there been no fee waiver.
3. Amounts included as distribution expenses under this caption are estimates of the
amounts to be received by the Fund's distributor under the Brokerage Plan in the
current fiscal year in connection with the purchase and sale of securities held by the
Fund.
4. Other Expenses for Series G, Series H, Series I, Series L, Series Q, Series T, Series
W and Series Y are based on estimated amounts for the current fiscal year.
5. Total expenses for Series I reflect fee waivers and/or reimbursements of expenses. In
the absence of such waivers or reimbursements, Series I's actual expenses would have
been 4.2%.
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EXAMPLES -- The examples presented below show the expenses that you would pay at
the end of one, three, five or ten years (except for the Large Cap Growth,
Enhanced Index, International, Capital Growth, Small Cap Value, Technology, Main
Street Growth and Income(R), and Select 25 Subaccounts, which show expenses for
only the one and three year periods). The information presented applies if, at
the end of those time periods, the Contract is (1) surrendered, or (2)
annuitized or otherwise not surrendered. The examples show expenses based upon
an allocation of $1,000 to each of the Subaccounts and a hypothetical return of
5 percent.
YOU SHOULD NOT CONSIDER THE EXAMPLES BELOW A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE 5 PERCENT
RETURN ASSUMED IN THE EXAMPLES IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ACTUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THE ASSUMED AMOUNT.
Example -- You would pay the expenses shown below assuming full withdrawal of
the Contract at the end of the applicable time period:
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1 3 5 10
YEAR YEARS YEARS YEARS
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Equity Subaccount ............................ $64 $104 $146 $220
Large Cap Value Subaccount ................... 64 105 147 222
Money Market Subaccount ...................... 62 96 133 193
Global Subaccount ............................ 68 116 166 261
Diversified Income Subaccount ................ 64 104 146 220
Large Cap Growth Subaccount .................. 70 120 --- ---
Enhanced Index Subaccount .................... 66 110 --- ---
International Subaccount ..................... 78 147 --- ---
Mid Cap Growth Subaccount .................... 64 104 147 221
Global Strategic Income Subaccount ........... 72 128 187 301
Capital Growth Subaccount .................... 70 120 --- ---
Global Total Return Subaccount ............... 69 120 174 276
Managed Asset Allocation Subaccount .......... 68 115 164 256
Equity Income Subaccount ..................... 67 112 160 248
High Yield Subaccount ........................ 65 105 148 224
Small Cap Value Subaccount ................... 70 120 --- ---
Social Awareness Subaccount .................. 64 104 147 221
Technology Subaccount ........................ 75 138 --- ---
Mid Cap Value Subaccount ..................... 65 105 148 224
Main Street Growth and Income(R) Subaccount .. 68 116 --- ---
Small Cap Growth Subaccount .................. 69 119 172 273
Select 25 Subaccount ......................... 66 109 --- ---
--------------------------------------------------------------------------------
Example -- You would pay the expenses shown below assuming NO withdrawals:
--------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------
Equity Subaccount ............................ $19 $59 $102 $220
Large Cap Value Subaccount ................... 19 60 103 222
Money Market Subaccount ...................... 17 52 88 193
Global Subaccount ............................ 23 71 122 260
Diversified Income Subaccount ................ 19 59 102 220
Large Cap Growth Subaccount .................. 24 74 --- ---
Enhanced Index Subaccount .................... 21 66 --- ---
International Subaccount ..................... 33 102 --- ---
Mid Cap Growth Subaccount .................... 19 60 102 221
Global Strategic Income Subaccount ........... 27 83 142 301
Capital Growth Subaccount .................... 24 74 --- ---
Global Total Return Subaccount ............... 25 76 129 276
Managed Asset Allocation Subaccount .......... 23 70 120 256
Equity Income Subaccount ..................... 22 67 116 248
High Yield Subaccount ........................ 20 60 104 224
Small Cap Value Subaccount ................... 24 74 --- ---
Social Awareness Subaccount .................. 19 60 102 221
Technology Subaccount ........................ 30 91 --- ---
Mid Cap Value Subaccount ..................... 20 60 104 224
Main Street Growth and Income(R) Subaccount .. 23 69 --- ---
Small Cap Growth Subaccount .................. 24 75 128 273
Select 25 Subaccount ......................... 21 64 --- ---
--------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values for each of the years in the period ending December 31, 1999, as well as
ending accumulation units outstanding under each Subaccount.
--------------------------------------------------------------------------------
1999(b) 1998(a)
--------------------------------------------------------------------------------
EQUITY SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $25.40 $21.03
End of period............................................. $23.89 $25.40
Accumulation units outstanding at the end of period.......... 1,322 25
--------------------------------------------------------------------------------
LARGE CAP VALUE SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $19.85 $17.73
End of period............................................. $19.10 $19.85
Accumulation units outstanding at the end of period.......... 1,599 57
--------------------------------------------------------------------------------
MONEY MARKET SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $11.68 $11.55
End of period............................................. $12.10 $11.68
Accumulation units outstanding at the end of period.......... 0 0
--------------------------------------------------------------------------------
GLOBAL SUBACCOUN
Accumulation unit value:
Beginning of period....................................... $16.98 $14.18
End of period............................................. $18.75 $16.98
Accumulation units outstanding at the end of period.......... 42 0
--------------------------------------------------------------------------------
DIVERSIFIED INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $13.25 $13.02
End of period............................................. $11.34 $13.25
Accumulation units outstanding at the end of period.......... 87 7
--------------------------------------------------------------------------------
ENHANCED INDEX SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $10.00 ---
End of period............................................. $11.16 ---
Accumulation units outstanding at the end of period.......... 0 ---
--------------------------------------------------------------------------------
INTERNATIONAL SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $10.00 ---
End of period............................................. $13.03 ---
Accumulation units outstanding at the end of period.......... 0 ---
--------------------------------------------------------------------------------
MID CAP GROWTH SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $19.01 $14.79
End of period............................................. $31.35 $19.01
Accumulation units outstanding at the end of period.......... 0 0
--------------------------------------------------------------------------------
GLOBAL STRATEGIC INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $13.39 $12.16
End of period............................................. $13.33 $13.39
Accumulation units outstanding at the end of period.......... 0 0
--------------------------------------------------------------------------------
GLOBAL TOTAL RETURN SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $14.19 $12.53
End of period............................................. $15.93 $14.19
Accumulation units outstanding at the end of period.......... 0 0
--------------------------------------------------------------------------------
MANAGED ASSET ALLOCATION SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $16.36 $14.60
End of period............................................. $15.98 $16.36
Accumulation units outstanding at the end of period.......... 761 19
--------------------------------------------------------------------------------
EQUITY INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $18.95 $16.73
End of period............................................. $17.54 $18.95
Accumulation units outstanding at the end of period.......... 920 4
--------------------------------------------------------------------------------
HIGH YIELD SUBACCOUN
Accumulation unit value:
Beginning of period....................................... $12.48 $12.09
End of period............................................. $12.52 $12.48
Accumulation units outstanding at the end of period.......... 0 4
--------------------------------------------------------------------------------
SOCIAL AWARENESS SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $23.37 $18.63
End of period............................................. $24.40 $23.37
Accumulation units outstanding at the end of period.......... 1,940 10
--------------------------------------------------------------------------------
MID CAP VALUE SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $14.94 $12.58
End of period............................................. $14.92 $14.94
Accumulation units outstanding at the end of period.......... 812 0
--------------------------------------------------------------------------------
SMALL CAP GROWTH SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $10.34 $ 8.63
End of period............................................. $13.03 $10.34
Accumulation units outstanding at the end of period.......... 0 0
--------------------------------------------------------------------------------
SELECT 25 SUBACCOUNT
Accumulation unit value:
Beginning of period....................................... $10.00 ---
End of period............................................. $11.74 ---
Accumulation units outstanding at the end of period.......... 571 ---
--------------------------------------------------------------------------------
(a) For the period of September 10, 1998 (date of inception) through December
31, 1998.
(b) For the period of May 3, 1999 (date of inception) through December 31, 1999
for Enhanced Index, International, and Select 25 Series.
--------------------------------------------------------------------------------
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND
SECURITY BENEFIT LIFE INSURANCE COMPANY -- Security Benefit is a life insurance
company organized under the laws of the State of Kansas. It was organized
originally as a fraternal benefit society and commenced business February 22,
1892. It became a mutual life insurance company under its present name on
January 2, 1950.
On July 31, 1998, Security Benefit converted from a mutual life insurance
company to a stock life insurance company ultimately controlled by Security
Benefit Mutual Holding Company, a Kansas mutual holding company. Membership
interests of persons who were Contractowners as of July 31, 1998 became
membership interests in Security Benefit Mutual Holding Company as of that date,
and persons who acquire policies from Security Benefit after that date
automatically become members in the mutual holding company.
Security Benefit offers life insurance policies and annuity contracts, as
well as financial and retirement services. It is admitted to do business in the
District of Columbia, and in all states except New York. As of the end of 1999,
the Company had total assets of approximately $8.3 billion. Together with its
subsidiaries, the Company has total funds under management of approximately $9.9
billion.
The Principal Underwriter for the Contracts is Security Distributors, Inc.
("SDI"), 700 SW Harrison Street, Topeka, Kansas 66636-0001. SDI is registered as
a broker/dealer with the SEC and is a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company wholly owned by
Security Benefit.
PUBLISHED RATINGS -- Security Benefit may from time to time publish in
advertisements, sales literature and reports to Participants the ratings and
other information assigned to it by one or more independent rating organizations
such as A. M. Best Company and Standard & Poor's. The purpose of the ratings is
to reflect the financial strength and/or claims-paying ability of Security
Benefit and should not be considered as bearing on the investment performance of
assets held in the Separate Account. Each year A. M. Best Company reviews the
financial status of thousands of insurers, culminating in the assignment of
Best's Ratings. These ratings reflect their current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. In addition, the
claims-paying ability of Security Benefit as measured by Standard & Poor's
Insurance Ratings Services may be referred to in advertisements or sales
literature or in reports to Participants. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of its
insurance and annuity policies in accordance with their terms. Such ratings do
not reflect the investment performance of the Separate Account or the degree of
risk associated with an investment in the Separate Account.
SEPARATE ACCOUNT -- Security Benefit established the Separate Account under
Kansas law on January 31, 1984. The Contract provides that the income, gains, or
losses of the Separate Account, whether or not realized, are credited to or
charged against the assets of the Separate Account without regard to other
income, gains, or losses of Security Benefit. Kansas law provides that assets in
a separate account attributable to the reserves and other liabilities under the
contracts may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent, the contracts so
provide. The Contract contains such a provision. Security Benefit owns the
assets in the Separate Account and is required to maintain sufficient assets in
the Separate Account to meet all Separate Account obligations under the
Contracts. Security Benefit may transfer to its General Account assets that
exceed anticipated obligations of the Separate Account. All obligations arising
under the Contracts are general corporate obligations of Security Benefit.
Security Benefit may invest its own assets in the Separate Account for other
purposes, but not to support contracts other than variable annuity contracts,
and may accumulate in the Separate Account proceeds from Contract charges and
investment results applicable to those assets.
The Separate Account is currently divided into twenty-two Subaccounts. The
Contract provides that the income, gains and losses, whether or not realized,
are credited to, or charged against, the assets of each Subaccount without
regard to the income, gains or losses in the other Subaccounts. Each Subaccount
invests exclusively in shares of a specific Series of SBL Fund. Security Benefit
may in the future establish additional Subaccounts of the Separate Account,
which may invest in other Series of SBL Fund or in other securities, mutual
funds, or investment vehicles.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with the
SEC does not involve supervision by the SEC of the administration or investment
practices of the Separate Account or of Security Benefit.
SBL FUND -- SBL Fund is an open-end management investment company of the series
type. It is registered with the SEC under the 1940 Act. Such registration does
not involve supervision by the SEC of the investments or investment policy of
the Fund. SBL Fund currently has twenty-two separate portfolios ("Series"), each
of which pursues different investment objectives and policies.
Shares of the Fund currently are offered only for purchase by separate
accounts of Security Benefit to serve as an investment medium for variable life
insurance policies and variable annuity contracts issued by Security Benefit.
Thus, SBL Fund serves as an investment medium for both variable life insurance
policies and variable annuity contracts. This is called "mixed funding." Shares
of SBL Fund also may be sold in the future to separate accounts of other
insurance companies, both affiliated and not affiliated with Security Benefit.
