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PARKSTONE
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VARIABLE
ANNUITY
1995
ANNUAL
REPORT
[SBLIC LOGO]
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A LETTER FROM THE PRESIDENT
The key to Security Benefit's record-setting year was our ability to focus
on building value for our policyholders and customers by offering an array of
competitive and innovative products backed by service that we believe is
second-to-none.
We have grown into a diverse financial services organization with $5.7
billion in assets under management and statutory equity exceeding $200 million.
We are a leader in the variable annuity and 403(b) market, and are ranked
among the top 25 variable annuity providers in the country, according to
Variable Annuity Research and Data Services (September 30, 1995).
SERVICE, STRENGTH and STABILITY are fundamental to our success, and
distinguish us from our competitors in the financial field.
SERVICE. We use the power of advanced technology to deliver fast, accurate,
personalized service to our customers. We believe in making investing simpler
for our customers.
STRENGTH. Security Benefit's financial strength is reflected in the
consistently strong ratings we receive from the financial analysts who study our
industry.
STABILITY. A lot has happened since Security Benefit's founding in 1892 --
wars, recessions, booms, busts. Investment strategies have risen and fallen.
Products have come into vogue and gone out just as fast. But we haven't varied
from our original purpose -- to care for and protect others.
In the coming year our focus will continue to be on equity-oriented
products -- variable annuities, mutual funds and variable life insurance. As we
go forward, we will continue to build financial strength and provide service
that exceeds the expectations of our customers.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board,
President and Chief Executive Officer
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BOARD OF DIRECTORS
HOWARD R. FRICKE WILLIAM W. HANNA
Chairman of the Board, President & Chief
President & CEO Operating Officer
The Security Benefit Koch Industries
Group of Companies Wichita, Kansas
Topeka, Kansas
JOHN E. HAYES, JR.
THOMAS R. CLEVENGER Chairman of the Board,
Wichita, Kansas President & CEO
Western Resources, Inc.
SISTER LORETTO MARIE COLWELL Topeka, Kansas
President
St. Francis Hospital and LAIRD G. NOLLER
Medical Center President
Topeka, Kansas Noller Enterprises
Topeka, Kansas
JOHN C. DICUS
Chairman of the Board FRANK SABATINI
Capitol Federal Savings Chairman of the Board
& Loan Association and President
Topeka, Kansas Capital City Bank
Topeka, Kansas
MELANIE S. FANNIN
President ROBERT C. WHEELER
Kansas - Southwestern President
Bell Telephone Hill's Pet Nutrition, Inc.
Topeka, Kansas Topeka, Kansas
The Parkstone Variable Annuity involves risk, including loss of principal. It is
not a deposit or obligation of, or guaranteed or endorsed by any bank and is not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 4, 1996 at Security Benefit Life, 700 SW Harrison St., Topeka,
Kansas at 2:00 p.m. Each policyowner is entitled to vote, either in person or by
proxy, on all matters coming before the meeting. Proxies are available from the
corporate secretary and must be returned at least 30 days prior to the annual
meeting.
This report is submitted only for the general information of Parkstone Variable
Annuity contractowners and is not authorized for
distribution to the public.
