<PAGE> 1
File No. 33-83238
File No. 811-8724
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [x]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 4 [x]
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(Check appropriate box or boxes)
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
Security Benefit Life Insurance Company
(Name of Depositor)
700 Harrison Street, Topeka, Kansas 66636-0001
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, Including Area Code:
(913) 295-3000
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Copies to:
Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group Building Dechert Price & Rhoads
700 Harrison Street, Topeka, KS 66636-0001 1500 K Street, N.W.
(Name and address of Agent for Service) Washington, DC 20005
It is proposed that this filing will become effective:
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[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on April 29, 1996, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on April 29, 1996, pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on April 29, 1996, pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Regulation 270.24f-2 of the Investment Company Act of 1940 the
Registrant has elected to register an indefinite number of securities. The
Registrant filed the Notice required by 24f-2 on February 28, 1996.
<PAGE> 2
Cross Reference Sheet
Pursuant to Rule 495(a)
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
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PART A
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<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . . . . . Definitions
3. Synopsis . . . . . . . . . . . . . . . . . Summary; Expense Table; Contractual Expenses; Annual
Separate Account Expenses; Annual Portfolio Expenses
4. Condensed Financial Information
(a) Accumulated Unit Values . . . . . . . N/A
(b) Performance Data . . . . . . . . . . . Performance Information
(c) Additional Financial Information . . . Additional Information; Financial Statements
5. General Description of Registrant, Depositor,
and Portfolio Companies
(a) Depositor . . . . . . . . . . . . . . Information about the Company, the Separate Account,
and the Funds; Security Benefit Life Insurance
Company
(b) Registrant . . . . . . . . . . . . . . Separate Account; Information about the Company, the
Separate Account, and the Funds
(c) Portfolio Company . . . . . . . . . . Information about the Company, the Separate Account,
and the Funds; The Funds; The Investment Advisers
(d) Fund Prospectus . . . . . . . . . . . The Funds
(e) Voting Rights . . . . . . . . . . . . Voting of Fund Shares
(f) Administrators . . . . . . . . . . . . Security Benefit Life Insurance Company
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6. Deductions and Expenses
(a) General . . . . . . . . . . . . . . . Charges and Deductions; Mortality and Expense Risk
Charge; Premium Tax Charge; Other Charges; Guarantee
of Certain Charges; Fund Expenses; Contract Charges
(b) Sales Load % . . . . . . . . . . . . . N/A
(c) Special Purchase Plan . . . . . . . . N/A
(d) Commissions . . . . . . . . . . . . . N/A
(e) Fund Expenses . . . . . . . . . . . . Fund Expenses
(f) Organization Expenses . . . . . . . . N/A
7. General Description of Contracts
(a) Persons with Rights . . . . . . . . . The Contract; More About the Contract; Ownership;
Joint Owners; Contract Benefits; The Fixed Interest
Account; Reports to Owners
(b) (i) Allocation of Purchase Payments Purchase Payments; Allocation of Purchase Payments
(ii) Transfers . . . . . . . . . . . Exchanges of Contract Value; Telephone Exchange
Privileges; Dollar Cost Averaging Option; Asset
Rebalancing Option; Exchanges and Withdrawals
(iii) Exchanges . . . . . . . . . . . Exchanges of Contract Value; Exchanges and
Withdrawals
(c) Changes . . . . . . . . . . . . . . . Substitution of Investments; Changes to Comply with
Law and Amendments
(d) Inquiries . . . . . . . . . . . . . . Contacting the Company
8. Annuity Period . . . . . . . . . . . . . . Annuity Period; General; Annuity Options; Selection
of an Option
9. Death Benefit . . . . . . . . . . . . . . Death Benefit
10. Purchases and Contract Value
(a) Purchases . . . . . . . . . . . . . . The Contract; General; Application for a Contract;
Purchase Payments; Dollar Cost Averaging Option;
Asset Rebalancing Option
</TABLE>
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(b) Valuation . . . . . . . . . . . . . . Contract Value; Determination of Contract Value;
Exchanges of Contract Value; Interest
(c) Daily Calculation . . . . . . . . . . Determination of Contract Value
(d) Underwriter . . . . . . . . . . . . . Distribution of the Contract
11. Redemptions
(a) - By Owners . . . . . . . . . . . . . Full and Partial Withdrawals; Systematic
Withdrawals; Payments from the Separate Account;
Payments from the Fixed Interest Account;
- By Annuitant . . . . . . . . . . . . Annuity Options
(b) Texas ORP . . . . . . . . . . . . . . N/A
(c) Check Delay . . . . . . . . . . . . . N/A
(d) Lapse . . . . . . . . . . . . . . . . Full and Partial Withdrawals
(e) Free Look . . . . . . . . . . . . . . Free-Look Right
12. Taxes . . . . . . . . . . . . . . . . . . Federal Tax Matters; Introduction; Tax Status of the
Company and the Separate Account; Income Taxation of
Annuities in General -- Non-Qualified Plans;
Additional Considerations; Qualified Plans
13. Legal Proceedings . . . . . . . . . . . . Legal Proceedings; Legal Matters
14. Table of Contents for the Statement of
Additional Information . . . . . . . . . . Statement of Additional Information
</TABLE>
<PAGE> 5
PROSPECTUS
THE T. ROWE PRICE
No-Load Variable Annuity
[GRAPHIC]
May 1, 1996
<PAGE> 6
Variable Annuity Prospectus
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
AN INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
May 1, 1996
ISSUED BY: MAILING ADDRESS:
Security Benefit T. Rowe Price Variable
Life Insurance Company Annuity Service Center
700 SW Harrison Street P.O. Box 750440
Topeka, Kansas 66636-0001 Topeka, Kansas 66675-0440
1-800-888-2461 1-800-469-6587
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1
<PAGE> 7
Variable Annuity Prospectus
INTRODUCTION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE T. ROWE PRICE
EQUITY SERIES, INC., THE T. ROWE PRICE FIXED INCOME SERIES, INC. AND THE T.
ROWE PRICE INTERNATIONAL SERIES, INC. THE PROSPECTUSES SHOULD BE READ
CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
This Prospectus describes the T. Rowe Price No-Load Variable Annuity-an
individual flexible premium deferred variable annuity contract (the "Contract")
issued by Security Benefit Life Insurance Company (the "Company"). The
Contract is available for individuals as a non-tax qualified retirement plan
("Non-Qualified Plan") or in connection with an individual retirement annuity
("IRA") qualified under Section 408 of the Internal Revenue Code ("Qualified
Plan"). The Contract is designed to give Contract owners flexibility in
planning for retirement and other financial goals.
During the Accumulation Period, the Contract provides for the accumulation of a
Contract owner's value on either a variable basis, a fixed basis, or both.
The Contract also provides several options for annuity payments on either a
variable basis, a fixed basis, or both to begin on the Annuity Payout Date.
The minimum initial purchase payment is $10,000 ($5,000 if made pursuant to
an Automatic Investment Program) to purchase a Contract in connection with a
Non-Qualified Plan and $2,000 ($25 if made pursuant to an Automatic Investment
Program) to purchase a Contract in connection with a Qualified Plan.
Subsequent purchase payments are flexible, though they must be for at least
$1,000 ($200 if made pursuant to an Automatic Investment Program) for a
Contract funding a Non-Qualified Plan or $500 ($25 if made pursuant to an
Automatic Investment Program) for a Contract funding a Qualified Plan.
Purchase payments may be allocated at the Contract owner's discretion to one or
more of the Subaccounts that comprise a separate account of the Company called
the T. Rowe Price Variable Annuity Account (the "Separate Account"), or to the
Fixed Interest Account of the Company. Each Subaccount of the Separate Account
invests in a corresponding portfolio ("Portfolio") of the T. Rowe Price Equity
Series, Inc., the T. Rowe Price Fixed Income Series, Inc. or the T. Rowe Price
International Series, Inc. (the "Funds"). Each Portfolio is listed under its
respective Fund below.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price New America Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
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<PAGE> 8
Variable Annuity Prospectus
Prospective purchasers should be aware that the investments made by the
Funds at any given time are not expected to be the same as the investments made
by other mutual funds T. Rowe Price sponsors, including other mutual funds with
investment objectives and policies similar to those of the Funds.
The Contract Value in the Fixed Interest Account will accrue interest at
rates that are paid by the Company as described in "The Fixed Interest Account"
on page 28. Contract Value in the Fixed Interest Account is guaranteed by the
Company.
The Contract Value in the Subaccounts under a Contract will vary based on
investment performance of the Subaccounts to which the Contract Value is
allocated. No minimum amount of Contract Value in the Subaccounts is
guaranteed.
A Contract may be returned according to the terms of its Free-Look Right (see
"Free-Look Right," page 23). This Prospectus concisely sets forth information
about the Contract and the Separate Account that a prospective investor should
know before purchasing the Contract. Certain additional information is
contained in a "Statement of Additional Information," dated May 1, 1996, which
has been filed with the Securities and Exchange Commission (the "SEC"). 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 the T. Rowe Price Variable Annuity Service Center, P.O.
Box 750440, Topeka, Kansas 66675-0440, or by calling 1-800-469-6587. The table
of contents of the Statement of Additional Information is set forth on page 44
of this Prospectus.
Date: May 1, 1996
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3
<PAGE> 9
Variable Annuity Prospectus
CONTENTS
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE
LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR THE
STATEMENT OF ADDITIONAL INFORMATION, THE FUNDS' PROSPECTUS OR STATEMENT OF
ADDITIONAL INFORMATION, OR ANY SUPPLEMENT THERETO.
<TABLE>
<S> <C>
5 Definitions
7 Summary
10 Expense Table
11 Condensed Financial Information
12 Information About the Company, the Separate Account,
and the Funds
15 The Contract
24 Charges and Deductions
26 Annuity Period
28 The Fixed Interest Account
31 More About the Contract
33 Federal Tax Matters
40 Other Information
43 Performance Information
44 Additional Information
</TABLE>
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4
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Variable Annuity Prospectus
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 Payout Date or, if earlier, when the Contract is terminated, either
through a full withdrawal, payment of charges, or payment of the death benefit
proceeds.
ACCUMULATION UNIT A unit of measure used to calculate the value of a
Contractowner's interest in a Subaccount during the Accumulation Period.
ANNUITANT The person or persons on whose life annuity payments depend. If
Joint Annuitants are named in the Contract, "Annuitant" means both Annuitants
unless otherwise stated.
ANNUITY A series of periodic income payments made by the Company to an
Annuitant, Joint Annuitant, or Beneficiary during the period specified
in the Annuity Option.
ANNUITY OPTIONS Options under the Contract that prescribe the provisions
under which a series of annuity payments are made.
ANNUITY PERIOD The period during which annuity payments are made.
ANNUITY PAYOUT DATE The date when annuity payments are scheduled to begin.
AUTOMATIC INVESTMENT PROGRAM A program pursuant to which purchase payments are
automatically paid from the owner's checking account on a specified day of the
month, on a monthly, quarterly, semiannual or annual basis, or a salary
reduction arrangement.
CONTRACT DATE The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is
usually the date that the initial purchase payment is credited to the Contract.
CONTRACTOWNER OR OWNER The person entitled to the ownership rights under
the Contract and in whose name the Contract is issued.
CONTRACT VALUE The total value of the amounts in a Contract allocated to the
Sub-accounts of the Separate Account and the Fixed Interest Account as of any
Valuation Date.
CONTRACT YEAR Each 12-month period measured from the Contract Date.
DESIGNATED BENEFICIARY The person having the right to the death benefit, if
any, pay-able upon the death of the Owner or the Joint Owner 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 Owner or the Joint
Owner: the Owner; the Joint Owner; the Primary Beneficiary; the Secondary
Beneficiary; the Annuitant; or if none of the above is alive, the Owner's
Estate.
FIXED INTEREST ACCOUNT An account that is part of the Company's General
Account in which all or a portion of the Contract Value may be held for
accumulation at fixed rates of interest (which may not be less than 3%)
declared by the Company periodically at its discretion.
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5
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Variable Annuity Prospectus
FUNDS T.Rowe Price Equity Series, Inc., T.Rowe Price Fixed Income Series,
Inc. and T.Rowe Price International Series, Inc. The Funds are diversified,
open-end management investment companies commonly referred to as mutual funds.
GENERAL ACCOUNT All assets of the Company other than those allocated to
the Separate Account or to any other separate account of the Company.
PURCHASE PAYMENT The amounts paid to the Company as consideration for the
Contract.
SEPARATE ACCOUNT The T. Rowe Price Variable Annuity Account is a separate
account of the Company. Contract Value under the Contract may be allocated to
Subaccounts of the Separate Account for variable accumulation.
SUBACCOUNT A division of the Separate Account of the Company which invests in
a separate Portfolio of one of the Funds. Currently, five Subaccounts are
available under the Contract.
T. ROWE PRICE VARIABLE ANNUITY SERVICE CENTER P.O. Box 750440, Topeka, Kansas
66675-0440, 1-800-469-6587.
VALUATION DATE Each date on which the Separate Account is valued, which
currently includes each day that the T. Rowe Price Variable Annuity
Service Center and the New York Stock Exchange are open for trading. The T.
Rowe Price Variable Annuity Service Center and the New York Stock Exchange are
closed on weekends and on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUATION PERIOD A period used in measuring the investment experience of each
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 a Contractowner receives upon full withdrawal
of the Contract, which is equal to Contract Value less any premium taxes due
and paid by the Company.
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Variable Annuity Prospectus
SUMMARY
This summary is intended to provide a brief overview of the more significant
aspects of the Contract. Further detail is provided in this Prospectus, the
Statement of Additional Information, and the Contract. Unless the context
indicates otherwise, the discussion in this summary and the remainder of the
Prospectus relates to the portion of the Contract involving the Separate
Account. The Fixed Interest Account is briefly described under "The Fixed
Interest Account" on Page 28 and in the Contract.
PURPOSE OF THE CONTRACT
The individual flexible premium deferred variable annuity contract ("Contract")
described in this Prospectus is designed to give Contractowners flexibility in
planning for retirement and other financial goals. The Contract provides for
the accumulation of values on a variable basis, a fixed basis, or both, during
the Accumulation Period, and provides several options for annuity payments on a
variable basis, a fixed basis, or both. During the Accumulation Period, an
Owner can pursue various allocation options by allocating purchase payments to
the Subaccounts of the Separate Account or to the Fixed Interest Account.
See "The Contract," Page 15.
The Contract is eligible for purchase as a non-tax qualified retirement plan
for an individual ("Non-Qualified Plan"). The Contract is also eligible for
purchase as an individual retirement annuity ("IRA") qualified under Section
408 of the Internal Revenue Code of 1986, as amended ("Qualified Plan").
THE SEPARATE ACCOUNT AND THE FUNDS
Purchase payments designated to accumulate on a variable basis are allocated to
the Separate Account. See "Separate Account," Page 12. The Separate Account
is currently divided into five accounts referred to as Subaccounts. Each
Subaccount invests exclusively in shares of a specific Portfolio of one of the
Funds. Each of the Funds' Portfolios has a different investment objective or
objectives. Each Portfolio is listed under its respective Fund below.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price New America Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
Amounts held in a Subaccount will increase or decrease in dollar value
depending on the investment performance of the corresponding Portfolio in which
such Subaccount invests. The Contractowner bears the investment risk for
amounts allocated to a Subaccount of the Separate Account.
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7
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Variable Annuity Prospectus
FIXED INTEREST ACCOUNT
Purchase payments designated to accumulate on a fixed basis may be allocated to
the Fixed Interest Account, which is part of the Company's General Account.
Amounts allocated to the Fixed Interest Account earn interest at rates
determined at the discretion of the Company and that are guaranteed to be at
least an effective annual rate of 3%. See "The Fixed Interest Account" on
Page 28.
PURCHASE PAYMENTS
The minimum initial purchase payment is $10,000 ($5,000 if made pursuant to an
Automatic Investment Program) for a Contract issued in connection with a
Non-Qualified Plan and $2,000 ($25 if made pursuant to an Automatic Investment
Program) for a Contract issued in connection with a Qualified Plan.
Thereafter, the Contractowner may choose the amount and frequency of purchase
payments, except that the minimum subsequent purchase payment is $1,000 ($200
if made pursuant to an Automatic Investment Program) for a Contract funding a
Non-Qualified Plan or $500 ($25 if made pursuant to an Automatic Investment
Program) for a Contract funding a Qualified Plan. See "Purchase Payments" on
Page 16.
CONTRACT BENEFITS
During the Accumulation Period, Contract Value may be exchanged by the
Contractowner among the Subaccounts of the Separate Account and to and from the
Fixed Interest Account, subject to certain restrictions as described in "The
Contract" on Page 15 and "The Fixed Interest Account" on Page 28
At any time before the Annuity Payout Date, a Contract may be surrendered for
its Withdrawal Value, and partial withdrawals, including systematic
withdrawals, may be taken from the Contract Value, subject to certain
restrictions described in "The Fixed Interest Account" on Page 28. See "Full
and Partial Withdrawals," Page 21 and Federal Tax Matters," Page 33 for more
information about withdrawals, including the 10% penalty tax that may be
imposed upon full and partial withdrawals (including systematic withdrawals)
made prior to the Owner attaining age 59 1/2.
The Contract provides for a death benefit upon the death of the Owner during
the Accumulation Period. See "Death Benefit," on Page 23 for more information.
The Contract provides for several Annuity Options on either a variable basis,
a fixed basis, or both. Payments under the fixed Annuity Options will be
guaranteed by the Company. See "Annuity Period" on Page 26.
FREE-LOOK RIGHT
An Owner may return a Contract within the Free-Look Period, which is generally
a 10-day period beginning when the Owner receives the Contract. In this event,
the Company will refund to the Owner purchase payments allocated to the Fixed
Interest Account plus the Contract Value in the Subaccounts increased by any
fees or other charges paid. The Company will refund purchase payments
allocated to the Subaccounts rather than the Contract Value in those states and
circumstances in which it is required to do so. See "Free-Look Right" on
Page 23.
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Variable Annuity Prospectus
CHARGES AND DEDUCTIONS
The Company does not make any deductions for sales load from purchase payments.
Certain charges will be deducted in connection with the Contract as described
below.
- - Mortality and Expense Risk Charge The Company deducts a daily charge from
the assets of each Subaccount for mortality and expense risks equal to an
annual rate of .55% of each Subaccount's average daily net assets. See
"Mortality and Expense Risk Charge" on Page 24.
- - Premium Tax Charge The Company 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 the Company 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 the Company and is not refundable. The Company reserves the
right to deduct such taxes when due or anytime thereafter. Premium tax
rates currently range from 0% to 3.5%. See "Premium Tax Charge" on
Page 25.
- - Other Expenses The operating expenses of the Separate Account are paid by
the Company. Investment management fees and operating expenses of the
Funds are paid by the Funds and are reflected in the net asset value of
Fund shares. For a description of these charges and expenses, see the
Prospectus for the Funds.
CONTACTING THE COMPANY
All written requests, notices, and forms required by the Contract, and any
questions or inquiries should be directed to the T. Rowe Price Variable Annuity
Service Center, at P.O. Box 750440, Topeka, Kansas 66675-0440, 1-800-469-6587.
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Variable Annuity Prospectus
EXPENSE TABLE
The purpose of this table is to assist investors in understanding the various
costs and expenses borne directly and indirectly by Owners allocating Contract
Value to the Subaccounts. The table reflects any contractual charges, expenses
of the Separate Account, and charges and expenses of the Funds. The table does
not reflect premium taxes that may be imposed by various jurisdictions. See
"Premium Tax Charge," Page25. The information contained in the table is not
applicable to amounts allocated to the Fixed Interest Account.
For a complete description of a Contract's costs and expenses, see "Charges and
Deductions," Page 24. For a more complete description of each Fund's costs and
expenses, see the Fund Prospectus, which accompanies this Prospectus.
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CONTRACTUAL EXPENSES
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Sales Load on Purchase Payments None
- ------------------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee None
- ------------------------------------------------------------------------------------------------------------------------------
ANNUAL SEPARATE ACCOUNT EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------
Annual Mortality and Expense Risk Charge (as a percentage of each
Subaccount's average daily net assets) .55%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Separate Account Expenses .55%
- ------------------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO EXPENSES (AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL
MANAGEMENT OTHER PORTFOLIO
FEE* EXPENSES EXPENSES
--------------------------------------
T. Rowe Price New America Growth Portfolio .85% 0% .85%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio 1.05% 0% 1.05%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio .85% 0% .85%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Personal Strategy Balanced Portfolio .90% 0% .90%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Limited-Term Bond Portfolio .70% 0% .70%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 1
*The management fee includes the ordinary expenses of operating the Funds.
Example
The example presented below shows expenses that a Contractowner would pay at
the end of one or three years. The information presented applies if, at the
end of those time periods, the Contract is (1) surrendered, (2) annuitized, or
(3) not surrendered or annuitized. The example shows expenses based upon an
allocation of $1,000 to each of the Subaccounts.
The example below should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown. The 5%
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 lesser
than the assumed amount.
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Variable Annuity Prospectus
EXAMPLE -- The Owner would pay the expenses shown below on a $1,000 investment,
assuming 5% annual return on assets:
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1 YEAR 3 YEARS
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New America Growth Subaccount $14 $44
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International Stock Subaccount $16 $50
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Equity Income Subaccount $14 $44
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Personal Strategy Balanced Subaccount $15 $46
-------------------------------------------------------
Limited-Term Bond Subaccount $13 $40
-------------------------------------------------------
</TABLE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit values
for the period April 1, 1995 (date of inception) through December 31, 1995, as
well as ending accumulation units outstanding under each Subaccount.
