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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. |_|
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Post-Effective Amendment No. 6 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 7 |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
Copies to:
Amy J. Lee Jeffrey S. Puretz, Esq.
Associate General Counsel and Vice President Dechert Price & Rhoads
Security Benefit Group Building 1500 K Street, N.W.
700 Harrison Street, Topeka, KS 66636-0001 Washington, DC 20005
(Name and address of Agent for Service) It is proposed that this filing
will become effective:
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on April 30, 1997, pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on April 30, 1997, pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on April 30, 1997, pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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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 26, 1997.
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Cross Reference Sheet
Pursuant to Rule 495(a)
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
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PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
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) Accumulation Unit Values....... Condensed Financial Information
(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
<PAGE>
(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
<PAGE>
PART B
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..................... Experts
(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
<PAGE>
PROSPECTUS
THE T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
[T. ROWE PRICE LOGO]
MAY 1, 1997
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Variable Annuity Prospectus
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
AN INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
MAY 1, 1997
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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
1
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Variable Annuity Prospectus
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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 Contractowners flexibility in planning
for retirement and other financial goals.
During the Accumulation Period, the Contract provides for the accumulation of a
Contractowner'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 Contractowner'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 Mid-Cap 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 Prime Reserve Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
2
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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, 1997, 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, 1997
3
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Variable Annuity Prospectus
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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.
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
32 Federal Tax Matters
39 Other Information
42 Performance Information
43 Additional Information
4
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Variable Annuity Prospectus
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DEFINITIONS
VARIOUS TERMS COMMONLY USED IN THIS PROSPECTUS ARE DEFINED AS FOLLOWS:
ACCUMULATION PERIOD The period commencing on the Contract Date and ending on the
Annuity 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,
payable 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.
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, seven 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.
6
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Variable Annuity Prospectus
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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 seven 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 Mid-Cap 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 Prime Reserve 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.
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 32 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.
8
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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.
9
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Variable Annuity Prospectus
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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," page 25. 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
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Annual Maintenance Fee None
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ANNUAL SEPARATE ACCOUNT EXPENSES
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Annual Mortality and Expense Risk Charge (as a percentage
of each Subaccount's average daily net assets) .55%
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Total Annual Separate Account Expenses .55%
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ANNUAL PORTFOLIO EXPENSES (AS A PERCENTAGE OF
EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS)
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Total
Management Other Portfolio
Fee* Expenses Expenses
-----------------------------
T. Rowe Price New America Growth Portfolio .85% 0% .85%
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T. Rowe Price International Stock Portfolio 1.05% 0% 1.05%
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T. Rowe Price Mid-Cap Growth Portfolio .85% 0% .85%
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T. Rowe Price Equity Income Portfolio .85% 0% .85%
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T. Rowe Price Personal Strategy Balanced Portfolio .90% 0% .90%
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T. Rowe Price Limited-Term Bond Portfolio .70% 0% .70%
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T. Rowe Price Prime Reserve Portfolio .55% 0% .55%
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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, three, five or ten 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.
10
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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 5 Years 10 Years
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New America Growth Subaccount $14 $44 $77 $168
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International Stock Subaccount $16 $50 $87 $190
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Mid-Cap Growth Subaccount $14 $44 $77 $168
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Equity Income Subaccount $14 $44 $77 $168
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Personal Strategy Balanced Subaccount $15 $46 $79 $174
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Limited-Term Bond Subaccount $13 $40 $69 $151
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Prime Reserve Subaccount $11 $35 $61 $134
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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, and
the year ended December 31, 1996, as well as ending accumulation units
outstanding under each Subaccount. Condensed financial information is not yet
available for the Mid-Cap Growth and Prime Reserve Subaccounts.
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1995 1996
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NEW AMERICA GROWTH SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00 $13.40
End of period $13.40 $16.00
Accumulation units:
Outstanding at the end of period 333,934 1,596,903
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INTERNATIONAL STOCK SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00 $11.19
End of period $11.19 $12.77
Accumulation units:
Outstanding at the end of period 218,427 1,124,821
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EQUITY INCOME SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00 $12.37
End of period $12.37 $14.70
Accumulation units:
Outstanding at the end of period 365,712 1,402,935
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PERSONAL STRATEGY BALANCED SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00 $11.90
End of period $11.90 $13.51
Accumulation units:
Outstanding at the end of period 148,349 599,843
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LIMITED-TERM BOND SUBACCOUNT
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Accumulation unit value:
Beginning of period $10.00 $10.64
End of period $10.64 $10.93
Accumulation units:
Outstanding at the end of period 86,891 445,079
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11
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Variable Annuity Prospectus
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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 1996, Security Benefit had over $15.5 billion of life insurance in
force and total assets of approximately $5.5 billion. Together with its
subsidiaries, Security Benefit has total funds under management of approximately
$6.6 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 Account. All obligations arising under the Contracts are
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Variable Annuity Prospectus
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 seven 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 in shares of the
Portfolio(s) would cause undue risk to the Company. For more information about
the underwriter, see "Distribution of the Contract," page 42.
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 seven 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 be
taken in response. In addition, if the Company believes that any Fund's response
to any of those events or
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Variable Annuity Prospectus
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 MID-CAP GROWTH PORTFOLIO
The investment objective of the Mid-Cap Growth Portfolio is to provide long-term
capital appreciation by investing primarily in companies that offer proven
products or services.
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.
T. ROWE PRICE PRIME RESERVE PORTFOLIO
The investment objectives of the Prime Reserve Portfolio are preservation of
capital, liquidity, and, consistent with these, the highest possible current
income, by investing primarily in high-quality money market securities.
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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
responsible for selection and management of their portfolio investments. As
Investment Adviser to the T. Rowe Price International Stock Portfolio,
Price-Fleming is responsible for selection and management of its portfolio
investments. Each of T. Rowe 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.
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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
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Variable Annuity Prospectus
may result in a taxable gain or loss. The application may be obtained by
contacting the T. Rowe 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.
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 T.
Rowe 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 T. Rowe 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.
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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 seven
Subaccounts and the Fixed Interest Account.
A Contractowner may change the purchase payment allocation instructions by
submitting a proper written request to the T. Rowe Price Variable Annuity
Service Center. A proper change in allocation instructions will be effective
upon receipt by the Company at the T. Rowe 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 and 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 T. Rowe 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
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Variable Annuity Prospectus
Request in proper form must be received by the Company at the T. Rowe 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 T. Rowe Price Variable Annuity Service Center, the Company will exchange
Contract Value in amounts designated by the Contractowner from the Subaccount
from which 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 T. Rowe 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
T. Rowe 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
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Variable Annuity Prospectus
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
T. Rowe 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 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 T. Rowe 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 T. Rowe 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
Sub-accounts by the Contractowner upon proper written request to the T. Rowe
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 T. Rowe 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.
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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, 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
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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.
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
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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.
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 32.
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 32.
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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 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.
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Variable Annuity Prospectus
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 32 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.
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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 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
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Variable Annuity Prospectus
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," page 33.
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 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.
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Variable Annuity Prospectus
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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 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.
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Variable Annuity Prospectus
During the Annuity Period, Contract Value may be exchanged among the Subaccounts
by the Contractowner upon proper written request to the T. Rowe Price Variable
Annuity Service Center. Up to six exchanges are allowed in any Contract Year.
Exchanges are not allowed within 30 days of the Annuity Payout Date. If one of
Annuity Options 5 through 7 is selected, Contract Value also may be exchanged
between the Subaccounts and the Fixed Interest Account, subject to the
restrictions on exchanges from the Fixed Interest Account described under "The
Fixed Interest Account," page 28. The minimum exchange amount is $500 or, if
less, the amount remaining in the Fixed Interest Account or Subaccount.
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, 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.
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Variable Annuity Prospectus
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.
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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
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.
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Variable Annuity Prospectus
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 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
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Variable Annuity Prospectus
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 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
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Variable Annuity Prospectus
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 allocated to the Fixed
Interest Account 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.
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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 32.
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
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Variable Annuity Prospectus
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
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Variable Annuity Prospectus
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.
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
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Variable Annuity Prospectus
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 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 36 and "Diversification
Standards" on page 33. 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.
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Variable Annuity Prospectus
* 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.
Forfixed 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 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
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Variable Annuity Prospectus
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% 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
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Variable Annuity Prospectus
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.
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.
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Variable Annuity Prospectus
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, and will have
the right to revoke the Contract under certain circumstances. See the IRA
Disclosure Statement which accompanies this Prospectus.
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"). The Contractowner's retirement date, if any, will not affect his or
her 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).
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.
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Variable Annuity Prospectus
* 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; (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; (iv) made to pay for
certain medical expenses; (v) that are exempt withdrawals of an excess
contribution; (vi) that are rolled over or transferred in accordance with
Code requirements; or (vii) which, subject to certain restrictions, do not
exceed the health insurance premiums paid by unemployed individuals in
certain cases.
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) $150,000, or (ii) $112,500, as indexed for
inflation ($160,000 for 1997), a penalty tax of 15 percent is generally
imposed (in addition to any ordinary income tax) on the excess portion of the
distribution. The 15 percent excise tax on excess distributions will not
apply to withdrawals during calendar years 1997, 1998 and 1999.
* 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.
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.
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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
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Variable Annuity Prospectus
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.
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 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 in 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 Sub-accounts 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
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Variable Annuity Prospectus
determined by the Company and Investment Services. The Company may also
eliminate or combine one or more Subaccounts 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 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 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
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Variable Annuity Prospectus
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 their 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.
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 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, Esq., 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.
42
<PAGE>
Variable Annuity Prospectus
Current yield for the Prime Reserve Subaccount will be based on income received
by a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Prime Reserve Subaccount is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings.
For the other 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 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
The consolidated financial statements of the Company at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996, and
the financial statements of the Separate Account for the year ended December 31,
1996, and the period from May 1, 1995 to December 31, 1995 are included in the
Statement of Additional Information.
43
<PAGE>
Variable Annuity Prospectus
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to the Company and the Separate Account. The Table
of Contents of the Statement of Additional Information is set forth below:
TABLE OF CONTENTS
General Information and History ......................................... 1
Distribution of the Contract ............................................ 1
Limits on Premiums Paid Under Tax-Qualified Retirement Plans ............ 1
Experts ................................................................. 2
Performance Information ................................................. 2
Financial Statements .................................................... 4
44
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR THE VARIABLE ANNUITY
THE T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
[T. ROWE PRICE LOGO]
MAY 1, 1997
<PAGE>
Statement of Additional Information
T. ROWE PRICE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: MAY 1, 1997
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, 1997. 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>
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 Experts
2 Performance Information
4 Financial Statements
<PAGE>
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 Security 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 $2,000 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>
Statement of Additional Information
in the Plan, or (b) $30,000. Salary reduction contributions, if any, are subject
to additional annual limits. Salary reduction simplified employee pensions
("SARSEPs") have been repealed; however, the SARSEPs established prior to
January 1, 1997 may continue to receive contributions.
- --------------------------------------------------------------------------------
EXPERTS
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, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996, are contained in this
Statement of Additional Information. Financial statements of the Separate
Account for the year ended December 31, 1996, and the period from May 1, 1995,
to December 31, 1995, are also included in this Statement of Additional
Information. The financial statements have been audited by Ernst & Young LLP, as
set forth in their reports thereon appearing herein and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
- --------------------------------------------------------------------------------
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 Prime Reserve Subaccount will be based on the change
in the value, exclusive of capital changes, of a hypothetical investment in a
Contract over a particular seven day period, less a hypothetical charge
reflecting deductions from the Contract during the period (the "base period")
and stated as a percentage of the investment at the start of the base period
(the "base period return"). The base period return is then annualized by
multiplying by 365/7, with the resulting yield figure carried to at least the
nearest one hundredth of one percent. Any quotations of effective yield for the
Prime Reserve Subaccount assume that all dividends received during an annual
period have been reinvested. Calculation of "effective yield" begins with the
same "base period return" used in the yield calculation, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield = [ ( Base Period Return + 1 ) 365/7 ] - 1
A yield calculation is not yet available for the Prime Reserve Subaccount as it
did not begin operations until January 2, 1997.
Quotations of yield for the Subaccounts, other than the Prime Reserve
Subaccount, 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:
2
<PAGE>
Statement of Additional Information
YIELD = 2 [ ( a - b + 1)6 - 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, 1996, the yield of the Limited-Term
Bond Subaccount was 6.04%
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 of the mortality and
expense risk charge. Quotations of total return 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 will 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.