For More Information Call
1-800-888-2461
[SBLIC LOGO]
700 SW Harrison St., Topeka, Kansas 66636-0001
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Report of Independent Auditors
The Contractowners of Parkstone Variable Annuity
and The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of Parkstone Variable Annuity
(the Company) as of December 31, 1995, and the related statement of operations
and changes in net assets for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1995, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Parkstone Variable Annuity at
December 31, 1995, and the results of its operations and changes in its net
assets for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 2, 1996
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PARKSTONE VARIABLE ANNUITY
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BALANCE SHEET DECEMBER 31, 1995
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ASSETS (DOLLARS IN THOUSANDS)
Investments:
Parkstone Advantage Fund:
Prime Obligations Fund - 804,893 shares at net
asset value of $1.00 per share (cost, $805) $ 805
Bond Fund - 433,836 shares at net asset value of
$10.50 per share (cost, $4,286) 4,554
Equity Fund - 1,004,184 shares at net asset value
of $12.44 per share (cost, $10,287) 12,492
International Discovery Fund - 599,414 shares at
net asset value of $10.59 per share (cost, $6,154) 6,348
Small Capitalization Fund - 635,507 shares at net
asset value of $15.71 per share (cost, $7,524) 9,984
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Total assets $34,183
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NET ASSETS
Net assets are represented by (NOTE 3):
NUMBER UNIT
OF UNITS VALUE AMOUNT
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NON-TRUST CONTRACTS
Prime Obligations Subaccount:
Accumulation units 63,768 $10.43 $ 665
Bond Subaccount:
Accumulation units 369,775 10.69 3,953
Equity Subaccount:
Accumulation units 991,853 12.06 11,965
International Discovery Subaccount:
Accumulation units 600,836 10.26 6,167
Small Capitalization Subaccount:
Accumulation units 630,080 15.23 9,597
TRUST CONTRACTS
Prime Obligations Subaccount:
Accumulation units 13,728 10.17 140
Bond Subaccount:
Accumulation units 55,111 10.92 602
Equity Subaccount:
Accumulation units 42,810 12.32 527
International Discovery Subaccount:
Accumulation units 17,264 10.47 181
Small Capitalization Subaccount:
Accumulation units 24,824 15.57 386
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Total net assets $34,183
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SEE ACCOMPANYING NOTES.
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<TABLE>
PARKSTONE VARIABLE ANNUITY
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STATEMENT OF OPERATIONS AND
CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 1995
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(IN THOUSANDS)
<CAPTION>
PRIME INTERNATIONAL SMALL
OBLIGATIONS BOND EQUITY DISCOVERY CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
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<S> <C> <C> <C> <C> <C>
NON-TRUST CONTRACTS
Dividend distributions $ 14 $ 141 $ - $ - $ -
Expenses (NOTE 2):
Mortality and expense risk fee (4) (41) (119) (66) (88)
Administrative fee (1) (15) (33) (11) (11)
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Net investment income (loss) 9 85 (152) (77) (99)
Realized gain (loss) on investments - (1) 104 (26) 190
Unrealized appreciation on investments - 357 2,255 514 1,911
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Net realized and unrealized gain on investments - 356 2,359 488 2,101
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Net increase in net assets resulting from
operations 9 441 2,207 411 2,002
Net assets at beginning of year 178 2,716 7,121 4,622 4,991
Variable annuity deposits (NOTES 2 AND 3) 746 1,288 3,577 1,799 3,260
Terminations and withdrawals (NOTES 2 AND 3) (268) (492) (940) (665) (656)
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Net assets at end of year $665 $3,953 $11,965 $6,167 $9,597
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TRUST CONTRACTS
Dividend distributions $ 2 $ 14 $ - $ - $ -
Expenses (NOTE 2):
Mortality and expense risk fee - (2) (2) (1) (1)
Administrative fee - - - - -
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Net investment income (loss) 2 12 (2) (1) (1)
Realized gain (loss) on investments - - - - -
Unrealized appreciation on investments - 18 47 11 58
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Net realized and unrealized gain on investments - 18 47 11 58
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Net increase in net assets resulting from
operations 2 30 45 10 57
Net assets at beginning of year - 49 50 92 59
Variable annuity deposits (NOTES 2 AND 3) 138 523 432 79 270
Terminations and withdrawals (NOTES 2 AND 3) - - - - -
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Net assets at end of year $140 $602 $527 $181 $386
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SEE ACCOMPANYING NOTES.
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[BLANK PAGE]
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PARKSTONE VARIABLE ANNUITY
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Parkstone Variable Annuity (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of
1940, as amended. All deposits received by the Account have been invested in
the Parkstone Advantage Fund, a mutual fund not otherwise available to the
public. As directed by the owners, amounts deposited are invested in shares
of Prime Obligations Fund - emphasis on current income with liquidity and
stability of principal, Bond Fund - emphasis on current income as well as
preservation of capital, Equity Fund - emphasis on capital appreciation,
International Discovery Fund - emphasis on long-term capital growth through
investment in foreign and domestic common stocks and Small Capitalization
Fund - emphasis on capital appreciation through investment in small- to
medium-sized companies.