This is called "shared funding." Security Benefit currently does not foresee any
disadvantages to Participants arising from either mixed or shared funding;
however, due to differences in tax treatment or other considerations, it is
theoretically possible that the interests of owners of various contracts for
which SBL Fund serves as an investment medium might at some time be in conflict.
However, Security Benefit, the Fund's Board of Directors, and any other
insurance companies that participate in SBL Fund in the future are required to
monitor events in order to identify any material conflicts that arise from the
use of the Fund for mixed and/or shared funding. SBL Fund's Board of Directors
is required to determine what action, if any, should be taken in the event of
such a conflict. If such a conflict were to occur, Security Benefit might be
required to withdraw the investment of one or more of its separate accounts from
SBL Fund. This might force the Fund to sell securities at disadvantageous
prices.
A summary of the investment objective of each Series of SBL Fund is set forth
below. We cannot assure that any Series will achieve its objective. More
detailed information is contained in the accompanying prospectus of SBL Fund,
including information on the risks associated with the investments and
investment techniques of each Series.
SBL FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
SERIES A (EQUITY SERIES) -- Amounts that you allocate to the Equity Subaccount
are invested in Series A. The investment objective of Series A is to seek
long-term capital growth by investing in a broadly diversified portfolio of
common stocks, securities convertible into common stocks, preferred stocks,
bonds and other debt securities.
SERIES B (LARGE CAP VALUE SERIES) -- Amounts that you allocate to the Large Cap
Value Subaccount are invested in Series B. Series B seeks long-term growth of
capital by investing at least 65% of its total assets in large-capitalization
value companies. The Series' stock investments may include common stocks,
preferred stocks and convertible securities of both U.S. and U.S.
dollar-denominated foreign issuers. Series B may temporarily invest in cash,
government bonds or money market securities.
SERIES C (MONEY MARKET SERIES) -- Amounts that you allocate to the Money Market
Subaccount are invested in Series C. The investment objective of Series C is to
provide as high a level of current income as is consistent with preserving
capital. It invests in high quality money market instruments with maturities of
not longer than thirteen months.
SERIES D (GLOBAL SERIES) -- Amounts that you allocate to the Global Subaccount
are invested in Series D. The investment objective of Series D is to seek
long-term growth of capital primarily through investment in common stocks and
equivalents of companies domiciled in foreign countries and the United States.
SERIES E (DIVERSIFIED INCOME SERIES) -- Amounts that you allocate to the
Diversified Income Subaccount are invested in Series E. The investment objective
of Series E is to provide current income with security of principal. Series E
seeks to achieve this investment objective by investing primarily in a
diversified portfolio of investment-grade debt securities. The debt securities
in which Series E invests will primarily be domestic securities, but may also
include dollar denominated foreign securities.
SERIES G (LARGE CAP GROWTH SERIES) -- Amounts that you allocate to the Large Cap
Growth Subaccount are invested in Series G. The investment objective of Series G
is to seek long-term capital growth by investing primarily in equity securities
of large capitalization companies (defined as companies whose total market value
is at least $5 billion at the time of purchase).
SERIES H (ENHANCED INDEX SERIES) -- Amounts that you allocate to the Enhanced
Index Subaccount are invested in Series H. The investment objective of Series H
is to seek to outperform the S&P 500 Index through stock selection resulting in
different weightings of common stocks relative to the index.
SERIES I (INTERNATIONAL SERIES) -- Amounts that you allocate to the
International Subaccount are invested in Series I. The investment objective of
Series I is to seek long-term capital appreciation by investing primarily in
non-U.S. equity securities and other securities with equity characteristics.
SERIES J (MID CAP GROWTH SERIES) -- Amounts that you allocate to the Mid Cap
Growth Subaccount are invested in Series J. The investment objective of Series J
is to seek capital appreciation through investment in a broadly diversified
portfolio of securities which may include common stocks, preferred stocks, debt
securities and securities convertible into common stocks.
SERIES K (GLOBAL STRATEGIC INCOME SERIES) -- Amounts that you allocate to the
Global Strategic Income Subaccount are invested in Series K. The investment
objective of Series K is to seek high current income and, as a secondary
objective, capital appreciation by investing in a combination of foreign and
domestic high-yield, lower rated debt securities (commonly known as "junk
bonds").
SERIES L (CAPITAL GROWTH SERIES) -- Amounts that you allocate to the Capital
Growth Series are invested in Series L. The investment objective of Series L is
to seek growth of capital by pursuing aggressive investment policies primarily
in equity securities of U. S. companies.
SERIES M (GLOBAL TOTAL RETURN SERIES) -- Amounts that you allocate to the Global
Total Return Subaccount are invested in Series M. The investment objective of
Series M is to seek high total return consisting of capital appreciation and
current income. Series M seeks this objective through asset allocation and
security selection by investing in a diversified portfolio of global equity and
bond securities.
SERIES N (MANAGED ASSET ALLOCATION SERIES) -- Amounts that you allocate to the
Managed Asset Allocation Subaccount are invested in Series N. The investment
objective of Series N is to seek a high level of total return by investing
primarily in a diversified portfolio of debt and equity securities.
SERIES O (EQUITY INCOME SERIES) -- Amounts that you allocate to the Equity
Income Subaccount are invested in Series O. The investment objective of Series O
is to seek to provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of established
companies.
SERIES P (HIGH YIELD SERIES) -- Amounts that you allocate to the High Yield
Subaccount are invested in Series P. The investment objective of Series P is to
seek high current income. Capital appreciation is a secondary objective. Series
P seeks its objectives by investing primarily in higher yielding, higher risk
debt securities (commonly referred to as "junk bonds").
SERIES Q (SMALL CAP VALUE SERIES) -- Amounts that you allocate to the Small Cap
Value Series are invested in Series Q. The investment objective of Series Q is
to seek capital growth by investing in securities of small capitalization
companies (defined as companies with a market capitalization substantially
similar to that of companies in the Russell 2500TM Index at the time of
investment).
SERIES S (SOCIAL AWARENESS SERIES) -- Amounts that you allocate to the Social
Awareness Subaccount are invested in Series S. The investment objective of
Series S is to seek capital appreciation by investing in various types of
securities which meet certain social criteria established for the Series. The
Series also may invest in companies that are included in the Domini 400 Social
IndexSM, which companies will be deemed to comply with the Series' social
criteria. Series S will invest in a diversified portfolio of common stocks,
convertible securities, preferred stocks and debt securities.
SERIES T (TECHNOLOGY SERIES) -- Amounts that you allocate to the Technology
Subaccount are invested in Series T. The investment objective of Series T is to
seek long-term capital appreciation by investing in the equity securities of
technology companies.
SERIES V (MID CAP VALUE SERIES) -- Amounts that you allocate to the Mid Cap
Value Subaccount are invested in Series V. The investment objective of Series V
is to seek long-term growth of capital by investing in a diversified portfolio
consisting primarily of common stocks. The Series will invest in stocks that the
Investment Adviser believes are undervalued relative to assets, earnings, growth
potential or cash flow.
SERIES W (MAIN STREET GROWTH AND INCOME(R) SERIES) -- Amounts that you allocate
to the Main Street Growth and Income(R) Subaccount are invested in Series W. The
investment objective of Series W is to seek high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities.
SERIES X (SMALL CAP GROWTH SERIES) -- Amounts that you allocate to the Small Cap
Growth Subaccount are invested in Series X. The investment objective of Series X
is to seek long-term growth of capital by investing primarily in domestic and
foreign equity securities of small capitalization companies (defined as
companies with a market capitalization substantially similar to that of
companies in the Russell 2000TM Growth Index at the time of investment).
SERIES Y (SELECT 25 SERIES) -- Amounts that you allocate to the Select 25
Subaccount are invested in Series Y. The investment objective of Series Y is to
seek long-term growth of capital by concentrating its investments in a core
position of 20-30 common stocks of growth companies which have exhibited
consistent above average earnings growth.
THE INVESTMENT ADVISER -- Security Management Company, LLC, 700 SW Harrison
Street, Topeka, Kansas 66636, serves as Investment Adviser to each Series of SBL
Fund. The Investment Adviser is registered with the SEC as an investment
adviser. The Investment Adviser has engaged The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166, to provide investment advisory services to
Large Cap Value Series; OppenheimerFunds, Inc., Two World Trade Center, New
York, New York 10048-0203, to provide investment advisory services to Global
Series and Main Street Growth and Income(R) Series; Bankers Trust Company, 130
Liberty Street, New York, New York 10006 to provide investment advisory services
to Enhanced Index Series and International Series; Wellington Management Company
LLP, 75 State Street, Boston, Massachusetts 02109 to provide investment advisory
services to Global Strategic Income Series, Global Total Return Series and
Technology Series; T. Rowe Price Associates, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202 to provide investment advisory services to Managed
Asset Allocation Series and Equity Income Series; Strong Capital Management
Corporation, 900 Heritage Reserve, Menomonee, Wisconsin 53051 to provide
investment advisory services to Small Cap Value Series and Small Cap Growth
Series; and Alliance Capital Management L.P., 1345 Avenue of the Americas, New
York, New York 10105 to provide investment advisory services to Capital Growth
Series.
THE CONTRACT
GENERAL -- Security Benefit issues the Contract offered by this Prospectus. It
is a flexible purchase payment deferred variable annuity. To the extent that you
allocate all or a portion of your purchase payments to the Subaccounts, the
Contract is significantly different from a fixed annuity contract in that it is
the Participant under a Contract who assumes the risk of investment gain or loss
rather than Security Benefit. When you are ready to begin receiving annuity
payments, the Contract provides several Annuity Options under which Security
Benefit will pay periodic annuity payments on a variable basis, a fixed basis or
both, beginning on the Annuity Commencement Date. The amount that will be
available for annuity payments will depend on the investment performance of the
Subaccounts to which you have allocated purchase payments and the amount of
interest credited on Contract Value that you have allocated to the Fixed
Account.
The Contract is eligible for purchase in connection with certain tax
qualified retirement plans that meet the requirements of Section 401, 403(b) or
457 of the Internal Revenue Code ("Qualified Plan"). Certain federal tax
advantages are currently available to retirement plans that qualify as (1)
self-employed individuals' retirement plans under Section 401, such as HR-10 and
Keogh plans, (2) pension or profit-sharing plans established by an employer for
the benefit of its employees under Section 401, (3) annuity purchase plans of
public school systems and certain tax-exempt organizations under Section 403(b)
or (4) deferred compensation plans for employees established by a unit of a
state or local government or by a tax-exempt organization under Section 457.
APPLICATION FOR A CONTRACT -- If you wish to purchase a Contract, you may submit
an application and an initial purchase payment to Security Benefit, as well as
any other form or information that Security Benefit may require. Security
Benefit reserves the right to reject an application or purchase payment for any
reason, subject to Security Benefit's underwriting standards and guidelines and
any applicable state or federal law relating to nondiscrimination.
PURCHASE PAYMENTS -- The minimum initial purchase payment for the purchase of a
Contract is $500. Thereafter, you may choose the amount and frequency of
purchase payments, except that the minimum subsequent purchase payment is $500.
The minimum initial and subsequent purchase payment if you elect an Automatic
Investment Program is $25. Security Benefit may reduce the minimum purchase
payment requirement under certain circumstances. A purchase payment exceeding $1
million will not be accepted without prior approval of Security Benefit.
Security Benefit will apply the initial purchase payment not later than the
end of the second Valuation Date after the Valuation Date it is received by
Security Benefit; provided that the purchase payment is preceded or accompanied
by an application that contains sufficient information to establish an account
and properly credit such purchase payment. The application form will be provided
by Security Benefit. If Security Benefit does not receive a complete
application, Security Benefit will notify you that it does not have the
necessary information to issue a Contract. If you do not provide the necessary
information to Security Benefit within five Valuation Dates after the Valuation
Date on which Security Benefit first receives the initial purchase payment or if
Security Benefit determines it cannot otherwise issue the Contract, Security
Benefit will return the initial purchase payment to you unless you consent to
Security Benefit retaining the purchase payment until the application is made
complete.
Security Benefit will credit subsequent purchase payments as of the end of
the Valuation Period in which they are received by Security Benefit at its Home
Office. Purchase payments after the initial purchase payment may be made at any
time prior to the Annuity Commencement Date, so long as the Participant is
living. Subsequent purchase payments may be limited by the terms of the Plan and
provisions of the Internal Revenue Code.