For the one year period ended December 31, 1996, the average annual total return
of New America Growth Subaccount, International Stock Subaccount, Equity Income
Subaccount, Personal Strategy Balanced Subaccount, and the Limited-Term Bond
Subaccount was 19.40%, 14.12%, 18.93%, 13.53%, and 2.73%, respectively. For the
period from March 31, 1994 (Portfolio date of inception) to December 31, 1996,
the average annual total return for the New America Growth Subaccount,
International Stock Subaccount, and Equity Income Subaccount was 23.93%, 9.38%,
and 20.21%, respectively. For the from between December 30, 1994 (Portfolio date
of inception) to December 31, 1996, the average annual total return for the
Personal Strategy Balanced Subaccount was 20.53%. For the period from May 13,
1994 (Portfolio date of inception) to December 31, 1996, the average annual
total return for the Limited-Term Bond Subaccount was 5.37%. Total return
information is not yet available for the Mid-Cap Growth Subaccount as it did not
begin operations until January 2, 1997.
3
<PAGE>
Statement of Additional Information
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.
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 consolidated financial statements of the Company at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996, and
the financial statements of the Separate Account for the year ended December 31,
1996 and for the period May 1, 1995 to December 31, 1995, are set forth herein,
starting on page 6.
4
<PAGE>
Statement of Additional Information
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.
- --------------------------------------------------------------------------------
CONTENTS
FINANCIAL STATEMENTS
Audited Financial Statements - Separate Account
6 Report of Independent Auditors - Separate Account
7 Balance Sheet
8 Statement of Operations and Changes in Net Assets
10 Notes to Financial Statements
5
<PAGE>
Statement of Additional Information
Report of Independent Auditors
The Contract Owners of T. Rowe Price Variable
Annuity Account and The Board of Directors of
Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of T. Rowe Price Variable Annuity
Account (the Company) as of December 31, 1996, and the related statements of
operations and changes in net assets for the year ended December 31, 1996 and
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our 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 T. Rowe Price Variable Annuity
Account at December 31, 1996, and the results of its operations and changes in
its net assets for the year ended December 31, 1996 and for the period from May
1, 1995 (inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
February 7, 1997
6
<PAGE>
Statement of Additional Information
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
Balance Sheet
December 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
Investments:
T. Rowe Price Portfolios:
New America Growth Portfolio -- 1,447,071
shares at net asset value of $17.67 per
share (cost, $23,715) $25,570
International Stock Portfolio -- 1,136,231
shares at net asset value of $12.64 per
share (cost, $13,554) 14,362
Equity Income Portfolio -- 1,833,719 shares
at net asset value of $15.26 per share
(cost, $25,720) 27,983
Personal Strategy Balanced Portfolio -- 604,272
shares at net asset value of $13.44
per share (cost, $7,721) 8,121
Limited-Term Bond Portfolio -- 986,818 shares
at net asset value of $4.93 per share
(cost, $4,840) 4,865
- --------------------------------------------------------------------------------
Total assets $80,901
================================================================================
Number Unit
of Units Value Amount
- --------------------------------------------------------------------------------
NET ASSETS
Net assets are represented by (NOTE 3):
New America Growth Subaccount:
Accumulation units 1,596,903 $16.00 $22,554
Annuity reserves 985 16.00 16 $25,570
International Stock Subaccount:
Accumulation units 1,124,821 12.77 14,360
Annuity reserves 181 12.77 2 14,362
Equity Income Subaccount:
Accumulation units 1,902,935 14.70 27,973
Annuity reserves 656 14.70 10 27,983
Personal Strategy Balanced Subaccount:
Accumulation units 599,843 13.51 8,105
Annuity reserves 1,153 13.51 16 8,121
Limited-Term Bond Subaccount:
Accumulation units 445,079 10.93 4,865
- -------------------------------------------------------------------------------
Total net assets $80,901
================================================================================
SEE ACCOMPANYING NOTES.
7
<PAGE>
Statement of Additional Information
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
Statement of Operations and Changes in Net Assets
Year ended December 31, 1996
(IN THOUSANDS)
- --------------------------------------------------------------------------------
New Inter- Personal Limited-
America national Equity Strategy Term
Growth Stock Income Balanced Bond
Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------
Dividend distributions $ 36 $ 132 $ 534 $ 185 $ 164
Expenses (NOTE 2):
Mortality and
expense risk
fee (89) (49) (88) (28) (15)
- --------------------------------------------------------------------------------
Net investment
income (loss) (53) 83 446 157 149
Capital gains
distributions 319 75 130 150 -
Realized gain (loss)
on investments 521 227 341 72 (37)
Unrealized
appreciation
on investments 1,675 731 2,087 359 18
- --------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments 2,515 1,033 2,558 581 (19)
- --------------------------------------------------------------------------------
Net increase in
net assets
resulting
from operations 2,462 1,116 3,004 738 130
Net assets
at beginning
of year 4,474 2,444 4,522 1,765 925
Variable annuity
deposits
(Notes 2 and 3) 22,024 12,438 22,410 6,629 5,935
Terminations
and withdrawals
(Notes 2 and 3) (3,389) (1,636) (1,952) (1,008) (2,125)
Annuity payments
(Notes 2 and 3) (1) - - (1) -
Net mortality guarantee
transfer - - (1) (2) -
- --------------------------------------------------------------------------------
Net assets
at end
of year $25,570 $14,362 $27,983 $8,121 $4,865
================================================================================
SEE ACCOMPANYING NOTES.
8
<PAGE>
Statement of Additional Information
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT
Statement of Operations and Changes in Net Assets
Period from May 1, 1995 (inception) to December 31, 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
New Inter- Personal Limited-
America national Equity Strategy Term
Growth Stock Income Balanced Bond
Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------
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
================================================================================
SEE ACCOMPANYING NOTES.
9
<PAGE>
Statement of Additional Information
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
T. Rowe Price Variable Annuity Account (the Account) is a separate account of
Security Benefit Life Insurance Company (SBL). The Account is registered as a
unit investment trust under the Investment Company Act of 1940, as amended. The
Account currently is divided into five subaccounts. Each subaccount invests
exclusively in shares of a single corresponding mutual fund. Purchase payments
received by the Account are 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, purchase payments 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 investment grade debt securities.
T. Rowe Price Associates, Inc. (T. Rowe Price) serves as the investment advisor
to each Portfolio except the International Stock Portfolio, which is managed by
Rowe Price-Fleming International, Inc., an affiliate of T. Rowe Price. The
investment advisors are responsible for managing the Portfolio's assets in
accordance with the terms of the investment advisory contracts.
INVESTMENT VALUATION
Investments in mutual fund shares are carried in the balance sheet at market
value (net asset value of the underlying mutual fund). The first-in, first-out
cost method is used to determine gains and losses. Security transactions are
accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold were as
follows:
PERIOD FROM
MAY 1, 1995
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------------------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
--------------------------------------------
(IN THOUSANDS)
New America Growth Portfolio $23,168 $4,268 $4,685 $439
International Stock Portfolio 13,265 2,305 2,698 323
Equity Income Portfolio 24,102 3,069 4,967 662
Personal Strategy Balanced Portfolio 7,279 1,354 1,952 235
Limited-Term Bond Portfolio 6,946 2,986 1,237 321
10
<PAGE>
Statement of Additional Information
ANNUITY RESERVES
Annuity reserves relate to contracts which have matured and are in the payout
stage. Such reserves are computed on the basis of published mortality tables
using assumed interest rates that will provide reserves as prescribed by law. In
cases where the payout option selected is life contingent, SBL periodically
recalculates the required annuity reserves, and any resulting adjustment is
either charged or credited to SBL and not to the Account.
REINVESTMENT OF DIVIDENDS
Dividend and capital gains distributions paid by the mutual fund to the Account
are reinvested in additional shares of each respective Portfolio. 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.
11
<PAGE>
Statement of Additional Information
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
-----------------------------
PERIOD FROM
MAY 1, 1995
YEAR (INCEPTION)
ENDED TO
DECEMBER 31, DECEMBER 31,
1996 1995
-----------------------------
(IN THOUSANDS)
New America Growth Subaccount:
Variable annuity deposits 1,494 336
Terminations, withdrawals and annuity payments 230 2
International Stock Subaccount:
Variable annuity deposits 1,043 221
Terminations, withdrawals and annuity payments 137 3
Equity Income Subaccount:
Variable annuity deposits 1,686 373
Terminations, withdrawals and annuity payments 148 7
Personal Strategy Balanced Subaccount:
Variable annuity deposits 534 149
Terminations, withdrawals and annuity payments 81 1
Limited-Term Bond Subaccount:
Variable annuity deposits 604 113
Terminations, withdrawals and annuity payments 246 26
12
<PAGE>
Statement of Additional Information
Financial Statements
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
CONTENTS
14 Report of Independent Auditors - Company
Audited Financial Statements - Company
15 Consolidated Balance Sheets
17 Consolidated Statements of Income
18 Consolidated Statements of Changes in Equity
19 Consolidated Statements of Cash Flows
21 Notes to Consolidated Financial Statements
13
<PAGE>
Statement of Additional Information
Report of Independent Auditors
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security Benefit
Life Insurance Company and Subsidiaries (the Company) as of December 31, 1996
and 1995, and the related consolidated statements of income, changes in equity
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in NOTE 1 to the consolidated financial statements, in 1996, the
Company adopted certain accounting changes to conform with generally accepted
accounting principles for mutual life insurance enterprises and retroactively
restated the prior years financial statements for the change. Also, as discussed
in NOTE 1 to the consolidated financial statements, the Company changed its
method of accounting for debt securities as of January 1, 1994.
Our audits were conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidating balance
sheet and statement of income are presented for purposes of additional analysis
and are not a required part of the basic consolidated financial statements. Such
information has been subjected to the auditing procedures applied in our audits
of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic consolidated financial
statements taken as a whole.
ERNST & YOUNG LLP
February 7, 1997
14
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995*
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Securities available-for-sale, at fair value (NOTES 2 AND 9):
Fixed maturities...................................................... $1,805,066 $1,778,370
Equity securities .................................................... 89,188 21,880
Fixed maturities held-to-maturity, at amortized cost (NOTE 2)........... 528,045 536,137
Mortgage loans.......................................................... 66,611 74,342
Real estate............................................................. 4,000 5,864
Policy loans............................................................ 106,822 100,452
Short-term investments.................................................. - 992
Cash and cash equivalents............................................... 8,310 16,788
Other invested assets................................................... 40,531 37,769
------------------------------------
Total investments.......................................................... 2,648,573 2,572,594
Premiums deferred and uncollected.......................................... 149 574
Accrued investment income.................................................. 32,161 30,623
Accounts receivable........................................................ 4,256 3,064
Reinsurance recoverable (NOTE 4)........................................... 92,197 78,877
Notes receivable........................................................... 110 147
Property and equipment, net................................................ 18,592 18,884
Deferred policy acquisition costs (NOTE 1)................................. 216,918 186,940
Other assets............................................................... 24,680 36,221
Separate account assets (NOTE 10).......................................... 2,802,927 2,065,306
------------------------------------
$5,840,563 $4,993,230
====================================
</TABLE>
15
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Balance Sheet
DECEMBER 31
1996 1995*
---------------------------
(IN THOUSANDS)
LIABILITIES AND EQUITY
Liabilities:
Policy reserves and annuity
account values................................ $2,497,998 $2,495,113
Policy and contract claims...................... 10,607 10,571
Other policyholder funds........................ 24,073 21,305
Accounts payable and accrued expenses........... 18,003 13,609
Income taxes payable (NOTE 5):
Current....................................... 6,686 10,371
Deferred...................................... 54,847 53,659
Long-term debt (NOTE 8)......................... 65,000 -
Other liabilities............................... 11,990 11,619
Separate account liabilities.................... 2,793,911 2,051,292
---------------------------
Total liabilities.................................. 5,483,115 4,667,539
Equity:
Retained earnings............................... 357,927 314,084
Unrealized appreciation
(depreciation) of securities
available-for-sale, net....................... (479) 11,607
---------------------------
Total equity....................................... 357,448 325,691
---------------------------
$5,840,563 $4,993,230
===========================
*As restated
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
16
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995* 1994*
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Insurance premiums and other considerations........... $ 28,848 $ 49,608 $ 55,148
Net investment income................................. 192,636 179,940 166,857
Asset based fees...................................... 55,977 40,652 33,809
Other product charges................................. 10,470 10,412 7,335
Realized gains (losses) on investments................ (244) 3,876 134
Other revenues........................................ 20,033 22,164 27,241
------------------------------------------------------
Total revenues........................................... 307,720 306,652 290,524
Benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances............... 108,705 113,700 103,087
Benefit claims in excess of account balances........ 7,541 6,808 7,145
Traditional life insurance benefits................... 6,474 7,460 6,203
Supplementary contract payments....................... 11,121 11,508 11,286
Increase in traditional life reserves................. 8,580 13,212 12,977
Dividends to policyholders............................ 2,374 2,499 2,669
Other benefits........................................ 20,790 22,379 29,924
------------------------------------------------------
Total benefits........................................... 165,585 177,566 173,291
Commissions and other operating expenses................. 45,539 46,233 39,998
Amortization of deferred policy acquisition costs........ 25,930 26,628 24,674
Other expenses........................................... 1,667 1,099 785
Interest expense......................................... 4,285 7 630
------------------------------------------------------
Total benefits and expenses.............................. 243,006 251,533 239,378
------------------------------------------------------
Income before income taxes............................... 64,714 55,119 51,146
Income taxes (NOTE 5).................................... 20,871 17,927 17,129
------------------------------------------------------
Net income............................................... $ 43,843 $ 37,192 $ 34,017
======================================================
</TABLE>
*As restated
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Equity
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995* 1994*
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Retained earnings:
Beginning of year, as previously reported................. $207,669 $150,726 $128,785
Cumulative effect of change in accounting principle.......