Two types of investment contracts are offered - one for individuals (the
Non-Trust Contracts) and one for trusts and customers of financial
institutions' trust departments (the Trust Contracts).
Under the terms of the investment advisory contracts, portfolio investments
of the mutual fund are made by First of America Investment Corporation, a
wholly-owned subsidiary of First of America Bank - Michigan, N.A., which is
a wholly-owned subsidiary of First of America Bank Corporation.
INVESTMENT VALUATION - Investments in mutual fund shares are carried in the
balance sheet at market value (net asset value of the underlying mutual
fund). The first-in, first-out cost method is used to determine gains and
losses. Security transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold were as
follows:
NON-TRUST CONTRACTS TRUST CONTRACTS
------------------- ---------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
--------- ---------- --------- ----------
(IN THOUSANDS)
Prime Obligations Fund $ 764 $ 277 $140 $-
Bond Fund 1,495 614 537 2
Equity Fund 3,824 1,339 432 2
International Discovery Fund 1,999 943 79 1
Small Capitalization Fund 3,542 1,036 270 1
ANNUITY RESERVES - As of December 31, 1995, annuity reserves have not been
established because there are no contracts which have matured and are in the
payout stage. Such reserves would be computed on the basis of published
mortality tables using assumed interest rates that will provide reserves as
prescribed by law. In cases where the payout option selected is life
contingent, SBL periodically recalculates the required annuity reserves, and
any resulting adjustment is either charged or credited to SBL and not to the
Account.
REINVESTMENT OF DIVIDENDS - Dividend and capital gains distributions paid by
the mutual fund to the Account are reinvested in additional shares of each
respective Fund. Dividend income and capital gains distributions are
recorded as income on the ex-dividend date.
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PARKSTONE VARIABLE ANNUITY
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES - Under current law, no federal income taxes are
payable with respect to the Account.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts a maintenance fee of $30 per year for each Individual Contract.
An administrative fee is deducted equal to an annual rate of 0.15% and 0.05%
of each subaccount's average daily net assets which funds the Non-Trust and
Trust Contracts, respectively. Mortality and expense risks assumed by SBL
are compensated for by a fee equivalent to an annual rate of 1.25% and 0.65%
of the asset value of each Non-Trust and Trust Contract, respectively, of
which 0.6% is for assuming mortality risks and the remainder is for assuming
expense risks.
When applicable, an amount for state premium taxes is deducted as provided
by pertinent state law, either from the purchase payments or from the amount
applied to effect an annuity at the time annuity payments commence.
A contingent deferred sales charge is assessed against certain withdrawals
during the first seven years of the contract, declining from 5% in each of
the first four years to 2% in the seventh year. Such surrender charges and
other contract charges totaled $27,915 during 1995.
3. SUMMARY OF UNIT TRANSACTIONS
NON-TRUST TRUST
CONTRACTS CONTRACTS
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(IN THOUSANDS)
Prime Obligations Subaccount:
Variable annuity deposits 72 14
Terminations, withdrawals and annuity payments 26 -
Bond Subaccount:
Variable annuity deposits 127 50
Terminations, withdrawals and annuity payments 50 -
Equity Subaccount:
Variable annuity deposits 332 38
Terminations, withdrawals and annuity payments 91 -
International Discovery Subaccount:
Variable annuity deposits 183 8
Terminations, withdrawals and annuity payments 69 -
Small Capitalization Subaccount:
Variable annuity deposits 243 20
Terminations, withdrawals and annuity payments 51 -
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[THE SECURITY BENEFIT GROUP OF COMPANIES LOGO] BULK RATE
700 SW Harrison St., Topeka, Kansas 66636-0001 U.S. POSTAGE PAID
TOPEKA, KS
PERMIT NO. 428