ALLOCATION OF PURCHASE PAYMENTS -- In an application for a Contract, you select
the Subaccounts or the Fixed Account to which purchase payments will be
allocated. Purchase payments will be allocated according to your instructions
contained in the application or more recent instructions received, if any,
except that no purchase payment allocation is permitted that would result in
less than $25 of any payment being allocated to any one Subaccount or the Fixed
Account. The allocations must be whole percentages and must total 100 percent.
Available allocation alternatives include the twenty-two Subaccounts and the
Fixed Account.
You may change the purchase payment allocation instructions by submitting a
proper written request to Security Benefit's Home Office. A proper change in
allocation instructions will be effective upon receipt by Security Benefit at
its Home Office and will continue in effect until you submit a change in
instructions to the company. You may make changes in your purchase payment
allocation and changes to an existing Dollar Cost Averaging or Asset
Reallocation Option by telephone provided the Telephone Transfer section of the
application or an Authorization for Telephone Requests form is properly
completed, signed, and filed at Security Benefit's Home Office. Changes in the
allocation of future purchase payments have no effect on existing Contract
Value. You may, however, transfer Contract Value among the Subaccounts and the
Fixed Account in the manner described in "Transfers of Contract Value," page 16.
DOLLAR COST AVERAGING OPTION -- Prior to the Annuity Commencement Date, you may
dollar cost average your Contract Value by authorizing Security Benefit to make
periodic transfers of Contract Value from any one Subaccount to one or more of
the other Subaccounts. Dollar cost averaging is a systematic method of investing
in which securities are purchased at regular intervals in fixed dollar amounts
so that the cost of the securities gets averaged over time and possibly over
various market cycles. The option will result in the transfer of Contract Value
from one Subaccount to one or more of the other Subaccounts. Amounts transferred
under this option will be credited at the price of the Subaccount as of the end
of the Valuation Dates on which the transfers are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts transferred to a
Subaccount will result in the crediting of a greater number of units when the
price is low and a lesser number of units when the price is high. Similarly, the
amounts transferred from a Subaccount will result in a debiting of a greater
number of units when the price is low and a lesser number of units when the
price is high. Dollar cost averaging does not guarantee profits, nor does it
assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
you must designate whether Contract Value is to be transferred on the basis of a
specific dollar amount, fixed period or earnings only, the Subaccount or
Subaccounts to and from which the transfers will be made, the desired frequency
of the transfers, which may be on a monthly or quarterly basis, and the length
of time during which the transfers shall continue or the total amount to be
transferred over time. You must have Contract Value of at least $10,000 at the
time you elect this option.
After Security Benefit has received a Dollar Cost Averaging Request in proper
form at its Home Office, Security Benefit will transfer Contract Value in the
amounts you designate from the Subaccount from which transfers are to be made to
the Subaccount or Subaccounts you have chosen. The minimum amount that you may
transfer to any one Subaccount is $25. Security Benefit will effect each
transfer on the date you specify, or if no date is specified, on the monthly or
quarterly anniversary, whichever corresponds to the period selected, of the date
of receipt at the Home Office of a Dollar Cost Averaging Request in proper form.
Transfers will be made until the total amount elected has been transferred or
until Contract Value in the Subaccount from which transfers are made has been
depleted. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," page 16.
You may instruct Security Benefit at any time to terminate the option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccount from which transfers were being made that has not been
transferred will remain in that Subaccount unless you instruct us otherwise. If
you wish to continue transferring on a dollar cost averaging basis after the
expiration of the applicable period, the total amount elected has been
transferred, the Subaccount has been depleted, or the Dollar Cost Averaging
Option has been canceled, a new Dollar Cost Averaging Request must be completed
and sent to the Home Office. You must have Contract Value of at least $10,000 at
the time you elect to reinstate the option. Security Benefit requires that you
wait at least a month (or a quarter if transfers were made on a quarterly basis)
before reinstating Dollar Cost Averaging after it has been terminated for any
reason. Security Benefit may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time. The Dollar Cost Averaging Option is not available
while you have Contract Value allocated to the DCA Plus Account.
You may also dollar cost average Contract Value to or from the Fixed Account,
subject to certain restrictions described under "The Fixed Account," page 22.
ASSET REALLOCATION OPTION -- Prior to the Annuity Commencement Date, you may
authorize Security Benefit to automatically transfer Contract Value on a
quarterly, semiannual or annual basis to maintain a particular percentage
allocation among the Subaccounts. The Contract Value allocated to each
Subaccount will grow or decline in value at different rates during the selected
period, and Asset Reallocation automatically reallocates the Contract Value in
the Subaccounts to the allocation you selected on a quarterly, semiannual or
annual basis, as you select. Asset Reallocation is intended to transfer Contract
Value from those Subaccounts that have increased in value to those Subaccounts
that have declined in value. Over time, this method of investing may help you
buy low and sell high. This investment method does not guarantee profits, nor
does it assure that you will not have losses.
To elect this option an Asset Reallocation Request in proper form must be
received by Security Benefit at its Home Office, and you must have Contract
Value of at least $10,000 at the time you elect this option. An Asset
Reallocation Request form is available upon request. On the form, you must
indicate the applicable Subaccounts, the applicable time period and the
percentage of Contract Value to be allocated to each Subaccount.
Upon receipt of the Asset Reallocation Request, Security Benefit will effect
a transfer or, in the case of a new Contract, will allocate the initial purchase
payment, among the Subaccounts based upon the percentages that you selected.
Thereafter, Security Benefit will transfer Contract Value to maintain that
allocation on each quarterly, semiannual or annual anniversary, as applicable,
of the date of Security Benefit's receipt of the Asset Reallocation Request in
proper form. The amounts transferred will be credited at the price of the
Subaccount as of the end of the Valuation Date on which the transfer is
effected. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," below.
You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccounts that has not been transferred will remain in those
Subaccounts regardless of the percentage allocation unless you instruct us
otherwise. If you wish to continue Asset Reallocation after it has been
canceled, a new Asset Reallocation Request form must be completed and sent to
Security Benefit's Home Office. You must have Contract Value of at least $10,000
at the time you elect to reinstate the option. Security Benefit may discontinue,
modify, or suspend, and reserves the right to charge a fee for the Asset
Reallocation Option at any time. The Asset Reallocation Option is not available
while you have Contract Value allocated to the DCA Plus Account.
Contract Value allocated to the Fixed Account may be included in the Asset
Reallocation option, subject to certain restrictions described in "The Fixed
Account," page 22.
TRANSFERS OF CONTRACT VALUE -- Prior to the Annuity Commencement Date, you may
transfer Contract Value among the Subaccounts upon proper written request to
Security Benefit's Home Office. You may make transfers (other than transfers
pursuant to the Dollar Cost Averaging and Asset Reallocation Options) by
telephone if the Telephone Transfer section of the application or an
Authorization for Telephone Requests form has been properly completed, signed
and filed at Security Benefit's Home Office. The minimum transfer amount is $100
or the amount remaining in a given Subaccount. The minimum transfer amount does
not apply to transfers under the Dollar Cost Averaging or Asset Reallocation
Options.
You may also transfer Contract Value from the Subaccounts to the Fixed
Account; however, transfers from the Fixed Account to the Subaccounts are
restricted as described in "The Fixed Account," page 22.
Security Benefit generally does not limit the frequency of transfers,
although Security Benefit reserves the right at a future date to limit the
number of transfers to 14 in a Contract Year. Security Benefit also reserves the
right to limit the size and frequency of such transfers and to discontinue
telephone transfers.
CONTRACT VALUE -- The Contract Value is the sum of the amounts under your
Contract held in each Subaccount and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
On each Valuation Date, the amount of Contract Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience of
that Subaccount. See "Determination of Contract Value," below. No minimum amount
of Contract Value is guaranteed. You bear the entire investment risk relating to
the investment performance of Contract Value allocated to the Subaccounts.
DETERMINATION OF CONTRACT VALUE -- The Contract Value will vary to a degree that
depends upon several factors, including investment performance of the
Subaccounts to which you have allocated Contract Value, payment of purchase
payments, the amount of any outstanding Contract Debt, partial withdrawals, and
the charges assessed in connection with the Contract. The amounts allocated to
the Subaccounts will be invested in shares of the corresponding Series of SBL
Fund. The investment performance of the Subaccounts will reflect increases or
decreases in the net asset value per share of the corresponding Series and any
dividends or distributions declared by a Series. Any dividends or distributions
from any Series of the Fund will be automatically reinvested in shares of the
same Series, unless Security Benefit, on behalf of the Separate Account, elects
otherwise.
Assets in the Subaccounts are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of your interest in a
Subaccount. When you allocate purchase payments to a Subaccount, your Contract
is credited with Accumulation Units. The number of Accumulation Units to be
credited is determined by dividing the dollar amount allocated to the particular
Subaccount by the price for the Subaccount as of the end of the Valuation Period
in which the purchase payment is credited. In addition, other transactions,
including loans, full or partial withdrawals, transfers, and assessment of
certain charges against the Contract, affect the number of Accumulation Units
credited to a Contract. The number of units credited or debited in connection
with any such transaction is determined by dividing the dollar amount of such
transaction by the price of the affected Subaccount. The price of each
Subaccount is determined on each Valuation Date. The number of Accumulation
Units credited to a Contract shall not be changed by any subsequent change in
the value of an Accumulation Unit, but the dollar value of an Accumulation Unit
may vary from Valuation Date to Valuation Date depending upon the investment
experience of the Subaccount and charges against the Subaccount.
The price of each Subaccount's units initially was $10. The price of a
Subaccount on any Valuation Date takes into account the following: (1) the
investment performance of the Subaccount, which is based upon the investment
performance of the corresponding Series of SBL Fund, (2) any dividends or
distributions paid by the corresponding Series, (3) the charges, if any, that
may be assessed by Security Benefit for taxes attributable to the operation of
the Subaccount, and (4) the mortality and expense risk charge under the
Contract.
FULL AND PARTIAL WITHDRAWALS -- You may make a partial withdrawal of Contract
Value or surrender the Contract for its Withdrawal Value. A full or partial
withdrawal, including a systematic withdrawal, may be taken from Contract Value
at any time while the Participant is living and before the Annuity Commencement
Date, subject to limitations under the Plan and applicable law. A full or
partial withdrawal request will be effective as of the end of the Valuation
Period that a proper written request is received by Security Benefit at its Home
Office. A proper written request must include the written consent of any
effective assignee or irrevocable Beneficiary, if applicable.
The proceeds received upon a full withdrawal will be the Contract's
Withdrawal Value. The Withdrawal Value is equal to the Contract Value as of the
end of the Valuation Period during which a proper withdrawal request is received
by Security Benefit at its Home Office, less any outstanding Contract Debt, any
applicable withdrawal charges, a pro rata administration charge, and any
uncollected premium taxes.
Security Benefit requires the signature of the Participant on any request for
withdrawal and a guarantee of such signature to effect the transfer or exchange
of all or part of the Contract for another investment. The signature guarantee
must be provided by an eligible guarantor, such as a bank, broker, credit union,
national securities exchange or savings association. Security Benefit further
requires that any request to transfer or exchange all or part of the Contract
for another investment be made upon a transfer form provided by Security
Benefit, which is available upon request.
A partial withdrawal may be requested for a specified percentage or dollar
amount of Contract Value. Each partial withdrawal must be at least $100. A
request for a partial withdrawal will result in a payment by Security Benefit of
the amount specified in the partial withdrawal request provided there is
sufficient Contract Value to meet the request. Upon payment, the Contract Value
will be reduced by an amount equal to the payment and any applicable withdrawal
charge and premium tax. If a partial withdrawal is requested after the first
Contract Year that would leave the Withdrawal Value in the Contract less than
$2,000, Security Benefit reserves the right to treat the partial withdrawal as a
request for a full withdrawal.
Security Benefit will deduct the amount of a partial withdrawal from the
Contract Value in the Subaccounts and the Fixed Account according to your
instructions to Security Benefit. If you do not specify the allocation, Security
Benefit will deduct the withdrawal from the Contract Value in the Subaccounts
and the Fixed Account in the following order: Money Market Subaccount,
Diversified Income Subaccount, High Yield Subaccount, Global Strategic Income
Subaccount, Managed Asset Allocation Subaccount, Equity Income Subaccount,
Global Total Return Subaccount, Large Cap Value Subaccount, Main Street Growth
and Income(R) Subaccount, Equity Subaccount, Large Cap Growth Subaccount,
Enhanced Index Subaccount, Capital Growth Subaccount, Select 25 Subaccount,
Social Awareness Subaccount, Mid Cap Value Subaccount, Mid Cap Growth
Subaccount, Global Subaccount, International Subaccount, Technology Subaccount,
Small Cap Value Subaccount and Small Cap Growth Subaccount, and then from the
Fixed Account. The value of each account will be depleted before the next
account is charged.