106,415 126,166 114,090
------------------------------------------------------
Beginning of year, as restated............................ 314,084 276,892 242,875
Net income................................................ 43,843 37,192 34,017
------------------------------------------------------
End of year............................................... 357,927 314,084 276,892
Unrealized appreciation (depreciation)
of securities available-for-sale, net:
Beginning of year....................................... 11,607 (48,466) (10,034)
Cumulative effect of change in accounting
principle (NOTE 1).................................... - - 10,733
Change in unrealized appreciation (depreciation) of
securities available-for-sale, net.................... (12,086) 60,073 (49,165)
------------------------------------------------------
End of year............................................. (479) 11,607 (48,466)
------------------------------------------------------
Total equity................................................. $357,448 $325,691 $228,426
======================================================
</TABLE>
*As restated
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995* 1994*
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 43,843 $ 37,192 $ 34,017
Adjustments to reconcile net income to net cash provided
by operating activities:
Annuity and interest sensitive life products:
Interest credited to account balances............. 108,705 113,700 103,087
Charges for mortality and administration.......... (13,115) (16,585) (17,000)
Decrease (increase) in traditional life policy
reserves.......................................... 10,697 2,142 (5,950)
Increase in accrued investment income............... (1,538) (4,573) (567)
Policy acquisition costs deferred................... (36,865) (33,021) (38,737)
Policy acquisition costs amortized.................. 25,930 26,628 24,674
Accrual of discounts on investments................. (3,905) (3,421) (3,588)
Amortization of premiums on investments............. 11,284 9,782 15,726
Provision for depreciation and amortization......... 3,748 3,750 3,201
Other............................................... (3,379) (4,225) 2,511
------------------------------------------------------
Net cash provided by operating activities................ 145,405 131,369 117,374
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities available-for-sale................... 870,240 517,480 318,252
Fixed maturities held-to-maturity..................... 58,874 59,873 147,043
Equity securities available-for-sale.................. 8,857 10,242 3,830
Mortgage loans........................................ 12,545 23,248 21,096
Real estate........................................... 2,935 3,173 2,782
Short-term investments................................ 20,069 229,871 834,082
Other invested assets................................. 6,224 22,839 6,748
------------------------------------------------------
979,744 866,726 1,333,833
Acquisition of investments:
Fixed maturities available-for-sale................... (936,376) (591,121) (552,433)
Fixed maturities held-to-maturity..................... (52,422) (125,276) (56,398)
Equity securities available-for-sale.................. (68,222) (19,500) (4,627)
Mortgage loans........................................ (4,538) (4,179) (34,260)
Real estate........................................... (2,637) (1,511) (554)
Short-term investments................................ (19,070) (180,259) (854,833)
Other invested assets................................. (3,712) (31,861) (18,581)
------------------------------------------------------
(1,086,977) (953,707) (1,521,686)
Other investing activities:
Purchase of property and equipment.................... $ (1,879) $ (2,036) $ (2,932)
Net increase in policy loans.......................... (6,370) (8,058) (5,569)
Net cash transferred per coinsurance agreement........
- (16,295) -
------------------------------------------------------
Net cash used in investing activities.................... (115,482) (113,370) (196,354)
</TABLE>
19
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995* 1994*
------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Issuance of long-term debt............................... 65,000 - -
Annuity and interest sensitive life products:
Deposits credited to account balances................. 705,118 509,183 553,542
Withdrawals from account balances..................... (808,519) (526,509) (466,760)
------------------------------------------------
Net cash provided by (used in) financing activities......
(38,401) (17,326) 86,782
------------------------------------------------
Increase (decrease) in cash and cash equivalents......... (8,478) 673 7,802
Cash and cash equivalents at beginning of year........... 16,788 16,115 8,313
------------------------------------------------
Cash and cash equivalents at end of year................. $ 8,310 $ 16,788 $ 16,115
================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest.............................................. $ 2,966 $ 120 $ 157
================================================
Income taxes.......................................... $ 16,213 $ 11,551 $ 14,634
================================================
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of mortgage loans to real estate owned........ $ 844 $ - $ 2,350
================================================
</TABLE>
*As restated
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
Statement of Additional Information
Security Benefit Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Benefit Life Insurance Company (SBL or the Company) is a
Kansas-domiciled mutual life insurance company whose insurance operations are
licensed to sell insurance products in 50 states. The Company offers a
diversified portfolio 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 accompanying consolidated financial statements have been prepared on the
basis of generally accepted accounting principles (GAAP). Prior to 1996, the
Company prepared its financial statements in conformity with accounting
practices prescribed or permitted by the Kansas Insurance Department, which
practices were considered GAAP for mutual life insurance companies and their
stock life insurance subsidiaries. Financial Accounting Standards Board (FASB)
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises," as amended, which is
effective for 1996 annual financial statements and thereafter, no longer permits
statutory-basis financial statements to be described as being prepared in
conformity with GAAP. Accordingly, the Company has adopted GAAP, including
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 Statement of Position 95-1,
"Accounting for Certain Insurance Activities of Mutual Life Insurance
Enterprises," which address the accounting for long-duration and short-duration
insurance and reinsurance contracts, including all participating business.
Pursuant to the requirements of FASB Interpretation No. 40 and SFAS No. 120, the
effect of the changes in accounting have been applied retroactively, and the
previously issued 1995 and 1994 financial statements have been restated for the
change. The effect of the changes applicable to years prior to January 1, 1994
has been presented as a restatement of retained earnings as of that date. The
adoption had the effect of increasing net income for 1996, 1995 and 1994 by
approximately $5,897,000, $8,436,000 and $6,663,000, respectively.
The consolidated financial statements include the operations and accounts of
Security Benefit Life Insurance Company and the following wholly-owned
subsidiaries: Security Benefit Group, Inc., First Security Benefit Life
Insurance and Annuity Company of New York, Security Management Company, LLC,
Security Distributors, Inc., Security Benefit Academy, Inc., First Advantage
Insurance Agency, Inc. and Creative Impressions, Inc. Significant intercompany
transactions have been eliminated in consolidation.
21
<PAGE>
Statement of Additional Information
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
ACCOUNTING CHANGE
Prior to January 1, 1994, fixed maturities were reported at cost, adjusted for
amortization of premiums and accrual of discounts. Effective January 1, 1994,
the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." SFAS No. 115 requires that fixed maturities are to be
classified as either held-to-maturity, trading or available-for-sale. Equity
securities are to be classified as either available-for-sale or trading. The
adoption had no effect on net income and resulted in an increase in equity at
January 1, 1994 of $10,733,000, net of the related effect of deferred policy
acquisition costs and deferred income taxes.
INVESTMENTS
Fixed maturities have been classified as either held-to-maturity or
available-for-sale. Fixed maturities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accrual of discounts. Such amortization and accrual
on these securities are included in investment income. Fixed maturities not
classified as held-to-maturity are classified as available-for-sale.
Available-for-sale fixed maturities are stated at fair value with the unrealized
appreciation or depreciation, net of adjustment of deferred policy acquisition
costs and deferred income taxes, reported in a separate component of equity and,
accordingly, have no effect on net income.
The DPAC offsets to the unrealized appreciation or depreciation represent
valuation adjustments or restatements of DPAC that would have been required as a
charge or credit to operations had such unrealized amounts been realized. The
amortized cost of fixed maturities classified as available-for-sale is adjusted
for amortization of premiums and accrual of discounts. Premiums and discounts
are recognized over the estimated lives of the assets adjusted for prepayment
activity.
Equity securities consisting of common stocks, mutual funds and nonredeemable
preferred stock are carried at fair value and are reported in accordance with
SFAS No. 115. Mortgage loans and short-term investments are reported at cost,
adjusted for amortization of premiums and accrual of discounts. Real estate
investments are carried at the lower of depreciated cost or estimated realizable
value. Policy loans are reported at unpaid principal. Investments accounted for
by the equity method include investments in, and advances to, various joint
ventures and partnerships. Realized gains and losses on sales of investments are
recognized in revenues on the specific identification method.
The carrying amounts of all the Company's investments are reviewed on an ongoing
basis. If this review indicates a decline in value that is other than temporary
for any investment, the amortized cost of the investment is reduced to its fair
value. Such reductions in carrying amount are recognized as realized losses in
the determination of net income.
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
22
<PAGE>
Statement of Additional Information
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
reprice or 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.
Interest rate exchange agreements are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income as incurred.
Gains and losses on those instruments are included in the carrying amount of the
underlying hedged investments, or anticipated investment transactions, and are
amortized over the remaining lives of the hedged investments as adjustments to
investment income. Any unamortized gains or losses are recognized when the
underlying investments are sold.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits,
commissions and other policy-issue, underwriting and marketing costs incurred to
acquire or renew traditional life insurance, interest sensitive life and
deferred annuity business that vary with and are primarily related to the
production of new and renewal business have been deferred.
Traditional life insurance deferred policy acquisition costs are being amortized
in proportion to premium revenues over the premium-paying period of the related
policies using assumptions consistent with those used in computing policy
benefit reserves.
For interest sensitive life and deferred annuity business, deferred policy
acquisition costs are amortized in proportion to the present value (discounted
at the crediting rate) of expected gross profits from investment, mortality and
expense margins. That amortization is adjusted retrospectively when estimates of
current or future gross profits to be realized from a group of products are
revised.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers certificates
of deposits with original maturities of 90 days or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment, including real estate, furniture and fixtures, and data
processing hardware and related systems, are recorded at cost, less accumulated
depreciation. The provision for depreciation of property and equipment is
computed using the straight-line method over the estimated lives of the related
assets.
23
<PAGE>
Statement of Additional Information
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the benefit of
contractholders who bear the investment risk. The separate account assets and
liabilities are carried at fair value. Revenues and expenses related to separate
account assets and liabilities, to the extent of benefits paid or provided to
the separate account contractholders, are excluded from the amounts reported in
the consolidated statements of income. Investment income and gains or losses
arising from separate accounts accrue directly to the contractholders and are,
therefore, not included in investment earnings in the accompanying statements of
income. Revenues to the Company from separate accounts consist principally of
contract maintenance charges, administrative fees, and mortality and expense
risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES
The liabilities for future policy benefits for traditional life and reinsurance
products are computed using a net level premium method, including assumptions as
to investment yields, mortality, withdrawals, and other assumptions that
approximate expected experience.
Liabilities for future policy benefits for interest sensitive life and deferred
annuity products represent accumulated contract values without reduction for
potential surrender charges and deferred front-end contract charges that are
amortized over the life of the policy. Interest on accumulated contract values
is credited to contracts as earned. Crediting rates ranged from 3.5% to 7.25%
during 1996, 4.0% to 7.75% during 1995, and 4.5% to 7.75% during 1994.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under that method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and income tax bases of assets and liabilities and are measured using
the enacted tax rates and laws. Deferred income tax expenses or credits
reflected in the Company's statements of income are based on the changes in
deferred tax assets or liabilities from period to period (excluding the SFAS No.
115 adjustment, which is charged or credited directly to equity).
RECOGNITION OF REVENUES
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these traditional products are
recognized as revenues when due. Revenues from interest sensitive life insurance
products and deferred annuities consist of policy charges for the cost of
insurance, policy administration charges and surrender charges assessed against
contractholder account balances during the period.
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, certificates of deposits and short-term investments: The carrying
amounts reported in the balance sheet for these instruments approximate
their fair values.
24
<PAGE>
Statement of Additional Information
Investment securities: Fair values for fixed maturities are based on quoted
market prices, where available. For fixed maturities not actively traded,
fair values are estimated using values obtained from independent pricing
services or estimated by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality and maturity of
the investments. The fair values for equity securities are based on quoted
market prices.
Mortgage loans and policy loans: Fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses based on 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-type contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming
company would realize from the business is calculated. Those amounts are
then discounted at a rate of return commensurate with the rate presently
offered by the Company on similar contracts.