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1995
----------------------------------------------
NEW AMERICA GROWTH SUBACCOUNT
----------------------------------------------
Accumulation unit value:
Beginning of period $10.00
End of period $13.40
Accumulation units:
Outstanding at the end of period 333,934
----------------------------------------------
INTERNATIONAL STOCK SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00
End of period $11.19
Accumulation units:
Outstanding at the end of period 218,427
----------------------------------------------
EQUITY INCOME SUBACCOUNT
----------------------------------------------
Accumulation unit value:
Beginning of period $10.00
End of period $12.37
Accumulation units:
Outstanding at the end of period 365,712
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PERSONAL STRATEGY BALANCED SUBACCOUNT
----------------------------------------------
Accumulation unit value:
Beginning of period $10.00
End of period $11.90
Accumulation units:
Outstanding at the end of period 148,349
----------------------------------------------
LIMITED-TERM BOND SUBACCOUNT
----------------------------------------------
Accumulation unit value:
Beginning of period $10.00
End of period $10.64
Accumulation units:
Outstanding at the end of period 86,891
</TABLE> ----------------------------------------------
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Variable Annuity Prospectus
INFORMATION ABOUT THE COMPANY, THE SEPARATE ACCOUNT, AND THE FUNDS
SECURITY BENEFIT LIFE INSURANCE COMPANY
The Company is a mutual 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.
The Company offers a complete line of 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 1995, Security Benefit had over $15 billion of life insurance in
force and total assets of approximately $4.7 billion. Together with its
subsidiaries, Security Benefit has total funds under management of
approximately $5.7 billion.
PUBLISHED RATINGS
The Company may from time to time publish in advertisements, sales literature
and reports to Owners, 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 the Company and should not be considered as
bearing on the investment performance of assets held in the Separate Account.
Each year the 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 the
Company as measured by Standard & Poor's Insurance Ratings Services may be
referred to in advertisements or sales literature or in reports to Owners.
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
T. Rowe Price Variable Annuity Account
The T. Rowe Price Variable Annuity Account was established by the Company as a
separate account on March 28, 1994, pursuant to procedures established under
Kansas law. The income, gains, or losses of the Separate Account, whether or
not realized, are, in accordance with the Contracts, credited to or charged
against the assets of the Separate Account without regard to other income,
gains, or losses of the Company. K.S.A. 40-436 provides that assets in a
separate account attributable to the reserves and other liabilities under the
contracts are not chargeable with liabilities arising from any other business
that the insurance company conducts if, and to the extent the contracts so
provide, and the Contract contains such a provision. The Company 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. The Company may transfer to its General Account assets that exceed
anticipated obligations of the Separate
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Variable Annuity Prospectus
Account. All obligations arising under the Contracts are general corporate
obligations of the Company. The Company 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 five Subaccounts. Income, gains
and losses, whether or not realized, are, in accordance with the Contracts,
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 Portfolio of one of the Funds. The
Company may in the future establish additional Subaccounts of the Separate
Account, which may invest in other Portfolios of the Funds or in other
securities, mutual funds, or investment vehicles. Under current contractual
arrangements with the underwriter, T. Rowe Price Investment Services, Inc.
("Investment Services"), the Company cannot add new Subaccounts, or substitute
shares of another portfolio, without the consent of Investment Services, unless
such change is necessary to comply with applicable laws, shares of any or all
of the Portfolios should no longer be available for investment, or, if the
Company receives an opinion from counsel acceptable to Investment Services that
substitution is in the best interest of Contractowners and that further
investment and shares of the Portfolio(s) would cause undue risk to the
Company. For more information about the underwriter, see "Distribution of the
Contract," page 43.
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 the Company.
THE FUNDS
The T. Rowe Price Equity Series, Inc., the T. Rowe Price Fixed Income Series,
Inc. and the T. Rowe Price International Series, Inc. (the "Funds") are
diversified, open-end management investment companies of the series type. The
Funds are 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 Funds. Together, the Funds currently have five separate portfolios
("Portfolios"), each of which pursues different investment objectives and
policies.
In addition to the Separate Account, shares of the Funds are being sold to
variable life insurance and variable annuity separate accounts of other
insurance companies, including insurance companies affiliated with the Company.
In the future, it may be disadvantageous for variable annuity separate
accounts of other life insurance companies, or for both variable life insurance
separate accounts and variable annuity separate accounts, to invest
simultaneously in the Funds, although currently neither the Company nor the
Funds foresee any such disadvantages to either variable annuity owners or
variable life insurance owners. The management of the Funds intends to monitor
events in order to identify any material conflicts between or among variable
annuity owners and variable life insurance owners and to determine what action,
if any, should
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Variable Annuity Prospectus
be taken in response. In addition, if the Company believes that
any Fund's response to any of those events or conflicts insufficiently protects
Owners, it will take appropriate action on its own. For more information see
the Funds' prospectus.
A summary of the investment objective of each Portfolio of the Funds is
described below. There can be no assurance that any Portfolio will achieve its
objective. More detailed information is contained in the accompanying
prospectus of the Funds, including information on the risks associated with the
investments and investment techniques of each Portfolio.
The Funds' prospectus accompanies this prospectus and should be read carefully
before investing.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
The investment objective of the New America Growth Portfolio is long-term
growth of capital through investments primarily in the common stocks of U.S.
growth companies which operate in service industries.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
The investment objective of the International Stock Portfolio is to seek
long-term growth of capital through investments primarily in common stocks of
established, non-U.S. companies.
T. ROWE PRICE EQUITY INCOME PORTFOLIO
The investment objective of the Equity Income Portfolio is to provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
The investment objective of the Personal Strategy Balanced Portfolio is to seek
the highest total return over time consistent with an emphasis on both capital
appreciation and income.
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO
The investment objective of the Limited-Term Bond Portfolio is to seek a high
level of income consistent with moderate price fluctuation by investing
primarily in short- and intermediate-term investment grade debt securities.
THE INVESTMENT ADVISERS
T. Rowe Price Associates, Inc. ("T. Rowe Price"), located at 100 East Pratt
Street, Baltimore, Maryland 21202, serves as Investment Adviser to each
Portfolio, except the T. Rowe Price International Stock Portfolio. Rowe
Price-Fleming International, Inc. ("Price-Fleming"), an affiliate of T. Rowe
Price, serves as Investment Adviser to the T. Rowe Price International Stock
Portfolio. Price-Fleming's U.S. office is located at 100 East Pratt Street,
Baltimore, Maryland 21202. As Investment Adviser to each of the Portfolios,
except the T. Rowe Price International Stock Portfolio, T. Rowe Price is
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Variable Annuity Prospectus
responsible for selection and management of their portfolio investments. As
Investment Adviser to the owe Price International Stock Portfolio,
Price-Fleming is responsible for selection and management of its portfolio
investments. Each of owe Price and Price-Fleming is registered with the SEC as
an investment adviser.
T. Rowe Price and Price-Fleming are not affiliated with the Company, and the
Company has no responsibility for the management or operations of the
Portfolios.
THE CONTRACT
GENERAL
The Contract offered by this Prospectus is an individual flexible premium
deferred variable annuity that is issued by the Company. To the extent that
all or a portion of purchase payments are allocated to the Subaccounts, the
Contract is significantly different from a fixed annuity contract in that it is
the Owner under a Contract who assumes the risk of investment gain or loss
rather than the Company. During the Accumulation Period, a Contractowner's
value accumulates on either a variable basis, a fixed basis, or both, depending
on the Owner's allocation of Contract Value to the Subaccounts and the Fixed
Interest Account. The Contract also provides several Annuity Options under
which the Company will pay periodic annuity payments on a variable basis, a
fixed basis or both, beginning on the Annuity Payout Date. The amount that
will be available for annuity payments will depend on the investment
performance of the Subaccounts to which Contract Value has been allocated and
the amount of interest credited on Contract Value that has been allocated to
the Fixed Interest Account.
The Contract is available for purchase as a non-tax qualified retirement plan
("Non-Qualified Plan") by an individual. The Contract is also eligible for
purchase as an individual retirement annuity ("IRA") qualified under Section
408 of the Internal Revenue Code ("Qualified Plan"). Joint Owners are
permitted only on a Contract issued pursuant to a Non-Qualified Plan.
APPLICATION FOR A CONTRACT
Any person wishing to purchase a Contract may submit an application and an
initial purchase payment to the Company, as well as any other form or
information that the Company may require. The initial purchase payment may be
made by check or, if an applicant owns shares of one or more mutual funds
distributed by Investment Services ("T. Rowe Price Funds"), by electing on the
application to redeem shares of that fund(s) and forward the redemption
proceeds to the Company. Any such transaction shall be effected by Investment
Services, the distributor of the T. Rowe Price mutual funds and the Contract.
The redemption of fund shares is a sale of shares for tax purposes, which may
result in a taxable gain or loss. The application may be obtained by
contacting the owe Price Variable Annuity Service Center. The Company
reserves the right to reject an application or purchase payment for any reason,
subject to the Company's underwriting standards and guidelines and any
applicable state or federal law relating to nondiscrimination.
The maximum age of an Owner or Annuitant for which a Contract will be issued is
85. If there are Joint Owners or Annuitants, the maximum issue age will be
determined by reference to the older Owner or Annuitant.
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Variable Annuity Prospectus
PURCHASE PAYMENTS
The minimum initial purchase payment for the purchase of a Contract is $10,000
($5,000 if made pursuant to an Automatic Investment Program) in connection with
a Non-Qualified Plan and $2,000 ($25 if made pursuant to an Automatic
Investment Program) in connection with a Qualified Plan. Thereafter, the
Contractowner may choose the amount and frequency of purchase payments, except
that the minimum subsequent purchase payment is $1,000 ($200 if made pursuant
to an Automatic Investment Program) for Non-Qualified Plans and $500 ($25 if
made pursuant to an Automatic Investment Program) for Qualified Plans. The
Company may reduce the minimum purchase payment requirements under certain
circumstances, such as for group or sponsored arrangements. Cumulative
purchase payments exceeding $1 million will not be accepted under a Contract
without prior approval of the Company.
An initial purchase payment will be applied not later than the end of the
second Valuation Date after the Valuation Date it is received by the Company at
the owe Price Variable Annuity Service Center if the purchase payment is
preceded or accompanied by an application that contains sufficient information
necessary to establish an account and properly credit such purchase payment. If
the Company does not receive a complete application, the Company will notify
the applicant that it does not have the necessary information to issue a
Contract. If the necessary information is not provided to the Company within
five Valuation Dates after the Valuation Date on which the Company first
receives the initial purchase payment or if the Company determines it cannot
otherwise issue the Contract, the Company will return the initial purchase
payment to the applicant unless the applicant consents to the Company retaining
the purchase payment until the application is made complete.
Subsequent purchase payments will be credited as of the end of the Valuation
Period in which they are received by the Company at the owe Price Variable
Annuity Service Center. Purchase payments after the initial purchase payment
may be made at any time prior to the Annuity Payout Date, so long as the Owner
is living. Subsequent purchase payments under a Qualified Plan may be limited
by the terms of the plan and provisions of the Internal Revenue Code.
Subsequent purchase payments may be paid under an Automatic Investment Program
or, if an Owner owns shares of one or more T. Rowe Price Funds, by directing
Investment Services to redeem shares of that fund(s) and forward the redemption
proceeds to the Company as a subsequent purchase payment.
The minimum initial purchase payment required must be paid before the Automatic
Investment Program will be accepted by the Company. The redemption of fund
shares is a sale of shares for tax purposes, which may result in a taxable gain
or loss.
ALLOCATION OF PURCHASE PAYMENTS
In an application for a Contract, the Contractowner selects the Subaccounts or
the Fixed Interest Account to which purchase payments will be allocated.
Purchase payments will be allocated according to the Contractowner's
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 per payment being allocated to any one Subaccount or
the Fixed Interest Account. Available allocation alternatives include the five
Subaccounts and the Fixed Interest Account.
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Variable Annuity Prospectus
A Contractowner may change the purchase payment allocation instructions by
submitting a proper written request to the owe Price Variable Annuity Service
Center. A proper change in allocation instructions will be effective upon
receipt by the Company at the owe Price Variable Annuity Service Center and
will continue in effect until subsequently changed. Changes in purchase
payment allocation instructions may be made by telephone or by sending a
request in writing to the T. Rowe Price Variable Annuity Service Center.
Changes in the allocation of future purchase payments have no effect on
existing Contract Value. Such Contract Value, however, may be exchanged among
the Subaccounts of the Separate Account or the Fixed Interest Account in the
manner described in "Exchanges of Contract Value," Page 19.
DOLLAR COST AVERAGING OPTION
The Company currently offers an option under which Contractowners may dollar
cost average their allocations in the Subaccounts under the Contract by
authorizing the Company to make periodic allocations 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 allocation of Contract Value to one or more Subaccounts, and
these amounts will be credited at the Accumulation Unit value as of the end of
the Valuation Dates on which the exchanges are effected. Since the value of
Accumulation Units will vary, the amounts allocated to a Subaccount will result
in the crediting of a greater number of units when the Accumulation Unit value
is low and a lesser number of units when the Accumulation Unit value is high.
Similarly, the amounts exchanged from a Subaccount will result in a debiting of
a greater number of units when the Subaccount's Accumulation Unit value is low
and a lesser number of units when the Accumulation Unit value is high. Dollar
cost averaging does not guarantee profits, nor does it assure that a
Contractowner will not have losses.
A Dollar Cost Averaging Request form is available from the owe Price
Variable Annuity Service Center upon request. On the form, the Contractowner
must designate whether Contract Value is to be exchanged on the basis of a
specific dollar amount, a fixed period or earnings only, the Subaccount or
Subaccounts to and from which the exchanges will be made, the desired frequency
of the exchanges, which may be on a monthly, quarterly, semiannual, or annual
basis, and the length of time during which the exchanges shall continue or the
total amount to be exchanged over time.
To elect the Dollar Cost Averaging Option, the Owner's Contract Value must be
at least $5,000, ($2,000 for a Contract funding a Qualified Plan), and a Dollar
Cost Averaging Request in proper form must be received by the Company at the
owe Price Variable Annuity Service Center. The Dollar Cost Averaging
Request form will not be considered complete until the Contractowner's Contract
Value is at least the required amount. A Contractowner may not have in effect
at the same time Dollar Cost Averaging and Asset Rebalancing Options.
After the Company has received a Dollar Cost Averaging Request in proper form
at the owe Price Variable Annuity Service Center, the Company will exchange
Contract Value in amounts designated by the Contractowner from the Subaccount
from which
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Variable Annuity Prospectus
exchanges are to be made to the Subaccount or Subaccounts chosen by
the Contractowner. The minimum amount that may be exchanged is $200 and the
minimum amount that may be allocated to any one Subaccount is $25. Each
exchange will be effected on the date specified by the Owner or if no date is
specified, on the monthly, quarterly, semiannual, or annual anniversary,
whichever corresponds to the period selected by the Contractowner, of the date
of receipt at the T. Rowe Price Variable Annuity Service Center of a Dollar
Cost Averaging Request in proper form. Exchanges will be made until the total
amount elected has been exchanged, or until Contract Value in the Subaccount
from which exchanges are made has been depleted. Amounts periodically
exchanged under this option are not included in the six exchanges per Contract
Year that are allowed as discussed in "Exchanges of Contract Value" on Page 19.
A Contractowner may instruct the Company at any time to terminate the option by
written request to the owe Price Variable Annuity Service Center. In that
event, the Contract Value in the Subaccount from which exchanges were being
made that has not been exchanged will remain in that Subaccount unless the
Contractowner instructs otherwise. If a Contractowner wishes to continue
exchanging on a dollar cost averaging basis after the expiration of the
applicable period, the total amount elected has been exchanged, or the
Subaccount has been depleted, or after the Dollar Cost Averaging Option has
been canceled, a new Dollar Cost Averaging Request must be completed and sent
to the owe Price Variable Annuity Service Center, and the Contract must
meet the $5,000 ($2,000 for a Contract funding a Qualified Plan) minimum
required amount of Contract Value at that time. The Company may discontinue,
modify, or suspend the Dollar Cost Averaging Option at any time provided that,
as required by its current contractual arrangements with Investment Services,
the Company first obtains the consent of Investment Services, which consent
shall not be unreasonably withheld.
Contract Value may also be dollar cost averaged to or from the Fixed Interest
Account, subject to certain restrictions described under "The Fixed Interest
Account," Page 28.
ASSET REBALANCING OPTION
The Company currently offers an option under which Contractowners may authorize
the Company to automatically exchange Contract Value each quarter to maintain a
particular percentage allocation among the Subaccounts as selected by the
Contractowner. The Contract Value allocated to each Subaccount will grow or
decline in value at different rates during the quarter, and Asset Rebalancing
automatically reallocates the Contract Value in the Subaccounts each quarter to
the allocation selected by the Contractowner. Asset Rebalancing is intended to
exchange 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 a Contractowner buy low and sell high, although there can be
no assurance of this. This investment method does not guarantee profits, nor
does it assure that a Contractowner will not have losses.
To elect the Asset Rebalancing Option, the Contract Value in the Contract must
be at least $10,000 ($2,000 for a Contract funding a Qualified Plan) and an
Asset Rebalancing Request in proper form must be received by the Company at the
owe Price Variable Annuity Service Center. A Contractowner may not have in
effect at the same time Dollar Cost Averaging and Asset Rebalancing Options.
An Asset Rebalancing Request form is
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Variable Annuity Prospectus
available upon request. On the form, the Contractowner must indicate the
applicable Subaccounts and the percentage of Contract Value which should be
allocated to each of the applicable Subaccounts each quarter under the Asset
Rebalancing Option. If the Asset Rebalancing Option is elected, all Contract
Value allocated to the Subaccounts must be included in the Asset Rebalancing
Option.
This option will result in the exchange of Contract Value to one or more of the
Subaccounts on the date specified by the Contractowner or, if no date is
specified, on the date of the Company's receipt of the Asset Rebalancing
Request in proper form and on each quarterly anniversary of the applicable date
thereafter. The amounts exchanged will be credited at the Accumulation Unit
value as of the end of the Valuation Dates on which the exchanges are effected.
Amounts periodically exchanged under this option are not included in the six
exchanges per Contract Year that are allowed as discussed below.
A Contractowner may instruct the Company at any time to terminate this option
by written request to the owe Price Variable Annuity Service Center and, in
the event of an exchange of Contract Value by written request or telephone
instructions, this option will terminate automatically. In either event, the
Contract Value in the Subaccounts that has not been exchanged will remain in
those Subaccounts regardless of the percentage allocation unless the
Contractowner instructs otherwise. If a Contractowner wishes to resume Asset
Rebalancing after it has been canceled, a new Asset Rebalancing Request form
must be completed and sent to the owe Price Variable Annuity Service Center
and the Contract Value at the time the request is made must be at least $10,000
($2,000 for a Contract funding a Qualified Plan). The Company may discontinue,
modify, or suspend the Asset Rebalancing Option at any time provided that, as
required by its current contractual arrangements with Investment Services, the
Company first obtains the consent of Investment Services, which consent shall
not be unreasonably withheld.
Contract Value allocated to the Fixed Interest Account may be included in the
Asset Rebalancing Program, subject to certain restrictions described under "The
Fixed Interest Account," page 28.
EXCHANGES OF CONTRACT VALUE
During the Accumulation Period, Contract Value may be exchanged among the
Subaccounts by the Contractowner upon proper written request to the owe
Price Variable Annuity Service Center. Exchanges (other than exchanges in
connection with the Dollar Cost Averaging or Asset Rebalancing Options) may be
made by telephone if an Authorization for Telephone Requests form has been
properly completed, signed and filed at the owe Price Variable Annuity
Service Center. Up to six exchanges are allowed in any Contract Year. The
minimum exchange amount is $500 ($200 under the Dollar Cost Averaging Option),
or the amount remaining in a given Subaccount.
Contract Value may also be exchanged between the Subaccounts and the Fixed
Interest Account; however, exchanges from the Fixed Interest Account to the
Subaccounts are restricted as described in "The Fixed Interest Account,"
Page 28.
The Company reserves the right at a future date, to waive or limit the number
of exchanges permitted each Contract Year, to suspend exchanges, to limit the
amount that may be subject to exchanges and the amount remaining in an account
after an exchange,
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Variable Annuity Prospectus
to impose conditions on the right to exchange and to discontinue telephone
exchanges provided that, as required by its current contractual arrangements
with Investment Services, the Company first obtains the consent of Investment
Services, which consent shall not be unreasonably withheld.
CONTRACT VALUE
The Contract Value is the sum of the amounts under the Contract held in each
Subaccount of the Separate Account and in the Fixed Interest Account as of any
Valuation Date.
On each Valuation Date, the portion of the Contract Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience of
that Subaccount for that date. See "Determination of Contract Value," below.