A full or partial withdrawal, including a systematic withdrawal, may be
subject to a withdrawal charge, and a premium tax charge to reimburse Security
Benefit for any tax on premiums on a Contract that may be imposed by various
states and municipalities. See "Contingent Deferred Sales Charge," page 19, and
"Premium Tax Charge," page 20.
A full or partial withdrawal, including a systematic withdrawal, may result
in the receipt of taxable income to the Participant and, if made prior to the
Participant attaining age 59 1/2, may be subject to a 10 percent penalty tax. In
the case of Contracts issued in connection with retirement plans that meet the
requirements of Section 401(a), 403(b) or 457 of the Internal Revenue Code,
reference should be made to the terms of the particular Plan for any limitations
or restrictions on withdrawals. For more information, see "Restrictions on
Withdrawals from Qualified Plans," page 25. The tax consequences of a withdrawal
under the Contract should be carefully considered. See "Federal Tax Matters,"
page 26.
SYSTEMATIC WITHDRAWALS -- Security Benefit currently offers a feature under
which you may select systematic withdrawals. Under this feature, you may elect
to receive systematic withdrawals before the Annuity Commencement Date by
sending a properly completed Systematic Withdrawal Request form to Security
Benefit at its Home Office. This option may be elected at any time. You may
designate the systematic withdrawal amount as a percentage of Contract Value
allocated to the Subaccounts and/or Fixed Account, as a fixed period, as a
specified dollar amount, as all earnings in the Contract, or based upon your
life expectancy or that of you and a beneficiary. You also may designate the
desired frequency of the systematic withdrawals, which may be monthly,
quarterly, semiannually or annually. You may stop or modify systematic
withdrawals upon proper written request received by Security Benefit at its Home
Office at least 30 days in advance of the requested date of termination or
modification. A proper request must include the written consent of any effective
assignee or irrevocable beneficiary, if applicable.
Each systematic withdrawal must be at least $100. Upon payment, your Contract
Value will be reduced by an amount equal to the payment proceeds plus any
applicable withdrawal charge and premium tax. Any systematic withdrawal that
equals or exceeds the Withdrawal Value will be treated as a full withdrawal. In
no event will payment of a systematic withdrawal exceed the Withdrawal Value.
The Contract will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.
Security Benefit will effect each systematic withdrawal as of the end of the
Valuation Period during which the withdrawal is scheduled. The deduction caused
by the systematic withdrawal, including any applicable withdrawal charge, will
be allocated from your Contract Value in the Subaccounts and the Fixed Account,
as you direct. If you do not specify the allocation, the systematic withdrawal
will be deducted from the Contract Value in the Subaccounts and the Fixed
Account in the following order: Money Market Subaccount, Diversified Income
Subaccount, High Yield Subaccount, Global Strategic Income Subaccount, Managed
Asset Allocation Subaccount, Equity Income Subaccount, Global Total Return
Subaccount, Large Cap Value Subaccount, Main Street Growth and Income(R)
Subaccount, Equity Subaccount, Large Cap Growth Subaccount, Enhanced Index
Subaccount, Capital Growth Subaccount, Select 25 Subaccount, Social Awareness
Subaccount, Mid Cap Value Subaccount, Mid Cap Growth Subaccount, Global
Subaccount, International Subaccount, Technology Subaccount, Small Cap Value
Subaccount and Small Cap Growth Subaccount, and then from the Fixed Account. The
value of each account will be depleted before the next account is charged.
Security Benefit may, at any time, discontinue, modify or suspend systematic
withdrawals. You should consider carefully the tax consequences of a systematic
withdrawal, including the 10 percent penalty tax which may be imposed on
withdrawals made prior to the Participant attaining age 59 1/2. See "Federal Tax
Matters," page 26.
FREE-LOOK RIGHT -- You may return a Contract within the Free-Look Period, which
is generally a ten-day period beginning when you receive the Contract. Security
Benefit will then deem void the returned Contract and will refund to you any
purchase payments allocated to the Fixed Account plus the Contract Value in the
Subaccounts as of the end of the Valuation Period during which the returned
Contract is received by Security Benefit. Security Benefit will refund purchase
payments allocated to the Subaccounts rather than Contract Value in those states
that require it to do so.
DEATH BENEFIT -- If the Participant dies prior to the Annuity Commencement Date,
Security Benefit will pay the death benefit proceeds to the Designated
Beneficiary upon receipt of due proof of the Participant's death and
instructions regarding payment to the Designated Beneficiary. (If the death of
the Participant occurs on or after the Annuity Commencement Date, any death
benefit will be determined according to the terms of the Annuity Option. See
"Annuity Options," page 21.)
The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt, any pro rata administration charge and any
uncollected premium tax. If the Participant dies during the Accumulation Period
and the age of the Participant was 75 or less on the date the Contract was
issued, the amount of the death benefit will be the greatest of:
* The sum of all Purchase Payments, less any reductions caused by previous
withdrawals,
* The Contract Value on the date due proof of death and instructions regarding
payment are received by Security Benefit, or
* The stepped-up death benefit.
* The stepped-up death benefit is:
* The largest death benefit on any Contract anniversary that is both an exact
multiple of five and occurs prior to the Participant attaining age 76, plus
* Any Purchase Payments made since the applicable Contract anniversary, less
* Any withdrawals since the applicable anniversary.
If the Participant dies during the Accumulation Period and the age of the
Participant was 76 or greater on the date the Contract was issued, or if due
proof of death (regardless of the age of the Participant on the date the
Contract was issued) and instructions regarding payment are not received by
Security Benefit at its Home Office within six months of the date of the
Participant's death, the death benefit will be the Contract Value on the date
due proof of death and instructions regarding payment are received by Security
Benefit at its Home Office.
The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as elected by the Designated
Beneficiary. If the Designated Beneficiary is to receive annuity payments under
an Annuity Option, there may be limits under applicable law on the amount and
duration of payments that the Beneficiary may receive and requirements
respecting timing of payments. A tax adviser should be consulted in considering
Annuity Options. See "Federal Tax Matters," page 26 for a discussion of the tax
consequences in the event of death.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE -- Security Benefit does not deduct sales
charges from purchase payments before allocating them to Contract Value.
However, except as set forth below, Security Benefit may assess a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on
a full or partial withdrawal, including systematic withdrawals, depending upon
the number of years the purchase payment withdrawn has been credited under the
Contract.
Security Benefit will waive the withdrawal charge on withdrawals to the
extent that total withdrawals in a Contract Year, including systematic
withdrawals, do not exceed the Free Withdrawal amount. The Free Withdrawal
amount is equal in the first Contract Year to 10 percent of purchase payments
made during the year, and for any subsequent Contract Year, to 10 percent of
Contract Value as of the first day of that Contract Year. The withdrawal charge
generally applies to the amount of withdrawals in a Contract Year that exceed
the Free Withdrawal amount for that Contract Year. The withdrawal charge does
not apply, however, to withdrawals of earnings. For the purpose of determining
any withdrawal charge, Security Benefit deems any withdrawals that are subject
to the withdrawal charge to be made first from purchase payments and then from
earnings. Free withdrawal amounts do not reduce purchase payments for the
purpose of determining future withdrawal charges. The amount of the charge will
depend on the number of years the purchase payment has been credited under the
Contract, according to the following schedule:
-------------------------- -------------------------
AGE OF PURCHASE PAYMENT
IN YEARS WITHDRAWAL CHARGE
-------------------------- -------------------------
1 5%
2 5%
3 5%
4 5%
5 5%
6 and later 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 5 percent of purchase payments paid under the Contract. No withdrawal
charge will be imposed upon: (1) payment of death benefit proceeds; or (2)
annuity options that provide for payments for life or a period of at least 5
years. In addition, if you are not making the withdrawal for the purpose of
exchanging your Contract for another investment available under your Plan,
Security Benefit will waive the withdrawal charge under the following
circumstances:
* Your Contract has been in force for 15 Contract Years or longer
* You are totally and permanently disabled as defined under section 72(m)(7)
of the Internal Revenue Code
* The withdrawal is made to satisfy the minimum distribution requirements of
the Internal Revenue Code and regulations thereunder
* You are age 55 or older and your Contract has been in force for five
Contract Years or longer
Security Benefit will assess the withdrawal charge against the Subaccounts and
the Fixed Account in the same proportion as the withdrawal proceeds are
allocated.
Security Benefit pays sales commissions to broker-dealers and other expenses
associated with the promotion and sales of the Contracts. The withdrawal charge
is designed to reimburse Security Benefit for these costs, although it is
expected that actual expenses will be greater than the amount of the charge. To
the extent that all sales expenses are not recovered from the charge, such
expenses may be recovered from other charges, including amounts derived
indirectly from the charge for mortality and expense risk. Broker-dealers may
receive aggregate commissions of up to 7 percent of aggregate purchase payments
and an annual trail commission of up to 0.75 percent of Contract Value. Security
Benefit also may pay override payments, expense allowances, bonuses, wholesaler
fees and training allowances. Registered representatives earn commissions from
the broker-dealers with which they are affiliated and such arrangements will
vary. In addition, registered representatives who meet specified production
levels may qualify under sales incentive programs adopted by Security Benefit to
receive non-cash compensation such as expense-paid trips and educational
seminars and merchandise. No compensation will be offered to the extent it is
prohibited by the laws of any state or self-regulatory agency, such as the NASD.
MORTALITY AND EXPENSE RISK CHARGE -- Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks assumed by
Security Benefit under the Contracts. The charge is equal to an annual rate of
1.00 percent of each Subaccount's average daily net assets. This amount is
intended to compensate Security Benefit for certain mortality and expense risks
Security Benefit assumes in offering and administering the Contracts and in
operating the Subaccounts.
The expense risk is the risk that Security Benefit's actual expenses in
issuing and administering the Contracts and operating the Subaccounts will be
more than the charges assessed for such expenses. The mortality risk borne by
Security Benefit is the risk that Annuitants, as a group, will live longer than
Security Benefit's actuarial tables predict. In this event, Security Benefit
guarantees that annuity payments will not be affected by a change in mortality
experience that results in the payment of greater annuity income than assumed
under the Annuity Options in the Contract. Security Benefit also assumes a
mortality risk in connection with the death benefit under the Contract.
Security Benefit may ultimately realize a profit from this charge to the
extent it is not needed to cover mortality and administrative expenses, but
Security Benefit may realize a loss to the extent the charge is not sufficient.
Security Benefit may use any profit derived from this charge for any lawful
purpose, including distribution expenses.
ADMINISTRATION CHARGE -- Security Benefit will deduct from your Contract Value
an administration charge of $15. The administration charge is not assessed
against Contract Value which has been applied under Annuity Options 1 through 4
or 8. Security Benefit deducts the administration charge on each Contract
Anniversary, but will waive the charge if your Contract Value is $10,000 or more
on the applicable Contract Anniversary. Security Benefit will deduct a pro rata
administration charge upon:
* A full withdrawal of Contract Value
* Payment of a death benefit
* The Annuity Commencement Date if one of Annuity Options 1 through 4 or 8 is
elected
The purpose of this charge is to reimburse Security Benefit for the expenses
associated with administration of the Contracts. Security Benefit does not
expect to profit from this charge.
PREMIUM TAX CHARGE -- Various states and municipalities impose a tax on premiums
on annuity contracts received by insurance companies. Whether or not a premium
tax is imposed will depend upon, among other things, the Participant's state of
residence and the insurance tax laws and Security Benefit's status in a
particular state. Security Benefit assesses a premium tax charge to reimburse
itself for premium taxes that it incurs in connection with a Contract. Security
Benefit currently deducts this charge upon the Annuity Commencement Date or upon
full or partial withdrawal if a premium tax was incurred and is not refundable.
Security Benefit reserves the right to deduct premium taxes when due or any time
thereafter. Premium tax rates currently range from 0 percent to 3.5 percent, but
are subject to change by a governmental entity.