Long-term debt: Fair values for long-term debt are estimated using
discounted cash flow analyses based on current borrowing rates available
for similar types of borrowing arrangements.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses, and
fair values of the Company's portfolio of fixed maturities and equity securities
at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.......... $ 173,884 $ 414 $ 1,431 $ 172,867
Obligations of states and political subdivisions.
23,244 361 705 22,900
Special revenue and assessment................... 330 - - 330
Corporate securities............................. 863,124 13,758 18,651 858,231
Mortgage-backed securities....................... 627,875 9,091 9,308 627,658
Asset-backed securities.......................... 122,523 832 275 123,080
-----------------------------------------------------------------
Total fixed maturities........................... $1,810,980 $24,456 $30,370 $1,805,066
=================================================================
Equity securities................................ $ 86,991 $ 2,422 $ 225 $ 89,188
=================================================================
</TABLE>
25
<PAGE>
Statement of Additional Information
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
Obligations of states and political subdivisions.
$ 81,791 $ 463 $ 1,036 $ 81,218
Special revenue and assessment................... 420 - - 420
Corporate securities............................. 128,487 2,003 1,830 128,660
Mortgage-backed securities....................... 264,155 2,121 1,347 264,929
Asset-backed securities.......................... 53,192 382 97 53,477
-----------------------------------------------------------------
Total fixed maturities........................... $ 528,045 $ 4,969 $ 4,310 $ 528,704
=================================================================
DECEMBER 31, 1995
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-----------------------------------------------------------------
(IN THOUSANDS)
AVAILABLE-FOR-SALE
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.......... $ 5,746 $ 522 $ - $ 6,268
Obligations of states and political subdivisions. 23,304 510 139 23,675
Special revenue and assessment................... 330 2 - 332
Corporate securities............................. 857,926 29,671 13,146 874,451
Mortgage-backed securities....................... 857,685 17,838 1,879 873,644
-----------------------------------------------------------------
Total fixed securities........................... $1,744,991 $48,543 $15,164 $1,778,370
=================================================================
Equity securities................................ $ 21,278 $ 687 $ 85 $ 21,880
=================================================================
DECEMBER 31, 1995
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-----------------------------------------------------------------
(IN THOUSANDS)
HELD-TO-MATURITY
Obligations of states and political subdivisions. $ 67,160 $ 1,221 $ - $ 68,381
Special revenue and assessment................... 870 - - 870
Corporate securities............................. 163,032 6,426 43 169,415
Mortgage-backed securities....................... 305,075 5,539 4 310,610
-----------------------------------------------------------------
Totals........................................... $ 536,137 $13,186 $ 47 $ 549,276
=================================================================
</TABLE>
The change in the Company's unrealized appreciation (depreciation) on fixed
maturities was $(51,773,000), $220,048,000 and $(219,496,000) during 1996, 1995
and 1994, respectively; the corresponding amounts for equity securities were
$1,595,000, $1,034,000 and $(1,702,000) during 1996, 1995 and 1994,
respectively.
26
<PAGE>
Statement of Additional Information
The amortized cost and fair value of fixed maturities at December 31, 1996, 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>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
-------------------------------------------------------------------
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE
-------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less........................ $ 17,711 $ 17,764 $ 320 $ 320
Due after one year through five years.......... 197,414 197,267 12,184 12,240
Due after five years through 10 years.......... 469,394 471,099 47,804 48,193
Due after 10 years............................. 376,063 368,198 150,390 149,545
Mortgage-backed securities..................... 627,875 627,658 264,155 264,929
Asset-backed securities........................ 122,523 123,080 53,192 53,477
-------------------------------------------------------------------
$1,810,980 $1,805,066 $528,045 $528,704
===================================================================
</TABLE>
Late in 1995, the FASB issued a special report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities." This report provided companies with an opportunity for a one-time
reassessment and reclassification of securities as of a single measurement date
without tainting the held-to-maturity debt securities classification. On
December 8, 1995, the Company reclassified securities with an amortized cost of
$202,417,000 from held-to-maturity to available-for-sale. The transfer resulted
in an increase to unrealized gains on securities of approximately $2,162,000 net
of related adjustments for deferred policy acquisition costs and deferred income
taxes.
The Company did not hold any investments that individually exceeded 10% of
equity at December 31, 1996 except for securities guaranteed by the U.S.
government or an agency of the U.S. government.
1996 1995 1994
----------------------------------
(IN THOUSANDS)
Interest on fixed maturities................ $174,592 $165,684 $154,739
Dividends on equity securities.............. 5,817 1,309 712
Interest on mortgage loans.................. 6,680 7,876 7,746
Real estate income.......................... 781 1,287 1,326
Interest on policy loans.................... 6,372 5,927 5,462
Interest on short-term investments.......... 1,487 2,625 2,272
Other....................................... 3,418 1,453 525
----------------------------------
Total investment income..................... 199,147 186,161 172,782
Investment expenses......................... 6,511 6,221 5,925
----------------------------------
Net investment income....................... $192,636 $179,940 $166,857
==================================
Proceeds from sales of fixed maturities and equity securities and related
realized gains and losses, including valuation adjustments, are as follows:
27
<PAGE>
Statement of Additional Information
1996 1995 1994
----------------------------------
(IN THOUSANDS)
Proceeds from sales......................... $393,189 $310,590 $128,533
Gross realized gains........................ 9,407 5,901 5,814
Gross realized losses....................... 9,723 3,361 4,889
The composition of the Company's portfolio of fixed maturities by quality rating
at December 31, 1996 is as follows:
QUALITY RATING CARRYING AMOUNT %
- ------------------------ ------------------------ --------------------
(IN THOUSANDS)
AAA..................... $1,199,762 51.4%
AA...................... 158,785 6.8
A....................... 361,008 15.5
BBB..................... 416,589 17.9
Noninvestment grade..... 196,967 8.4
------------------------ --------------------
$2,333,111 100.0%
======================== ====================
The Company has a diversified portfolio of commercial and residential mortgage
loans outstanding in 14 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1996 being in the states of Kansas (34%),
Iowa (15%) and Texas (14%).
Net realized gains (losses) consist of the following:
1996 1995 1994
----------------------------------
(IN THOUSANDS)
Fixed maturities........................... $(1,329) $1,805 $397
Equity securities.......................... 1,013 735 528
Other...................................... 72 1,336 (791)
-----------------------------------
Total realized gains (losses).............. $ (244) $3,876 $134
===================================
28
<PAGE>
Statement of Additional Information
Deferred losses totaling $2.2 million and $3.9 million at December 31, 1996 and
1995, respectively, resulting from terminated and expired futures contracts are
included in fixed maturities and will be amortized as an adjustment to net
investment income. The notional amount of outstanding agreements to sell
securities was $79 million at December 31, 1995. There were no outstanding
agreements at December 31, 1996.
For interest rate exchange agreements, one agreement was terminated during 1996
resulting in a deferred gain of $1.1 million. The notional amount of the
remaining outstanding agreements was $30 million at December 31, 1996. Also, as
of December 31, 1996, these agreements have maturities ranging from March 1997
to May 2005. Under these agreements, the Company receives variable rates based
on the one- and three-month LIBOR and pays fixed rates ranging from 6.875% to
7.215%.
3. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified, noncontributory
defined benefit pension plan sponsored by the Company and certain of its
affiliates. Benefits are based on years of service and an employee's highest
average compensation over a period of five consecutive years during the last 10
years of service. The Company's policy has been to contribute funds to the plan
in amounts required to maintain sufficient plan assets to provide for accrued
benefits. In applying this general policy, the Company considers, among other
factors, the recommendations of its independent consulting actuaries, the
requirements of federal pension law and the limitations on deductibility imposed
by federal income tax law. The Company records pension cost in accordance with
the provisions of SFAS No. 87, "Employers' Accounting for Pensions."
Pension cost for the plan for 1996, 1995 and 1994 is summarized as follows:
1996 1995 1994
----------------------------------
(IN THOUSANDS)
Service cost............................... $ 670 $ 528 $679
Interest cost.............................. 587 508 535
Actual return on plan assets............... (1,064) (1,568) 310
Net amortization and deferral.............. 284 900 (949)
-----------------------------------
Net pension cost........................... $ 477 $ 368 $575
===================================
29
<PAGE>
Statement of Additional Information
The funded status of the plan as of December 31, 1996 and 1995 was as follows:
DECEMBER 31
1996 1995
------------------------
(IN THOUSANDS)
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $(6,059) $(5,243)
Non-vested benefit obligation...................... (202) (165)
------------------------
Accumulated benefit obligation..................... (6,261) (5,408)
Excess of projected benefit obligation
over accumulated benefit obligation.............. (2,961) (2,865)
------------------------
Projected benefit obligation....................... (9,222) (8,273)
Plan assets, at fair market value..................... 10,085 8,342
------------------------
Plan assets greater than projected
benefit obligation.................................. 863 69
Unrecognized net loss................................. 1,007 1,560
Unrecognized prior service cost....................... 700 758
Unrecognized net asset established at
the date of initial application..................... (1,841) (2,025)
------------------------
Net prepaid pension cost.............................. $ 729 $ 362
========================
Assumptions were as follows:
1996 1995 1994
-----------------------------
Weighted average discount rate........... 7.75% 7.5% 8.5%
Weighted average rate of
increase in compensation
for participants age
45 and older.......................... 4.5 4.5 4.5
Weighted average expected
long-term return on plan assets....... 9.0 9.0 9.0
Compensation rates that vary by age for participants under age 45 were used in
determining the actuarial present value of the projected benefit obligation in
1996. Plan assets are invested in a diversified portfolio of affiliated mutual
funds that invest in equity and debt securities.
In addition to the Company's defined benefit pension plan, the Company provides
certain medical and life insurance benefits to full-time employees who have
retired after the age of 55 with five years of service. The plan is
contributory, with retiree contributions adjusted annually and contains other
cost-sharing features such as deductibles and coinsurance. Contributions vary
based on the employee's years of service earned after age 40. The Company's
portion of the costs is frozen after 1996 with all future cost increases
30
<PAGE>
Statement of Additional Information
passed on to the retirees. Retirees in the plan prior to July 1, 1993 are
covered 100% by the Company.
Retiree medical care and life insurance cost for the total plan for 1996, 1995
and 1994 is summarized as follows:
1996 1995 1994
----------------------------------
(IN THOUSANDS)
Service cost..................... $157 $151 $116
Interest cost.................... 280 305 275
----------------------------------
$437 $456 $391
==================================
The funded status of the plan as of December 31, 1996 and 1995 was as follows:
DECEMBER 31
1996 1995
-----------------------
(IN THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees...................................... $(2,498) $(2,514)
Active participants:
Retirement eligible........................... (568) (632)
Others........................................ (1,023) (1,035)
-----------------------
(4,089) (4,181)
Unrecognized net (gain) loss..................... (348) 67
-----------------------
Accrued postretirement benefit cost.............. $(4,437) $(4,114)
=======================
The annual assumed rate of increase in the per capita cost of covered benefits
is 10% for 1996 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, 1996 by
$191,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1996 by $54,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75%, 7.5% and 8.5% at December 31, 1996, 1995 and 1994,
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
31
<PAGE>
Statement of Additional Information
fully vested, and Company contributions are vested over a five-year period.
Company contributions to the profit-sharing and savings plan charged to
operations were $1,783,000, $1,567,000 and $1,075,000 for 1996, 1995 and 1994,
respectively.
4. REINSURANCE
The Company assumes and cedes reinsurance with other companies to provide for
greater diversification of business, allow management to control exposure to
potential losses arising from large risks, and provide additional capacity for
growth. The Company's maximum retention on any one life is $500,000. The Company
does not use financial or surplus relief reinsurance. Life insurance in force
ceded at December 31, 1996 and 1995 was $4.0 and $3.9 billion, respectively.
Principal reinsurance transactions are summarized as follows:
1996 1995 1994
--------------------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid................. $25,442 $5,305 $3,980
============================================
Commissions received.......... $ 4,669 $ 230 $1,443
============================================
Claim recoveries.............. $ 5,235 $3,089 $2,485
============================================
In the accompanying financial statements, premiums, benefits, settlement
expenses and deferred policy acquisition costs are reported net of reinsurance
ceded; policy liabilities and accruals are reported gross of reinsurance ceded.
The Company remains liable to policyholders if the reinsurers are unable to meet
their contractual obligations under the applicable reinsurance agreements. To
minimize its exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of reinsurers. At December 31, 1996 and
1995, the Company had established a receivable totaling $92,197,000 and
$78,877,000 for reserve credits, reinsurance claims and other receivables from
its reinsurers. The amount of reinsurance assumed is not significant.
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.
In prior years, the Company was involved in litigation arising out of its
participation from 1986 to 1990 in a reinsurance pool. The litigation related to
the pool manager and a reinsurance intermediary placing major medical business
in the pool without authorization. During 1993, the Company settled the major
medical portion of the pool's activity with no significantly adverse effect on
the Company. The nonmajor medical business placed in the pool has experienced
significant losses. At December 31, 1996, the Company believes adequate
provision has been made for such losses.