No minimum amount of Contract Value is guaranteed. A Contractowner bears the
entire investment risk relating to the investment performance of Contract Value
allocated to the 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 Contract Value has
been allocated, payment of subsequent purchase payments, 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
Portfolios of the Funds. The investment performance of the Subaccounts will
reflect increases or decreases in the net asset value per share of the
corresponding Portfolios and any dividends or distributions declared by the
corresponding Portfolios. Any dividends or distributions from any Portfolio of
the Funds will be automatically reinvested in shares of the same Portfolio,
unless the Company, 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 a Contractowner's
interest in a Subaccount. When a Contractowner allocates purchase payments to
a Subaccount, the Contract is credited with Accumulation Units. The number of
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the particular Subaccount by the Accumulation Unit value for the
particular Subaccount at the end of the Valuation Period in which the purchase
payment is credited. In addition, other transactions including full or partial
withdrawals, exchanges, and assessment of premium taxes against the Contract
affect the number of Accumulation Units credited to a Contract. The number of
units credited or debited in connection with any such transaction is determined
by dividing the dollar amount of such transaction by the unit value of the
affected Subaccount. The Accumulation Unit value of each Subaccount is
determined on each Valuation Date. The number of Accumulation Units credited
to a Contract will 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.
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Variable Annuity Prospectus
The Accumulation Unit value of each Subaccount's units initially was
$10. The unit value of a Subaccount on any Valuation Date is calculated by
dividing the value of each Subaccount's net assets by the number of
Accumulation Units credited to the Subaccount on that date. Determination of
the value of the net assets of a Subaccount takes into account the following:
(1) the investment performance of the Subaccount, which is based upon the
investment performance of the corresponding Portfolio of the Funds, (2) any
dividends or distributions paid by the corresponding Portfolio, (3) the
charges, if any, that may be assessed by the Company for taxes attributable to
the operation of the Subaccount, and (4) the mortality and expense risk charge
under the Contract.
FULL AND PARTIAL WITHDRAWALS
A Contractowner may obtain proceeds from a Contract by surrendering the
Contract for its Withdrawal Value or by making a partial withdrawal. A full or
partial withdrawal, including a systematic withdrawal, may be taken from the
Contract Value at any time while the Owner is living and before the Annuity
Payout Date, subject to restrictions on partial withdrawals of Contract Value
from the Fixed Interest Account and limitations under 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 the Company at the T. Rowe
Price Variable Annuity Service Center. A proper written request must include
the written consent of any effective assignee or irrevocable Beneficiary, if
applicable. A Contractowner may direct Investment Services to apply the
proceeds of a full or partial withdrawal to the purchase of shares of one or
more of the T. Rowe Price Funds by so indicating in their written withdrawal
request.
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
the Company at the T. Rowe Price Variable Annuity Service Center, less any
premium taxes due and paid by the Company. A partial withdrawal may be
requested for a specified percentage or dollar amount of Contract Value. Each
partial withdrawal must be for at least $500 except systematic withdrawals
discussed on the next page. A request for a partial withdrawal will result in
a payment by the Company in accordance with the amount specified in the partial
withdrawal request. Upon payment, the Contract Value will be reduced by an
amount equal to the payment and any applicable premium tax. If a partial
withdrawal is requested that would leave the Withdrawal Value in the Contract
less than $2,000, then the Company reserves the right to treat the partial
withdrawal as a request for a full withdrawal.
The amount of a partial withdrawal will be deducted from the Contract Value in
the Subaccounts and the Fixed Interest Account, according to the
Contractowner's instructions to the Company, subject to the restrictions on
partial withdrawals from the Fixed Interest Account. See "The Fixed Interest
Account" on Page 28. If a Contractowner does not specify the allocation, the
Company will contact the Contractowner for instructions, and the withdrawal
will be effected as of the end of the Valuation Period in which such
instructions are obtained. A full or partial withdrawal, including a
systematic withdrawal, may be subject to a premium tax charge to reimburse the
Company for any tax on premiums on a Contract that may be imposed by various
states and municipalities. See "Premium Tax Charge" on Page 25.
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Variable Annuity Prospectus
A full or partial withdrawal, including a systematic withdrawal, may
result in receipt of taxable income to the Owner and, if made prior to the
Owner attaining age 59 1/2, may be subject to a 10% penalty tax. The tax
consequences of a withdrawal under the Contract should be carefully considered.
See "Federal Tax Matters" on Page 33.
SYSTEMATIC WITHDRAWALS
The Company currently offers a feature under which systematic withdrawals may
be elected. Under this feature, a Contractowner may elect to receive
systematic withdrawals before the Annuity Payout Date by sending a properly
completed Systematic Withdrawal Request form to the Company at the T. Rowe
Price Variable Annuity Service Center. A Contractowner may direct Investment
Services to apply the proceeds of a systematic withdrawal to shares of one or
more of the T. Rowe Price Funds by so indicating on the Systematic Withdrawal
Request form. A proper request must include the written consent of any
effective assignee or irrevocable Beneficiary, if applicable. A Contractowner
may designate the systematic withdrawal amount as a percentage of Contract
Value allocated to the Subaccounts and/or Fixed Interest Account, as a
specified dollar amount, as all earnings in the Contract, or as based upon the
life expectancy of the Owner or the Owner and a Beneficiary, and the desired
frequency of the systematic withdrawals, which may be monthly, quarterly,
semiannually or annually. Systematic withdrawals may be stopped or modified
upon proper written request by the Contractowner received by the Company at the
T. Rowe Price Variable Annuity Service Center at least 30 days in advance of
the requested date of termination or modification.
Each systematic withdrawal must be at least $100. Upon payment, the
Contractowner's Contract Value will be reduced by an amount equal to the
payment proceeds plus any applicable premium taxes. Any systematic withdrawal
that equals or exceeds the Withdrawal Value will be treated as a full
withdrawal. In no event will payment of a systematic withdrawal exceed the
Withdrawal Value. The Contract will automatically terminate if a systematic
withdrawal causes the Contract's Withdrawal Value to equal zero.
Each systematic withdrawal will be effected as of the end of the Valuation
Period during which the withdrawal is scheduled. The deduction caused by the
systematic withdrawal will be allocated to the Contractowner's Contract Value
in the Subaccounts and the Fixed Interest Account as directed by the
Contractowner.
The Company may, at any time, discontinue, modify or suspend systematic
withdrawals provided that, as required by its current contractual arrangements
with Investment Services, the Company first obtains the consent of Investment
Services, which consent shall not be unreasonably withheld. Systematic
withdrawals from Contract Value allocated to the Fixed Interest Account must
provide for payments over a period of not less than 36 months as described
under "The Fixed Interest Account" on Page 28. The tax consequences of a
systematic withdrawal, including the 10% penalty tax imposed on withdrawals
made prior to the Owner attaining age 59 1/2, should be carefully considered.
See "Federal Tax Matters" on Page 33.
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Variable Annuity Prospectus
FREE-LOOK RIGHT
An Owner may return a Contract within the Free-Look Period, which is
generally a 10-day period beginning when the Owner receives the Contract. The
returned Contract will then be deemed void and the Company will refund any
purchase payments allocated to the Fixed Interest Account plus the Contract
Value in the Subaccounts as of the end of the Valuation Period during which the
returned Contract is received by the Company. The Company will return purchase
payments allocated to the Subaccounts rather than Contract Value in those
states and circumstances in which it is required to do so.
DEATH BENEFIT
If the Owner dies during the Accumulation Period, the Company will pay the
death benefit proceeds to the Designated Beneficiary upon receipt of due proof
of death and instructions regarding payment to the Designated Beneficiary. If
there are Joint Owners, the death benefit proceeds will be payable upon receipt
of due proof of death of either Owner during the Accumulation Period and
instructions regarding payment. If the surviving spouse of the deceased Owner
is the sole Designated Beneficiary, such spouse may elect to continue the
Contract in force, subject to certain limitations. See "Distribution
Requirements" on the next page. If the Owner is not a natural person, the
death benefit proceeds will be payable upon receipt of due proof of death of
the Annuitant during the Accumulation Period and instructions regarding
payment, and the amount of the death benefit is based on the age of the oldest
Annuitant on the date the Contract was issued. If the death of an Owner occurs
on or after the Annuity Payout Date, no death benefit proceeds will be payable
under the Contract, except that any guaranteed payments remaining unpaid will
continue to be paid to the Annuitant pursuant to the Annuity Option in force at
the date of death.
The death benefit proceeds will be the death benefit reduced by any premium
taxes due or paid by the Company. If an Owner dies during the Accumulation
Period and the age of each Owner was 75 or younger on the date the Contract was
issued, the amount of the death benefit will be the greatest of (1) the
Contract Value as of the end of the Valuation Period in which due proof of
death and instructions regarding payment are received by the Company at the
T. Rowe Price Variable Annuity Service Center, (2) the aggregate purchase
payments received less any reductions caused by previous withdrawals, or
(3) the stepped-up death benefit. The stepped-up death benefit is: (a) the
highest death benefit on any annual Contract anniversary that is both an exact
multiple of five and occurs prior to the oldest Owner attaining age 76, plus
(b) any purchase payments made since the applicable fifth annual Contract
anniversary, less (c) any withdrawals since the applicable anniversary.
If an Owner dies during the Accumulation Period and the Contract was issued to
the Owner after age 75, the amount of the death benefit will be the Contract
Value as of the end of the Valuation Period in which due proof of death and
instructions regarding payment are received by the Company at the T. Rowe Price
Variable Annuity Service Center.
Notwithstanding the foregoing, the death benefit for Contracts issued in
Florida, regardless of age at issue, is the greater of (1) the Contract Value
as of the end of the Valuation
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Variable Annuity Prospectus
Period in which due proof of death and instructions regarding payment
are received at the T. Rowe Price Variable Annuity Service Center, or (2) the
aggregate purchase payments received less any reductions caused by previous
withdrawals.
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," on Page 33 for a
discussion of the tax consequences in the event of death.
DISTRIBUTION REQUIREMENTS
For Contracts issued in connection with Non-Qualified Plans, if the surviving
spouse of the deceased Owner is the sole Designated Beneficiary, such spouse
may elect to continue the Contract in force until the earlier of the surviving
spouse's death or the Annuity Payout Date or to receive the death benefit
proceeds. For any Designated Beneficiary other than a surviving spouse, only
those options may be chosen that provide for complete distribution of the
Owner's interest in the Contract within five years of the death of the Owner.
If the Designated Beneficiary is a natural person, that person alternatively
can elect to begin receiving annuity payments within one year of the Owner's
death over a period not extending beyond his or her life or life expectancy.
If the Owner of the Contract is not a natural person, these distribution rules
are applicable upon the death of or a change in the primary Annuitant.
For Contracts issued in connection with Qualified Plans, the terms of any
Qualified Plan and the Internal Revenue Code should be reviewed with respect to
limitations or restrictions on distributions following the death of the Owner
or Annuitant. Because the rules applicable to Qualified Plans are extremely
complex, a competent tax adviser should be consulted.
DEATH OF THE ANNUITANT
If the Annuitant dies prior to the Annuity Payout Date, and the Owner is a
natural person and is not the Annuitant, no death benefit proceeds will be
payable under the Contract. The Owner may name a new Annuitant within 30 days
of the Annuitant's death. If a new Annuitant is not named, the Company will
designate the Owner as Annuitant. On the death of the Annuitant after the
Annuity Payout Date, any guaranteed payments remaining unpaid will continue to
be paid to the Designated Beneficiary pursuant to the Annuity Option in force
at the date of death.
CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of each Subaccount for
mortality and expense risks assumed by the Company under the Contracts. The
charge is equal to an annual rate of .55% of each Subaccount's average daily net
assets. This amount is intended to compensate the Company for certain
mortality and expense risks the
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Variable Annuity Prospectus
Company assumes in offering and administering the Contracts and in
operating the Subaccounts.
The expense risk borne by the Company is the risk that the Company's actual
expenses in issuing and administering the Contracts and operating the
Subaccounts will be more than the profit realized from the mortality and
expense risk charge. The mortality risk borne by the Company is the risk that
Annuitants, as a group, will live longer than the Company's actuarial tables
predict. In this event, the Company 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.
The Company also assumes a mortality risk in connection with the death benefit
under the Contract.
The Company may ultimately realize a profit from this charge to the extent it
is not needed to cover mortality and administrative expenses, but the Company
may realize a loss to the extent the charge is not sufficient. The Company may
use any profit derived from this charge for any lawful purpose, including any
promotional and administrative expenses, including compensation paid by the
Company to T. Rowe Price Insurance Agency, Inc. at the annual rate of .10% of
each Subaccount's average daily net assets for administrative services.
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 Owner's state of residence,
the Annuitant's state of residence, and the insurance tax laws and the
Company's status in a particular state. The Company assesses a premium tax
charge to reimburse itself for premium taxes that it incurs in connection with
a Contract. This charge will be deducted upon annuitization, upon full or
partial withdrawal, or upon payment of the death benefit, if premium taxes are
incurred at that time and are not refundable. The Company reserves the right
to deduct premium taxes when due or anytime thereafter. Premium tax rates
currently range from 0% to 3.5%, but are subject to change by a governmental
entity.
OTHER CHARGES
The Company may charge the Separate Account or the Subaccounts for the federal,
state, or local taxes incurred by the Company that are attributable to the
Separate Account or the Subaccounts, or to the operations of the Company with
respect to the Contracts, or that are attributable to payment of premiums or
acquisition costs under the Contracts. No such charge is currently assessed.
See "Tax Status of the Company and the Separate Account" and "Charge for the
Company's Taxes."
GUARANTEE OF CERTAIN CHARGES
The Company guarantees that the charge for mortality and expense risks will not
exceed an annual rate of .55% of each Subaccount's average daily net assets.
FUND EXPENSES
Each Subaccount of the Separate Account purchases shares at the net asset value
of the corresponding Portfolio of the Funds. Each Portfolio's net asset value
reflects the investment management fee and any other expenses that are deducted
from the assets of the
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Variable Annuity Prospectus
Fund. These fees and expenses are not deducted from the
Subaccount, but are paid from the assets of the corresponding Portfolio. As a
result, the Owner indirectly bears a pro rata portion of such fees and
expenses. The management fees and other expenses, if any, which are more fully
described in the Funds' prospectus, are not specified or fixed under the terms
of the Contract and the Company bears no responsibility for such fees and
expenses.
ANNUITY PERIOD
GENERAL
The Contractowner may select the Annuity Payout Date at the time of
application. The Annuity Payout Date may not be deferred beyond the Annuitant's
90th birthday, although the terms of a Qualified Plan and the laws of certain
states may require annuitization at an earlier age. If the Contractowner does
not select an Annuity Payout Date, the Annuity Payout Date will be the later of
the Annuitant's 70th birthday or the tenth annual Contract Anniversary. See
"Selection of an Option," on page 28. If there are Joint Annuitants, the birth
date of the older Annuitant will be used to determine the latest Annuity Payout
Date.
On the Annuity Payout Date, the proceeds under the Contract will be applied to
provide an annuity under one of the options described on pages 27 and 28. Each
option is available in two forms -- either as a variable annuity supported by
the Subaccounts or as a fixed annuity supported by the Fixed Interest 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 the Owner directs
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 Interest Account will be applied to
purchase a fixed annuity. The proceeds under the Contract will be equal to the
Contractowner's Contract Value in the Subaccounts and the Fixed Interest
Account as of the Annuity Payout Date, reduced by any applicable premium taxes.
The Contract provides for seven Annuity Options. Other Annuity Options may be
available upon request at the discretion of the Company. Annuity payments
under Annuity Options 1 through 4 are based upon annuity rates that vary with
the Annuity Option selected. In the case of Options 1 through 4, the annuity
rates will vary based on the age and sex of the Annuitant, except that unisex
rates are used where required by law. In the case of Options 5, 6 and 7 as
described on pages 27 and 28, annuity rates based on age and sex are not used
to calculate annuity payments. The annuity rates are based upon an assumed
interest rate of 3.5 percent, compounded annually. If no Annuity Option has
been selected, annuity payments will be made to the Annuitant under Option 2
which shall be an annuity payable monthly during the lifetime of the Annuitant
with payments guaranteed to be made for 120 months.
Annuity payments can be made on a monthly, quarterly, semiannual, or annual
basis, although no payments will be made for less than $100. A Contractowner
may direct Investment Services to apply the proceeds of an annuity payment to
shares of one or more of the T. Rowe Price Funds by submitting a written
request to the T. Rowe Price
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Variable Annuity Prospectus
Variable Annuity Service Center. If the frequency of payments selected
would result in payments of less than $100, the Company reserves the right to
change the frequency.
An Owner may designate or change an Annuity Payout Date, Annuity Option, and
Annuitant, provided proper written notice is received by the Company at the T.
Rowe Price Variable Annuity Service Center at least 30 days prior to the
Annuity Payout Date set forth in the Contract. The date selected as the new
Annuity Payout Date must be at least 30 days after the date written notice
requesting a change of Annuity Payout Date is received at the T. Rowe Price
Variable Annuity Service Center.
Once annuity payments have commenced under Annuity Options 1, 2, 3 or
4, an Annuitant or Owner cannot change the Annuity Option and cannot surrender
his or her annuity and receive a lump-sum settlement in lieu thereof. The
Contract specifies annuity tables for Annuity Options 1 through 4 described
below which contain the guaranteed minimum dollar amount of periodic annuity
payments for each $1,000 applied to an Annuity Option 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 occurred prior to
the due date of the second annuity payment, two if death occurred prior to the
third annuity payment due date, etc. THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS 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 5, 10, 15, or 20
years, as elected, annuity payments will be continued during the remainder of
such period to the Designated Beneficiary.
OPTION 3 - LIFE WITH INSTALLMENT OR UNIT 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 died prior to the second
annuity payment due date, two if both died prior 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 5 to 20 years, as elected, with the
guarantee that,
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Variable Annuity Prospectus
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 payments of the amount
elected 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 - AGE RECALCULATION Periodic annuity payments will be made based upon
the Annuitant's life expectancy, or the joint life expectancies of the
Annuitant and a beneficiary, at the Annuitant's attained age (and the
beneficiary's attained or adjusted age, if applicable) each year. The payments
are computed by reference to actuarial tables prescribed by the Treasury
Secretary, until the amount applied is exhausted. This option should be
elected only under Contracts funding Qualified Plans.
SELECTION OF AN OPTION
Contractowners should carefully review the Annuity Options with their financial
or tax advisers, and, for Contracts used in connection with a Qualified Plan,
reference should be made to the terms of the particular plan and the
requirements of the Internal Revenue Code for pertinent limitations respecting
annuity payments and other matters. 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 10
years younger than the Annuitant. For Non-Qualified Plans, the Company does
not allow annuity payments to be deferred beyond the Annuitant's 90th birthday.
THE FIXED INTEREST ACCOUNT
Contractowners may allocate all or a portion of their purchase payments and
exchange Contract Value to the Fixed Interest Account. Amounts allocated to
the Fixed Interest Account become part of the Company's General Account, which
supports the Company's insurance and annuity obligations. The Company's
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 Interest Account have not been registered as securities under the
Securities Act of 1933 (the "1933 Act") and the Fixed Interest Account has not
been registered as an investment company under the Investment Company Act of
1940 (the "1940 Act"). Accordingly, neither the Fixed Interest Account nor any
interests therein are generally subject to the provisions of the 1933 Act or
the 1940 Act. The Company has been advised that the staff of the SEC has not
reviewed the disclosure in this Prospectus relating to the Fixed Interest
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
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Variable Annuity Prospectus
disclosure document only for aspects of a
Contract involving the Separate Account and contains only selected information
regarding the Fixed Interest Account. For more information regarding the Fixed
Interest Account, see "The Contract" on page 15.
Amounts allocated to the Fixed Interest Account become part of the General
Account of the Company, which consists of all assets owned by the Company other
than those in the Separate Account and other separate accounts of the Company.
Subject to applicable law, the Company has sole discretion over the investment
of the assets of its General Account.
INTEREST
Amounts allocated to the Fixed Interest Account earn interest at a fixed rate
or rates that are paid by the Company. The Contract Value in the Fixed
Interest Account earns interest at an interest rate that is guaranteed to be at
least an annual effective rate of 3% which will accrue daily ("Guaranteed
Rate"). Such interest will be paid regardless of the actual investment
experience of the Company's General Account. In addition, the Company may in
its discretion pay interest at a rate ("Current Rate") that exceeds the
Guaranteed Rate. The Company will determine the Current Rate, if any, from
time to time.
Contract Value allocated or exchanged to the Fixed Interest Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Contract Value is allocated or exchanged to the Fixed Interest Account. The
Current Rate paid on any such portion of Contract Value allocated or exchanged
to the Fixed Interest Account will be guaranteed for rolling periods of one or
more years (each a "Guarantee Period"). The Company currently offers only
Guarantee Periods of one year. Upon expiration of any Guarantee Period, a new
Guarantee Period of the same duration begins with respect to that portion of
Contract Value, which will earn interest at the Current Rate, if any, declared
by the Company on the first day of the new Guarantee Period.
Contract Value allocated or exchanged to the Fixed Interest Account at one
point in time may be credited with a different Current Rate than amounts
allocated or exchanged to the Fixed Interest Account at another point in time.
For example, amounts allocated to the Fixed Interest Account in June may be
credited with a different current rate than amounts allocated to the Fixed
Interest Account in July. In addition, if Guarantee Periods of different
durations are offered, Contract Value allocated or exchanged to the Fixed
Interest Account for a Guarantee Period of one duration may be credited with a
different Current Rate than amounts allocated or exchanged to the Fixed
Interest Account for a Guarantee Period of a different duration. Therefore, at
any time, various portions of a Contractowner's Contract Value in the Fixed
Interest Account may be earning interest at different Current Rates depending
upon the point in time such portions were allocated or exchanged to the Fixed
Interest Account and the duration of the Guarantee Period. The Company bears
the investment risk for the Contract Value allocated to the Fixed Interest
Account and for paying interest at the Guaranteed Rate on amounts allocated to
the Fixed Interest Account.