OTHER CHARGES -- Security Benefit may charge the Separate Account or the
Subaccounts for the federal, state, or local taxes incurred by Security Benefit
that are attributable to the Separate Account or the Subaccounts, the operations
of Security Benefit with respect to the Contracts, or payment of premiums or
acquisition costs under the Contracts. No such charge is currently assessed. See
"Tax Status of Security Benefit and the Separate Account" and "Charge for
Security Benefit Taxes," page 26.
VARIATIONS IN CHARGES -- Security Benefit may reduce or waive the amount of the
contingent deferred sales charge and administration charge for a Contract where
the administrative and maintenance costs associated with the Contract are
reduced for reasons such as the amount of the initial purchase payment or
projected purchase payments or the Contract is sold in connection with a group
or sponsored arrangement.
GUARANTEE OF CERTAIN CHARGES -- Security Benefit guarantees that the charge for
mortality and expense risks will not exceed an annual rate of 1.00 percent of
each Subaccount's average daily net assets and the administration charge will
not exceed $15 per Contract Year.
SBL FUND EXPENSES -- Each Subaccount of the Separate Account purchases shares at
the net asset value of the corresponding Series of SBL Fund. Each Series' net
asset value reflects the investment advisory fee and other expenses that are
deducted from the assets of the Series. These fees and expenses are not deducted
from the Subaccounts, but are paid from the assets of the corresponding Series.
As a result, you indirectly bear a pro rata portion of such fees and expenses.
The advisory fees and other expenses, if any, which are more fully described in
SBL Fund's prospectus, are not specified or fixed under the terms of the
Contract.
ANNUITY PERIOD
GENERAL -- You select the Annuity Commencement Date at the time of application.
The Annuity Commencement Date may not be prior to the third annual Contract
anniversary and may not be deferred beyond your 85th birthday, although the
terms of the Plan and the laws of certain states may require that you start
annuity payments at an earlier age. If you do not select an Annuity Commencement
Date, the Annuity Commencement Date will be the later of the Annuitant's 70th
birthday or the tenth Contract Anniversary. See "Selection of an Option," page
22. If there are Joint Annuitants, the birthdate of the older Annuitant will be
used to determine the latest Annuity Commencement Date.
On the Annuity Commencement Date, the proceeds under the Contract will be
applied to provide an annuity under one of the options described below. Each
option is available in two forms--either as a variable annuity for use with the
Subaccounts or as a fixed annuity for use with the Fixed Account. A combination
variable and fixed annuity is also available. Variable annuity payments will
fluctuate with the investment performance of the applicable Subaccounts while
fixed annuity payments will not. Unless you direct otherwise, proceeds derived
from Contract Value allocated to the Subaccounts will be applied to purchase a
variable annuity and proceeds derived from Contract Value allocated to the Fixed
Account will be applied to purchase a fixed annuity. The proceeds under the
Contract will be equal to your Contract Value in the Subaccounts and the Fixed
Account as of the Annuity Commencement Date, reduced by any applicable premium
taxes and withdrawal charges and any outstanding Contract Debt. If you elected
one of Annuity Options 1 through 4 or 8, Security Benefit will also deduct a pro
rata administration charge.
The Contracts provide for eight Annuity Options. Security Benefit may make
other Annuity Options available upon request. Annuity payments under Annuity
Options 1 through 4, 7 and 8 are based upon annuity rates that vary with the
Annuity Option selected. In the case of Options 1 through 4 and 8, the annuity
rates will vary based on the age and sex of the Annuitant, except that unisex
rates are available where required by law. The annuity rates reflect your life
expectancy based upon your age as of the Annuity Commencement Date and your
gender, unless unisex rates apply. The annuity rates are based upon the 1983(a)
mortality table and are adjusted to reflect an assumed interest rate of 3.5
percent, compounded annually. In the case of Options 5 and 6 as described below,
annuity payments are based upon Contract Value without regard to annuity rates.
If no Annuity Option has been selected, annuity payments will be made to the
Annuitant under an automatic option, which shall be an annuity payable during
the lifetime of the Annuitant with payments guaranteed to be made for 10 years
under Option 2.
Annuity Options 1 through 4 and 8 provide for payments to be made during the
lifetime of the Annuitant. Annuity payments under such options cease in the
event of the Annuitant's death, unless the option provides for a guaranteed
minimum number of payments, for example, a life income with guaranteed payments
of 5, 10, 15 or 20 years. The level of annuity payments will be greater for
shorter guaranteed periods and less for longer guaranteed periods. Similarly,
payments will be greater for life annuities than for joint and survivor
annuities, because payments for life annuities are expected to be made for a
shorter period.
You may elect to receive annuity payments on a monthly, quarterly,
semiannual, or annual basis, although no payments will be made for less than
$100. If the frequency of payments selected would result in payments of less
than $100, Security Benefit reserves the right to change the frequency.
You may designate or change an Annuity Commencement Date or Annuity Option
provided proper written notice is received by Security Benefit at its Home
Office at least 30 days prior to the Annuity Commencement Date set forth in the
Contract. The date selected as the new Annuity Commencement Date must be at
least 30 days after the date written notice requesting a change of Annuity
Commencement Date is received at Security Benefit's Home Office.
Once annuity payments have commenced under Annuity Options 1 through 4 and 8,
an Annuitant or Participant cannot change the Annuity Option and cannot
surrender his or her annuity and receive a lump-sum settlement in lieu thereof.
Under Annuity Options 5 through 7, full or partial withdrawals may be made after
the Annuity Commencement Date, subject to any applicable withdrawal charge. The
Contract specifies annuity tables for Annuity Options 1 through 4, 7 and 8,
described below. The tables contain the guaranteed minimum dollar amount (per
$1,000 applied) of the FIRST annuity payment for a variable annuity and each
annuity payment for a fixed annuity.
ANNUITY OPTIONS --
OPTION 1 -- LIFE INCOME. Periodic annuity payments will be made during the
lifetime of the Annuitant. It is possible under this Option for any Annuitant to
receive only one annuity payment if the Annuitant's death occurs prior to the
due date of the second annuity payment, two if death occurs prior to the due
date of the third annuity payment, etc. THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS WILL CEASE UPON THE DEATH OF THE
ANNUITANT, REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 2 -- LIFE INCOME WITH GUARANTEED PAYMENTS OF 5, 10, 15 OR 20 YEARS.
Periodic annuity payments will be made during the lifetime of the Annuitant with
the promise that if, at the death of the Annuitant, payments have been made for
less than a stated period, which may be five, ten, fifteen or twenty years, as
elected by the Owner, annuity payments will be continued during the remainder of
such period to the Designated Beneficiary.
OPTION 3 -- LIFE WITH INSTALLMENT REFUND OPTION. Periodic annuity payments
will be made during the lifetime of the Annuitant with the promise that if, at
the death of the Annuitant, the number of payments that has been made is less
than the number determined by dividing the amount applied under this Option by
the amount of the first payment, annuity payments will be continued to the
Designated Beneficiary until that number of payments has been made.
OPTION 4 -- JOINT AND LAST SURVIVOR. Periodic annuity payments will be made
during the lifetime of either Annuitant. It is possible under this Option for
only one annuity payment to be made if both Annuitants die prior to the second
annuity payment due date, two if both die prior to the third annuity payment due
date, etc. AS IN THE CASE OF OPTION 1, THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT, REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 5 -- PAYMENTS FOR SPECIFIED PERIOD. Periodic annuity payments will be
made for a fixed period, which may be from five to twenty years, as elected by
the Owner, with the guarantee that if, at the death of all Annuitants, payments
have been made for less than the selected fixed period, the remaining unpaid
payments will be paid to the Designated Beneficiary.
OPTION 6 -- PAYMENTS OF A SPECIFIED AMOUNT. Periodic annuity payments of the
amount elected by the Owner will be made until the amount applied and interest
thereon are exhausted, with the guarantee that if, at the death of all
Annuitants, all guaranteed payments have not yet been made, the remaining unpaid
payments will be paid to the Designated Beneficiary.
OPTION 7 -- PERIOD CERTAIN. Periodic annuity payments will be made for a
stated period, which may be five, ten, fifteen or twenty years, as elected by
the Owner. If the Annuitant dies prior to the end of the period, the remaining
payments will be made to the Designated Beneficiary.
OPTION 8 -- JOINT AND CONTINGENT SURVIVOR OPTION. Periodic annuity payments
will be made during the life of the primary Annuitant. Upon the death of the
primary Annuitant, payments will be made to the contingent Annuitant during his
or her life. If the contingent Annuitant is not living upon the death of the
Primary Annuitant, no payments will be made to the contingent Annuitant. It is
possible under this Option for only one annuity payment to be made if both
Annuitants die prior to the second annuity payment due date, two if both die
prior to the third annuity payment due date, etc. AS IN THE CASE OF OPTIONS 1
AND 4, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT, REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
VALUE OF VARIABLE ANNUITY PAYMENTS: ASSUMED INTEREST RATE. The annuity tables
in the Contract which are used to calculate variable annuity payments for
Annuity Options 1 through 4, 7 and 8 are based on an "assumed interest rate" of
3 1/2 percent, compounded annually. Variable annuity payments generally increase
or decrease from one annuity payment date to the next based upon the performance
of the applicable Subaccounts during the interim period adjusted for the assumed
interest rate. If the performance of the Subaccount selected is equal to the
assumed interest rate, the annuity payments will remain constant. If the
performance of the Subaccounts is greater than the assumed interest rate, the
annuity payments will increase, and if it is less than the assumed interest
rate, the annuity payments will decline. A higher assumed interest rate would
mean a higher initial annuity payment, but the amount of the annuity payment
would increase more slowly in a rising market (or the amount of the annuity
payment would decline more rapidly in a declining market). A lower assumption
would have the opposite effect.
SELECTION OF AN OPTION -- You should carefully review the Annuity Options with
your financial or tax advisers. For Contracts used in connection with a
Qualified Plan, reference should be made to the terms of the particular plan and
the requirements of the Internal Revenue Code for pertinent limitations
respecting annuity payments and other matters. For instance, Qualified Plans
generally require that annuity payments begin no later than April 1 of the
calendar year following the year in which the Annuitant reaches age 70 1/2. In
addition, under Qualified Plans, the period elected for receipt of annuity
payments under Annuity Options (other than Life Income) generally may be no
longer than the joint life expectancy of the Annuitant and beneficiary in the
year that the Annuitant reaches age 70 1/2, and must be shorter than such joint
life expectancy if the beneficiary is not the Annuitant's spouse and is more
than ten years younger than the Annuitant.
THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments and transfer
Contract Value to the Fixed Account. There are two Fixed Account options, the
Traditional General Account and the DCA Plus Account, as discussed on page 24.
Amounts allocated to the Fixed Account become part of Security Benefit's General
Account, which supports Security Benefit's insurance and annuity obligations.
The General Account is subject to regulation and supervision by the Kansas
Department of Insurance and is also subject to the insurance laws and
regulations of other jurisdictions in which the Contract is distributed. In
reliance on certain exemptive and exclusionary provisions, interests in the
Fixed Account have not been registered as securities under the Securities Act of
1933 (the "1933 Act") and the Fixed Account has not been registered as an
investment company under the the 1940 Act. Accordingly, neither the Fixed
Account nor any interests therein are generally subject to the provisions of the
1933 Act or the 1940 Act. Security Benefit has been advised that the staff of
the SEC has not reviewed the disclosure in this Prospectus relating to the Fixed
Account. This disclosure, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in the Prospectus. This Prospectus is
generally intended to serve as a disclosure document only for aspects of a
Contract involving the Separate Account and contains only selected information
regarding the Fixed Account. For more information regarding the Fixed Account,
see "The Contract," page 14.
Amounts allocated to the Fixed Account options become part of the General
Account of Security Benefit, which consists of all assets owned by Security
Benefit other than those in the Separate Account and other separate accounts of
Security Benefit. Subject to applicable law, Security Benefit has sole
discretion over investment of the assets of its General Account.
INTEREST -- Contract Value allocated to the Fixed Account earns interest at a
fixed rate or rates that are paid by Security Benefit. The Contract Value in the
Fixed Account earns interest at an interest rate that is guaranteed to be at
least an annual effective rate of 3 percent, which will accrue daily
("Guaranteed Rate"). Such interest will be paid regardless of the actual
investment experience of the Fixed Account. In addition, Security Benefit may in
its discretion pay interest at a rate ("Current Rate") that exceeds the
Guaranteed Rate. Security Benefit will determine the Current Rate, if any, from
time to time.