32
<PAGE>
Statement of Additional Information
5. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return. The
provision for income taxes includes current federal income tax expense or
benefit and deferred income tax expense or benefit due to temporary differences
between the financial reporting and income tax bases of assets and liabilities.
Such differences relate principally to liabilities for future policy benefits
and accumulated contract values, deferred compensation, deferred policy
acquisition costs, postretirement benefits, deferred selling commissions,
depreciation expense and unrealized appreciation (depreciation) on securities
available-for-sale.
Income tax expense consists of the following for 1996, 1995 and 1994:
1996 1995 1994
--------------------------------------------------
(IN THOUSANDS)
Current............... $12,528 $15,200 $11,361
Deferred.............. 8,343 2,727 5,768
==================================================
$20,871 $ 17,927 $ 17,129
==================================================
The provision for income taxes differs from the amount computed at the statutory
federal income tax rate due primarily to dividends received deductions and tax
credits.
Income taxes paid by the Company were $16,213,000, $11,551,000, and $14,634,000
during 1996, 1995, and 1994, respectively.
Net deferred tax assets or liabilities consist of the following:
1996 1995
------------------------------
(IN THOUSANDS)
Deferred tax assets:
Future policy benefits..................... $20,487 $17,780
Net unrealized depreciation on
securities available-for-sale............ 1,409 -
Guaranty fund assessments.................. 1,400 1,260
Employee benefits.......................... 4,852 3,836
Other...................................... 4,620 3,662
------------------------------
Total deferred tax assets..................... 32,768 26,538
Deferred tax liabilities:
Deferred policy acquisition costs.......... 69,647 50,580
Net unrealized appreciation on
securities available-for-sale............ - 12,539
Deferred gain on investments............... 10,446 8,681
Depreciation............................... 2,061 988
Other...................................... 5,461 7,409
------------------------------
Tax deferred tax liabilities.................. 87,615 80,197
------------------------------
Net deferred tax liabilities.................. $54,847 $53,659
==============================
33
<PAGE>
Statement of Additional Information
6. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosures of fair value information about financial instruments, whether
recognized or not recognized in a company's balance sheet, for which it is
practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under all
insurance contracts are taken into consideration in the Company's overall
management of interest rate risk that minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings in excess of interest credited) to
be earned in the future on investment-type products or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------------- ---------------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------------------------- ---------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (NOTE 2)................. $2,333,111 $2,333,770 $2,314,507 $2,327,646
Equity securities (NOTE 2)................ 89,188 89,188 21,880 21,880
Mortgage loans............................ 66,611 69,004 74,342 80,175
Policy loans.............................. 106,822 108,685 100,452 104,077
Short-term investments.................... - - 992 992
Cash and cash equivalents................. 8,310 8,310 16,788 16,788
Accrued investment income................. 32,161 32,161 30,623 30,623
Futures contracts......................... - - - (737)
Interest rate exchange agreements - (282) - (2,291)
Liabilities:
Supplementary contracts without life
contingencies........................... 33,225 33,803 34,363 35,387
Individual and group annuities............ 1,942,697 1,767,692 1,922,901 1,774,642
Long-term debt............................ 56,000 67,683 - -
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment under several operating lease agreements.
Total expense for all operating leases amounted to $1,904,000, $1,302,000 and
$1,450,000 for 1996, 1995 and 1994, respectively. The Company has aggregate
future lease commitments
34
<PAGE>
Statement of Additional Information
at December 31, 1996 of $4,337,000 for noncancelable operating leases consisting
of $992,000 in 1997, $941,000 in 1998, $829,000 in 1999, $818,000 in 2000 and
$757,000 in 2001 and thereafter.
In addition, in 2001, under the terms of an operating lease for an airplane, the
Company has the option to renew the lease for another five years, purchase the
airplane for approximately $4.7 million, or return the airplane to the lessor
and pay a termination charge of approximately $3.7 million. If the option to
renew the lease for five years is selected, at the end of the five-year period
(2006), the Company has the option to purchase the airplane for approximately
$3.4 million or return the airplane to the lessor and pay a termination charge
of approximately $2.7 million.
The economy and other factors have caused an increase in the number of insurance
companies that have required regulatory supervision. Guaranty fund assessments
are levied on the Company by life and health guaranty associations in most
states in which it is licensed to cover losses of policyholders of insolvent or
rehabilitated insurers. In some states, these assessments can be partially
recovered through a reduction in future premium taxes. The Company cannot
predict whether and to what extent legislative initiatives may affect the right
to offset. Based on information from the National Organization of Life and
Health Guaranty Association and information from the various state guaranty
associations, the Company believes that it is probable that these insolvencies
will result in future assessments. The Company regularly evaluates its reserve
for these insolvencies and updates its reserve based on the Company's
interpretation of information recently received. The associated costs for a
particular insurance company can vary significantly based on its premium volume
by line of business in a particular state and its potential for premium tax
offset. The Company accrued and charged to expense $1,574,000, $2,302,000 and
$237,000 for 1996, 1995 and 1994, respectively. At December 31, 1996, the
Company has reserved $4,000,000 to cover current and estimated future
assessments net of related premium tax credits.
8. LONG-TERM DEBT
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. No amounts were outstanding at
December 31, 1996.
In February 1996, the Company negotiated three separate $5,000,000 advances with
the Federal Home Loan Bank of Topeka. The advances are due February 27, 1998,
February 26, 1999 and February 28, 2001 and carry interest rates of 5.59%, 5.76%
and 6.04%, respectively.
In May 1996, the Company issued $50 million of 8.75% surplus notes maturing on
May 15, 2016. The surplus notes were issued pursuant to Rule 144A under the
Securities Act of 1933. The surplus notes have repayment conditions and
restrictions whereby each payment of interest on or principal of the surplus
notes may be made only with the prior approval of the Kansas Insurance
Commissioner and only out of surplus funds that the Kansas Insurance
Commissioner determines to be available for such payment under the Kansas
Insurance Code.
9. RELATED-PARTY TRANSACTIONS
The Company owns shares of mutual funds managed by Security Management Company,
LLC with a net asset value totaling $60,559,000 and $5,364,000 at December 31,
1996 and 1995, respectively.
35
<PAGE>
Statement of Additional Information
10. ASSETS HELD IN SEPARATE ACCOUNTS
Separate account assets were as follows:
1996 1995
-------------------------------
(IN THOUSANDS)
Premium and annuity considerations
for the variable annuity
products and variable universal
life product for which the
contractholder, rather than the
Company, bears the investment risk........ $2,793,911 $2,051,292
Assets of the separate accounts
owned by the Company, at
fair value................................ 9,016 14,014
-------------------------------
$2,802,927 $2,065,306
===============================
11. STATUTORY INFORMATION
The Company and its insurance subsidiary prepare statutory-basis financial
statements in accordance with accounting practices prescribed or permitted by
the Kansas and New York Insurance regulatory authorities, respectively.
Accounting practices used to prepare statutory-basis financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners (NAIC), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed; such practices may differ from state to state, may differ from
company to company within a state and may change in the future. Statutory
capital and surplus of the insurance operations are $286,689,000 and
$207,669,000 at December 31, 1996 and 1995, respectively.
36
<PAGE>
T. ROWE PRICE
VARIABLE ANNUITY SERVICE CENTER
P.O. BOX 750440
TOPEKA, KANSAS 66675-0440
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) 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
(5) Form of Application(c)
(6) (a) Composite of Articles of Incorporation of SBL(c)
(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 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
(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).
(c) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 4 under the Securities Act of
1933 and Amendment No. 5 under the Investment Company Act of 1940 to
Registration Statement No. 33-83238 (January 2, 1997).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDERSS WITH DEPOSITOR
- ------------------ ---------------------
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
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
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 (and Interim
Chief Investment Officer)
Kathleen R. Blum* Vice President - Administration
*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 0.0004%
of the voting power of SBL. The Registrant is a segregated asset account of SBL.
<PAGE>
The following chart indicates the persons controlled by or under common
control with T. Rowe Price Variable Annuity Account or SBL:
PERCENT OF
NAME JURISDICTION VOTING SECURITIES
OF INCORPORATION OWNED BY SBL
Security Benefit Life Insurance Company Kansas -----
(Mutual Life Insurance Company)
Security Benefit Group, Inc. (Holding Kansas 100%
Company)
Security Management Company, LLC Kansas 100%
(Investment Adviser)
Security Distributors, Inc. Kansas 100%
(Broker/Dealer, Principal Underwriter
of Mutual Funds)
Security Benefit Academy, Inc. (Daycare Kansas 100%
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, Inc. Kansas 100%
First Security Benefit Life Insurance New York 100%
and Annuity Company of New York
<PAGE>
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:
Security Equity Fund 15.9% Security Income Fund 7.6%
Corporate Bond Series
Security Growth and Income Fund 40.1% SBL Fund 100%
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 1, 1997, there were 2,663 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>
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>
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>
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)
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
------------------ ------------------
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
<PAGE>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
------------------ ------------------
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
*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>
(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.
(e) Registrant represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Registrant.
<PAGE>
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(b) 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 23rd day of April, 1997.
SIGNATURES AND TITLES
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,
Director General Counsel and 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
Melanie S. Fannin COMPANY (THE DEPOSITOR)
Director
By: HOWARD R. FRICKE
--------------------------------------
William W. Hanna Howard R. Fricke,
Director Chairman of the Board, President
Chief Executive Officer and Director
John E. Hayes, Jr.
Director By: DONALD J. SCHEPKER
--------------------------------------
Donald J. Schepker,
Laird G. Noller Senior Vice President,
Director Chief Financial Officer and Treasurer
(ATTEST): ROGER K. VIOLA
Frank C. Sabatini ---------------------------------
Director Roger K. Viola,
Senior Vice President,
General Counsel and Secretary
Robert C. Wheeler
Director Date: April 23, 1997
<PAGE>
EXHIBIT INDEX
(1) None
(2) None
(3) None
(4) Sample Contract
(5) None
(6) (a) None
(b) 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
(14) Financial Data Schedules
(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
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration for the Purchase Payments and the attached application,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, HE OR SHE MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE FIXED ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Payout Date or
termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Payout Date according to the
Contract provisions.
* Annuity Payments begin on the Annuity Payout Date using the method specified
in this Contract.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBG LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750440, Topeka, KS 66675-0440
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
1-800-469-6587 FOR CUSTOMER SERVICE
Form V6021 (4-94)
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
CONTRACT SPECIFICATIONS ............................................... 3
DEFINITIONS ........................................................... 4-6
GENERAL PROVISIONS .................................................... 7, 8
THE CONTRACT ....................................................... 7
COMPLIANCE ......................................................... 7
MISSTATEMENT OF AGE AND SEX ........................................ 7
EVIDENCE OF SURVIVAL ............................................... 7
INCONTESTABILITY ................................................... 7
ASSIGNMENT ......................................................... 7
EXCHANGES .......................................................... 8
CLAIMS OF CREDITORS ................................................ 8
NONFORFEITURE VALUES ............................................... 8
PARTICIPATION ...................................................... 8
STATEMENTS ......................................................... 8
OWNERSHIP, ANNUITANT AND
BENEFICIARY PROVISIONS ................................................ 9
OWNERSHIP .......................................................... 9
JOINT OWNERSHIP .................................................... 9
ANNUITANT .......................................................... 9
PRIMARY AND SECONDARY BENEFICIARIES ................................ 9
OWNERSHIP AND BENEFICIARY CHANGES .................................. 9
PURCHASE PAYMENT PROVISIONS ........................................... 10
FLEXIBLE PURCHASE PAYMENTS ......................................... 10
PURCHASE PAYMENT LIMITATIONS ....................................... 10
PURCHASE PAYMENT ALLOCATION ........................................ 10
PLACE OF PAYMENT ................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS ................................. 10-12
CONTRACT VALUE ..................................................... 10
FIXED ACCOUNT CONTRACT VALUE ....................................... 10
FIXED ACCOUNT INTEREST CREDITING ................................... 11
SEPARATE ACCOUNT CONTRACT VALUE .................................... 11
ACCUMULATION UNIT VALUE ............................................ 11
DETERMINING ACCUMULATION UNITS ..................................... 11
MORTALITY AND EXPENSE RISK CHARGE .................................. 12
PREMIUM TAX EXPENSE ................................................ 12
MUTUAL FUND EXPENSES ............................................... 12
WITHDRAWAL PROVISIONS ................................................. 12, 13
WITHDRAWALS ........................................................ 12
WITHDRAWAL VALUE ................................................... 13
SYSTEMATIC WITHDRAWALS ............................................. 13
DATE OF REQUEST .................................................... 13
PAYMENT OF WITHDRAWAL BENEFITS ..................................... 13
DEATH BENEFIT PROVISIONS .............................................. 14, 15
DEATH BENEFIT ...................................................... 14
PROOF OF DEATH ..................................................... 14
DISTRIBUTION RULES ................................................. 14, 15
ANNUITY PAYMENT PROVISIONS ............................................ 15-19
ANNUITY PAYOUT DATE ................................................ 15
CHANGE OF ANNUITY PAYOUT DATE ...................................... 15
ANNUITY PAYOUT AMOUNT .............................................. 15
ANNUITY TABLES ..................................................... 16
ANNUITY PAYMENTS ................................................... 16
CHANGE OF ANNUITY OPTION ........................................... 16
FIXED ANNUITY PAYMENTS ............................................. 16
VARIABLE ANNUITY PAYMENTS .......................................... 16
ANNUITY UNITS ...................................................... 16, 17
NET INVESTMENT FACTOR .............................................. 17
ALTERNATE ANNUITY OPTION RATES ..................................... 17
ANNUITY OPTIONS .................................................... 18, 19
ANNUITY TABLES ........................................................ 20
AMENDMENTS OR ENDORSEMENTS, IF ANY
-2-
15-60210-00
BP 602111
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: CONTRACT NUMBER:
OWNER DATE OF BIRTH: CONTRACT DATE:
JOINT OWNER NAME: ISSUE DATE:
JOINT OWNER DATE OF BIRTH: ANNUITY PAYOUT DATE:
ANNUITANT NAME: PLAN:
ANNUITANT DATE OF BIRTH: ASSIGNMENT:
ANNUITANT GENDER:
PRIMARY BENEFICIARY: SECONDARY BENEFICIARY
NAME: See Application or subsequent
change form
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT ..............................