For purposes of determining the interest rates to be credited on Contract Value
in the Fixed Interest Account, withdrawals or exchanges from the Fixed Interest
Account will
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Variable Annuity Prospectus
be deemed to be taken first from any portion of Contract Value
allocated to the Fixed Interest Account for which the Guarantee Period expires
during the calendar month in which the withdrawal, loan or exchange is
effected, then in the order beginning with that portion of such Contract Value
which has the longest amount of time remaining before the end of its Guarantee
Period and ending with that portion which has the least amount of time
remaining before the end of its Guarantee Period. For more information about
exchanges and withdrawals from the Fixed Interest Account, see "Exchanges and
Withdrawals" 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 Interest Account as for a
Contract that has Contract Value allocated to the Subaccounts. See "Death
Benefit," Page 23.
CONTRACT CHARGES
Premium taxes will be the same for Contractowners who allocate purchase
payments or exchange Contract Value to the Fixed Interest Account as for those
who allocate purchase payments to the Subaccounts. The charge for mortality
and expense risks will not be assessed against the Fixed Interest Account, and
any amounts that the Company pays for income taxes allocable to the Subaccounts
will not be charged against the Fixed Interest Account. In addition, the
investment management fees and any other expenses paid by the Funds will not be
paid directly or indirectly by Contractowners to the extent the Contract Value
is allocated to the Fixed Interest Account; however, such Contractowners will
not participate in the investment experience of the Subaccounts.
EXCHANGES AND WITHDRAWALS
Amounts may be exchanged from the Subaccounts to the Fixed Interest Account and
from the Fixed Interest Account to the Subaccounts, subject to the following
limitations. Exchanges from the Fixed Interest Account are allowed only
(1) from Contract Value, the Guarantee Period of which expires during the
calendar month in which the exchange is effected, (2) pursuant to the Dollar
Cost Averaging Option provided that such exchanges are scheduled to be made
over a period of not less than one year, and (3) pursuant to the Asset
Rebalancing Option, provided that upon receipt of the Asset Rebalancing
Request, Contract Value is allocated among the Fixed Interest Account and the
Subaccounts in the percentages selected by the Contractowner without violating
the restrictions on exchanges from the Fixed Interest Account set forth in (1)
above. Accordingly, a Contractowner who desires to implement the Asset
Rebalancing Option should do so at a time when Contract Value may be exchanged
from the Fixed Interest Account to the Subaccounts in the percentages selected
by the Contractowner without violating the restrictions on exchanges from the
Fixed Interest Account. Once an Asset Rebalancing Option is implemented, the
restrictions on exchanges will not apply to exchanges made pursuant to the
Option. Up to six exchanges are allowed in any Contract Year and exchanges
pursuant to the Dollar Cost Averaging and Asset Rebalancing Options are not
included in the six exchanges allowed per Contract Year. The minimum exchange
amount is $500 ($200 under the Dollar Cost Averaging Option) or the amount
remaining in the Fixed Interest Account. The Company reserves the right to
waive or limit the number of exchanges permitted each Contract Year, to
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Variable Annuity Prospectus
suspend exchanges, to limit the amount that may be subject to exchanges
and the amount remaining in an account after an exchange and to impose
conditions on the right to exchange.
If Contract Value is being exchanged from the Fixed Interest Account pursuant
to the Dollar Cost Averaging or Asset Rebalancing Option or withdrawn from the
Fixed Interest Account pursuant to systematic withdrawals, any purchase payment
allocated to, or Contract Value exchanged to or from, the Fixed Interest
Account will automatically terminate such Dollar Cost Averaging or Asset
Rebalancing Option or systematic withdrawals, and any withdrawal from the Fixed
Interest Account or the Subaccounts will automatically terminate the Asset
Rebalancing Option. In the event of automatic termination of any of the
foregoing options, the Company shall so notify the Contractowner, and the
Contractowner may reestablish Dollar Cost Averaging, Asset Rebalancing or
Systematic Withdrawals by sending a written request to the Company, provided
that the Owner's Contract Value at that time meets any minimum amount required
for the Dollar Cost Averaging or Asset Rebalancing Option.
The Contractowner may also make full withdrawals to the same extent as
a Contractowner who has allocated Contract Value to the Subaccounts. A
Contractowner may make a partial withdrawal from the Fixed Interest Account
only (1) from Contract Value, the Guarantee Period of which expires during the
calendar month in which the partial withdrawal is effected, (2) pursuant to
Systematic Withdrawals, and (3) once per Contract Year in an amount up to the
greater of $5,000 or 10 percent of Contract Value at the time of the partial
withdrawal. Systematic Withdrawals from Contract Value allocated to the Fixed
Interest Account must provide for payments over a period of not less than 36
months. See "Full and Partial Withdrawals," page 21 and "Systematic
Withdrawals," page 22.
PAYMENTS FROM THE FIXED INTEREST ACCOUNT
As required by most states, the Company reserves the right to delay for up to
six months after a written request in proper form is received by the Company at
the T. Rowe Price Variable Annuity Service Center, full and partial withdrawals
and exchanges from the Fixed Interest Account. 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 Interest Account. The Company does not
expect to delay payments from the Fixed Interest Account and will notify the
Contractowner if there will be a delay.
MORE ABOUT THE CONTRACT
OWNERSHIP
The Contractowner is the person named as such in the application or in any
later change shown in the Company's records. While living, the Contractowner
alone has the right to receive all benefits and exercise all rights that the
Contract grants or the Company allows. The Owner may be an entity that is not
a living person, such as a trust or corporation, referred to herein as
"Non-Natural Persons." See "Federal Tax Matters," page 33.
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Joint Owners. The Joint Owners will be joint tenants with rights of
survivorship and upon the death of an Owner, the surviving Owner shall be the
sole Owner. Any Contract transaction requires the signature of all persons
named jointly.
DESIGNATION AND CHANGE OF BENEFICIARY
The Beneficiary is the individual named as such in the application or any later
change shown in the Company's records. The Contractowner may change the
Beneficiary at any time while the Contract is in force by written request on a
form provided by the Company and received by the Company at the T. Rowe Price
Variable Annuity Service Center. The change will not be binding on the Company
until it is received and recorded at the T. Rowe Price Variable Annuity Service
Center. The change will be effective as of the date this form is signed
subject to any payments made or other actions taken by the Company before the
change is received and recorded. A Secondary Beneficiary may be designated.
The Owner may designate a permanent Beneficiary whose rights under the Contract
cannot be changed without the Beneficiary's consent.
PARTICIPATING
The Contract is participating and will share in the surplus earnings of the
Company. However, the current dividend scale is zero and the Company does not
anticipate that dividends will be paid.
PAYMENTS FROM THE SEPARATE ACCOUNT
The Company will pay any full or partial withdrawal benefit or death benefit
proceeds from Contract Value allocated to the Subaccounts, and will effect an
exchange between Subaccounts or from a Subaccount to the Fixed Interest Account
within seven days from the Valuation Date a proper request is received at the
T. Rowe Price Variable Annuity Service Center. However, the Company can
postpone the calculation or payment of such a payment or exchange of amounts
from the Subaccounts to the extent permitted under applicable law, for any
period: (a) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, (b) during which trading on the New
York Stock Exchange is restricted as determined by the SEC, or (c) 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.
PROOF OF AGE AND SURVIVAL
The Company may require proof of age or survival of any person on whose life
annuity payments depend.
MISSTATEMENTS
If the age or sex of an Annuitant or age of an Owner has been misstated, the
correct amount paid or payable by the Company under the Contract shall be such
as the Contract Value would have provided for the correct age or sex (unless
unisex rates apply).
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FEDERAL TAX MATTERS
INTRODUCTION
The Contract described in this Prospectus is designed for use by individuals in
retirement plans which may or may not be Qualified Plans under the provisions
of the Internal Revenue Code ("Code"). The ultimate effect of federal income
taxes on the amounts held under a Contract, on annuity payments, and on the
economic benefits to the Owner, the Annuitant, and the Beneficiary or other
payee will depend upon the type of retirement plan for which the Contract is
purchased, the tax and employment status of the individuals involved and a
number of other factors. The discussion of the federal income tax
considerations relating to a contract 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 the Company's understanding of the present federal
income tax laws as currently interpreted by the Internal Revenue Service
("IRS"), and is not intended as tax advice. No representation is made
regarding the likelihood of continuation of the present federal income tax laws
or of the current interpretations by the IRS or the courts. Future legislation
may affect annuity contracts adversely. Moreover, no attempt has been made to
consider any applicable state or other laws. Because of the inherent
complexity of the tax laws and the fact that tax results will vary according to
the particular circumstances of the individual involved and, if applicable, the
Qualified Plan, a person should consult 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 (including an exchange). THE COMPANY DOES NOT MAKE ANY
GUARANTEE REGARDING THE TAX STATUS OF, OR TAX CONSEQUENCES ARISING FROM, ANY
CONTRACT OR ANY TRANSACTION INVOLVING THE CONTRACT.
TAX STATUS OF THE COMPANY AND THE SEPARATE ACCOUNT
General
The Company 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 the Company, the Company 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 the Company's Taxes
A charge may be made against the Separate Account for any federal taxes
incurred by the Company that are attributable to the Separate Account, the
Subaccounts or to the operations of the Company with respect to the Contracts
or attributable to payments, premiums, or acquisition costs under the
Contracts. The Company will review the question of a charge to the Separate
Account, the Subaccounts or the Contracts for the Company's federal taxes
periodically. Charges may become necessary if, among other reasons, the tax
treatment of the Company or of income and expenses under the Contracts is
ultimately determined to be other than what the Company 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
the Company's tax status.
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Variable Annuity Prospectus
Under current laws, the Company 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, the
Company 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 of the Portfolios 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% of the total assets of a Portfolio
may be represented by any one investment, no more than 70% may be represented
by any two investments, no more than 80% may be represented by any three
investments, and no more than 90% 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 Portfolios, 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 includible in the
variable contractowner's gross income. The IRS has stated in published rulings
that a variable contractowner will be considered the owner of separate account
assets if the contractowner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The
Treasury Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
policyowner), rather than the insurance company, to be treated as the owner of
the assets in the account." This announcement also stated that guidance would
be issued by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular subaccounts without
being treated as owners of the underlying assets." As of the date of this
Prospectus, no such guidance has been issued.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the Contractowner 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, the Company 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. The Company therefore reserves the
right to modify the Contract, as deemed appropriate by the Company, to attempt
to prevent a Contractowner from being considered the owner of a pro rata share
of the assets of the
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Variable Annuity Prospectus
Separate Account. Moreover, in the event that regulations
or rulings are adopted, there can be no assurance that the Portfolios will be
able to operate as currently described in the Prospectus, or that the Funds
will not have to change any Portfolio's investment objective or investment
policies.
INCOME TAXATION OF ANNUITIES IN GENERAL - NON-QUALIFIED PLANS
Section 72 of the Code governs the taxation of annuities. In general, a
contractowner is not taxed on increases in value under an annuity contract
until some form of distribution is made under the contract. However, the
increase in value may be subject to tax currently under certain circumstances.
See "Contracts Owned by Non-Natural Persons" on page 37 and "Diversification
Standards" on page 34. Withholding of federal income taxes on all
distributions may be required unless a recipient who is eligible elects not to
have any amounts withheld and properly notifies the Company of that election.
- - SURRENDERS OR WITHDRAWALS PRIOR TO THE ANNUITY PAYOUT DATE Code
Section 72 provides that amounts received upon a total or
partial withdrawal (including systematic withdrawals) from a
Contract prior to the Annuity Payout Date generally will be
treated as gross income to the extent that the cash value of the
Contract (determined without regard to any surrender charge in
the case of a partial withdrawal) exceeds the "investment in the
contract." The "investment in the contract" is that portion, if
any, of purchase payments paid under a Contract less any
distributions received previously under the Contract that are
excluded from the recipient's gross income. The taxable portion
is taxed at ordinary income tax rates. For purposes of this
rule, a pledge or assignment of a Contract is treated as a
payment received on account of a partial withdrawal of a
Contract. Similarly, loans under a Contract are generally
treated as distributions under the Contract.
- - SURRENDERS OR WITHDRAWALS ON OR AFTER THE ANNUITY PAYOUT
DATE Upon a complete surrender, the receipt is taxable to the
extent that the cash value of the Contract exceeds the
investment in the Contract. The taxable portion of such
payments will be taxed at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment
generally is determined by using a formula known as the
"exclusion ratio," which establishes the ratio that the
investment in the Contract bears to the total expected amount of
annuity payments for the term of the Contract. That ratio is
then applied to each payment to determine the non-taxable
portion of the payment. The remaining portion of each payment
is taxed at ordinary income rates. For variable annuity
payments, the taxable portion of each payment is determined by
using a formula known as the "excludable amount," which
establishes the non-taxable portion of each payment. The
non-taxable portion is a fixed dollar amount for each payment,
determined by dividing the investment in the Contract by the
number of payments to be made. The remainder of each variable
annuity payment is taxable. Once the excludable portion of
annuity payments to date equals the investment in the Contract,
the balance of the annuity payments will be fully taxable.
- - PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS With respect
to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is generally imposed equal to 10% of
the portion of such amount which is includible in gross
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Variable Annuity Prospectus
income. However, the penalty tax is not applicable to
withdrawals: (i) made on or after the death of the owner (or
where the owner is not an individual, the death of the "primary
annuitant," who is defined as the individual the events in whose
life are of primary importance in affecting the timing and
amount of the payout under the Contract); (ii) attributable to
the taxpayer's becoming totally disabled within the meaning of
Code Section 72(m)(7); (iii) which are part of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
taxpayer, or the joint lives (or joint life expectancies) of the
taxpayer and his or her beneficiary; (iv) from certain qualified
plans; (v) under a so-called qualified funding asset (as defined
in Code Section 130(d)); (vi) under an immediate annuity
contract; or (vii) which are purchased by an employer on
termination of certain types of qualified plans and which are
held by the employer until the employee separates from service.
If the penalty tax does not apply to a surrender or withdrawal
as a result of the application of item (iii) above, and the
series of payments are subsequently modified (other than by
reason of death or disability), the tax for the first year in
which the modification occurs will be increased by an amount
(determined by the regulations) equal to the tax that would have
been imposed but for item (iii) above, plus interest for the
deferral period, if the modification takes place (a) before the
close of the period which is five years from the date of the
first payment and after the taxpayer attains age 59 1/2, or
(b) before the taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
- - DISTRIBUTION-AT-DEATH RULES In order to be treated as an annuity
contract, a Contract must provide the following two distribution
rules: (a) if any owner dies on or after the Annuity Payout
Date, and before the entire interest in the Contract has been
distributed, the remainder of the owner's interest will be
distributed at least as quickly as the method in effect on the
owner's death; and (b) if any owner dies before the Annuity
Payout Date, the entire interest in the Contract must generally
be distributed within five years after the date of death, or, if
payable to a designated beneficiary, must be annuitized over the
life of that designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary,
commencing within one year after the date of death of the owner.
If the sole designated beneficiary is the spouse of the
deceased owner, the Contract (together with the deferral of tax
on the accrued and future income thereunder) may be continued in
the name of the spouse as owner.
Generally, for purposes of determining when distributions must
begin under the foregoing rules, where an owner is not an
individual, the primary annuitant is considered the owner. In
that case, a change in the primary annuitant will be treated as
the death of the owner. Finally, in the case of joint owners,
the distribution-at-death rules will be applied by treating the
death of the first owner as the one to be taken into account in
determining generally when distributions must commence, unless
the sole Beneficiary is the deceased owner's spouse.
- - GIFT OF ANNUITY CONTRACTS Generally, gifts of Non-Qualified Plan
Contracts prior to the Annuity Payout Date will trigger tax on
the gain on the Contract, with the donee getting a stepped-up
basis for the amount included in the donor's income. The 10%
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Variable Annuity Prospectus
penalty tax and gift tax also may be applicable. This provision
does not apply to transfers between spouses or incident to a
divorce.
- - CONTRACTS OWNED BY NON-NATURAL PERSONS If the Contract is held
by a non-natural person (for example, a corporation), the income
on that Contract (generally the increase in net surrender value
less the purchase payments) is includible in taxable income each
year. The rule does not apply where the Contract is acquired by
the estate of a decedent, where the Contract is held by certain
types of retirement plans, where the Contract is a qualified
funding asset for structured settlements, where the Contract is
purchased on behalf of an employee upon termination of a
qualified plan, and in the case of a so-called immediate
annuity. An annuity contract held by a trust or other entity as
agent for a natural person is considered held by a natural
person.
- - MULTIPLE CONTRACT RULE For purposes of determining the amount of
any distribution under Code Section 72(e) (amounts not received
as annuities) that is includible in gross income, all
Non-Qualified annuity contracts issued by the same insurer to
the same Contractowner during any calendar year are to be
aggregated and treated as one contract. Thus, any amount
received under any such contract prior to the contract's Annuity
Payout Date, such as a partial withdrawal, dividend, or loan,
will be taxable (and possibly subject to the 10% penalty tax) to
the extent of the combined income in all such contracts.
In addition, the Treasury Department has broad regulatory
authority in applying this provision to prevent avoidance of the
purposes of this rule. It is possible that, under this
authority, the Treasury Department may apply this rule to
amounts that are paid as annuities (on and after the Annuity
Payout Date) under annuity contracts issued by the same company
to the same owner during any calendar year. In this case,
annuity payments could be fully taxable (and possibly subject to
the 10% penalty tax) to the extent of the combined income in all
such contracts and regardless of whether any amount would
otherwise have been excluded from income because of the
"exclusion ratio" under the contract.
- - POSSIBLE TAX CHANGES In recent years, legislation has been
proposed that would have adversely modified the federal taxation
of certain annuities. Although as of the date of this
Prospectus Congress is not considering any legislation regarding
the taxation of annuities, there is always the possibility that
the tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, and
judicial decisions). Moreover, although unlikely, it is also
possible that any legislative change could be retroactive (that
is, effective prior to the date of such change).
- - TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT A transfer of
ownership of a Contract, the designation of an Annuitant, Payee
or other Beneficiary who is not also the Owner, the selection of
certain Annuity Payout Dates or the exchange of a Contract may
result in certain tax consequences to the Owner that are not
discussed herein. An Owner contemplating any such transfer,
assignment, selection or exchange should contact a qualified tax
adviser with respect to the potential effects of such a
transaction.
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QUALIFIED PLANS
The Contract may be used as a Qualified Plan that meets the requirements of an
individual retirement annuity ("IRA") under Section 408 of the Code. No
attempt is made herein to provide more than general information about the use
of the Contract as a Qualified Plan. Contractowners, Annuitants, and
Beneficiaries are cautioned that the rights of any person to any benefits under
such Qualified Plans may be limited by applicable law, regardless of the terms
and conditions of the Contract issued in connection therewith.
The amount that may be contributed to a Qualified Plan is subject to
limitations under the Code. In addition, early distributions from Qualified
Plans may be subject to penalty taxes. Furthermore, distributions from most
Qualified Plans are subject to certain minimum distribution rules. Failure to
comply with these rules could result in disqualification of the Plan or subject
the Owner or Annuitant to penalty taxes. As a result, the minimum distribution
rules may limit the availability of certain Annuity Options to certain
Annuitants and their beneficiaries. These rules and requirements may not be
incorporated into our Contract administration procedures. Therefore,
Contractowners, Annuitants, and Beneficiaries are responsible for determining
that contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
THE FOLLOWING IS A BRIEF DESCRIPTION OF QUALIFIED PLANS AND THE USE OF THE
CONTRACT THEREWITH:
- - SECTION 408
Section 408 of the Code permits eligible individuals to establish
individual retirement programs through the purchase of Individual
Retirement Annuities ("IRAs"). The Contract may be purchased as an IRA.
IRAs are subject to limitations on the amount that may be contributed, the
persons who may be eligible and on the time when distributions must
commence. Depending upon the circumstances of the individual,
contributions to an IRA may be made on a deductible or nondeductible
basis. IRAs may not be transferred, sold, assigned, discounted or pledged
as collateral for a loan or other obligation. The annual premium for an
IRA may not be fixed and may not exceed $2,000. Any refund of premium
must be applied to the payment of future premiums or the purchase of
additional benefits.
Sale of the Contracts for use with IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the
Contracts for such purposes will be provided with such supplementary
information as may be required by the Internal Revenue Service.
An individual's interest in an IRA must generally be distributed or
begin to be distributed not later than April 1 of the calendar year
following the calendar year in which the individual reaches age 70 1/2
("required beginning date"). Periodic distributions must not extend
beyond the life of the individual or the lives of the individual and a
designated beneficiary (or over a period extending beyond the life
expectancy of the individual or the joint life expectancy of the
individual and a designated beneficiary).
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Variable Annuity Prospectus
If an individual dies before reaching his or her required beginning
date, the individual's entire interest must generally be distributed
within five years of the individual's death. However, the five-year
rule will be deemed satisfied, if distributions begin before the close
of the calendar year following the individual'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 individual's surviving spouse,
distributions may be delayed until the individual would have reached age
70 1/2.
If an individual dies after reaching his or her required beginning date,
the individual's interest must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
individual's death.
Distributions from IRAs are generally taxed under Code Section 72.
Under these rules, a portion of each distribution may be excludable from
income. The amount excludable from the individual's income is the
amount of the distribution which bears the same ratio as the
individual's nondeductible contributions bears to the expected return
under the IRA.
