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PARKSTONE
VARIABLE ANNUITY
1996 ANNUAL REPORT
[SBL LOGO]
Security Benefit Life Insurance Company
A Member of The Security Benefit
Group of Companies
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A LETTER FROM THE PRESIDENT
Security Benefit is one company dedicated to the successful mastery of our
mission: MAINTAINING A STRONG FINANCIAL POSITION AND CONSISTENT GROWTH FOR THE
PROTECTION AND SECURITY OF ALL OF OUR POLICYHOLDERS AND CUSTOMERS. All of us at
Security Benefit renew our commitment to this mission every day. We want to be
the best and do our best for you. As a member of the Security Benefit team, I am
especially proud that mastering successful growth is an achievement we have come
to expect as a team.
It is my pleasure to report that 1996 was again a record year of outstanding
achievements for Security Benefit.
* Sales surpassed 1995 results by 48%
* Profits are up 18% over last year
* Revenues and deposit funds exceeded 1995 results by 28%
* Company assets rose 17% over 1995 figures
These accomplishments would just be facts on paper without the efforts of the
people who work at Security Benefit. They are the heart of our company, and I am
proud to be part of their team.
My wish for 1997 is to have another record year for our company. Last year's
accomplishments will be difficult to top but all of us at Security Benefit have
our sights and goals set high. We are well positioned with new, creative
products designed in response to our customers' changing investment goals and
lifestyle requirements. We know true mastery does not come easily. With
perseverance and attention to constantly improving what we do best, I know we
can do it.
HOWARD R. FRICKE
Howard R. Fricke
Chairman of the Board
President and Chief Executive Officer
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BOARD OF DIRECTORS
HOWARD R. FRICKE
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Security Benefit Life Insurance Company
Topeka, Kansas
THOMAS R. CLEVENGER
Wichita, Kansas
SISTER LORETTO MARIE COLWELL
PRESIDENT
St. Francis Hospital and Medical Center
Topeka, Kansas
JOHN C. DICUS
CHAIRMAN OF THE BOARD
Capitol Federal Savings & Loan Association
Topeka, Kansas
MELANIE S. FANNIN
PRESIDENT
Kansas - Southwestern Bell Telephone
Topeka, Kansas
WILLIAM W. HANNA
PRESIDENT & CHIEF OPERATING OFFICER
Koch Industries
Wichita, Kansas
JOHN E. HAYES, JR.
CHAIRMAN OF THE BOARD, PRESIDENT & CEO
Western Resources, Inc.
Topeka, Kansas
LAIRD G. NOLLER
PRESIDENT
Noller Enterprises
Topeka, Kansas
FRANK SABATINI
CHAIRMAN OF THE BOARD AND PRESIDENT
Capital City Bank
Topeka, Kansas
ROBERT C. WHEELER
PRESIDENT
Hill's Pet Nutrition, Inc.
Topeka, Kansas
NOTICE OF POLICYOWNERS' MEETING
We encourage you to attend the annual meeting of policyowners to be held on
Tuesday, June 3, 1997 at Security Benefit Life, 700 SW Harrison St., Topeka,
Kansas, at 2:00 p.m. Each policyowner is entitled to vote, either in person or
by proxy, on all matters coming before the meeting. Proxies are available from
the corporate secretary and must be returned at least 30 days prior to the
annual meeting.
This report is submitted only for the general information of Security Benefit
Life Variable Annuity contractowners and participants and is not authorized for
distribution to the public.
For More Information Call
1-800-888-2461
www.securitybenefit.com
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Report of Independent Auditors
The Contractowners of Parkstone Variable Annuity Account and
The Board of Directors of Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of Parkstone Variable Annuity
(the Company) as of December 31, 1996, and the related statement of operations
and changes in net assets for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Parkstone Variable Annuity
Account at December 31, 1996, and the results of its operations and changes in
its net assets for the year then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
February 7, 1997
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PARKSTONE VARIABLE ANNUITY
Balance Sheet
December 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
Investments:
Parkstone Advantage Fund:
Prime Obligations Fund - 1,357,148 shares at net asset value
of $1.00 per share (cost $1,357).................................. $ 1,357
Bond Fund - 728,511 shares at net asset value of $10.33 per share
(cost $7,328)..................................................... 7,526
Equity Fund - 1,446,828 shares at net asset value of $14.60 per
share (cost $17,084).............................................. 21,124
International Discovery Fund - 893,799 shares at net asset value
of $12.18 per share (cost $9,594)................................. 10,886
Small Capitalization Fund - 1,112,695 shares at net asset value
of $18.20 per share (cost $17,111)................................ 20,251
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Total assets.................................................... $61,144
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NET ASSETS
Net assets are represented by (Note 3):
NUMBER UNIT
OF UNITS VALUE
-------------------------------
NON-TRUST CONTRACTS
Prime Obligations Subaccount:
Accumulation units........................... 98,511 $10.75 $ 1,059
Bond Subaccount:
Accumulation units........................... 615,320 10.73 6,605
Equity Subaccount:
Accumulation units........................... 1,391,560 13.96 19,425
International Discovery Subaccount:
Accumulation units........................... 849,239 11.68 9,919
Small Capitalization Subaccount:
Accumulation units........................... 962,144 19.47 18,737
TRUST CONTRACTS
Prime Obligations Subaccount:
Accumulation units........................... 28,380 10.51 298
Bond Subaccount:
Accumulation units........................... 84,419 10.90 921
Equity Subaccount:
Accumulation units........................... 117,468 14.46 1,699
International Discovery Subaccount:
Accumulation units........................... 79,831 12.11 967
Small Capitalization Subaccount:
Accumulation units........................... 74,886 20.21 1,514
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Total net assets $61,144
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See accompanying notes.