MINIMUM SUBSEQUENT PURCHASE PAYMENTS ..................
investment program
MINIMUM SYSTEMATIC WITHDRAWAL ......................... $100
MORTALITY AND EXPENSE RISK CHARGE ..................... .55% Annually
GUARANTEED RATE ....................................... 3%
ANNUITY OPTION ........................................
SUBACCOUNTS:
New America Growth Subaccount
International Stock Subaccount
Mid-Cap Growth Subaccount
Equity Income Subaccount
Personal Strategy Balanced Subaccount
Limited-Term Bond Subaccount
Prime Reserve Subaccount
METHOD FOR DEDUCTIONS:
Deductions for any Premium Taxes will be allocated proportionately to the
Owner's Contract Value in the Subaccounts and the Fixed Account.
* The Annuity Payout Date and Annuity Option are assigned automatically and may
be changed by the Owner prior to the Annuity Payout Date. See "Change of
Annuity Payout Date" and "Change of Annuity Option."
-3-
V6021 A (9-96)
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
An Account is one of the Subaccounts or the Fixed Account.
ACCUMULATION UNIT
The Accumulation Unit is a unit of measure. It is used to
compute the Separate Account Contract Value prior to the
Annuity Payout Date. It is also used to compute the
Variable annuity Payments for Annuity Options 5 through 7.
ANNUITANT
The Annuitant is the person named by the Owner on whose
life the Annuity Payments depend for Annuity Options 1
through 4. The Annuitant receives Annuity Payments under
this Contract. Please see "Annuitant" provisions on page 9.
ANNUITY OPTION
An Annuity Option is a set of provisions that form the
basis for making Annuity Payments. The Annuity Option is
set prior to the Annuity Payout Date. Please see "Annuity
Options" on pages 18 and 19.
ANNUITY PAYOUT DATE
The Annuity Payout Date is the date on which Annuity
Payments are scheduled to begin. This date may be changed
by the Owner. The Annuity Payout Date is shown on Page 3.
Please see "Annuity Payout Date" on page 15.
ANNUITY UNIT
The Annuity Unit is a unit of measure used to compute
Variable Annuity Payments for Annuity Options 1 through 4.
AUTOMATIC EXCHANGES
Automatic Exchanges are Exchanges among the Subaccounts and
the Fixed Account. Such exchanges are made automatically on
a periodic basis by the Company at the written request of
the Owner. The Company reserves the right to discontinue,
modify or suspend Automatic Exchanges.
COMPANY
The Company is Security Benefit Life Insurance Company,
P.O. Box 750440, Topeka, Kansas 66675-0440.
CONTRACT ANNIVERSARY
A Contract Anniversary is a 12-month anniversary of the
Contract Date.
CONTRACT DATE
The Contract Date is the date the Contract begins. The
Contract Date is shown on page 3.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CURRENT INTEREST
The Company may in its discretion pay Current Interest on
the Fixed Account at a rate that exceeds the Guaranteed
Rate shown on page 3. The Company will declare the rate of
Current Interest, if any, from time to time.
DESIGNATED BENEFICIARY
Upon the death of the Owner or Joint Owner, the Designated
Beneficiary will be the first person on the following list
who is alive on the date of death:
1. Owner;
2. Joint Owner;
3. Primary Beneficiary;
4. Secondary Beneficiary;
5. Annuitant; and
6. the Owner's estate if no one listed above is alive.
-4-
V6021 B (4-94)
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
DESIGNATED
BENEFICIARY (Cont'd)
The Designated Beneficiary receives a death benefit upon
the death of the Owner. Please see "Ownership, Annuitant,
and Beneficiary Provisions" on page 9 and "Death Benefit
Provisions" on pages 14 and 15.
FIXED ACCOUNT
The Fixed Account is part of the Company's general account.
The Company manages the general account and guarantees that
it will credit interest on Fixed Account Contract Value at
an annual rate at least equal to the Guaranteed Rate. This
Rate is shown on page 3.
GUARANTEE PERIOD
Current Interest, if declared, is fixed for rolling periods
of one or more years, referred to as Guarantee Periods. The
Company may offer Guarantee Periods of different durations.
The Guarantee Period that applies to any Fixed Account
Contract Value: (1) starts on the date that such Contract
Value is allocated to the Fixed Account pursuant to: (a) a
Purchase Payment Received by the Company; or (b) an
Exchange to the Fixed Account; and (2) ends on the last day
of the same month in the year in which the Guarantee Period
expires. When any Guarantee Period expires, a new Guarantee
Period shall start for such Contract Value on the date that
follows such expiration date. Such period shall end on the
immediately preceding date in the year in which the
Guarantee Period expires. For example, assuming a one-year
Guarantee Period, Contract Value exchanged to the Fixed
Account on June 1 would have a Guarantee Period starting on
that date and ending on June 30 of the following year. A
new Guarantee Period for such Contract Value would start on
July 1 of that year and end on June 30 of the following
year.
HOME OFFICE
The address of the Company's Home Office is Security
Benefit Life Insurance Company, P.O. Box 750440, Topeka,
Kansas 66675-0440.
ISSUE DATE
The Issue Date is the date the Company uses to determine
the date the Contract becomes incontestable. The Issue Date
is shown on Page 3. Please see "Incontestability" on page
7.
JOINT OWNER
The Joint Owner, if any, shares an undivided interest in
the entire Contract with the Owner. The Joint Owner, if
any, is named on page 3. Please see "Joint Ownership"
provisions on page 9.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a
trust or corporation.
OWNER
The Owner is the person who has all rights under the
Contract. The Owner is named on page 3. Please see
"Ownership" provisions on page 9.
PREMIUM TAX
Any Premium Taxes levied by a state or other governmental
entity will be charged against this Contract. When Premium
Tax is assessed after the Purchase Payment is applied, it
will be deducted as described on page 3.
PURCHASE PAYMENT
A Purchase Payment is money Received by the Company and
applied to the Contract.
RECEIVED BY THE
COMPANY
The phrase "Received by the Company" means receipt by the
Company in good order at its Home Office, P.O. Box 750440,
Topeka, Kansas 66675-0440.
-5-
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT
The T. Rowe Price Variable Annuity Account is a Separate
Account established and maintained by the Company under
Kansas law. The Separate Account is registered with the
Securities and Exchange Commission under the Investment
Company Act of 1940 as a Unit Investment Trust. It was
established by the Company to support variable annuity
contracts. The Company owns the assets of the Separate
Account and maintains them apart from the assets of its
general account and its other separate accounts. The assets
held in the Separate Account equal to the reserves and
other Contract liabilities with respect to the Separate
Account may not be charged with liabilities arising from
any other business the Company may conduct.
Income and realized and unrealized gains and losses from
assets in the Separate Account are credited to, or charged
against, the Separate Account without regard to the income,
gains or losses from the Company's general account or its
other separate accounts. The Separate Account is divided
into Subaccounts shown on page 3. Income and realized and
unrealized gains and losses from assets in each Subaccount
are credited to, or charged against, the Subaccount without
regard to income, gains or losses in the other Subaccounts.
The Company has the right to transfer to its general
account any assets of the Separate Account that are in
excess of the reserves and other Contract liabilities with
respect to the Separate Account. The values of the assets
in the Separate Account on each Valuation Date are
determined at the end of each Valuation Date.
SUBACCOUNT NET
ASSET VALUE
The Subaccount Net Asset Value is equal to: (1) the net
asset value of all shares of the underlying mutual fund
held by the Subaccount; plus (2) any cash or other assets;
less (3) all liabilities of the Subaccount.
SUBACCOUNTS
The Separate Account is divided into Subaccounts which
invest in shares of mutual funds. Each Subaccount may
invest its assets in a separate class or series of a
designated mutual fund or funds. The Subaccounts are shown
on page 3. Subject to the regulatory requirements then in
force, the Company reserves the right to:
1. change or add designated mutual funds or other
investment vehicles;
2. add, remove or combine Subaccounts;
3. add, delete or make substitutions for securities that
are held or purchased by the Separate Account or any
Subaccount;
4. operate the Separate Account as a management investment
company;
5. combine the assets of the Separate Account with other
Separate Accounts of the Company or an affiliate
thereof;
6. restrict or eliminate any voting rights of the Owner
with respect to the Separate Account or other persons
who have voting rights as to the Separate Account; and
7. terminate and liquidate any Subaccount.
If any of these changes result in a material change to the
Separate Account or a Subaccount, the Company will notify
the Owner of the change. The Company will not change the
investment policy of any Subaccount in any material respect
without complying with the filing and other procedures of
the insurance regulators of the state of issue.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange
and the Company's Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one
Valuation Date to the next Valuation Date.
-6-
V6021 C (4-94)
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company
consists of this Contract, the attached Application, and
any Amendments, Endorsements or Riders to the Contract. All
statements made in the Application will, in the absence of
fraud, as ruled by a court of competent jurisdiction, be
deemed representations and not warranties. The Company will
use no statement made by or on behalf of the Owner or the
Annuitant to void this Contract unless it is in the written
Application. Any change in the Contract can be made only
with the written consent of the President, a Vice
President, or the Secretary of the Company.
The Purchase Payment(s) and the Application must be
acceptable to the Company under its rules and practices. If
they are not, the Company's liability shall be limited to a
return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the
provisions of this Contract to comply with or give the
Owner the benefit of any federal or state statute, rule or
regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal
Revenue Code or the laws of any state. The Company will
provide the Owner with a copy of any such change and will
also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered.
MISSTATEMENT OF AGE
AND SEX
If the age or sex of the Annuitant has been misstated,
payments shall be adjusted, when allowed by law, to the
amount which would have been provided for the correct age
or sex. Proof of the age of an Annuitant may be required at
any time, in a form suitable to the Company. If payments
have already commenced and the misstatement has caused an
underpayment, the full amount due will be paid with the
next scheduled payment. If the misstatement has caused an
overpayment, the amount due will be deducted from one or
more future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee
being alive on a given date, proof that the payee is living
may be required by the Company. Such proof must be in a
form accepted by the Company, and may be required prior to
making the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in
force for two years from the Issue Date during the life of
the Owner.
ASSIGNMENT
Please refer to page 3 to see if this Contract may be
assigned. If it may be assigned, no Assignment under this
Contract is binding unless Received by the Company in
writing. The Company assumes no responsibility for the
validity, legality, or tax status of any Assignment. The
Assignment will be subject to any payment made or other
action taken by the Company before the Assignment is
Received by the Company. Once filed, the rights of the
Owner, Annuitant and Beneficiary are subject to the
Assignment. Any claim is subject to proof of interest of
the assignee.
-7-
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
EXCHANGES
The Owner may Exchange Contract Value among the Fixed
Account and Subaccounts subject to the following.
The Owner may make only six Exchanges per Contract Year.
Exchanges are not allowed within 30 days of the Annuity
Payout Date. Automatic Exchanges are not included in the
six Exchanges allowed per Contract Year. After the Annuity
Payout Date, for Annuity Options 1 through 4, the Owner may
Exchange Contract Value only among Subaccounts.