The Internal Revenue Service has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in
the Contract comports with IRA qualification requirements.
- - TAX PENALTIES
Premature Distribution Tax. Distributions from a Qualified Plan before
the owner 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 Owner; (ii) attributable to the Owner's
disability; or (iii) which are part of a series of substantially equal
periodic payments made (at least annually) for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies)
of the Owner and a designated beneficiary and which begin after the
Owner terminates employment.
Minimum Distribution Tax. If the amount distributed from a Qualified
Plan is less than the minimum required distribution for the year, the
Owner is subject to a 50 percent tax on the amount that was not properly
distributed.
Excess Distribution Tax. If the aggregate distributions from all IRAs
and certain other retirement plans with respect to an individual in a
calendar year exceed the greater of (i)E$150,000, or (ii)E$112,500, as
indexed for inflation ($155,000 for 1996), a penalty tax of 15 percent
is generally imposed (in addition to any ordinary income tax) on the
excess portion of the distribution.
- - WITHHOLDING
Periodic distributions (e.g., annuities and installment payments) from a
Qualified Plan that will last for a period of 10 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.
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Variable Annuity Prospectus
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than 10 years) from an IRA are subject to income tax
withholding at a flat 10 percent rate. The recipient of such a
distribution may elect not to have withholding apply.
The above description of the federal income tax consequences applicable to
Qualified Plans which may be funded by the Contract offered by this Prospectus
is only a brief summary and is not intended as tax advice. The rules governing
the provisions of Qualified Plans are extremely complex and often difficult to
comprehend. Anything less than full compliance with the applicable rules, all
of which are subject to change, may have adverse tax consequences. A
prospective Contractowner considering adoption of a Qualified Plan and purchase
of a Contract in connection therewith should first consult a qualified and
competent tax adviser, with regard to the suitability of the Contract as an
investment vehicle for the Qualified Plan.
OTHER INFORMATION
VOTING OF FUND SHARES
The Company is the legal owner of the shares of the Funds held by the
Subaccounts of the Separate Account. The Company will exercise voting rights
attributable to the shares of each Portfolio of the Funds held in the
Subaccounts at any regular and special meetings of the shareholders of the
Funds on matters requiring shareholder voting under the 1940 Act. In
accordance with its view of presently applicable law, the Company will exercise
these voting rights based on instructions received from persons having the
voting interest in corresponding Subaccounts of the Separate Account. However,
if the 1940 Act or any regulations thereunder should be amended, or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the Funds 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
Portfolio as to which voting instructions may be given to the Company is
determined by dividing a Contractowner's Contract Value in a Subaccount on a
particular date by the net asset value per share of that Portfolio as of the
same date. Fractional votes will be counted. The number of votes as to which
voting instructions may be given will be determined as of the date coincident
with the date established by the Fund for determining shareholders eligible to
vote at the meeting of the Fund. If required by the SEC, the Company reserves
the right to determine in a different fashion the voting rights attributable to
the shares of the Funds. Voting instructions may be cast in person or by
proxy.
Voting rights attributable to the Contractowner's Contract Value in a
Subaccount for which no timely voting instructions are received will be voted
by the Company in the same proportion as the voting instructions that are
received in a timely manner for all Contracts participating in that Subaccount.
The Company 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.
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SUBSTITUTION OF INVESTMENTS
The Company 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 Portfolios of the Funds should no longer be
available for investments or if the Company receives an opinion from counsel
acceptable to Investment Services that substitution is in the best interest of
Contractowners and that further investment and shares of the Portfolio(s) would
cause undue risk to the Company, the Company may substitute shares of another
Portfolio of the Funds or of a different fund for shares already purchased, or
to be purchased in the future under the Contract. The Company may also
purchase, through the Subaccount, other securities for other classes of
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, the Company 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.
The Company also reserves the right to establish additional Subaccounts
of the Separate Account that would invest in a new Portfolio of one of the
Funds or in shares of another investment company, a series thereof, or other
suitable investment vehicle. New Subaccounts may be established by the Company
with the consent of Investment Services, and any new Subaccount will be made
available to existing Owners on a basis to be determined by the Company and
Investment Services. The Company may also eliminate or combine one or more
Subaccounts with the consent of Investment Services if, marketing, tax, or
investment conditions so warrant.
Subject to compliance with applicable law, the Company may transfer assets to
the General Account with the consent of the Investment Services. The Company
also reserves the right, subject to any required regulatory approvals, to
transfer assets of any Subaccount of the Separate Account to another separate
account or Subaccount with the consent of Investment Services.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in these and other contracts as may
be necessary or appropriate to reflect such substitution or change. If deemed
by the Company to be in the best interests of persons having voting rights
under the Contracts, the Separate Account may be operated as a management
investment company under the 1940 Act or any other form permitted by law; it
may be deregistered under that Act in the event such registration is no longer
required; or it may be combined with other separate accounts of the Company or
an affiliate thereof. Subject to compliance with applicable law, the Company
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
The Company reserves the right, without the consent of Owners, to suspend sales
of the Contract as presently offered and to make any change to the provisions
of the Contracts
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Variable Annuity Prospectus
to comply with, or give Owners 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. The Company also
reserves the right to limit the amount and frequency of subsequent purchase
payments.
REPORTS TO OWNERS
A statement will be sent annually to each Contractowner setting forth a summary
of the transactions that occurred during the year, and indicating the Contract
Value as of the end of each year. In addition, the statement will indicate the
allocation of Contract Value among the Fixed Interest Account and the
Subaccounts and any other information required by law. Confirmations will also
be sent out upon purchase payments, exchanges, loans, loan repayments, and full
and partial withdrawals. Certain transactions will be confirmed quarterly.
These transactions include exchanges under the Dollar Cost Averaging and Asset
Rebalancing Options, purchase payments made under an Automatic Investment
Program, systematic withdrawals and annuity payments.
Each Contractowner will also receive an annual and semiannual report containing
financial statements for the Portfolios, which will include a list of the
portfolio securities of the Portfolios, as required by the 1940 Act, and/or
such other reports as may be required by federal securities laws.
TELEPHONE EXCHANGE PRIVILEGES
A Contractowner may request an exchange of Contract Value by telephone if an
Authorization for Telephone Requests form ("Telephone Authorization") has been
completed, signed, and filed at the T. Rowe Price Variable Annuity Service
Center. The Company 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 that it complies with its
procedures. The Company's procedures require that any person requesting an
exchange by telephone provide the account number and the Owner's tax
identification number and such instructions must be received on a recorded
line. The Company reserves the right to deny any telephone exchange request.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), Contractowners might not be able to
request exchanges by telephone and would have to submit written requests.
By authorizing telephone exchanges, a Contractowner authorizes the Company to
accept and act upon telephonic instructions for exchanges involving the
Contractowner's Contract, and agrees that neither the Company, nor any of its
affiliates, nor the Funds, nor any of the directors, trustees, officers,
employees or agents, will be liable for any loss, damages, cost, or expense
(including attorney's fees) arising out of any requests effected in accordance
with the Telephone Authorization and believed by the Company to be genuine,
provided that the Company has complied with its procedures. As a result of
this policy on telephone requests, the Contractowner will bear the risk of loss
arising from the telephone exchange privileges. The Company may discontinue,
modify, or suspend telephone exchange privileges at any time.
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DISTRIBUTION OF THE CONTRACT
T. Rowe Price Investment Services, Inc. ("Investment Services") is the
distributor of the Contracts. Investment Services also acts as the distributor
of certain other mutual funds advised by T. Rowe Price and Price-Fleming.
Investment Services is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934, and in all 50 states, the District of Columbia
and Puerto Rico. Investment Services is a member of the National Association
of Securities Dealers, Inc. Investment Services is a wholly owned subsidiary
of T. Rowe Price and is an affiliate of the Funds.
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
Legal matters in connection with the issue and sale of the Contracts
described in this Prospectus, the Company's authority to issue the Contracts
under Kansas law, and the validity of the forms of the Contracts under Kansas
law have been passed upon by Amy J. Lee,sq., the Company's Associate General
Counsel.
Legal matters relating to the federal securities and federal income tax laws
have been passed upon by Dechert Price & Rhoads, Washington, D.C.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account, including
the yield and total return of all Subaccounts may appear in advertisements,
reports, and promotional literature to current or prospective Owners.
For all 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 1, 5, and 10
years (or, if less, up to the life of the Subaccount), and will reflect the
deduction of the mortality and expense risk charge and may simultaneously be
shown for other periods. Where the Portfolio in which a Subaccount invests was
established prior to inception of the Subaccount, quotations of total return
may include quotations for periods beginning prior to the Subaccount's date of
inception. Such quotations of total return are based upon the performance of
the Subaccount's corresponding Portfolio adjusted to reflect deduction of the
mortality and expense risk charge.
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 Portfolios in
which the Subaccount invests, and the market conditions
- ---
43
<PAGE> 49
Variable Annuity Prospectus
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 and the
usage of other performance related information, see the Statement of Additional
Information.
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 has
been filed as a part of the Registration Statement and does not contain all of
the information set forth in the Registration Statement and exhibits thereto,
and reference is made to such Registration Statement and exhibits for further
information relating to the Company and the Contract. Statements contained in
this Prospectus, as to the content of the Contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is
made to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the SEC's office, located at 450 Fifth Street, N.W., Washington, D.C.
FINANCIAL STATEMENTS
Financial statements of the Company at December 31, 1995, and 1994, and for
each of the three years in the period ended December 31, 1995, and financial
statements of the Separate Account for the period from May 1, 1995 to December
31, 1995, 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 the Company. The Table of Contents of the
Statement of Additional Information is set forth below:
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
General Information and History.................................. 1
Distribution of the Contract..................................... 1
Limits on Premiums Paid Under Tax-Qualified Retirement Plans .... 1
Independent Auditors............................................. 2
Performance Information.......................................... 2
Financial Statements............................................. 3
</TABLE>
- ---
44
<PAGE> 50
T. ROWE PRICE
Variable Annuity Service Center
P.O. Box 750440
Topeka, Kansas 66675-0440
NATL TRP607 (5/96)
<PAGE> 51
PART B
<TABLE>
<S> <C>
Item of Form N-4 Statement of Additional Information Caption
---------------- -------------------------------------------
15. Cover Page . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . Table of Contents
17. General Information and History . . . . . . General Information and History
18. Services
(a) Fees and Expenses of Registrant . . . . N/A
(b) Management Contracts . . . . . . . . . . N/A
(c) Custodian . . . . . . . . . . . . . . . N/A
Independent Public Accountant . . . . . Independent Auditors
(d) Assets of Registrant . . . . . . . . . . N/A
(e) Affiliated Persons . . . . . . . . . . . N/A
(f) Principal Underwriter . . . . . . . . . N/A
19. Purchase of Securities Being Offered . . . Distribution of the Contract; Limits on Premiums
Paid Under Tax-Qualified Retirement Plans
20. Underwriters . . . . . . . . . . . . . . . Distribution of the Contract
21. Calculation of Performance Data . . . . . Performance Information
22. Annuity Payments . . . . . . . . . . . . . N/A
23. Financial Statements . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
FOR THE VARIABLE ANNUITY
THE T. ROWE PRICE
No-Load Variable Annuity
[GRAPHIC]
May 1, 1996
<PAGE> 53
Statement of Additional Information
T. ROWE PRICE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: MAY 1, 1996
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACT
- ------------------------------------------------------------
ISSUED BY: MAILING ADDRESS:
Security Benefit T. Rowe Price Variable
Life Insurance Company Annuity Service Center
700 SW Harrison Street PO Box 750440
Topeka, Kansas 66636-0001 Topeka, Kansas 66675-0440
1-800-888-2461 1-800-469-6587
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current Prospectus for the T. Rowe Price Variable
Annuity dated May 1, 1996. A copy of the Prospectus may be obtained from the T.
Rowe Price Variable Annuity Service Center by calling 1-800-469-6587 or by
writing P.O. Box 750440, Topeka, Kansas 66675-0440.
<PAGE> 54
Statement of Additional Information
CONTENTS
1 General Information and History
1 Distribution of the Contract
1 Limits on Premiums Paid Under Tax-Qualified Retirement Plans
2 Independent Auditors
2 Performance Information
4 Financial Statements
<PAGE> 55
Statement of Additional Information
GENERAL INFORMATION
AND HISTORY
For a description of the Individual Flexible Premium Deferred Variable Annuity
Contract (the "Contract"), Security Benefit Life Insurance Company ("the
Company"), and the T. Rowe Price Variable Annuity Account (the "Separate
Account"), see the Prospectus. This Statement of Additional Information
contains information that supplements the information in the Prospectus.
Defined terms used in this Statement of Additional Information have the same
meaning as terms defined in the section entitled "Definitions" in the
Prospectus.
SAFEKEEPING OF ASSETS
The Company is responsible for the safekeeping of the assets of the
Subaccounts. These assets, which consist of shares of the Portfolios of the
Funds in non-certificated form, are held separate and apart from the assets of
the Company's General Account and its other separate accounts.
DISTRIBUTION OF THE
CONTRACT
T. Rowe Price Investment Services, Inc. ("Investment Services"), a Maryland
corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price
Associates, Inc., is Principal Underwriter of the Contract. Investment Services
is registered as a broker/dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The offering of the
Contracts is continuous.
Investment Services serves as Principal Underwriter under a Distribution
Agreement with the Company. Investment Services' registered representatives are
required to be authorized under applicable state regulations to make the
Contract available to its customers. Investment Services is not compensated
under its Distribution Agreement with the Company.
LIMITS ON PREMIUMS
PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
SECTION 408
Premiums paid under a Contract used in connection with an individual retirement
annuity (IRA) that is described in Section 408 of the Internal Revenue Code are
subject to the limits on contributions to IRA's under Section 219(b) of the
Internal Revenue Code. Under Section 219(b) of the Code, contributions to an
IRA are limited to the lesser of $2,000 per year or the Owner's annual
compensation. An additional $250 may be contributed if the Owner has a spouse
with little or no compensation for the year, provided distinct accounts are
maintained for the Owner and his or her spouse, and no more than $2,000 is
contributed to either account in any one year. The extent to which an Owner may
deduct contributions to an IRA depends on the gross income of the Owner and his
or her spouse for the year and whether either participates in another
employer-sponsored retirement plan.
Premiums under a Contract used in connection with a simplified employee pension
plan described in Section 408 of the Internal Revenue Code are subject to
limits under Section 402(h) of the Internal Revenue Code. Section 402(h)
currently limits employer contributions and salary reduction contributions (if
permitted) under a simplified employee pension plan to the lesser of (a) 15% of
the compensation of the participant
- ---
1
<PAGE> 56
Statement of Additional Information
in the Plan, or (b) $30,000. Salary reduction contributions, if any, are
subject to additional annual limits.
INDEPENDENT AUDITORS
Ernst & Young LLP, independent accountants, perform certain accounting
and auditing services for the Company and the Separate Account. The financial
statements for the Company at December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, and the financial statements
of the Separate Account for the period from May 1, 1995 to December 31, 1995,
included in this Statement of Additional Information have been audited by Ernst
& Young LLP, as set forth in their report thereon appearing on page 6 herein.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account, including
the yield and total return of all Subaccounts, may appear in advertisements,
reports, and promotional literature provided to current or prospective Owners.
Quotations of yield for the Subaccounts will be based on all investment income
per Accumulation Unit earned during a particular 30-day period, less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the value of the Accumulation Unit on the
last day of the period, according to the following formula:
6
YIELD = 2[(a - b + 1) - 1]
-----
cd
where a = net investment income earned during the period by the Portfolio
attributable to shares owned by the Subaccount,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of Accumulation Units outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per Accumulation Unit on the last day of
the period.
For the 30-day period ended December 31, 1995, the yield of the Limited-Term
Bond Subaccount was 5.66%.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of 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), calculated pursuant to the following
formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000,
T = the average annual total return, n = the number of years, and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the period). All total return figures reflect the deduction
- ---
2
<PAGE> 57
Statement of Additional Information
of the mortality and expense risk charge. Quotations of total return
may simultaneously be shown for other periods.
For the period between April 1, 1995 (date of inception) and December 31, 1995,
the total return for New America Growth Subaccount, International Stock
Subaccount, Equity Income Subaccount, Personal Strategy Balanced Subaccount,
and Limited-Term Bond Subaccount was 34.00%, 11.90%, 23.60%, 19.00%, and 6.40%,
respectively.
For the period between April 1, 1995 (date of inception) and December 31, 1995,
the average annual total return for New America Growth Subaccount,
International Stock Subaccount, Equity Income Subaccount, Personal Strategy
Balanced Subaccount, and Limited-Term Bond Subaccount was 47.73%, 16.17%,
32.65%, 26.10%, and 8.62%, respectively.
Although the Contract was not available for purchase until April 1, 1995, the
underlying investment vehicles of the Contract, the Portfolios, have been in
existence prior to that date. Performance information for the Contract may also
include quotations of average annual total return and total return for periods,
beginning prior to the availability of the Contract, that incorporate the
performance of the Portfolios.
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"), Donoghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index, or other indices that
measure 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, mutual funds, or other investment products tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by The Variable Annuity Research and Data
Service ("VARDS"), an independent service which monitors and ranks the
performance of variable annuity issues by investment objectives on an
industry-wide basis or tracked by Morningstar, Inc., a widely used independent
research firm which rates mutual funds and variable annuities by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications or persons who rank such investment companies on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment in
the 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 an Owner's 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 Portfolio of the
Funds 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.
- ---
3
<PAGE> 58
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, insurance products funds, or other investment
products tracked by Lipper Analytical Services, Morningstar, Inc., or by other
rating services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other criteria,
and (ii) the effect of a 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.
FINANCIAL STATEMENTS
The financial statements of the Company at December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995, and the
financial statements of the Separate Account for the period from May 1, 1995 to
December 31, 1995, are set forth herein, starting on page 6.
The financial statements of the Company, which are included in this Statement
of Additional Information, should be considered only as bearing on the ability
of the Company to meet its obligations under the Contracts. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
- ---
4
<PAGE> 59
FINANCIAL STATEMENTS
T. ROWE PRICE VARIABLE ANNUITY
PERIOD FROM MAY 1, 1995 (INCEPTION)
TO DECEMBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
5 Report of Independent Auditors - Separate Account
Audited Financial Statements - Separate Account
6 Balance Sheets
7 Statements of Operations and Changes in Net Assets
8 Notes to Financial Statements
- ---
5
<PAGE> 60
REPORT OF INDEPENDENT AUDITORS
The Contract Owners of T. Rowe Price Variable
Annuity and The Board of Directors of
Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of T. Rowe Price Variable
Annuity (the Company) as of December 31, 1995, and the related statement of
operations and changes in net assets for the period from May 1, 1995
(inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 T. Rowe Price Variable Annuity
at December 31, 1995, and the results of its operations and changes in its net
assets for the period from May 1, 1995 (inception) to December 31, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Kansas City, Missouri
February 2, 1996
- ---
6
<PAGE> 61
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
T. ROWE PRICE VARIABLE ANNUITY
- ---------------------------------------------------------------------------------------------------------
Balance Sheets
- ---------------------------------------------------------------------------------------------------------
December 31, 1995
(Dollars In Thousands)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments:
T. Rowe Price Portfolios:
New America Growth Portfolio - 293,778 shares at net asset value of
$15.23 per share (cost, $4,294) $ 4,474
International Stock Portfolio - 217,083 shares at net asset value of
$11.26 per share (cost, $2,367) 2,444
Equity Income Portfolio - 342,348 shares at net asset value of
$13.21 per share (cost, $4,346) 4,522
Personal Strategy Balanced Portfolio - 141,994 shares at net asset
value of $12.43 per share (cost, $1,724) 1,765
Limited-Term Bond Portfolio - 182,590 shares at net asset value of
$5.06 per share (cost, $917) 924
Actuarial risk fees receivable 1
- ---------------------------------------------------------------------------------------------------------
Total assets $14,130
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Net assets
Net assets are represented by (Note 3):
Number Unit
of Units Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New America Growth Subaccount:
Accumulation units 333,934 $13.40 $ 4,474
International Stock Subaccount:
Accumulation units 218,427 11.19 2,444
Equity Income Subaccount:
Accumulation units 365,712 12.37 4,522
Personal Strategy Balanced Subaccount:
Accumulation units 148,349 11.90 1,765
Limited-Term Bond Subaccount:
Accumulation units 86,891 10.64 925
- ---------------------------------------------------------------------------------------------------------
Total net assets $14,130
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- ---
7
<PAGE> 62
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
T. ROWE PRICE VARIABLE ANNUITY
- ---------------------------------------------------------------------------------------------------
Statement of Operations and Changes in Net Assets
- ---------------------------------------------------------------------------------------------------
Period from May 1, 1995 (inception) to December 31, 1995
(In Thousands)
- ---------------------------------------------------------------------------------------------------
New Personal
America International Equity Strategy Limited-Term
Growth Stock Income Balanced Bond
Subaccount Subaccount Subaccount Subaccount Subaccount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions $ -- $ -- $ 44 $ 16 $ 8
Expenses (Note 2):
Mortality and expense
risk fee (4) (3) (4) (1) (1)
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (4) (3) 40 15 7
Realized gain (loss) on
investments 48 (8) 41 7 1
Unrealized appreciation on
investments 180 77 176 41 7
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 228 69 217 48 8
- ---------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 224 66 257 63 15
Net assets at beginning of
period -- -- -- -- --
Variable annuity deposits
(Notes 2 and 3) 4,279 2,410 4,348 1,714 1,182
Terminations and withdrawals
(Notes 2 and 3) (29) (32) (83) (12) (272)
- ---------------------------------------------------------------------------------------------------
Net assets at end of period $4,474 $2,444 $4,522 $1,765 $ 925
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- ---
8
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
T. Rowe Price 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 one of the portfolios
of either T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc. or T. Rowe Price International Series, Inc., mutual funds not otherwise
available to the public. As directed by the owners, amounts deposited are
invested in shares of New America Growth Portfolio--emphasis on long-term
capital growth through investments in common stocks of domestic companies,
International Stock Portfolio--emphasis on long-term capital growth through
investments in common stocks of established foreign companies, Equity Income
Portfolio--emphasis on substantial dividend income and capital appreciation by
investing primarily in dividend-paying common stocks, Personal Strategy
Balanced Portfolio--emphasis on both capital appreciation and income, and
Limited-Term Bond Portfolio--emphasis on income with moderate price fluctuation
by investing in short- and intermediate-term securities.