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STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Year ended December 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
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PRIME INTERNATIONAL SMALL
OBLIGATIONS BOND EQUITY DISCOVERY CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
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NON-TRUST CONTRACTS
<S> <C> <C> <C> <C> <C>
Dividend distributions................................... $ 43 $ 189 $ - $ 30 $ -
Expenses (Note 2):
Mortality and expense risk fee........................ (12) (64) (205) (100) (180)
Administrative fee.................................... (3) (21) (51) (16) (23)
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Net investment income.................................... 28 104 (256) (86) (203)
Capital gains distributions.............................. - - - - 1,930
Realized gain on investments............................. - 25 474 47 624
Unrealized appreciation (depreciation) on investments.... - (66) 1,820 1,035 824
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Net realized and unrealized gain (loss) on investments... - (41) 2,294 1,082 3,378
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Net increase in net assets resulting from operations.... 28 63 2,038 996 3,175
Net assets at beginning of year......................... 665 3,953 11,965 6,167 9,597
Variable annuity deposits (Notes 2 and 3)............... 1,576 3,034 6,587 3,310 7,009
Terminations and withdrawals (Notes 2 and 3)............ (1,210) (445) (1,165) (554) (1,044)
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Net assets at end of year............................... $1,059 $6,605 $19,425 $9,919 $18,737
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</TABLE>
<TABLE>
<CAPTION>
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PRIME INTERNATIONAL SMALL
OBLIGATIONS BOND EQUITY DISCOVERY CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
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TRUST CONTRACTS
<S> <C> <C> <C> <C> <C>
Dividend distributions................................... $ 47 $ 23 $ - $ 3 $ -
Expenses (Note 2):
Mortality and expense risk fee......................... (7) (5) (7) (4) (5)
Administrative fee..................................... (1) - - - -
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Net investment income (loss)............................. 39 18 (7) (1) (5)
Capital gains distributions.............................. - - - - 163
Realized gain on investments............................. - 1 56 2 77
Unrealized appreciation (depreciation) on investments.... - (4) 15 63 (144)
Net realized and unrealized gain (loss) on investments... - (3) 71 65 96
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Net increase in net assets resulting from operations..... 39 15 64 64 91
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Net assets at beginning of year......................... 140 602 527 181 386
Variable annuity deposits (Notes 2 and 3)............... 3,293 471 1,295 740 1,207
Terminations and withdrawals (Notes 2 and 3)............ (3,174) (167) (187) (18) (170)
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Net assets at end of year............................... $ 298 $921 $1,699 $967 $1,514
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</TABLE>
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PARKSTONE VARIABLE ANNUITY
Notes to Financial Statements
December 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Parkstone Variable Annuity Account (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended. Deposits received by the Account are invested in the 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 during 1996
were as follows (In Thousands):
<TABLE>
<CAPTION>
NON-TRUST CONTRACTS TRUST CONTRACTS
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COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Obligations Fund.................. $1,805 $1,411 $3,773 $3,615
Bond Fund............................... 3,383 689 503 181
Equity Fund............................. 6,871 1,705 1,322 221
International Discovery Fund............ 3,512 842 1,109 388
Small Capitalization Fund............... 9,211 1,519 1,393 199
</TABLE>
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
ANNUITY RESERVES - As of December 31, 1996, annuity reserves have not been
established because there are no contracts that 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.
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.
A contingent deferred sales charge is assessed by SBL 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 $43,278.
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.
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PARKSTONE VARIABLE ANNUITY
Notes to Financial Statements
December 31, 1996
3. SUMMARY OF UNIT TRANSACTIONS (IN THOUSANDS)
NON-TRUST TRUST
CONTRACTS CONTRACTS
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Prime Obligations Subaccount:
Variable annuity deposits....................... 149 327
Terminations and withdrawals.................... 115 313
Bond Subaccount:
Variable annuity deposits....................... 289 45
Terminations and withdrawals.................... 43 16
Equity Subaccount:
Variable annuity deposits....................... 487 88
Terminations and withdrawals.................... 87 14
International Discovery Subaccount:
Variable annuity deposits....................... 299 64
Terminations and withdrawals.................... 51 2
Small Capitalization Subaccount:
Variable annuity deposits....................... 390 59
Terminations and withdrawals.................... 57 9
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[SBG LOGO] BULK RATE
The Security Benefit Group of Companies U.S. POSTAGE PAID
700 SW Harrison St., TOPEKA, KS
Topeka, Kansas 66636-0001 PERMIT NO. 428