The Company reserves the right to: (1) limit the amount
that may be subject to Exchanges; (2) limit the amount
remaining in an account after an Exchange; (3) waive or
limit the number of Exchanges allowed each Contract Year;
(4) impose conditions on the right to Exchange; and (5)
suspend Exchanges. Exchanges must be at least $500 or, if
less, the remaining balance in the Fixed Account or a
Subaccount.
Contract Value may be exchanged from the Fixed Account
only: (1) during the calendar month in which the applicable
Guarantee Period expires; and (2) pursuant to an Automatic
Exchange. Exchanges of Fixed Account Contract Value shall
be made: (1) first from Fixed Account Contract Value for
which the Guarantee Period expires during the calendar
month in which the Exchange is effected; (2) then in the
order that starts with Fixed Account Contract Value which
has the longest amount of time before its Guarantee Period
expires; and (3) ends with that which has the least amount
of time before its Guarantee Period expires.
The Company will effect an Exchange to or from a Subaccount
on the basis of Accumulation Unit Value (or Annuity Unit
Value) determined at the end of the Valuation Period in
which the Exchange is effected. The Company will effect an
Exchange from the Fixed Account on the basis of Fixed
Account Contract Value at the end of the Valuation Period
in which the Exchange is effected.
The Company reserves the right to delay Exchanges from the
Fixed Account for up to 6 months as required by most
states. The Company will inform you if there will be a
delay.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract
are exempt from the claims of creditors of the Owner to the
extent allowed by law.
NONFORFEITURE
VALUES
The Death Benefits, Withdrawal Values and Annuity Payout
Values will at least equal the minimum required by law.
PARTICIPATION
The Company is a mutual life insurance company. Therefore,
it pays dividends on some of its contracts. However, the
Company does not expect dividends to become payable on this
Contract. At the end of each Contract Year the Company will
determine the Contract's dividend, if any. The Owner may
choose to have it: (1) added to the Contract Value; or (2)
paid in cash. If no choice is made, any dividend will be
added to the Contract Value.
STATEMENTS
At least once each Contract Year the Owner shall be sent a
statement including the current Contract Value and any
other information required by law. The Owner may send a
written request for a statement at other intervals. The
Company may charge a reasonable fee for such statements.
-8-
V6021 D (4-94)
<PAGE>
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OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP
During the Owner's lifetime, all rights and privileges
under the Contract may be exercised only by the Owner. If
the purchaser names someone other than himself or herself
as Owner, the purchaser has no rights in the Contract. No
Owner may be older than age 85 on the Contract Date.
JOINT OWNERSHIP
If a Joint Owner is named in the application, then the
Owner and Joint Owner share an undivided interest in the
entire Contract as joint tenants with rights of
survivorship. When an Owner and Joint Owner have been
named, the Company will honor only requests for changes and
the exercise of other Ownership rights made by both the
Owner and Joint Owner. When a Joint Owner is named, all
references to "Owner" throughout this Contract should be
construed to mean both the Owner and Joint Owner, except
for the "Statements" provision on page 8 and the "Death
Benefit Provisions" on pages 14 and 15.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the
Annuitant prior to the Annuity Payout Date. The request for
this change must be made in writing and Received by the
Company at least 30 days prior to the Annuity Payout Date.
No Annuitant may be named who is more than 85 years old on
the Contract Date. When the Annuitant dies prior to the
Annuity Payout Date, the Owner must name a new Annuitant
within 30 days or, if sooner, by the Annuity Payout Date,
except where the Owner is a Nonnatural Person. If a new
Annuitant is not named, the Owner becomes the Annuitant.
PRIMARY AND
SECONDARY
BENEFICIARIES
The Primary Beneficiary and any Secondary Beneficiary are
named on page 3. The Owner may change any Beneficiary as
described in "Ownership and Beneficiary Changes" below. If
the Primary Beneficiary dies prior to the Owner, the
Secondary Beneficiary becomes the Primary Beneficiary.
Unless the Owner directs otherwise, when there are two or
more Primary Beneficiaries, they will receive equal shares.
OWNERSHIP AND
BENEFICIARY CHANGES
Subject to the terms of any existing Assignment, the Owner
may name a new Owner, a new Primary Beneficiary or a new
Secondary Beneficiary. Any new choice of Owner, Primary
Beneficiary or Secondary Beneficiary will revoke any prior
choice. Any change must be made in writing and recorded at
the Home Office. The change will become effective as of the
date the written request is signed, whether or not the
Owner is living at the time the change is recorded. A new
choice of Primary Beneficiary or Secondary Beneficiary will
not apply to any payment made or action taken by the
Company prior to the time it was recorded. The Company may
require the Contract be returned so these changes may be
made.
-9-
<PAGE>
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PURCHASE PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
FLEXIBLE PURCHASE
PAYMENTS
The Contract becomes in force when the initial Purchase
Payment is applied. The Owner is not required to continue
Purchase Payments in the amount or frequency originally
planned. The Owner may: (1) increase or decrease the amount
of Purchase Payments, subject to any Contract or
administrative limits; or (2) change the frequency of
Purchase Payments. A change in frequency or amount of
Purchase Payments does not require a written request.
PURCHASE PAYMENT
LIMITATIONS
Total Purchase Payments to the Contract may not be greater
than $1,000,000 without prior approval by the Company. The
Minimum Subsequent Purchase Payment amount is shown on page
3.
PURCHASE PAYMENT
ALLOCATION
Purchase Payments may be allocated among the Fixed Account
and the Subaccounts. The allocations may be a whole dollar
amount or whole percentage. However, no less than $25 per
Purchase Payment may be allocated to any Account. The Owner
may change the allocations by written notice to the
Company.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to
the Company at its Home Office. Purchase Payments after the
first Purchase Payment are applied as of the end of the
Valuation Period during which they are Received by the
Company.
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CONTRACT VALUE AND EXPENSE PROVISIONS
- --------------------------------------------------------------------------------
CONTRACT VALUE
On any Valuation Date, the Contract Value is the sum of:
(1) the Separate Account Contract Value; and (2) the Fixed
Account Contract Value. At any time after the first
Contract Year and before the Annuity Payout Date, the
Company reserves the right to pay to the Owner the Contract
Value as a lump sum if it is below $2,000.
FIXED ACCOUNT
CONTRACT VALUE
On any Valuation Date, the Fixed Account Contract Value is
equal to the first Purchase Payment allocated under the
Contract to the Fixed Account:
PLUS:
1. any other Purchase Payments allocated under the Contract
to the Fixed Account;
2. any Exchanges from the Separate Account to the Fixed
Account; and
3. any interest credited to the Fixed Account.
LESS:
1. any Withdrawals deducted from the Fixed Account;
2. any Exchanges from the Fixed Account to the Separate
Account;
3. any applicable Premium Taxes;
4. any Fixed Account Contract Value which is applied to any
of Annuity Options 1 through 4; and
5. any Annuity Payments made under Annuity Options 5
through 7.
-10-
V6021 E (4-94)
<PAGE>
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CONTRACT VALUE AND EXPENSE PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
FIXED ACCOUNT
INTEREST CREDITING
The Company shall credit interest on Fixed Account Contract
Value at an annual rate at least equal to the Guaranteed
Rate shown on page 3. Also, the Company may in its sole
judgment credit Current Interest at a rate in excess of the
Guaranteed Rate. The rate of Current Interest, if declared,
shall be fixed during the Guarantee Period. Fixed Account
Contract Value shall earn Current Interest during each
Guarantee Period at the rate, if any, declared by the
Company on the first day of the Guarantee Period.
The Company may credit Current Interest on Contract Value
that was allocated or exchanged to the Fixed Account during
one period at a different rate than amounts allocated or
exchanged to the Fixed Account in another period. Also, the
Company may credit Current Interest on Fixed Account
Contract Value at different rates based upon the length of
the Guarantee Period. Therefore, at any time, portions of
Fixed Account Contract Value may be earning Current
Interest at different rates based upon the period during
which such portions were allocated or exchanged to the
Fixed Account and the length of the Guarantee Period.
SEPARATE ACCOUNT
CONTRACT VALUE
On any Valuation Date, the Separate Account Contract Value
is the sum of the then current value of the Accumulation
Units allocated to each Subaccount for this Contract.
ACCUMULATION UNIT
VALUE
The initial Accumulation Unit Value for each Subaccount was
set at $10. Other Accumulation Unit Values are found on
each Valuation Date by dividing (1) by (2) where:
1. is equal to:
a. the Subaccount Net Asset Value determined at the end
of the current Valuation Period; plus
b. any dividends declared by the Subaccount's underlying
mutual fund that are not part of the Subaccount Net
Asset Value; less
c. the accrued Mortality and Expense Risk Charge; and
d. any taxes for which the Company has reserved which
the Company deems to have resulted from the operation
of the Subaccount.
2. is the number of Accumulation Units at the start of the
Valuation Period.
The Accumulation Unit Value may increase or decrease from
one Valuation Period to the next.
DETERMINING
ACCUMULATION
UNITS
The number of Accumulation Units allocated to a Subaccount
under this Contract is found by dividing: (1) the amount
allocated to the Subaccount; by (2) the Accumulation Unit
Value for the Subaccount at the end of the Valuation Period
during which the amount is applied under the Contract. The
number of Accumulation Units allocated to a Subaccount
under the Contract will not change as a result of
investment experience. Events that change the number of
Accumulation Units are:
1. Purchase Payments that are applied to the Subaccount;
2. Contract Value that is Exchanged into or out of the
Subaccount;
3. Withdrawals that are deducted from the Subaccount; and
4. Premium Taxes that are deducted from the Subaccount.
-11-
<PAGE>
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CONTRACT VALUE AND EXPENSE PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
MORTALITY AND
EXPENSE RISK
CHARGE
The Company will deduct the Mortality and Expense Risk
Charge shown on page 3. This charge will be computed and
deducted from each Subaccount on each Valuation Date. This
charge is factored into the Accumulation Unit and Annuity
Unit Values on each Valuation Date.
PREMIUM TAX EXPENSE
The Company reserves the right to deduct Premium Tax when
due or any time thereafter. Any applicable Premium Taxes
will be allocated as described on page 3.
MUTUAL FUND EXPENSES
Each Subaccount invests in shares of a mutual fund. The net
asset value per share of each underlying fund reflects the
deduction of any investment advisory and administration
fees and other expenses of the fund. These fees and
expenses are not deducted from the assets of a Subaccount,
but are paid by the underlying funds. The Owner indirectly
bears a pro rata share of such fees and expenses. An
underlying fund's fees and expenses are not specified or
fixed under the terms of this Contract.
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
WITHDRAWALS
A full Withdrawal of the Contract Value or partial
Withdrawal of Separate Account Contract Value is allowed at
any time. Partial Withdrawals of Fixed Account Contract
Value are, however, restricted as described below. This
provision is subject to any federal or state Withdrawal
restrictions.
A partial Withdrawal of Fixed Account Contract Value may be
made only: (1) pursuant to Systematic Withdrawals; (2)
during the calendar month in which the applicable Guarantee
Period expires; and (3) once per Contract Year in an amount
up to the greater of $5,000 or 10 percent of the Fixed
Account Contract Value at the time of the partial
Withdrawal.
Upon the Owner's request for a full Withdrawal, the Company
will pay the Withdrawal Value in a lump sum.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by the
Company in writing or under other methods allowed by the
Company.
2. The Owner must apply: (a) while this Contract is in
force; and (b) prior to the Annuity Payout Date.
3. The amount Withdrawn must be at least $500.00 except for
Systematic Withdrawals, as discussed below, or when
terminating the Contract.
A partial Withdrawal request must state the allocations for
deducting the Withdrawal from each Account. Withdrawals of
Fixed Account Contract Value shall be made: (1) first from
Fixed Account Contract Value for which the Guarantee Period
expires during the calendar month in which the Withdrawal
is effected; (2) then in the order that starts with Fixed
Account Contract Value which has the longest amount of time
before its Guarantee Period expires; and (3) ends with that
which has the least amount of time before its Guarantee
Period expires.
-12-
V6021 F (4-94)
<PAGE>
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WITHDRAWAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
WITHDRAWAL VALUE
The Withdrawal Value at any time will be: (1) the Contract
Value; less (2) any Premium Taxes due or paid by the
Company.
SYSTEMATIC
WITHDRAWALS
Systematic Withdrawals are automatic periodic distributions
from the Contract in substantially equal amounts prior to
the Annuity Payout Date. In order to start Systematic
Withdrawals, the Owner must make the request in writing.
The Minimum Systematic Withdrawal is shown on page 3. The
Owner must choose the type of payment and its frequency.