Under the terms of the investment advisory contracts, portfolio investments of
the mutual fund are made by T. Rowe Price Associates, Inc. for each portfolio
except the T. Rowe Price International Stock Portfolio, which is advised by
Rowe Price-Fleming International, Inc., an affiliate of T. Rowe Price
Associates, Inc.
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 the
period from May 1, 1995 (inception) to December 31,1995 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Cost of Proceeds
Purchases From Sales
- ---------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
New America Growth Portfolio $4,685 $439
International Stock Portfolio 2,698 323
Equity Income Portfolio 4,967 662
Personal Strategy Balanced Portfolio 1,952 235
Limited-Term Bond Portfolio 1,237 321
- ---------------------------------------------------------------------------------
</TABLE>
- ---
9
<PAGE> 64
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.
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
Mortality and expense risks assumed by SBL are compensated for by a fee
equivalent to an annual rate of .55% of the average daily net assets of each
account.
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.
3. SUMMARY OF UNIT TRANSACTIONS
Unit transactions during the period from May 1, 1995 (inception) to December 31,
1995 were as follows (in thousands):
<TABLE>
- --------------------------------------------------------------
<S> <C>
New America Growth Subaccount:
Variable annuity deposits $336
Terminations and withdrawals 2
International Stock Subaccount:
Variable annuity deposits 221
Terminations and withdrawals 3
Equity Income Subaccount:
Variable annuity deposits 373
Terminations and withdrawals 7
Personal Strategy Balanced Subaccount:
Variable annuity deposits 149
Terminations and withdrawals 1
Limited-Term Bond Subaccount:
Variable annuity deposits 113
Terminations and withdrawals 26
- --------------------------------------------------------------
</TABLE>
- ---
10
<PAGE> 65
FINANCIAL STATEMENTS
SECURITY BENEFIT LIFE INSURANCE COMPANY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
12 Report of Independent Auditors - Company
Audited Financial Statements - Company
13 Balance Sheets
15 Statements of Operation
16 Statements of Surplus
17 Statements of Cash Flows
18 Notes to Financial Statements
- ---
11
<PAGE> 66
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying balance sheets of Security Benefit Life
Insurance Company (the Company) as of December 31, 1995 and 1994, and the
related statements of operations, surplus and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security Benefit Life
Insurance Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles
and with reporting practices prescribed or permitted by the Kansas Insurance
Department.
ERNST & YOUNG LLP
Kansas City, Missouri
February 2, 1996
- ---
12
<PAGE> 67
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------------------
Balance Sheets
- --------------------------------------------------------------------------------------------
December 31
1995 1994
(In Thousands)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments (Notes 2 and 5):
Fixed maturities, at amortized cost (fair value:
1995 - $2,340,910; 1994 - $1,987,040) $2,294,802 $2,160,550
Equity securities:
Preferred stock, at cost (fair value: 1995 - $4,490;
1994 - $6,423) 4,044 5,979
Common stock, at fair value (cost: 1995 - $8,309;
1994 - $2,509) 8,346 3,071
- --------------------------------------------------------------------------------------------
12,390 9,050
Affiliated entities 29,590 21,028
Mortgage loans 70,777 90,509
Real estate, less accumulated depreciation
(1995 - $10,864; 1994 - $10,821):
Home office properties 10,027 9,953
Investment properties 11,591 14,576
- --------------------------------------------------------------------------------------------
21,618 24,529
Policy loans 100,452 92,130
Short-term investments 992 50,406
Other invested assets 40,309 27,402
- --------------------------------------------------------------------------------------------
Total investments 2,570,930 2,475,604
Cash and certificates of deposit 12,059 10,820
Premiums deferred and uncollected 856 9,101
Investment income due and accrued 30,577 25,857
Other assets 16,894 14,088
Separate account assets (Note 3) 2,065,306 1,517,627
- --------------------------------------------------------------------------------------------
$4,696,622 $4,053,097
- --------------------------------------------------------------------------------------------
</TABLE>
- ---
13
<PAGE> 68
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------------------
Balance Sheets
- -------------------------------------------------------------------------------------------
December 31
1995 1994
(In Thousands)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and surplus
Policy reserves (Note 6):
Life $337,289 $355,338
Annuity 2,006,799 1,963,066
Accident and health 1,067 1,204
Policy proceeds left at interest 17,849 19,600
- -------------------------------------------------------------------------------------------
2,363,004 2,339,208
Policy and contract claims 9,602 8,058
Other policyholders' funds:
Dividend accumulations 19,525 19,697
Dividends payable in subsequent year 2,604 2,787
Premium deposit funds and other 1,331 2,446
- -------------------------------------------------------------------------------------------
23,460 24,930
Other liabilities, including income taxes of
$9,851 in 1995 and $3,111 in 1994 19,275 17,762
Net transfers due from separate accounts (Note 3) (38,615) (40,034)
Asset valuation reserve 33,478 27,834
Interest maintenance reserve 13,443 6,986
Separate account liabilities (Note 3) 2,065,306 1,517,627
- -------------------------------------------------------------------------------------------
Total liabilities 4,488,953 3,902,371
Commitments and contingencies (Notes 6 and 9)
Surplus:
Contingency surplus 900 900
Unassigned surplus 206,769 149,826
- -------------------------------------------------------------------------------------------
Total surplus 207,669 150,726
- -------------------------------------------------------------------------------------------
$4,696,622 $4,053,097
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- ---
14
<PAGE> 69
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------------------------------------
Statements of Operations
- ----------------------------------------------------------------------------------------------------
Year ended December 31
1995 1994 1993
(In Thousands)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Annuity considerations and deposits $484,907 $530,530 $467,396
Individual life premiums (Note 6) (15,177) 49,837 59,373
Group life and health premiums 18,936 18,435 15,632
Reinsurance premiums 694 944 988
Amortization of interest maintenance reserve 1,394 1,077 804
Net investment income (Note 2) 185,605 173,391 172,879
Other income 32,722 27,972 26,431
- ----------------------------------------------------------------------------------------------------
Total revenues 709,081 802,186 743,503
Benefits and expenses:
Death benefits 32,164 29,368 34,990
Annuity benefits 36,902 36,587 41,743
Accident and health and disability benefits 2,053 2,177 2,912
Surrender benefits 352,206 275,283 229,554
Increase in reserves and funds for all policies 164,517 333,749 319,457
Other benefits 13,811 12,126 13,407
Commissions 34,979 39,059 41,116
Other insurance operating expenses 32,699 31,994 29,226
- ----------------------------------------------------------------------------------------------------
Total benefits and expenses 669,331 760,343 712,405
Gain from operations before dividends to
policyholders, federal income taxes and net
realized losses 39,750 41,843 31,098
Dividends to policyholders 2,391 2,689 2,725
- ----------------------------------------------------------------------------------------------------
Gain from operations before federal income
taxes and net realized losses 37,359 39,154 28,373
Federal income taxes (Note 7) 7,520 10,678 4,569
- ----------------------------------------------------------------------------------------------------
Gain from operations before net realized
losses 29,839 28,476 23,804
Net realized losses (Note 2) (1,083) (1,122) (3,280)
- ----------------------------------------------------------------------------------------------------
Net income $28,756 $27,354 $20,524
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- ---
15
<PAGE> 70
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
- ---------------------------------------------------------------------------------------
Statements of Surplus
- ---------------------------------------------------------------------------------------
Year ended December 31
1995 1994 1993
(In Thousands)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $150,726 $128,785 $106,000
Add (deduct):
Net income 28,756 27,354 20,524
Increase in asset valuation (5,644) (2,958) (4,854)
Unrealized gain on investments 2,571 546 6,027
Reinsurance transaction, net of tax (Note 6) 33,270 -- --
Other (2,010) (3,001) 1,088
- ---------------------------------------------------------------------------------------
56,943 21,941 22,785
- ---------------------------------------------------------------------------------------
Balance at end of year $207,669 $150,726 $128,785
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
- ---
16
<PAGE> 71
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
- ------------------------------------------------------------------------------------------------------
Statements of Cash Flows
- ------------------------------------------------------------------------------------------------------
Year ended December 31
1995 1994 1993
(In Thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 28,756 $ 27,354 $ 20,524
Adjustments to reconcile net income to
net cash provided by operating activities:
Increase in investment income due and
accrued (4,720) (577) (4,147)
Increase in policy reserves 23,796 163,700 138,931
Accretion of discount on investments (3,400) (3,580) (5,135)
Amortization of premium on investments 9,725 15,623 16,440
Reinsurance transaction, net of tax 33,270 -- --
Other 8,399 1,529 (16,820)
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 95,826 204,049 149,793
Investing activities
Investments sold or matured:
Fixed maturities 566,887 460,070 1,251,398
Equity securities 10,242 3,830 2,103
Mortgage loans 22,953 20,432 16,969
Real estate 3,173 2,782 1,293
Short-term investments 229,871 834,082 2,416,685
Other invested assets 22,053 3,602 2,458
- ------------------------------------------------------------------------------------------------------
855,179 1,324,798 3,690,906
Acquisition of investments:
Fixed maturities 706,581 606,368 1,403,541
Equity securities 19,500 4,627 741
Mortgage loans 2,939 33,516 12,021
Real estate 1,511 554 448
Short-term investments 180,259 854,833 2,426,336
Other invested assets 30,654 17,036 875
- ------------------------------------------------------------------------------------------------------
941,444 1,516,934 3,843,962
Net increase in policy loans (8,322) (5,579 ) (2,212)
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (94,587) (197,715 ) (155,268)
Increase (decrease) in cash and certificates of deposit 1,239 6,334 (5,475)
Cash and certificates of deposit at beginning of year 10,820 4,486 9,961
- ------------------------------------------------------------------------------------------------------
Cash and certificates of deposit at end of year $ 12,059 10,820 $ 4,486
- ------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information
Cash paid for federal income taxes $ 9,055 $ 8,851 $ 6,284
- ------------------------------------------------------------------------------------------------------
Supplemental schedule of noncash
investing and financing activities
Conversion of mortgage loans to real estate owned $ -- $ 2,350 $ 673
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- ---
17
<PAGE> 72
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Benefit Life Insurance Company (the Company) is a Kansas-domiciled
mutual life insurance company licensed to sell insurance products in 49 states.
The Company offers a diversified portfolio of individual and group annuities,
ordinary life, and mutual fund products through multiple distribution channels.
In recent years, the Company's new business activities have increasingly been
concentrated in the individual flexible premium variable annuity markets.
BASIS OF PRESENTATION
The financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners (NAIC) and the Kansas Insurance Department. "Prescribed"
statutory accounting practices include state laws, regulations and general
administrative rules, as well as a variety of publications of the NAIC.
"Permitted" statutory accounting practices encompass all accounting practices
that are not prescribed; such practices may differ from state to state, may
differ from company to company within a state, and may change in the future.
The NAIC is currently in the process of recodifying statutory accounting
practices, the result of which is expected to constitute the only source of
prescribed statutory accounting practices. Accordingly, that project, which is
expected to be completed in 1997, will likely change, to some extent,
prescribed statutory accounting practices, and may result in changes to the
accounting practices that the Company uses to prepare its statutory financial
statements. Statutory accounting practices presently are regarded as generally
accepted accounting principles for mutual life insurance companies.
In April 1993, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises." Under this
Interpretation, financial statements of mutual life insurance companies
prepared on the basis of statutory accounting principles no longer will be
considered to be prepared in conformity with generally accepted accounting
principles. In January 1995, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts," and the American Institute of Certified Public
Accountants issued its Statement of Position No. 95-1, "Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises," which define
generally accepted accounting principles for mutual life insurance enterprises.
Interpretation No. 40, SFAS No. 120 and Statement of Position No. 95-1 are
concurrently effective for fiscal years beginning after December 15, 1995.
The Company has not yet determined whether it will continue to file statutory
financial statements with the Securities and Exchange Commission as currently
permitted by Regulation S-X, Rule 7-02(b) or file financial statements prepared
in accordance with all applicable authoritative accounting pronouncements that
define generally accepted
- ---
18
<PAGE> 73
accounting principles for all enterprises. The Company has assessed the impact
of FASB Interpretation No. 40, SFAS No. 120 and Statement of Position No. 95-1,
and estimates the adoption will result in an increase to surplus of
approximately $100 million.
INVESTMENTS
Investments are valued as prescribed by the NAIC.
Fixed maturities are reported at cost, adjusted for amortization of discount or
premium using the effective interest method. For mortgage-backed fixed
maturities, anticipated prepayments are considered using market consensus
prepayment speeds when determining the amortization of discount or premium.
Adjustments to discount or premium resulting when actual prepayments differ
substantially from estimates are determined using the retrospective method.
Preferred stocks in good standing are carried at cost. Bonds and preferred
stocks not in good standing are carried at market value. Common stocks are
valued at market except investments in stocks of unconsolidated subsidiaries,
which are carried at cost adjusted to reflect subsequent operating results.
Home office property (including the portion reported as investment real estate)
is reported at 1989 appraised value less accumulated depreciation as permitted
by the Kansas Insurance Department. Investment real estate or property acquired
in satisfaction of debt is reported at the lower of depreciated cost, less
encumbrances, or estimated market value. Other investments are reported on the
equity basis. Policy loans are stated at the aggregate unpaid balance. Mortgage
loans on real estate are carried at the aggregate unpaid balance adjusted for
any unamortized discount or premium.
The Asset Valuation Reserve (AVR) is computed in accordance with the formula
prescribed by the NAIC and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, and other invested
assets. Changes to the AVR are charged or credited directly to unassigned
surplus.
Realized gains and losses are determined on a specific identification basis and
are reported in income net of related federal income tax. Under a formula
prescribed by the NAIC, the Company reports an Interest Maintenance Reserve
(IMR) that represents the net accumulated unamortized realized capital gains
and losses on sales of fixed income investments, principally bonds and mortgage
loans, attributable to changes in the general level of interest rates. Such
gains or losses are amortized into income on a straight-line basis over the
remaining period to maturity based on groupings of individual securities sold
in five-year bands.
The investment in Security Benefit Group, Inc. (SBG), a wholly-owned
subsidiary, is reported on an equity basis, as permitted by the Kansas
Insurance Department. Changes in SBG's equity are reflected as unrealized gains
(losses) on investments and are accounted for through surplus and investment
reserves as described above. Dividends received from SBG are recorded as
investment income when received.
RESERVES FOR LIFE AND ANNUITY POLICIES
The reserves for life and annuity policies are developed by actuarial methods,
and the life reserves are established and maintained on the basis of published
mortality tables. Life and annuity reserves are computed using assumed interest
rates and valuation methods
- ---
19
<PAGE> 74
that will provide, in the aggregate, reserves that are greater than the minimum
valuation required by law and greater than the guaranteed policy cash values.
For life policies, the 1941, 1958 and 1980 CSO mortality tables have been used
principally, and interest assumptions range from 2% to 5 1/2%. For annuity
contracts, the PAT, 1971 IAM, 1983a, and 1980 CSO mortality tables have been
used principally, and interest assumptions range from 2 1/2% to 11 1/2%.
RECOGNITION OF PREMIUM REVENUES AND ACQUISITION COSTS
For life and annuity contracts, premiums are recognized as revenues over the
premium paying period, whereas commissions and other costs applicable to the
acquisition of new business are charged to operations as incurred.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and certificates of deposits, short-term investments: The carrying amounts
reported in the balance sheet for these instruments approximate their fair
values.
Investment securities: The fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality and
maturity of the investments. The fair values for equity securities are based on
quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses, using interest rates
currently being offered for similar loans to borrowers with similar credit
ratings. Loans with similar characteristics are aggregated for purposes of the
calculations.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming company
would realize from the business is calculated. Those amounts are then
discounted at a rate of return commensurate with the rate presently offered by
the Company on similar contracts.
USE OF ESTIMATES
The preparation of the financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 presentation.
- ---
20
<PAGE> 75
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses and
fair values of the Company's portfolio of fixed maturities at December 31, 1995
and 1994 is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
(In Thousands)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $1,192 $ 206 $ -- $ 1,398
Obligations of states and political
subdivisions 90,353 1,725 140 91,938
Corporate securities 1,044,051 36,090 13,189 1,066,952
Mortgage-backed securities 1,159,206 23,299 1,883 1,180,622
- ---------------------------------------------------------------------------------------------------
Totals $2,294,802 $61,320 $ 15,212 $2,340,910
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------
(In Thousands)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 10,490 $ 55 $ 622 $9,923
Obligations of states and political
subdivisions 21,147 -- 2,615 18,532
Corporate securities 773,714 1,809 64,494 711,029
Mortgage-backed securities 1,355,199 200 107,843 1,247,556
- ---------------------------------------------------------------------------------------------------------
Totals $2,160,550 $2,064 $ 175,574 $1,987,040
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---
21
<PAGE> 76
The amortized cost and fair value of debt securities at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
----------------------------------------------------------------
Amortized Fair
Cost Value
----------------------------------------------------------------
(In Thousands)
----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 12,575 $ 12,716
Due after one year through five years 239,718 244,165
Due after five years through 10 years 292,943 301,247
Due after 10 years 590,360 602,160
----------------------------------------------------------------
1,135,596 1,160,288
Mortgage-backed securities 1,159,206 1,180,622
----------------------------------------------------------------
$2,294,802 $2,340,910
</TABLE>
The cost and the fair values of the Company's equity securities at December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
DECEMBER 31, 1995
- ------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
- ------------------------------------------------------------------------
Preferred stock $4,044 $446 $-- $ 4,490
- ------------------------------------------------------------------------
Common stock 8,309 123 86 8,346
- ------------------------------------------------------------------------
$12,353 $569 $86 $12,836
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------
December 31, 1994
------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
------------------------------------------------------------
Preferred stock $5,979 $ 568 $124 $6,423
------------------------------------------------------------
Common stock 2,509 599 37 3,071
------------------------------------------------------------
$8,488 $ 1,167 $161 $9,494
------------------------------------------------------------
</TABLE>
- ---
22
<PAGE> 77
Proceeds from sales of fixed maturities and related realized gains and losses,
including valuation adjustments, are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
- ---------------------------------------------------------------------------------
Proceeds from sales $293,864 $119,773 $891,044
- ---------------------------------------------------------------------------------
Gross realized gains 4,294 4,966 35,955
- ---------------------------------------------------------------------------------
Gross realized losses 2,971 4,813 21,375
- ---------------------------------------------------------------------------------
</TABLE>
The composition of the Company's portfolio of fixed maturity securities by
quality rating at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
QUALITY RATING AMOUNT %
- -------------------------------------------------------------
(In Thousands)
<S> <C> <C>
- -------------------------------------------------------------
AAA $1,248,468 54.4%
- -------------------------------------------------------------
AA 119,533 5.2
- -------------------------------------------------------------
A 314,283 13.7
- -------------------------------------------------------------
BBB 431,147 18.8
- -------------------------------------------------------------
Noninvestment grade 181,371 7.9
- -------------------------------------------------------------
$2,294,802 100.0%
- -------------------------------------------------------------
</TABLE>
The Company has a diversified portfolio of commercial and residential mortgage
loans outstanding in 26 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1995 being in the states of Kansas (36%)
and Texas (13%).
Major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
- --------------------------------------------------------------------------------------
Interest on fixed maturities $165,742 $151,688 $150,930
Interest on mortgage loans 7,656 7,552 7,835
Real estate income 3,524 3,563 3,451
Interest on policy loans 5,934 5,446 5,174
Dividends from subsidiary (Note 5) 4,200 5,200 8,300
Other 4,749 5,857 2,705
- --------------------------------------------------------------------------------------
Total investment income 191,805 179,306 178,395
Investment expenses 6,200 5,915 5,516
- --------------------------------------------------------------------------------------
Net investment income $185,605 $173,391 $172,879
- --------------------------------------------------------------------------------------
</TABLE>
- ---
23
<PAGE> 78
The Company did not hold any investments that individually exceeded 10% of
surplus at December 31, 1995 except for securities guaranteed by the U.S.
government or an agency of the U.S. government.