Contract Value allocated or transferred to the Fixed Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Contract Value is allocated or transferred to the Fixed Account. Contract Value
allocated or transferred to the Fixed Account at one point in time may be
credited with a different Current Rate than amounts allocated or transferred to
the Fixed Account at another point in time. For example, amounts allocated to
the Fixed Account in June may be credited with a different current rate than
amounts allocated to the Fixed Account in July. In addition, Security Benefit
may credit interest at different Current Rates on the Traditional General
Account and DCA Plus Account options. Therefore, at any time, various portions
of your Contract Value in the Fixed Account may be earning interest at different
Current Rates depending upon the point in time such portions were allocated or
transferred to the Fixed Account and the Fixed Account option selected. Security
Benefit bears the investment risk for the Contract Value allocated to the Fixed
Account and for paying interest at the Guaranteed Rate on amounts allocated to
the Fixed Account.
For purposes of determining the interest rates to be credited on Contract
Value in the Fixed Account, withdrawals, loans or transfers from the Fixed
Account will be deemed to be taken from purchase payments and Contract Value
allocated to the Fixed Account on a first in, first out basis. Any interest
attributable to such amounts shall be deemed to be taken before the amount of
the purchase payment or other Contract Value allocated to the Fixed Account. For
more information about transfers and withdrawals from the Fixed Account, see the
discussion of the Fixed Account options below.
DEATH BENEFIT -- The death benefit under the Contract will be determined in the
same fashion for a Contract that has Contract Value in the Fixed Account as for
a Contract that has Contract Value allocated to the Subaccounts. See "Death
Benefit," page 18.
CONTRACT CHARGES -- Premium taxes will be the same for Contractowners who
allocate purchase payments or transfer Contract Value to the Fixed Account as
for those who allocate purchase payments or transfer Contract Value to the
Subaccounts. The charges for mortality and expense risks and the administration
charge will not be assessed against the Fixed Account, and any amounts that
Security Benefit pays for income taxes allocable to the Subaccounts will not be
charged against the Fixed Account. In addition, you will not pay directly or
indirectly the investment advisory fees and operating expenses of the SBL Fund
to the extent Contract Value is allocated to the Fixed Account; however, you
also will not participate in the investment experience of the Subaccounts.
TRADITIONAL GENERAL ACCOUNT OPTION -- You may allocate purchase payments to this
option and may transfer Contract Value from the Subaccounts to this option.
Security Benefit limits transfer from this option to the Subaccounts as
discussed below.
Prior to the Annuity Commencement Date, you may transfer from the Traditional
General Account option to the Subaccounts in a Contract Year not more than the
greatest of (1) $5,000, (2) one-third of the Contract Value allocated to the
option at the time of the first transfer in the Contract Year, or (3) 120
percent of the amount transferred from the Traditional General Account option
during the previous Contract Year. Security Benefit reserves the right for a
period of time to allow transfers from this option 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
Traditional General Account option is the greatest of: (1) above; (2) above; or
(3) 120 percent of the lesser of: (i) the dollar amount transferred from the
Traditional General Account option in the previous Contract Year; or (ii) the
maximum dollar amount that would have been allowed in the previous Contract Year
under the transfer provisions above absent the Waiver Period.
You may make full or partial withdrawals to the same extent as if you had
allocated Contract Value to the Subaccounts. However, no partial withdrawal
request will be processed which would result in the withdrawal of Contract Value
from the Loan Account. See "Full and Partial Withdrawals," page 17 and
"Systematic Withdrawals," page 17. In addition, to the same extent as
Contractowners with Contract Value in the Subaccounts, the Owner of a Contract
used in connection with a Qualified Plan may obtain a loan if so permitted under
the terms of the Plan. See "Loans," page 25.
DCA PLUS ACCOUNT OPTION -- This option is available ONLY for purchase payments
allocated to a Contract during the first two Contract Years.
Your purchase payments allocated to this option will be transferred monthly
to one or more of the Subaccounts over a period of one year (the "Transfer
Year"). The Transfer Year begins on the date a Purchase Payment is first
allocated to this option and the first monthly transfer is made on the same date
in the following month. When you first allocate a purchase payment to this
option, you must submit to Security Benefit written instruction specifying the
Subaccounts to which such transfers should be made. (The transfers may not be
made to the Traditional General Account option.) The monthly transfers from the
DCA Plus Account to the Subaccounts will be made in amounts determined by
dividing the Contract Value allocated to the DCA Plus Account by the number of
months remaining in the Transfer Year. If subsequent purchase payments are
allocated to the DCA Plus Account during a Transfer Year, they will be
transferred to the Subaccounts you select over the balance of the Transfer Year.
As a result, any subsequent purchase payments may be allocated to the DCA Plus
Account for less than a year. You should consider whether allocating a
subsequent purchase payment to the DCA Plus Account is appropriate in light of
the amount of time remaining in the Transfer Year. If a purchase payment is
allocated to the DCA Plus Account after the initial Transfer Year has ended, a
new Transfer Year will begin with respect to that purchase payment.
You may not transfer Contract Value from the Subaccounts or the Traditional
General Account option to this option. Full and partial withdrawals are allowed
as discussed under "Full and Partial Withdrawals," page 17.
PAYMENTS FROM THE FIXED ACCOUNT -- Full and partial withdrawals, loans, and
transfers from the Fixed Account may be delayed for up to six months after a
written request in proper form is received by Security Benefit at its Home
Office. During the period of deferral, interest at the applicable interest rate
or rates will continue to be credited to the amounts allocated to the Fixed
Account. However, payment of any amounts will not be deferred if they are to be
used to pay premiums on any policies or contracts issued by Security Benefit.
MORE ABOUT THE CONTRACT
DESIGNATION AND CHANGE OF BENEFICIARY -- The Designated Beneficiary is the
person having the right to the death benefit, if any, payable upon the death of
the Participant during the Accumulation Period. The Designated Beneficiary is
the first person on the following list who is alive on the date of death of the
Participant: the Primary Beneficiary; the Secondary Beneficiary; or if neither
of the above is alive, the Participant's estate. The Primary Beneficiary is the
individual named as such in the application or any later change shown in
Security Benefit's records. The Primary Beneficiary will receive the death
benefit of the Contract only if he or she is alive on the date of death of the
Participant during the Accumulation Period. Because the death benefit of the
Contract goes to the first person on the above list who is alive on the date of
death of the Participant, careful consideration should be given the designation
of the Primary Beneficiary. The Participant may change the Primary Beneficiary
at any time while the Contract is in force by written request on forms provided
by Security Benefit and received by Security Benefit at its Home Office. The
change will not be binding on Security Benefit until it is received and recorded
at its Home Office. The change will be effective as of the date the form is
signed, subject to any payments made or other actions taken by Security Benefit
before the change is received and recorded. A Secondary Beneficiary may be
designated.
Reference should be made to the terms of a the Plan and any applicable law
for any restrictions or limitations on the designation of a Beneficiary.
DIVIDENDS -- The Contract is participating and will share in the surplus
earnings of Security Benefit. However, the current dividend scale is zero and
Security Benefit does not anticipate that dividends will be paid. Certain states
will not permit the Contract to be issued as a dividend-paying policy.
PAYMENTS FROM THE SEPARATE ACCOUNT -- Security Benefit will pay any full or
partial withdrawal benefit or death benefit proceeds from Contract Value
allocated to the Subaccounts, and will effect a transfer between Subaccounts or
from a Subaccount to the Fixed Account on the Valuation Date a proper request is
received at Security Benefit's Home Office. However, Security Benefit can
postpone the calculation or payment of such a payment or transfer of amounts
from the Subaccounts to the extent permitted under applicable law, which is
currently permissible only for any period:
* During which the New York Stock Exchange is closed, other than customary
weekend and holiday closings,
* During which trading on the New York Stock Exchange is restricted as
determined by the SEC,
* During which an emergency, as determined by the SEC, exists as a result of
which (i) disposal of securities held by the Separate Account is not
reasonably practicable, or (ii) it is not reasonably practicable to
determine the value of the assets of the Separate Account, or
* For such other periods as the SEC may by order permit for the protection of
investors.
PROOF OF AGE AND SURVIVAL -- Security Benefit may require proof of age or
survival of any person on whose life annuity payments depend.
MISSTATEMENTS -- If you misstate the age or sex of an Annuitant or Participant,
the correct amount paid or payable by Security Benefit under the Contract shall
be such as the Contract Value would have provided for the correct age or sex
(unless unisex rates apply).
LOANS -- If you own a Contract issued in connection with a retirement plan that
is qualified under Section 403(b) of the Internal Revenue Code, you may borrow
money under your Contract using the Contract Value as the only security for the
loan. You may obtain a loan by submitting a proper written request to Security
Benefit. A loan must be taken prior to the Annuity Commencement Date. The
minimum loan that may be taken is $1,000. The maximum loan that can be taken is
generally equal to the lesser of: (1) $50,000 reduced by the excess of: (a) the
highest outstanding loan balance within the preceding 12-month period ending on
the day before the date the loan is made; over (b) the outstanding loan balance
on the date the loan is made; or (2) 50 percent of the Contract Value or
$10,000, whichever is greater. The Internal Revenue Code requires aggregation of
all loans made to an individual employee under a single employer plan. However,
since Security Benefit has no information concerning outstanding loans with
other providers, we will only use information available under annuity contracts
issued by us. Reference should be made to the terms of your particular Plan for
any additional loan restrictions.
When an eligible contractowner takes a loan, Contract Value in an amount
equal to the loan amount is transferred from the Subaccounts and/or the Fixed
Account into an account called the "Loan Account." Amounts allocated to the Loan
Account earn 3 percent, the minimum rate of interest guaranteed under the Fixed
Account. In addition, 10 percent of the loaned amount will be held in the Fixed
Account as security for the loan and will earn the Current Rate.
Interest will be charged for the loan and will accrue on the loan balance
from the effective date of any loan. The loan interest rate will be 5.0 percent.
Because the Contract Value maintained in the Loan Account (which will earn 3
percent) 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 Security Benefit determines
that the loan is to be used to acquire your principal residence, in which case
the loan must be repaid within 30 years. You must make loan repayments on at
least a quarterly basis, and you may prepay your loan at any time. Upon receipt
of a loan payment, Security Benefit will transfer Contract Value from the Loan
Account to the Fixed Account and/or the Subaccounts according to your current
instructions with respect to purchase payments in an amount equal to the amount
by which the payment reduces the amount of the loan outstanding.
If you do not make any required loan payment within 30 days of the due date
for loans with a monthly repayment schedule or within 90 days of the due date
for loans with a quarterly repayment schedule, your total outstanding loan
balance will be deemed to be in default for tax reporting purposes. The entire
loan balance, with any accrued interest, will be reported as income to the
Internal Revenue Service ("IRS"). Once a loan has gone into default, regularly
scheduled payments will not be accepted. No new loans will be allowed while a
loan is in default. Interest will continue to accrue on a loan in default and if
such interest is not paid by December 31 of each year, it will be added to the
outstanding balance of the loan and will be reported to the IRS. Contract Value
equal to the amount of the accrued interest will be transferred to the Loan
Account. If a loan continues to be in default, the total outstanding balance
will be deducted from Contract Value upon the Contractowner's attaining age 59
1/2. The Contract will be automatically terminated if the outstanding loan
balance on a loan in default equals or exceeds the Withdrawal Value. The
proceeds from the Contract will be used to repay the debt and any applicable
withdrawal charge. Because of the adverse tax consequences associated with
defaulting on a loan, you should carefully consider your ability to repay the
loan and should consult with a tax advisor before requesting a loan.
While the amount to secure the loan is held in the Loan Account, you forego
the investment experience of the Subaccounts and the Current Rate of interest on
the Fixed Account. Outstanding Contract Debt will reduce the amount of proceeds
paid upon full withdrawal, upon payment of the death benefit, and upon
annuitization. In addition, no partial withdrawal will be processed which would
result in the withdrawal of Contract Value from the Loan Account.
You should consult with your tax adviser on the effect of a loan.
Loans are not available in certain states pending department of insurance
approval. If loans are later approved by the insurance department of a state,
Security Benefit intends to make loans available to all Owners of 403(b)
contracts in that state at that time, but there can be no assurance that loans
will be approved. Prospective Contractowners should contact their agent
concerning availability of loans in their state.