Net realized losses consist of the following:
<TABLE>
<CAPTION>
=======================================================================
1995 1994 1993
- -----------------------------------------------------------------------
(In Thousands)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 1,323 $ 153 $14,580
Equity securities 607 (62) (5,179)
Other 566 (2,401) (1,934)
- -----------------------------------------------------------------------
Total realized gains (losses) 2,496 (2,310) 7,467
Income tax expense (benefit) (4,272) (3,593) 1,937
- -----------------------------------------------------------------------
6,768 1,283 5,530
Transferred to interest maintenance
reserve, net of tax 7,851 (2,405) (8,810)
- -----------------------------------------------------------------------
$(1,083) $(1,122) $(3,280)
=======================================================================
</TABLE>
The Company's principal objective in holding derivatives for purposes other
than trading is asset-liability management. The operations of the Company are
subject to risk of interest rate fluctuations to the extent that there is a
difference between the amount of the Company's interest-earning assets and
interest-bearing liabilities that mature in specified periods. The principal
objective of the Company's asset-liability management activities is to provide
maximum levels of net interest income while maintaining acceptable levels of
interest rate and liquidity risk and facilitating the funding needs of the
Company. To achieve that objective, the Company uses financial futures
instruments and interest rate exchange agreements. Financial futures contracts
are commitments to either purchase or sell a financial instrument at a specific
future date for a specified price and may be settled in cash or through
delivery of the financial instrument. Interest rate exchange agreements
generally involve the exchange of fixed and floating rate interest payments,
without an exchange of the underlying principal.
If a financial futures contract that is used to manage interest rate risk is
terminated early or results in a single payment based on the change in value of
an underlying asset, any resulting gain or loss is deferred and amortized as an
adjustment to yield of the designated asset over its remaining life. Deferred
losses totaling $3.9 million and deferred gains totaling $1.8 million at
December 31, 1995 and 1994, respectively, resulting from terminated and expired
futures contracts are included in fixed maturities and will be amortized as an
adjustment to interest income. The notional amount of outstanding agreements to
sell securities was $79 million and $51 million at December 31, 1995 and 1994,
respectively.
For interest rate exchange agreements, the differential of interest to be paid
or received is accrued as interest rates change and recognized as an adjustment
to interest income. The related amount payable to or receivable from
counterparties is included in investment
- ---
24
<PAGE> 79
income due and accrued. These amounts were insignificant to the
Company. There were no closed or terminated agreements during 1995 or 1994. The
fair values of the interest rate exchange agreements are not recognized in the
financial statements. The notional amount of outstanding agreements was $50
million at December 31, 1995. Also, as of December 31, 1995, these agreements
have maturities ranging from March 1997 to June 2005. Under these agreements,
the Company receives variable rates based on the one- and three-month LIBOR and
pays fixed rates ranging from 6.430% to 7.215%.
3. SEPARATE ACCOUNT TRANSACTIONS
The separate accounts are established in conformity with Kansas
Insurance Laws and are not chargeable with liabilities that arise from any
other business of the Company. Premiums designated for investment in the
separate accounts are included in income with corresponding liability increases
included in benefits. Separate account surplus created through the use of
Commissioners' Annuity Reserve Valuation Method is reported as an unsettled
transfer from the separate account to the general account. Assets and
liabilities of the separate accounts, representing net deposits and accumulated
net investment earnings held primarily for the benefit of contract holders, are
shown as separate captions in the balance sheet. Assets held in the separate
accounts are carried at quoted market values, or where quoted market values are
not available, at fair market value as determined by the fund investment
managers. Security Management Company, a wholly-owned subsidiary of SBG, serves
as the investment manager for the SBL fund separate account assets. T. Rowe
Price separate account assets are managed by T. Rowe Price Associates, Inc. (or
an affiliated company) and the Parkstone separate account assets are managed by
First of America Investment Corporation. The Company receives administrative
and risk fees relating to amounts invested in the separate accounts.
The statement of operations includes the following separate account
transactions, which have no effect on net income:
<TABLE>
<CAPTION>
========================================================================
1995 1994 1993
- ------------------------------------------------------------------------
(In Thousands)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Annuity considerations and deposits $275,257 $256,061 $235,624
- ------------------------------------------------------------------------
Benefits:
Benefits and other charges $127,205 $ 83,933 $ 52,283
Net transfers to separate accounts 148,052 172,128 183,341
- ------------------------------------------------------------------------
$275,257 $256,061 $235,624
========================================================================
</TABLE>
4. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified, noncontributory
defined benefit pension plan sponsored by the Company and certain of its
affiliates. Benefits are based on years of service and an employee's average
compensation during the last five years of service. The Company's policy has
been to contribute funds to the plan in amounts required to maintain sufficient
plan assets to provide for accrued benefits. In applying this general policy,
the Company considers, among other factors, the recommendations of its
- ---
25
<PAGE> 80
independent consulting actuaries, the requirements of federal pension law and
the limitations on deductibility imposed by federal income tax law.
The Company records pension cost in accordance with the provisions of SFAS No.
87, "Employers' Accounting for Pensions." Pension cost for the year is
allocated to each sponsoring company based on the ratio of salary costs for
each company to total salary cost. Pension cost allocated to the Company for
1995, 1994 and 1993 was $151,000, $218,000, and $139,000, respectively.
Separate information disaggregated by sponsoring employer company is not
available on the components of the net pension cost or on the funded status of
the plan. Pension cost for the total plan for 1995, 1994 and 1993 is summarized
as follows:
<TABLE>
<CAPTION>
================================================================
1995 1994 1993
- ----------------------------------------------------------------
(In Thousands)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 528 $ 679 $ 571
Interest cost 508 535 483
Actual return on plan assets (1,568) 310 (966)
Net amortization and deferral 900 (949) 277
- ----------------------------------------------------------------
Net pension cost $ 368 $ 575 $ 365
================================================================
</TABLE>
The funded status of the total plan as of December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
===============================================================================
DECEMBER 31
1995 1994
- -------------------------------------------------------------------------------
(In Thousands)
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(5,243) $(4,589)
Non-vested benefit obligation (165) (157)
- -------------------------------------------------------------------------------
Accumulated benefit obligation (5,408) (4,746)
Excess of projected benefit obligation over
accumulated benefit obligation (2,865) (2,405)
- -------------------------------------------------------------------------------
Projected benefit obligation (8,273) (7,151)
Plan assets at fair market value 8,342 6,514
- -------------------------------------------------------------------------------
Plan assets greater than (less than) projected
benefit obligation 69 (637)
Unrecognized net loss 1,560 1,971
Unrecognized prior service cost 758 815
Unrecognized net asset established at the date
of initial application (2,025) (2,209)
- -------------------------------------------------------------------------------
Net prepaid (accrued) pension expense $ 362 $ (60)
===============================================================================
</TABLE>
- ---
26
<PAGE> 81
Assumptions were as follows:
<TABLE>
<CAPTION>
============================================================================
1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 7.5% 8.5% 7.5%
- ----------------------------------------------------------------------------
Weighted average compensation rate for
participants age 45 and older 4.5 4.5 4.5
- ----------------------------------------------------------------------------
Weighted average expected long-term return
on plan assets 9.0 9.0 9.0
============================================================================
</TABLE>
Compensation rates that vary by age for participants under age 45 were used in
determining the actuarial present value of the projected benefit obligation in
1995. Plan assets are invested in a diversified portfolio of affiliated mutual
funds that invest in equity and debt securities.
In addition to the Company's defined benefit pension plan, the Company and
certain of its affiliates provide certain medical and life insurance benefits
to full-time employees who have retired after the age of 55 with five years of
service. The plan is contributory, with retiree contributions adjusted
annually, and contains other cost-sharing features, such as deductibles and
coinsurance. Contributions vary based on the employee's years of service earned
after age 40. The Company and its affiliates' portion of the costs is frozen
after 1996 with all future cost increases passed on to the retirees. Retirees
in the plan prior to July 1, 1993 are covered 100% by the Company.
The Company records net periodic cost for non-pension postretirement benefits
in accordance with the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The net periodic cost is
allocated among the Company and its affiliates based on the number of eligible
employees. The net periodic cost allocated to the Company was $198,000,
$171,000 and $166,000 for 1995, 1994 and 1993, respectively.
Separate information disaggregated by sponsoring employer company is not
available on the components of the net retiree medical care and life insurance
costs or on the funded status of the plan. Retiree medical care and life
insurance costs for the total plan for 1995, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
==================================================================
1995 1994 1993
- ------------------------------------------------------------------
(In Thousands)
- ------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $151 $116 $118
Interest cost 305 275 233
- ------------------------------------------------------------------
$456 $391 $351
==================================================================
</TABLE>
- ---
27
<PAGE> 82
The funded status of the total plan as of December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
=============================================================================
DECEMBER 31
1995 1994
- -----------------------------------------------------------------------------
(In Thousands)
- -----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(2,514) $(2,418)
Active participants:
Retirement eligible (632) (620)
Others (1,035) (706)
- -----------------------------------------------------------------------------
(4,181) (3,744)
Unrecognized net (gain) loss 67 (30)
- -----------------------------------------------------------------------------
Accrued postretirement benefit cost $(4,114) $(3,774)
=============================================================================
</TABLE>
The annual assumed rate of increase in the per capita cost of covered benefits
is 11% for 1995 and is assumed to decrease gradually to 5% for 2001 and remain
at that level thereafter. The health care cost trend rate has a significant
effect on the amount reported. For example, increasing the assumed health care
cost trend rates by one percentage point each year would increase the
accumulated postretirement benefit obligation as of December 31, 1995 by
$233,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1995 by $60,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5%, 8.5% and 7.5% at December 31, 1995, 1994 and 1993,
respectively.
The Company has a profit-sharing and savings plan for which substantially all
employees are eligible after one year of employment with the Company.
Contributions for profit sharing are based on a formula established by the
Board of Directors with pro rata allocation among employees based on salaries.
The savings plan is a tax-deferred 401(k) retirement plan. Employees may
contribute up to 10% of their eligible compensation. The Company matches 50% of
the first 6% of the employee contributions. Employee contributions are fully
vested, and Company contributions are vested over a five-year period. Company
contributions to the profit-sharing and savings plan charged to operations were
$721,000, $371,000 and $463,000 for 1995 1994 and 1993, respectively.
5. RELATED-PARTY TRANSACTIONS
SBG provides certain management and administrative services to the
Company. During 1995, 1994 and 1993, the Company incurred $18,654,000,
$16,852,000 and $14,729,000, respectively, for such services. The Company
leases certain office space to SBG for which annual rent income of $1,133,000
was recorded in 1995, 1994 and 1993. Additionally, in 1995, 1994 and 1993, the
Company paid commissions of $2,546,000, $2,700,000, $2,985,000, respectively,
to Security Distributors, Inc., a wholly-owned subsidiary of SBG.
Effective January 2, 1995, the Company acquired, pursuant to an assumption
reinsurance agreement from Pioneer National Life Insurance Company (PNL), then
a wholly-owned subsidiary of SBG, substantially all of PNL's life insurance
business. Concurrent with the assumption reinsurance agreement, the Company
entered into a 100% coinsurance agreement with PNL reinsuring the remaining
business. The Company did not recognize any
- ---
28
<PAGE> 83
gain or loss on the above transactions. The Company received $2.9
million of assets as consideration for the liabilities assumed by the Company
in the assumption reinsurance and coinsurance agreement. Assumed premiums and
claims related to this business were not significant to the Company during
1995. PNL was subsequently merged with First Security Benefit Life Insurance
and Annuity Company of New York (FSBL), a newly formed wholly-owned subsidiary
of SBG.
During 1995, the Company purchased an SBG note for the principal amount
of $17 million. The note is due May 24, 2000 and provides for semiannual
interest payments at 7.35% per annum commencing on November 24, 1995. The note
has been registered with the NAIC and is included in fixed maturities in the
accompanying balance sheet. SBG used $12 million of the proceeds to purchase
Company-issued annuity contracts for the purpose of funding new investment
options within the Company's separate account. The account balance of these
contracts totaled $13,005,000 at December 31, 1995. The remaining $5 million of
proceeds were used to purchase shares in new mutual funds managed by Security
Management Company, a wholly-owned subsidiary of SBG. The net asset value of
these shares totaled $5,364,000 at December 31, 1995.
At December 31, 1995 and 1994, the Company's investment in SBG was $29,590,000
and $21,028,000, respectively. The Company recorded cash dividends of
$4,200,000, $5,200,000 and $8,300,000 from SBG during 1995, 1994 and 1993,
respectively.
Condensed financial information related to SBG is as follows:
<TABLE>
<CAPTION>
=================================================================
BALANCE SHEETS: 1995 1994
- -----------------------------------------------------------------
(In Thousands)
- -----------------------------------------------------------------
<S> <C> <C>
Cash and investments $45,221 $19,456
Property and equipment 8,138 8,736
Other assets 7,594 7,910
- -----------------------------------------------------------------
$60,953 $36,102
- -----------------------------------------------------------------
Accounts payable and other liabilities $14,363 $15,074
Note payable to parent 17,000 --
Stockholder's equity 29,590 21,028
- -----------------------------------------------------------------
$60,953 $36,102
=================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================
STATEMENTS OF OPERATIONS: 1994 1993 1992
- ------------------------------------------------------------------------------
(In Thousands)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Management fees $18,654 $16,852 $14,729
Mutual fund fees 24,266 22,058 21,352
Other 3,226 2,373 7,287
- ------------------------------------------------------------------------------
46,146 41,283 43,368
General, administrative and other expenses 36,488 32,390 30,080
Income taxes 3,927 3,430 5,233
Cumulative effect of SFAS No. 106 -- -- 1,735
- ------------------------------------------------------------------------------
Net income $ 5,731 $ 5,463 $ 6,320
==============================================================================
</TABLE>
- ---
29
<PAGE> 84
6. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. The Company's maximum retention on any one life is $500,000.
Risks are reinsured with other companies to permit recovery of a portion of
direct losses.
Principal reinsurance transactions are summarized as follows:
<TABLE>
<CAPTION>
============================================================================
1995 1994 1993
- ----------------------------------------------------------------------------
(In Thousands)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance assumed:
Premiums received $ 866 $ 1,276 $ 1,359
============================================================================
Commissions paid $ 144 $ 239 $ 96
============================================================================
Claims paid $ 1,597 $ 1,469 $ 7,290
============================================================================
Reinsurance ceded:
Premiums paid $ 73,916 $ 12,018 $ 4,194
============================================================================
Commissions received $ 230 $ 1,443 $ 148
============================================================================
Claims recoveries $ 3,089 $ 2,485 $ 2,231
============================================================================
Reinsurance in force (at December 31):
Assumed policies $ 25,438 $ 30,814 $ 39,730
============================================================================
Ceded policies $3,932,146 $1,150,828 $1,081,591
============================================================================
</TABLE>
The liabilities for policy reserves and policy and contract claims include the
following amounts for reinsurance assumed: $354,000 and $2,790,000 at December
31, 1995 and $120,000 and $3,187,000 at December 31, 1994.
The ceding of insurance through reinsurance agreements does not discharge the
primary liability of the original underwriters to the insured. However,
statutory accounting practices treat risks that have been reinsured, to the
extent of reinsurance, as though they were not risks for which the original
insurer is liable. Therefore, in financial statement presentations, policy
reserves and policy and contract claim liabilities are presented net of that
portion of risk reinsured. Accordingly, policy reserves and policy and contract
claim liabilities have been shown net of reinsurance credits of $77,908,000 and
$968,000 at December 31, 1995 and $11,048,000 and $459,000 at December 31,
1994.
In 1995, the Company transferred, through a 100% coinsurance agreement, $66.9
million in policy reserves and claim liabilities. The agreement related to a
block of whole life and decreasing term life insurance business. The Company
recorded a pretax gain of $42.6 million which represented the initial ceding
commission. This gain, net of tax, was recorded as an increase to unassigned
surplus.
In prior years, the Company was involved in litigation arising out of its
participation from 1986 to 1990 in a reinsurance pool. The litigation related
to the pool manager and a reinsurance intermediary placing major medical
business in the pool without authorization.
- ---
30
<PAGE> 85
During 1993, the Company settled the major medical portion of the
pool's activity with no significantly adverse effect on the Company. The
nonmajor medical business placed in the pool has experienced significant
losses. At December 31, 1995, the Company believes adequate provision has been
made for such losses.
7. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return with
SBG. Income taxes are allocated to the Company on the basis of its filing a
separate tax return. The Company is taxed at usual corporate rates as defined
by the applicable income tax laws for mutual life insurance companies. These
laws provide for differences in the recognition of certain income and expenses,
and provide for deductions that may result in a provision for income taxes that
does not have the customary relationship of taxes to income. The provision for
income taxes differs from the amount computed at the statutory federal rate due
primarily to the dividends received deduction and tax credits.
During the year ended December 31, 1993, the Company began establishing
deferred income taxes on its tax-basis deferred policy acquisition costs. Prior
to this time, no deferred income taxes had been established on any difference
between the financial statement and income tax bases of assets and liabilities,
and, at December 31, 1995, this remains the only item to which deferred income
tax accounting has been applied. The Company's policy is to nonadmit any
resulting deferred tax asset; accordingly, this practice has no impact on
surplus. The cumulative effect of adopting this change as of January 1, 1993
amounted to $3,464,000 and was reflected as a nonadmitted asset at that time.
The effect of the new method increased income tax expense by $115,000 for 1995
and decreased income tax expense by $927,000 and $1,444,000 for 1994 and 1993,
respectively.
8. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether recognized or not recognized in a company's balance sheet, for which it
is practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in Note 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under
all insurance contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings over interest credited) to be
earned in the future on investment-type products, or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care
should be exercised in deriving conclusions about the Company's business or
financial condition based on the fair value information presented herein.
- ---
31
<PAGE> 86
<TABLE>
<CAPTION>
===========================================================================================
DECEMBER 31, 1995 DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -------------------------------------------------------------------------------------------
(In Thousands)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturities (Note 2) $2,294,802 $2,340,910 $2,160,550 $1,987,040
Equity securities (Note 2) 12,390 12,836 9,050 9,494
Mortgage loans 70,777 76,610 90,509 88,894
Policy loans 100,452 104,077 92,130 91,492
Short-term investments 992 992 50,406 50,406
Cash and certificates of deposit 12,059 12,059 10,820 10,820
Investment income due and accrued 30,577 30,577 25,857 25,857
Futures contracts -- (737) -- 240
Interest rate exchange agreements -- (2,291) -- --
Supplementary contracts
without life contingencies 34,363 35,387 41,239 39,771
Individual and group annuities 1,922,901 1,774,642 1,828,753 1,690,693
- -------------------------------------------------------------------------------------------
$4,479,313 $4,385,062 $4,309,314 $3,994,707
===========================================================================================
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has a $75.5 million line of credit facility from the Federal Home
Loan Bank of Topeka. Any borrowings in connection with this facility bear
interest at .1% over the Federal Funds rate. At December 31, 1995, there were
no borrowings outstanding under this facility.
The economy and other factors have caused an increase in the number of
insurance companies that have required regulatory supervision. This
circumstance is expected to result in an increase in assessments by state
guaranty funds, or voluntary payments by solvent insurance companies, to cover
losses to policyholders of insolvent or rehabilitated companies. Mandatory
assessments can be partially recovered through a reduction in future premium
taxes in some states. The Company records these assessments on a cash basis and
has paid $2,014,000, $2,270,000 and $2,077,000 for the years ended December 31,
1995, 1994 and 1993, respectively. The ultimate amounts or the ultimate effect
of any such increased assessments or voluntary payments on the Company's
financial position and results of operations are not currently determinable.
The accompanying financial statements do not include any provision for any such
potential assessments.
- ---
32
<PAGE> 87
10. ANNUITY AND DEPOSIT LIABILITIES
The withdrawal characteristics of the liability for future policy benefits for
annuities and supplementary contracts and deposits as of December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
============================================================================================
GENERAL SEPARATE
ACCOUNT ACCOUNT TOTAL PERCENT
- --------------------------------------------------------------------------------------------
(In Thousands)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 557 $ -- $ 557 --%
At book value less current surrender
charge of 5% or more 572,902 652,843 1,225,745 30
- --------------------------------------------------------------------------------------------
Total with adjustment 573,459 652,843 1,226,302 30
Subject to discretionary withdrawal
at book value with minimal or no
charge or adjustment 1,394,680 1,360,750 2,755,430 67
Not subject to discretionary withdrawal 112,382 12,070 124,452 3
- --------------------------------------------------------------------------------------------
$2,080,521 $2,025,663 $4,106,184 100%
============================================================================================
</TABLE>
- ---
33
<PAGE> 88
T. ROWE PRICE
Variable Annuity Service Center
P.O. Box 750440
Topeka, Kansas 66675-0440
CA TRP610 (5/96)
<PAGE> 89
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B
of this Registration Statement.
(b) Exhibits
(1) Certified Resolution of the Board of Directors
of Security Benefit Life Insurance Company
("SBL") authorizing establishment of the
Separate Account(a)
(2) Not Applicable
(3) Distribution Agreement(b)
(4) Sample Contract(a)
(5) Form of Application(a)
(6) (a) Composite of Articles of Incorporation of
SBL(a)
(b) Bylaws of SBL(a)
(7) Not Applicable
(8) (a) Participation Agreement(b)
(b) Master Agreement(b)
(9) Opinion of Counsel(a)
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedule of Computation of Performance
(14) Financial Data Schedules
(15) Powers of Attorney
(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 1 under the Securities Act of
1933 and Amendment No. 2 under the Investment Company Act of 1940 to
Registration Statement No. 33-83238 (April 28, 1995).
(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 2 under the Securities Act of
1933 and Amendment No. 3 under the Investment Company Act of 1940 to
Registration Statement No. 33-83238 (September 21, 1995).