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS -- Generally, a Qualified Plan
may not provide for the distribution or withdrawal of amounts accumulated under
the Plan until after a fixed number of years, the attainment of a stated age or
upon the occurrence of a specific event such as hardship, disability,
retirement, death or termination of employment. Therefore, if you own a Contract
purchased in connection with a Qualified Plan, you may not be entitled to make a
full or partial withdrawal, as described in this Prospectus, unless one of the
above-described conditions has been satisfied. For this reason, you should refer
to the terms of your particular Plan, the Internal Revenue Code and other
applicable law for any limitation or restriction on distributions and
withdrawals, including the 10 percent penalty tax that may be imposed in the
event of a distribution from a Qualified Plan before the Participant reaches age
59 1/2. See the discussion under "Tax Penalties," page 30.
Section 403(b) imposes restrictions on certain distributions from
tax-sheltered annuity contracts meeting the requirements of Section 403(b). The
restrictions apply to tax years beginning on or after January 1, 1989. Section
403(b) requires that distributions from Section 403(b) tax-sheltered annuities
that are attributable to employee contributions made after December 31, 1988
under a salary reduction agreement begin only after the employee (i) reaches age
59 1/2, (ii) separates from service, (iii) dies, (iv) becomes disabled, or (v)
incurs a hardship. Furthermore, distributions of gains attributable to such
contributions accrued after December 31, 1988 may not be made on account of
hardship. Hardship, for this purpose, is generally defined as an immediate and
heavy financial need, such as paying for medical expenses, the purchase of a
residence, or paying certain tuition expenses, that may ONLY be met by the
distribution.
If you own a Contract purchased as a tax-sheltered Section 403(b) annuity
contract, you will not, therefore, be entitled to make a full or partial
withdrawal, as described in this Prospectus, in order to receive proceeds from
the Contract attributable to contributions under a salary reduction agreement or
any gains credited to such Contract after December 31, 1988 unless one of the
above-described conditions has been satisfied. In the case of transfers of
amounts accumulated in a different Section 403(b) contract to this Contract
under a Section 403(b) program, the withdrawal constraints described above would
not apply to the amount transferred to the Contract attributable to the Owner's
December 31, 1988 account balance under the old contract, provided the amounts
transferred between contracts qualified as a tax-free exchange under the
Internal Revenue Code. An Owner of a Contract may be able to transfer the
Contract's Withdrawal Value to certain other investment alternatives meeting the
requirements of Section 403(b) that are available under an employer's Section
403(b) arrangement.
The distribution or withdrawal of amounts under a Contract purchased in
connection with a Qualified Plan may result in the receipt of taxable income to
the Participant and in some instances may also result in a penalty tax.
Therefore, you should carefully consider the tax consequences of a distribution
or withdrawal under a Contract and you should consult a competent tax adviser.
See "Federal Tax Matters," below.
FEDERAL TAX MATTERS
INTRODUCTION -- The Contract described in this Prospectus is designed for use by
groups which are 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
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 Security Benefit's understanding of the present federal income tax
laws as currently interpreted by the 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 the
Qualified Plan, a person should consult with a qualified tax adviser regarding
the purchase of a Contract, the selection of an Annuity Option under a Contract,
the receipt of annuity payments under a Contract or any other transaction
involving a Contract. SECURITY BENEFIT DOES NOT MAKE ANY GUARANTEE REGARDING THE
TAX STATUS OF, OR TAX CONSEQUENCES ARISING FROM, ANY CONTRACT OR ANY TRANSACTION
INVOLVING A CONTRACT.
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT --
GENERAL. Security Benefit intends to be taxed as a life insurance company
under Part I, Subchapter L of the Code. Because the operations of the Separate
Account form a part of Security Benefit, Security Benefit will be responsible
for any federal income taxes that become payable with respect to the income of
the Separate Account and its Subaccounts.
CHARGE FOR SECURITY BENEFIT TAXES. A charge may be made for any federal taxes
incurred by Security Benefit that are attributable to the Separate Account, the
Subaccounts or the operations of Security Benefit with respect to the Contracts,
or attributable to payments, premiums, or acquisition costs under the Contracts.
Security Benefit will review the question of a charge to the Separate Account,
the Subaccounts or the Contracts for Security Benefit's federal taxes
periodically. Charges may become necessary if, among other reasons, the tax
treatment of Security Benefit or of income and expenses under the Contracts is
ultimately determined to be other than what Security Benefit currently believes
it to be, if there are changes made in the federal income tax treatment of
variable annuities at the insurance company level, or if there is a change in
Security Benefit's tax status.
Under current laws, Security Benefit may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, Security Benefit reserves the right to charge the Separate Account or the
Subaccounts for such taxes, if any, attributable to the Separate Account or
Subaccounts.
DIVERSIFICATION STANDARDS. Each Series of 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, 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 Participant), 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." Guidance issued to date has no application to the Contract.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Contractowner has additional flexibility in allocating purchase
payments and Contract Values. These differences could result in a Contractowner
being treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, Security Benefit does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Security Benefit therefore reserves the right to
modify the Contract, as it deems appropriate, to attempt to prevent a
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 SBL Fund will not have to change
any Series' investment objective or investment policies.
QUALIFIED PLANS -- The Contract may be used with Qualified Plans that meet the
requirements of Section 401, 403(b), 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.
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, Security Benefit may accept beneficiary designations and payment
instructions under the terms of the Contract without regard to any spousal
consents that may be required under the Employee Retirement Income Security Act
of 1974 (ERISA). Consequently, a Participant'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 Participant or Annuitant to penalty taxes. As a result, the
minimum distribution rules may limit the availability of certain Annuity Options
to certain Annuitants and their Beneficiaries. These requirements may not be
incorporated into Security Benefit's Contract administration procedures. Owners,
Participants and Beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
The following are brief descriptions of the various types of Qualified Plans
and the use of the Contract therewith:
SECTION 401. Code Section 401 permits employers to establish various types of
retirement plans (e.g., pension, profit sharing and 401(k) plans) for their
employees. For this purpose, self-employed individuals (proprietors or partners
operating a trade or business) are treated as employees and therefore eligible
to participate in such plans. Retirement plans established in accordance with
Section 401 may permit the purchase of Contracts to provide benefits thereunder.
In order for a retirement plan to be "qualified" under Code Section 401, it
must: (i) meet certain minimum standards with respect to participation, coverage
and vesting; (ii) not discriminate in favor of "highly compensated" employees;
(iii) provide contributions or benefits that do not exceed certain limitations;
(iv) prohibit the use of plan assets for purposes other than the exclusive
benefit of the employees and their beneficiaries covered by the plan; (v)
provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.
A retirement plan qualified under Code Section 401 may be funded by employer
contributions, employee contributions or a combination of both. Plan
participants are not subject to tax on employer contributions until such amounts
are actually distributed from the plan. Depending upon the terms of the
particular plan, employee contributions may be made on a pre-tax or after-tax
basis. In addition, plan participants are not taxed on plan earnings derived
from either employer or employee contributions until such earnings are
distributed.
Each employee's interest in a retirement plan qualified under Code Section
401 must generally be distributed or begin to be distributed not later than
April 1 of the calendar year following the later of the calendar year in which
the employee reaches age 70 1/2 or retires ("required beginning date"). Periodic
distributions must not extend beyond the life of the employee or the lives of
the employee and a designated beneficiary (or over a period extending beyond the
life expectancy of the employee or the joint life expectancy of the employee and
a designated beneficiary).
If an employee dies before reaching his or her required beginning date, the
employee's entire interest in the plan must generally be distributed within five
years of the employee's death. However, the five-year rule will be deemed
satisfied if distributions begin before the close of the calendar year following
the year of the employee's death to a designated beneficiary and are made over
the life of the beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the designated beneficiary is the employee's
surviving spouse, distributions may be delayed until the employee would have
reached age 70 1/2.
If an employee dies after reaching his or her required beginning date, the
employee's interest in the plan must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
employee's death.
Annuity payments distributed from a retirement plan qualified under Code
Section 401 are taxable under Section 72 of the Code. Section 72 provides that
the portion of each payment attributable to contributions that were taxable to
the employee in the year made, if any, is excluded from gross income as a return
of the employee's investment. The portion so excluded is determined by dividing
the employee's investment in the plan by (1) the number of anticipated payments
determined under a table set forth in Section 72 of the Code or (2) in the case
of a contract calling for installment payments, the number of monthly annuity
payments under such contract. The portion of each payment in excess of the
exclusion amount is taxable as ordinary income. Once the employee's investment
has been recovered, the full annuity payment will be taxable. If the employee
should die prior to recovering his entire investment, the unrecovered investment
will be allowed as a deduction on his final return. If the employee made no
contributions that were taxable when made, the full amount of each annuity
payment is taxable to him 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," page 29.
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," page 28.
A Section 403(b) annuity contract may be purchased with employer
contributions, employee contributions or a combination of both. An employee's
rights under a Section 403(b) contract must be nonforfeitable. Numerous
limitations apply to the amount of contributions that may be made to a Section
403(b) annuity contract. The applicable limit will depend upon, among other
things, whether the annuity contract is purchased with employer or employee
contributions.
Amounts used to purchase Section 403(b) annuities generally are excludable
from the taxable income of the employee. As a result, all distributions from
such annuities are normally taxable in full as ordinary income to the employee.
A Section 403(b) annuity contract must prohibit the distribution of employee
contributions (including earnings thereon) until the employee: (i) attains age
59 1/2, (ii) terminates employment; (iii) dies; (iv) becomes disabled; or (v)
incurs a financial hardship (earnings may not be distributed in the event of
hardship).
Distributions from a Section 403(b) annuity contract may be eligible for a
tax-free rollover to either another Section 403(b) annuity contract or to an
individual retirement account or annuity (IRA). See "Rollovers," page 29.
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 a 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," page 28. Since under a Section 457 plan
contributions are generally excludable from the taxable income of the employee,
the full amount received will usually be taxable as ordinary income when annuity
payments commence or other distributions are made. Distributions from a Section
457 plan are not eligible for tax-free rollovers.
ROLLOVERS. A "rollover" is the tax-free transfer of a distribution from one
Qualified Plan to another. Distributions which are rolled over are not included
in the employee's gross income until some future time.
If any portion of the balance to the credit of an employee in a Section 401
plan or Section 403(b) plan is paid to the employee in an "eligible rollover
distribution" and the employee transfers any portion of the amount received to
an "eligible retirement plan," then the amount so transferred is not includable
in income. An "eligible rollover distribution" generally means any distribution
that is not one of a series of periodic payments made for the life of the
distributee or for a specified period of at least ten years. In addition, a
required minimum distribution will not qualify as an eligible rollover
distribution. A rollover must be completed within 60 days after receipt of the
distribution.
In the case of a Section 401 plan, an "eligible retirement plan" will be
another retirement plan qualified under Code Section 401 or an individual
retirement account or annuity under Code Section 408. With respect to a Section
403(b) plan, an "eligible retirement plan" will be another Section 403(b) plan
or an individual retirement account or annuity described in Code Section 408.
A Section 401 plan and a Section 403(b) plan must generally provide a
participant receiving an eligible rollover distribution the option to have the
distribution transferred directly to another eligible retirement plan.
TAX PENALTIES. PREMATURE DISTRIBUTION TAX. Distributions from a Qualified
Plan before the participant reaches age 59 1/2 are generally subject to an
additional tax equal to 10 percent of the taxable portion of the distribution.
The 10 percent penalty tax does not apply to distributions: (i) made on or after
the death of the employee; (ii) attributable to the employee's disability; (iii)
which are part of a series of substantially equal periodic payments made (at
least annually) for the life (or life expectancy) of the employee or the joint
lives (or joint life expectancies) of the employee and a designated beneficiary
and which begin after the employee terminates employment; (iv) made to an
employee after termination of employment after reaching age 55; (v) made to pay
for certain medical expenses; (vi) that are exempt withdrawals of an excess
contribution; (vii) that is rolled over or transferred in accordance with Code
requirements; or (viii) that is transferred pursuant to a decree of divorce or
separate maintenance or written instrument incident to such a decree. The 10
percent penalty tax is generally not applicable to distributions from a Section
457 plan.
MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan is
less than the minimum required distribution for the year, the participant is
subject to a 50 percent tax on the amount that was not properly distributed.