<PAGE> 90
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal Business Address Positions and Offices with Depositor
----------------------------------- ------------------------------------
<S> <C>
Howard R. Fricke* Chairman of the Board, President, Chief Executive Officer
and Director
Thomas R. Clevenger Director
P.O. Box 8514
Wichita, Kansas 67208
Sister Loretto Marie Colwell Director
1700 SW 7th Street
Topeka, Kansas 66044
John C. Dicus Director
700 Kansas Avenue
Topeka, Kansas 66603
Melanie S. Fannin Director
220 SE 6th Street
Topeka, Kansas 66603
William W. Hanna Director
P.O. Box 2256
Wichita, KS 67201
John E. Hayes, Jr. Director
P.O. Box 889
Topeka, Kansas 66601
Laird G. Noller Director
2245 Topeka Avenue
Topeka, Kansas 66611
Frank C. Sabatini Director
120 SW 6th Street
Topeka, Kansas 66603
Robert C. Wheeler Director
P.O. Box 148
Topeka, Kansas 66601
Donald J. Schepker* Senior Vice President, Chief Financial Officer and Treasurer
James L. Woods* Senior Vice President
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
Name and Principal Business Address Positions and Offices with Depositor
----------------------------------- ------------------------------------
<S> <C>
Jeffrey B. Pantages* Senior Vice President, and Chief Investment Officer
Roger K. Viola* Senior Vice President, General Counsel and Secretary
T. Gerald Lee* Senior Vice President - Administration
Malcolm E. Robinson* Senior Vice President and Assistant to the President
Donald E. Caum* Senior Vice President and Chief Marketing Officer
Richard K Ryan* Senior Vice President
Amy J. Lee* Associate General Counsel and Vice President
James R. Schmank* Vice President - Corporate Development
Kathleen R. Blum* Vice President - Administration
</TABLE>
*Located at 700 Harrison Street, Topeka, Kansas 66636.
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
The Depositor, Security Benefit Life Insurance Company ("SBL"), is
owned by its policy owners. No one person holds more than approximately
0.0005% of the voting power of SBL. The Registrant is a segregated asset
account of SBL.
<PAGE> 92
The following chart indicates the persons controlled by or under
common control with T. Rowe Price Variable Annuity Account or SBL:
<TABLE>
<CAPTION>
Percent of Voting Securities
Name Jurisdiction of Incorporation Owned by SBL
---- ----------------------------- -------------------------------
<S> <C> <C>
Security Benefit Life Insurance Kansas -----
Company (Mutual Life Insurance
Company)
Security Benefit Group, Inc. Kansas 100%
(Holding Company)
Security Management Company Kansas 100%
(Investment Adviser)
Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal
Underwriter of Mutual Funds)
Security Benefit Academy, Inc. Kansas 100%
(Daycare Company)
Creative Impressions, Inc. Kansas 100%
(Advertising Agency)
Security Benefit Clinic and Hospital Kansas 100%
(Nonprofit provider of hospital
benevolences for fraternal
certificate holders)
First Advantage Insurance Agency, Kansas 100%
Inc.
First Security Benefit Life New York 100%
Insurance and Annuity Company of New
York
</TABLE>
<PAGE> 93
SBL is also the depositor of the following separate accounts: SBL
Variable Annuity Accounts I, III, IV, Variflex, SBL Variable Life Insurance
Account Varilife, Security Varilife Separate Account, Parkstone Variable
Annuity Separate Account and Variflex LS.
Through the above-referenced separate accounts, SBL might be deemed to
control the open-end management investment companies listed below. The
approximate percentage of ownership by the separate accounts for each company
is as follows:
<TABLE>
<S> <C> <C> <C>
Security Equity Fund 18% Security Income Fund 5.9%
Corporate Bond Series
Security Growth and Income Fund 41% SBL Fund 100%
</TABLE>
Item 27. Number of Contract Owners
As of March 1, 1996, there were 884 owners of T. Rowe Price Variable
Annuity Contracts.
Item 28. Indemnification
The bylaws of Security Benefit Life Insurance Company provide that the
Company shall, to the extent authorized by the laws of the State of Kansas,
indemnify officers and directors for certain liabilities threatened or incurred
in connection with such person's capacity as director or officer.
The Articles of Incorporation include the following provision:
A Director shall not be personally liable to the Corporation or to its
policyholders for monetary damages for breach of fiduciary duty as a
director, provided that this sentence shall not eliminate nor limit
the liability of a director
A. for any breach of his or her duty of loyalty to the
Corporation or its policyholders;
B. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
C. under the provisions of K.S.A. 17-6424 and amendments
thereto; or
D. for any transaction from which the director derived an
improper personal benefit.
This Article Eighth shall not eliminate or limit the liability of a
director for any act or omission occurring prior to the date this
Article Eighth becomes effective.
<PAGE> 94
Insofar as indemnification for a liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Depositor has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Depositor will, unless in the opinion of its counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
(a) T. Rowe Price Investment Services, Inc. ("Investment Services"), a
Maryland corporation formed in 1980 as a wholly-owned subsidiary of T. Rowe
Price Associates, Inc., serves as the distributor of the T. Rowe Price Variable
Annuity Account contracts. Investment Services receives no compensation for
distributing the Contracts. Investment Services also serves as principal
underwriter for the following investment companies:
T. Rowe Price Growth Stock Fund, Inc.; T. Rowe Price New Horizons Fund, Inc.;
T. Rowe Price New Era Fund, Inc.; T. Rowe Price New Income Fund, Inc.; T. Rowe
Price Growth & Income Fund, Inc.; T. Rowe Price Prime Reserve Fund, Inc.; T.
Rowe Price Tax-Free Income Fund, Inc.; T. Rowe Price Tax-Exempt Money Fund,
Inc.; T. Rowe Price Short-Term Bond Fund, Inc.; T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc.; T. Rowe Price Tax-Free Short-Intermediate Fund,
Inc.; T. Rowe Price High Yield Fund, Inc.; T. Rowe Price Tax-Free High Yield
Fund, Inc.; T. Rowe Price GNMA Fund; T. Rowe Price Equity Income Fund; T. Rowe
Price New America Growth Fund; T. Rowe Price Capital Appreciation Fund; T. Rowe
Price
<PAGE> 95
Capital Opportunity Fund, Inc; T. Rowe Price Science & Technology Fund, Inc.;
T. Rowe Price Health Sciences Fund, Inc.; T. Rowe Price Small-Cap Value Fund,
Inc.; T. Rowe Price U.S. Treasury Funds, Inc. (which includes U.S. Treasury
Money Fund, U.S. Treasury Intermediate Fund and U.S. Treasury Long-Term Fund);
T. Rowe Price State Tax-Free Income Trust (which includes Maryland Tax-Free
Bond Fund, New York Tax-Free Bond Fund, New York Tax-Free Money Fund, Virginia
Tax- Free Bond Fund, New Jersey Tax-Free Bond Fund, Georgia Tax-Free Bond Fund,
Florida Insured Intermediate Tax-Free Fund, and Maryland Short-Term Tax-Free
Bond Fund); T. Rowe Price California Tax-Free Income Trust (which includes
California Tax-Free Bond Fund and California Tax-Free Money Fund); T. Rowe
Price Index Trust, Inc. (which includes the T. Rowe Price Equity Index Fund);
T. Rowe Price Spectrum Fund, Inc. (which includes the Spectrum Growth Fund and
Spectrum Income Fund); T. Rowe Price Short-Term U.S. Government Fund, Inc.; T.
Rowe Price Value Fund, Inc.; T. Rowe Price Balanced Fund, Inc.; T. Rowe Price
Mid-Cap Growth Fund, Inc.; T. Rowe Price OTC Fund, Inc. (which includes T. Rowe
Price OTC Fund); T. Rowe Price Blue Chip Growth Fund, Inc.; T. Rowe Price
Dividend Growth Fund, Inc.; T. Rowe Price Summit Funds, Inc. (which includes
Summit Cash Reserves Fund, Summit Limited-Term Bond Fund and Summit GNMA Fund);
T. Rowe Price Summit Municipal Funds, Inc. (which includes Summit Municipal
Money Market Fund, Summit Municipal Intermediate Fund, Summit Municipal Income
Fund); T. Rowe Price Corporate Income Fund, Inc.; CUNA Mutual Funds, Inc.
(which includes CUNA Mutual Tax-Free Intermediate-Term Fund, CUNA Mutual U.S.
Government Income Fund and CUNA Mutual Cornerstone Fund); T. Rowe Price Equity
Series, Inc., (which includes T. Rowe Price Equity Income Portfolio and T. Rowe
Price New America Growth Portfolio, and T. Rowe Price Personal Strategy
Balanced Portfolio); T. Rowe Price Fixed Income Series, Inc. (which includes T.
Rowe Price Limited-Term Bond Portfolio); T. Rowe Price International Series,
Inc. (which includes T. Rowe Price International Stock Portfolio); Personal
Strategy Funds, Inc. (which includes T. Rowe Price Personal Strategy Income
Fund, T. Rowe Price Personal Strategy Balanced Fund and Personal Strategy
Growth Fund); T. Rowe Price International Fund (which includes the T. Rowe
Price
<PAGE> 96
International Stock Fund, T. Rowe Price International Bond Fund, T. Rowe Price
International Discovery Fund, T. Rowe Price European Stock Fund, T. Rowe Price
New Asia Fund, T. Rowe Price Global Government Bond Fund, T. Rowe Price Japan
Fund, T. Rowe Price Short-Term Global Fund, T. Rowe Price Latin America Fund,
T. Rowe Price Emerging Markets Stock Fund, T. Rowe Price Global Stock Fund, and
T. Rowe Price Emerging Markets Bond Fund); Frank Russell Investment Securities
Fund; the RPF International Bond Fund; and the Institutional International
Funds, Inc. (which includes the Foreign Equity Fund).
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address* with Underwriter
------------------ --------------------
<S> <C>
Mark E. Rayford Director
James S. Riepe President and Director
Patricia M. Archer Vice President
Edward C. Bernard Vice President
Joseph C. Bonasorte Vice President
Meredith C. Callanan Vice President
Laura H. Chasney Vice President
Victoria C. Collins Vice President
Christopher W. Dyer Vice President
Forrest R. Foss Vice President
James W. Graves Vice President
Andrea G. Griffin Vice President
David J. Healy Vice President
Joseph P. Healy Vice President
Walter J. Helmlinger Vice President
Eric G. Knauss Vice President
Henry H. Hopkins Vice President and Director
Douglas G. Kremer Vice President
Sharon R. Krieger Vice President
Keith Wayne Lewis Vice President
David L. Lyons Vice President
Sarah McCafferty Vice President
Maurice Albert Minerbi Vice President
Nancy M. Morris Vice President
George A. Murnaghan Vice President
Steven E. Norwitz Vice President
Kathleen M. O'Brien Vice President
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address* with Underwriter
------------------ --------------------
<S> <C>
Pamela D. Preston Vice President
Lucy Beth Robins Vice President
John Richard Rockwell Vice President
Monica R. Tucker Vice President
Charles E. Vieth Vice President and Director
William F. Wendler, II Vice President
Terrie L. Westren Vice President
Jane F. White Vice President
Thomas R. Woolley Vice President
Alvin M. Younger, Jr. Treasurer and Secretary
Mark S. Finn Controller
</TABLE>
*Unless otherwise indicated, the business address of each of Investment
Services' officers and directors is 100 East Pratt Street, Baltimore, Maryland
21202.
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by SBL at its administrative
offices--700 Harrison Street, Topeka, Kansas 66636-0001.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more than
sixteen (16) months old for so long as payments under the Variable Annuity
contracts may be accepted.
(b) Registrant undertakes that it will affix to or include a post card as
part of the T. Rowe Price Variable Annuity Account Prospectus that an applicant
can remove to send for a Statement of Additional Information.
<PAGE> 98
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to SBL at the address or phone
number listed in the prospectus.
(d) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that Section.
<PAGE> 99
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, The Registrant certifies that it meets the requirements of
Securities Act Rule 485 for effectiveness of the Registration Statement and has
caused this Registration Statement to be signed on its behalf, in the City of
Topeka, and State of Kansas on this 25th day of April, 1996.
SIGNATURES AND TITLES
<TABLE>
<S> <C>
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE
Director, President and COMPANY (THE DEPOSITOR)
Chief Executive Officer
By: Roger K. Viola
---------------------------------------------------------
Thomas R. Clevenger Roger K. Viola, Senior Vice President, General Counsel and
Director Secretary as Attorney-In-Fact for the Officers and Directors
Whose Names Appear Opposite
Sister Loretto Marie Colwell
Director
T. ROWE PRICE VARIABLE ANNUITY
John C. Dicus ACCOUNT (THE REGISTRANT)
Director
By: SECURITY BENEFIT LIFE INSURANCE COMPANY (THE DEPOSITOR)
Melanie S. Fannin
Director
By: Howard R. Fricke
-------------------------------------------------------
William W. Hanna Howard R. Fricke, Chairman of the Board, President Chief
Director Executive Officer and Director
John E. Hayes, Jr.
Director By: Donald J. Schepker
---------------------------------------------------------
Donald J. Schepker, Senior Vice President, Chief Financial
Laird G. Noller Officer and Treasurer
Director
Frank C. Sabatini (ATTEST): Roger K. Viola
Director ----------------------------------------------------
Roger K. Viola, Senior Vice President, General
Counsel and Secretary
Robert C. Wheeler
Director Date: April 25, 1996
</TABLE>
<PAGE> 100
EXHIBIT INDEX
-------------
(1) None
(2) None
(3) None
(4) None
(5) None
(6) None
(7) None
(8) (a) None
(b) None
(9) None
(10) Consent of Independent Auditors
(11) None
(12) None
(13) Schedule of Computation of Performance
(15) Powers of Attorney of Thomas R. Clevenger, Sister Loretto Marie
Colwell, John C. Dicus, Melanie S. Fannin, Howard R. Fricke, William
W. Hanna, John E. Hayes, Jr., Laird G. Noller, Frank C. Sabatini, and
Robert C. Wheeler
(27) Financial Data Schedules
<PAGE> 1
Exhibit 10
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated February 2, 1996, with respect to
the financial statements of Security Benefit Life Insurance Company and the
financial statements of T. Rowe Price Variable Annuity included in the
Registration Statement on Form N-4 and the related Statement of Additional
Information accompanying the Prospectus of T. Rowe Price Variable Annuity.
Ernst & Young LLP
Kansas City, Missouri
April 24, 1996
<PAGE> 1
Item 24.b Exhibit 13
EQUITY INCOME
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
0.75 Year (From Date of Inception 4/1/95)
1000 (1+T) .75 = 1,172.23
((1+T) .75).75 = (1.17223).75
1+T = 1.2360
T = .2360
INTERNATIONAL STOCK
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
0.75 Year (From Date of Inception 4/1/95)
1000 (1+T) .75 = 1,087.98
((1+T) .75).75 = (1.08798).75
1+T = 1.1190
T = .1190
LIMITED-TERM BOND
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
0.75 Year (From Date of Inception 4/1/95)
1000 (1+T).75 = 1,047.63
((1+T) .75).75 = (1.04763).75
1+T = 1.0640
T = .0640
NEW AMERICAN GROWTH
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
0.75 Year (From Date of Inception 4/1/95)
1000 (1+T).75 = 1,245.46
((1+T) .75).75 = (1.24546).75
1+T = 1.3400
T = .3400
<PAGE> 2
Item 24.b Exhibit 13
PERSONAL STRATEGY
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
0.75 Year (From Date of Inception 4/1/95)
1000 (1+T).75 = 1,139.36
((1+T) .75).75 = (1.13936).75
1+T = 1.1900
T = .1900
LIMITED - TERM BOND
YIELD CALCULATION AS OF DECEMBER 31, 1995
2 [(4,845-1,644) +1]6]
-------------------
[(64,574.9258)(10.64)]]-1
2 [((3,201)+1)6]
-------------
[((687,077.211)] -1
2[((.004658650+1)6)-1]
2[(1.028280795)-1]
2(.028280795)
= .05656159 or 5.66% December 31, 1995
<PAGE> 1
Exhibit 15
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Thomas R. Clevenger, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way
related thereto, in connection with Variable Annuity Contracts offered, issued
or sold by SECURITY BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE
VARIABLE ANNUITY ACCOUNT with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in
the capacity aforesaid. Each of the aforesaid attorneys acting alone shall
have all the powers of all of said attorneys. I hereby ratify and confirm all
that the said attorneys, or any of them, may do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of April, 1996.
Thomas R. Clevenger
------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 5th day of April, 1996.
Jana R. Selley
------------------------
Notary Public
My Commission Expires:
June 14, 1996
- ----------------------------
<PAGE> 2
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Sister Loretto Marie Colwell, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way
related thereto, in connection with Variable Annuity Contracts offered, issued
or sold by SECURITY BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE
VARIABLE ANNUITY ACCOUNT with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in
the capacity aforesaid. Each of the aforesaid attorneys acting alone shall
have all the powers of all of said attorneys. I hereby ratify and confirm all
that the said attorneys, or any of them, may do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of March, 1996.
Sister Loretto Marie Colwell
----------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 28th day of March, 1996.
Julia A. Smrha
---------------------------------
Notary Public
My Commission Expires:
July 7, 1996
- -----------------------
<PAGE> 3
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John C. Dicus, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of April, 1996.
John C. Dicus
-------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 1st day of April, 1996.
Jana R. Selley
--------------------------
Notary Public
My Commission Expires:
June 14, 1996
- ------------------------
<PAGE> 4
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Melanie S. Fannin, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of March, 1996.
Melanie S. Fannin
---------------------------------
Melanie S. Fannin
SUBSCRIBED AND SWORN to before me this 28th day of March, 1996.
Nancy A. Gerval
---------------------------------
Notary Public
My Commission Expires:
Oct. 02, 1997
- ----------------------------
<PAGE> 5
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint James R. Schmank and
Roger K. Viola, and each of them, my true and lawful attorneys, each with full
power and authority for me and in my name and behalf to sign Registration
Statements, any amendments thereto and any applications for exemptive relief
filed pursuant to the Investment Company Act of 1940 or the Securities Act of
1933, as amended, and any instrument or document filed as part thereof, or in
connection therewith or in any way related thereto, in connection with Variable
Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE INSURANCE
COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT with like effect as
though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of March, 1996.
Howard R. Fricke
----------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 26th day of March, 1996.
Deborah D. Pryer
----------------------------------
Notary Public
My Commission Expires:
April 11, 1999
- ---------------------------
<PAGE> 6
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, W. W. Hanna, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of April, 1996.
W. W. Hanna
-----------------------------------------
W. W. Hanna
SUBSCRIBED AND SWORN to before me this 1st day of April, 1996.
Carolyn R. Souders
----------------------------------------
Notary Public
My Commission Expires:
July 21, 1999
- --------------------------
<PAGE> 7
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of March, 1996.
John E. Hayes, Jr.
----------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 29th day of March, 1996.
Jana R. Selley
----------------------------------
Notary Public
My Commission Expires:
June 14, 1996
- ---------------------------
<PAGE> 8
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Laird G. Noller, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of March, 1996.
Laird G. Noller
--------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 27th day of March, 1996.
Anne S. Reinking
--------------------
Notary Public
My Commission Expires:
March 13, 2000
- ------------------------
<PAGE> 9
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Frank C. Sabatini, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of April, 1996.
Frank C. Sabatini
--------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 5th day of April, 1996.
Joan B. Anderson
--------------------
Notary Public
My Commission Expires:
July 20, 1996
- ------------------------
<PAGE> 10
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Robert C. Wheeler, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications
for exemptive relief filed pursuant to the Investment Company Act of 1940 or
the Securities Act of 1933, as amended, and any instrument or document filed as
part thereof, or in connection therewith or in any way related thereto, in
connection with Variable Annuity Contracts offered, issued or sold by SECURITY
BENEFIT LIFE INSURANCE COMPANY and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
with like effect as though said Registration Statements and other documents had
been signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of March, 1996.
Robert C. Wheeler
--------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 27th day of March, 1996.
Jana R. Selley
--------------------
Notary Public
My Commission Expires:
June 14, 1996
- ------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANNUITY
<SERIES>
<NUMBER> 1
<NAME> NEW AMERICA GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,295
<INVESTMENTS-AT-VALUE> 4,474
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,474
<PAYABLE-FOR-SECURITIES> 4,474
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 4,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 333,934
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 180
<NET-ASSETS> 4,474
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4
<NET-INVESTMENT-INCOME> (4)
<REALIZED-GAINS-CURRENT> 48
<APPREC-INCREASE-CURRENT> 180
<NET-CHANGE-FROM-OPS> 224
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 336
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4
<AVERAGE-NET-ASSETS> 1,137
<PER-SHARE-NAV-BEGIN> 9.86
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 3.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.40
<EXPENSE-RATIO> .35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANNUITY
<SERIES>
<NUMBER> 2
<NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,346
<INVESTMENTS-AT-VALUE> 4,522
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,522
<PAYABLE-FOR-SECURITIES> 4,522
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 4,522
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 365,712
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176
<NET-ASSETS> 4,522
<DIVIDEND-INCOME> 44
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4
<NET-INVESTMENT-INCOME> 40
<REALIZED-GAINS-CURRENT> 41
<APPREC-INCREASE-CURRENT> 176
<NET-CHANGE-FROM-OPS> 257
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 373
<NUMBER-OF-SHARES-REDEEMED> 7
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 366
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4
<AVERAGE-NET-ASSETS> 1,097
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> 1.74
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.37
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANNUITY
<SERIES>
<NUMBER> 3
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