EXCESS DISTRIBUTION/ACCUMULATION TAX. The penalty tax of 15 percent which was
imposed (in addition to any ordinary income tax) on large plan distributions and
the "excess retirement accumulations" of an individual has been repealed
effective January 1, 1997.
WITHHOLDING. Periodic distributions (e.g., annuities and installment
payments) from a Qualified Plan that will last for a period of ten or more years
are generally subject to voluntary income tax withholding. The amount withheld
on such periodic distributions is determined at the rate applicable to wages.
The recipient of a periodic distribution may generally elect not to have
withholding apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of fewer than ten years) from a Qualified Plan (other than a Section
457 plan) 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.
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 Participant considering purchase of a Contract in connection with a
Qualified Plan should first consult a qualified and competent tax adviser with
regard to the suitability of the Contract as an investment vehicle for the
Qualified Plan.
OTHER INFORMATION
VOTING OF SBL FUND SHARES -- Security Benefit is the legal owner of the shares
of SBL Fund held by the Subaccounts. Security Benefit will exercise voting
rights attributable to the shares of each Series of the Fund held in the
Subaccounts at any regular and special meetings of the shareholders of the Fund
on matters requiring shareholder voting under the 1940 Act. In accordance with
its view of presently applicable law, Security Benefit will exercise its voting
rights based on instructions received from persons having the voting interest in
corresponding Subaccounts. However, if the 1940 Act or any regulations
thereunder should be amended, or if the present interpretation thereof should
change, and as a result Security Benefit determines that it is permitted to vote
the shares of SBL Fund in its own right, it may elect to do so.
The person having the voting interest under a Contract is the Owner. Unless
otherwise required by applicable law, the number of shares of a particular
Series as to which voting instructions may be given to Security Benefit is
determined by dividing your Contract Value in the corresponding Subaccount on a
particular date by the net asset value per share of the Series as of the same
date. Fractional votes will be counted. The number of votes as to which voting
instructions may be given will be determined as of the same date established by
SBL Fund for determining shareholders eligible to vote at the meeting of the
Fund. If required by the SEC, Security Benefit reserves the right to determine
in a different fashion the voting rights attributable to the shares of SBL Fund.
Voting instructions may be cast in person or by proxy.
Voting rights attributable to your Contract Value in a Subaccount for which
no timely voting instructions are received will be voted by Security Benefit in
the same proportion as the voting instructions that are received in a timely
manner for all Contracts participating in that Subaccount. Security Benefit will
also exercise the voting rights from assets in each Subaccount that are not
otherwise attributable to Contractowners, if any, in the same proportion as the
voting instructions that are received in a timely manner for all Contracts
participating in that Subaccount. Security Benefit generally will exercise
voting rights attributable to shares of the Series of SBL Fund held in its
General Account, if any, in the same proportion as votes cast with respect to
shares of the Series of the Fund held by the Separate Account and other separate
accounts of Security Benefit, in the aggregate.
SUBSTITUTION OF INVESTMENTS -- Security Benefit reserves the right, subject to
compliance with the law as then in effect, to make additions to, deletions from,
substitutions for, or combinations of the securities that are held by the
Separate Account or any Subaccount or that the Separate Account or any
Subaccount may purchase. If shares of any or all of the Series of SBL Fund
should no longer be available for investment, or if Security Benefit management
believes further investment in shares of any or all of the Series of SBL Fund
should become inappropriate in view of the purposes of the Contract, Security
Benefit may substitute shares of another Series of SBL Fund or of a different
fund for shares already purchased or to be purchased in the future under the
Contract. Security Benefit may also purchase, through the Subaccount, other
securities for other classes or contracts, or permit a conversion between
classes of contracts on the basis of requests made by Owners.
In connection with a substitution of any shares attributable to an Owner's
interest in a Subaccount or the Separate Account, Security Benefit will, to the
extent required under applicable law, provide notice, seek Owner approval, seek
prior approval of the SEC, and comply with the filing or other procedures
established by applicable state insurance regulators.
Security Benefit also reserves the right to establish additional Subaccounts
of the Separate Account that would invest in a new Series of SBL Fund or in
shares of another investment company, a series thereof, or other suitable
investment vehicle. Security Benefit may establish new Subaccounts in its sole
discretion, and will determine whether to make any new Subaccount available to
existing Owners. Security Benefit may also eliminate or combine one or more
Subaccounts if, in its sole discretion, marketing, tax, or investment conditions
so warrant.
Subject to compliance with applicable law, Security Benefit may transfer
assets to the Fixed Account. Security Benefit also reserves the right, subject
to any required regulatory approvals, to transfer assets of any Subaccount to
another separate account or Subaccount.
In the event of any such substitution or change, Security Benefit may, by
appropriate endorsement, make such changes in these and other contracts as may
be necessary or appropriate to reflect such substitution or change. If Security
Benefit believes it to be in the best interests of persons having voting rights
under the Contracts, the Separate Account may be operated as a management
investment company under the 1940 Act or any other form permitted by law. The
Separate Account may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with other separate
accounts of Security Benefit or an affiliate thereof. Subject to compliance with
applicable law, Security Benefit also may combine one or more Subaccounts and
may establish a committee, board, or other group to manage one or more aspects
of the operation of the Separate Account.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS -- Security Benefit reserves the
right, without the consent of the Owner or Participant, to suspend sales of the
Contract as presently offered and to make any change to the provisions of the
Contracts to comply with, or give Participants the benefit of, any federal or
state statute, rule, or regulation, including but not limited to requirements
for annuity contracts and retirement plans under the Internal Revenue Code and
regulations thereunder or any state statute or regulation. In addition, upon 30
days notice to the Owner, Security Benefit may make other changes to the
Contract that will apply only to individuals who become Participants after the
effective date of the change.
REPORTS TO OWNERS -- Security Benefit will send you annually a statement setting
forth a summary of the transactions that occurred during the year and the
Contract Value as of the end of the year. In addition, the statement will
indicate the allocation of Contract Value among the Fixed Account and the
Subaccounts and any other information required by law. Security Benefit will
also send confirmations upon purchase payments, transfers, loans, loan
repayments, and full and partial withdrawals. Security Benefit may confirm
certain transactions on a quarterly basis. These transactions include purchases
under an Automatic Investment Program, transfers under the Dollar Cost Averaging
and Asset Reallocation Options, systematic withdrawals and annuity payments.
You will also receive an annual and semiannual report containing financial
statements for SBL Fund, which will include a list of the portfolio securities
of each Series, as required by the 1940 Act, and/or such other reports as may be
required by federal securities laws.
TELEPHONE TRANSFER PRIVILEGES -- You may request a transfer of Contract Value
and may make changes to an existing Dollar Cost Averaging or Asset Reallocation
option by telephone if the Telephone Transfer section of the application or an
Authorization for Telephone Requests form ("Telephone Authorization") has been
completed, signed, and filed at Security Benefit's Home Office. Security Benefit
has established procedures to confirm that instructions communicated by
telephone are genuine and will not be liable for any losses due to fraudulent or
unauthorized instructions provided it complies with its procedures. Security
Benefit's procedures require that any person requesting a transfer by telephone
provide the account number and the Participant's tax identification number and
such instructions must be received on a recorded line. Security Benefit reserves
the right to deny any telephone transfer request. If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), you may not be able to request transfers by telephone and would
have to submit written requests.
By authorizing telephone transfers, you authorize Security Benefit to accept
and act upon telephonic instructions for transfers involving your Contract. You
agree that neither Security Benefit, any of its affiliates, nor SBL Fund will be
liable for any loss, damages, cost, or expense (including attorneys' fees)
arising out of any telephone requests; provided that Security Benefit effects
such request in accordance with its procedures. As a result of this policy on
telephone requests, you bear the risk of loss arising from the telephone
transfer privilege. Security Benefit may discontinue, modify, or suspend the
telephone transfer privilege at any time.
LEGAL PROCEEDINGS -- There are no legal proceedings pending to which the
Separate Account is a party or which would materially affect the Separate
Account.
LEGAL MATTERS -- Amy J. Lee, Esq., Associate General Counsel, Security Benefit,
has passed upon legal matters in connection with the issue and sale of the
Contracts described in this Prospectus, Security Benefit's authority to issue
the Contracts under Kansas law, and the validity of the forms of the Contracts
under Kansas law.
PERFORMANCE INFORMATION
Performance information for the Subaccounts, including the yield and
effective yield of the Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts may appear in
advertisements, reports, and promotional literature to current or prospective
Participants.
Current yield for the Money Market Subaccount will be based on income
received by a hypothetical investment over a given 7-day period (less expenses
accrued during the period), and then "annualized" (i.e., assuming that the 7-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Money Market Subaccount is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings.
For the remaining Subaccounts, quotations of yield will be based on all
investment income per Accumulation Unit earned during a given 30-day period,
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of an Accumulation Unit
on the last day of the period. Quotations of average annual total return for any
Subaccount will be expressed in terms of the average annual compounded rate of
return on a hypothetical investment in a Contract over a period of one, five,
and ten years (or, if less, up to the life of the Subaccount), will reflect the
deduction of the administration charge, mortality and expense risk charge and
contingent deferred sales charge and may simultaneously be shown for other
periods.
Quotations of yield and effective yield do not reflect deduction of the
contingent deferred sales charge, and total return figures may be quoted that do
not reflect deduction of the charge. If reflected, the performance figures
quoted would be lower. Such performance information will be accompanied by total
return figures that reflect deduction of the contingent deferred sales charge
that would be imposed if Contract Value were withdrawn at the end of the period
for which total return is quoted.
Although the Contracts were not available for purchase until September 1,
1998, the underlying investment vehicle of the Separate Account, SBL Fund, has
been in existence since May 26, 1977. Performance information for the
Subaccounts may also include quotations of total return for periods beginning
prior to the availability of the Contracts that incorporate the performance of
SBL Fund.
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donaghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index or other indices measuring
performance of a pertinent group of securities so that investors may compare a
Subaccount's results with those of a group of securities widely regarded by
investors as representative of the securities markets in general or
representative of a particular type of security; (ii) other variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other rating services, companies, publications, or persons
who rank separate accounts or other investment products on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Contract Value is allocated to a Subaccount
during a particular time period on which the calculations are based. Performance
information should be considered in light of the investment objectives and
policies, characteristics, and quality of the Series in which the Subaccount
invests and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Subaccounts, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on overall
performance or other criteria, (ii) the effect of tax-deferred compounding on a
Subaccount's investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a comparison, at various
points in time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with the
return on a taxable basis, and (iii) Security Benefit's rating or a rating of
Security Benefit's claim-paying ability as determined by firms that analyze and
rate insurance companies and by nationally recognized statistical rating
organizations.
ADDITIONAL INFORMATION
REGISTRATION STATEMENT -- A Registration Statement under the 1933 Act has been
filed with the SEC relating to the offering described in this Prospectus. This
Prospectus does not include all the information included in the Registration
Statement, certain portions of which, including the Statement of Additional
Information, have been omitted pursuant to the rules and regulations of the SEC.
The omitted information may be obtained at the SEC's principal office in
Washington, DC, upon payment of the SEC's prescribed fees and may also be
obtained from the SEC's web site (http://www.sec.gov).
FINANCIAL STATEMENTS -- Consolidated financial statements of Security Benefit
Life Insurance Company and Subsidiaries, at December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, and the financial
statements of the Separate Account at December 31, 1999 and for each of the two
years in the period ended December 31, 1999 are contained in the Statement of
Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to Security Benefit Life Insurance Company and
Subsidiaries. The Table of Contents of the Statement of Additional Information
is set forth below:
TABLE OF CONTENTS --
Page
The Contract............................................................... 3
Valuation of Accumulation Units......................................... 3
Computation of Variable Annuity Payments................................ 3
Illustration ........................................................... 3
Variation in Charges.................................................... 4
Termination of Contract................................................. 4
Group Contracts......................................................... 4
Performance Information.................................................... 4
Limits on Purchase Payments Paid Under Tax-Qualified Retirements Plans..... 7
Section 401............................................................. 7
Section 403(b).......................................................... 7
Section 457............................................................. 7
Assignment................................................................. 7
Distribution of Contracts.................................................. 7
Safekeeping of Variflex Account Assets..................................... 8
State Regulation........................................................... 8
Records and Reports........................................................ 8
Legal Matters.............................................................. 8
Experts.................................................................... 8
Other Information.......................................................... 8
Financial Statements....................................................... 8