The payment type may be: (1) a percentage of Contract
Value; (2) a specified dollar amount; (3) all earnings in
the Contract; or (4) based upon the life expectancy of the
Owner or the Owner and a Beneficiary. The payment frequency
may be: (1) monthly; (2) quarterly; (3) semiannually; or
(4) annually. Systematic Withdrawals of Fixed Account
Contract Value must provide for payments over a period of
not less than 36 months. Systematic Withdrawals may be
stopped by the Owner upon proper written request Received
by the Company at least 30 days in advance. The Company
reserves the right to stop, modify or suspend Systematic
Withdrawals.
DATE OF
REQUEST
The Company will effect a Withdrawal of Separate Account
Contract Value on the basis of Accumulation Unit Value
determined at the end of the Valuation Period in which all
the required information is Received by the Company.
PAYMENT OF
WITHDRAWAL
BENEFITS
The Company reserves the right to suspend an Exchange or
delay payment of a Withdrawal from the Separate Account for
any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is
restricted; or
3. when an emergency exists as a result of which: (a)
disposal of securities held in the Separate Account is
not reasonably practicable; or (b) it is not reasonably
practicable to fairly value the net assets of the
Separate Account; or
4. during any other period when the Securities and Exchange
Commission, by order, so permits to protect owners of
securities.
Rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions set
forth above exist.
The Company further reserves the right to delay payment of
a Withdrawal from the Fixed Account for up to six months as
required by most states. The Company will notify you if
there will be a delay.
-13-
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
If any Owner dies prior to the Annuity Payout Date, a Death
Benefit will be paid to the Designated Beneficiary when due
Proof of Death and instructions regarding payment are
Received by the Company. If an Owner is a Nonnatural
Person, then the Death Benefit will be paid in the event of
the death of the Annuitant or any joint Owner that is a
natural person prior to the Annuity Payout Date. Further,
if an Owner is a Nonnatural Person, the amount of the death
benefit is based on the age of the Annuitant or any joint
Owner that is a natural person on the Issue Date.
If the age of each Owner was 75 or younger on the Issue
Date, the Death Benefit will be the greatest of: (1) the
sum of all Purchase Payments, less any Premium Taxes due or
paid by the Company and less the sum of all partial
Withdrawals; (2) the Contract Value on the date due Proof
of Death and instructions regarding payment are Received by
the Company, less any Premium Taxes due or paid by the
Company; or (3) the Stepped-Up Death Benefit below.
The Stepped-Up Death Benefit is:
1. the largest Death Benefit on any Contract Anniversary
that is both an exact multiple of five and occurs prior
to the oldest Owner reaching age 76; plus
2. any Purchase Payments received since the applicable
fifth Contract Anniversary; less
3. any reductions caused by Withdrawals since the
applicable fifth Contract Anniversary; less
4. any Premium Taxes due or paid by the Company.
If the age of any Owner on the Issue Date was 76 or older,
the Death Benefit will be: (1) the Contract Value on the
date due Proof of Death and instructions regarding payment
are Received by the Company; less (2) any Premium Taxes due
or paid by the Company.
If a lump sum payment is requested, the payment will be
made in accordance with any laws and regulations that
govern the payment of Death Benefits.
The value of the Death Benefit is determined as of the date
that both Proof of Death and instructions regarding payment
are Received by the Company in good order.
PROOF OF
DEATH
Any of the following will serve as Proof of Death:
1. certified copy of the death certificate;
2. certified decree of a court of competent jurisdiction as
to the finding of death;
3. written statement by a medical doctor who attended the
deceased Owner; or
4. any proof accepted by the Company.
DISTRIBUTION
RULES
The entire Death Benefit with any interest shall be paid
within 5 years after the death of any Owner, except as
provided below. In the event that the Designated
Beneficiary elects an Annuity Option, the length of time
for the payment period may be longer than 5 years if: (1)
the Designated Beneficiary is a natural person; (2) the
Death Benefit is paid out under Annuity Options 1 through
7; (3) payments are made over a period that does not exceed
the life or life expectancy of the Designated Beneficiary;
and (4) Annuity Payments begin within one year of the death
of the Owner. If the deceased Owner's spouse is the sole
Designated Beneficiary, the spouse shall become the sole
Owner of the Contract. He or she may elect to: (1) keep the
Contract in force until the sooner of the spouse's death or
the Annuity Payout Date; or (2) receive the Death Benefit.
-14-
V6021 G (4-94)
<PAGE>
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DEATH BENEFIT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
DISTRIBUTION
RULES (cont'd)
If any Owner dies after the Annuity Payout Date, Annuity
Payments shall continue to be paid at least as rapidly as
under the method of payment being used as of the date of
the Owner's death.
If the Owner is a Nonnatural Person, the distribution rules
set forth above apply in the event of the death of, or a
change in, the Annuitant. This Contract is deemed to
incorporate any provision of Section 72(s) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any
successor provision. This Contract is also deemed to
incorporate any other provision of the Code deemed
necessary by the Company, in its sole judgment, to qualify
this Contract as an annuity. The application of the
distribution rules will be made in accordance with Code
section 72(s), or any successor provision, as interpreted
by the Company in its sole judgment.
The foregoing distribution rules do not apply to a Contract
which is: (1) provided under a plan described in Code
section 401(a); (2) described in Code section 403(b); (3)
an individual retirement annuity or provided under an
individual retirement account or annuity; or (4) otherwise
exempt from the Code section 72(s) distribution rules.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY PAYOUT
DATE
The Owner may choose the Annuity Payout Date at the time of
application. If no Annuity Payout Date is chosen, the
Company will use the later of: (1) the oldest Annuitant's
seventieth birthday; or (2) the tenth Contract Anniversary.
The Annuity Payout Date must be prior to the oldest
Annuitant's ninetieth birthday.
The Annuity Payout Date is the date the first payment will
be made to the Annuitant under any of the Annuity Options.
CHANGE OF ANNUITY
PAYOUT DATE
The Owner may change the Annuity Payout Date. A request for
the change must be made in writing. The written request
must be Received by the Company at least 30 days prior to
the new Annuity Payout Date as well as 30 days prior to the
previous Annuity Payout Date.
ANNUITY PAYOUT
AMOUNT
The Annuity Payout Amount is applied to one or more of the
Annuity Options listed on pages 18 and 19. The Annuity
Payout Amount is: (1) the Contract Value on the Annuity
Payout Date; less (2) any Premium Taxes due or paid by the
Company. Unless otherwise directed by the Owner, Annuity
Payout Amount derived from Fixed Account Contract Value
will be applied to purchase a Fixed Annuity Option; that
derived from Separate Account Contract Value will be
applied to purchase a Variable Annuity Option.
-15-
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY TABLES
The Annuity Tables show the guaranteed minimum amount of
monthly Annuity Payment that applies to the first payment
for Variable Annuity Payments and to each payment for Fixed
Annuity Payments for each $1,000 of Annuity Payout Amount
for each of Annuity Options 1 through 4. The amount of each
Annuity Payment for Annuity Options 1 through 4 will depend
on the Annuitant's sex and age on the Annuity Payout Date.
The Annuity Tables state values for the exact ages shown.
The values will be interpolated based on the Annuitant's
exact age on the Annuity Payout Date. On request the
Company will furnish the amount of monthly Annuity Payment
per $1,000 applied for any ages not shown.
The Company bases the Tables for Annuity Options 1 through
4 on: (1) the 1983 Table "A" Mortality Table projected for
mortality improvement for 45 years using Projection Scale
G; and (2) an interest rate of 3 1/2% a year.
For Annuity Options 5 through 7, age and sex are not
considered. Annuity Payments for these options are computed
without reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose
any form of Annuity Option that is allowed by the Company.
The Owner may choose an Annuity Option by written request.
This request must be Received by the Company at least 30
days prior to the Annuity Payout Date. Several Annuity
Options are listed on pages 18 and 19. No Annuity Option
can be selected that requires the Company to make periodic
payments of less than $100.00. If no Annuity Option is
chosen prior to the Annuity Payout Date, the Company will
use Life with 10-Year Fixed Period Option. Each Annuity
Option allows for making Annuity Payments annually,
semiannually, quarterly or monthly.
CHANGE OF ANNUITY
OPTION
Prior to the Annuity Payout Date, the Owner may change the
Annuity Option chosen. The Owner must request the change in
writing. This request must be Received by the Company at
least 30 days prior to the Annuity Payout Date.
FIXED ANNUITY
PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown
on the Tables are the guaranteed minimum for each Annuity
Payment for Annuity Options 1 through 4.
VARIABLE ANNUITY
PAYMENTS
With respect to Variable Annuity Payments, the amounts
shown on the Tables are the first Annuity Payment, based on
the assumed interest rate of 3 1/2% for Annuity Options 1
through 4. The amount of each Annuity Payment after the
first for these options is computed by means of Annuity
Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first
Annuity Payment by the Annuity Unit Value for the selected
Subaccount on the Annuity Payout Date. The number of
Annuity Units for the Subaccount then remains constant,
unless an Exchange of Annuity Units is made. After the
first Annuity Payment, the dollar amount of each subsequent
Annuity Payment is equal to the number of Annuity Units
times the Annuity Unit Value for the Subaccount on the due
date of the Annuity Payment.
-16-
V6021 H (4-94)
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Cont'd)
The Annuity Unit Value for each Subaccount was first set at
$1.00. The Annuity Unit Value for any subsequent Valuation
Date is equal to (a) times (b) times (c), where:
(a) is the Annuity Unit Value on the immediately preceding
Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate
of 3 1/2% per year used to determine the Annuity
Payment amounts. The assumed interest rate is reflected
in the Annuity Tables.
NET INVESTMENT
FACTOR
The Net Investment Factor for any Subaccount at the end of
any Valuation Period is found by dividing (1) by (2) and
subtracting (3) from the result, where:
1. is equal to:
a. the net asset value per share of the mutual fund
held in the Subaccount, found at the end of the
current Valuation Period; plus
b. the per share amount of any dividend or capital gain
distributions paid by the Subaccount's underlying
mutual fund that is not included in the net asset
value per share; plus or minus
c. a per share charge or credit for any taxes reserved
for, which the Company deems to have resulted from
the operation of the Subaccount.
2. is the net asset value per share of the Subaccount's
underlying mutual fund as found at the end of the prior
Valuation Period.
3. is a factor representing the Mortality and Expense Risk
Charge deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily
basis and pay such dividends once a month. The Net
Investment Factor allows for the monthly reinvestment of
these daily dividends. As described above, the gains and
losses from each Subaccount are credited or charged against
the Subaccount without regard to the gains or losses in the
Company or other Subaccounts.
ALTERNATE ANNUITY
OPTION RATES
The Company may, at the time of election of an Annuity
Option, offer more favorable rates in lieu of the
guaranteed rates shown in the Annuity Tables.
-17-
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS
OPTION 1
LIFE OPTION: This option provides payments for the life of
the Annuitant. Table A shows some of the guaranteed rates
for this option.
OPTION 2
LIFE WITH FIXED PERIOD OPTION: This option provides
payments for the life of the Annuitant. A fixed period of
5, 10, 15 or 20 years may be chosen. Payments will be made
to the end of this period even if the Annuitant dies prior
to the end of the period. If the Annuitant dies before
receiving all the payments during the fixed period, the
remaining payments will be made to the Designated
Beneficiary. Table A shows some of the guaranteed rates for
this option.
OPTION 3
LIFE WITH INSTALLMENT OR UNIT REFUND OPTION: This option
provides payments for the life of the Annuitant, with a
period certain determined by dividing the Annuity Payout
Amount by the amount of the first payment. A fixed number
of payments will be made even if the Annuitant dies. If the
Annuitant dies before receiving the fixed number of
payments, any remaining payments will be made to the
Designated Beneficiary. Table A shows some of the
guaranteed rates for this option.
OPTION 4
JOINT AND LAST SURVIVOR OPTION: This option provides
payments for the life of the Annuitant and Joint Annuitant.
Payments will be made as long as either is living. Table B
shows some of the guaranteed rates for this option.
OPTION 5
FIXED PERIOD OPTION: This option provides payments for a
fixed number of years between 5 and 20. If the Contract
Value is held in the Fixed Account, then the amount of the
payments will vary as a result of the interest rate (as
adjusted periodically) credited on the Fixed Account. This
rate is guaranteed to be no less than the Guaranteed Rate
shown on page 3. If the Contract Value is held in the
Separate Account, then the amount of the payments will vary
as a result of the investment performance of the
Subaccounts chosen. If all the Annuitants die before
receiving the fixed number of payments, any remaining
payments will be made to the Designated Beneficiary.
OPTION 6
FIXED PAYMENT OPTION: This option provides a fixed payment
amount. This amount is paid until the amount applied,
including daily interest adjustments, is paid. If the
Contract Value is held in the Fixed Account, then the
number of payments will vary as a result of the interest
rate (as adjusted periodically) credited on the Fixed
Account. This rate is guaranteed to be no less than the
Guaranteed Rate shown on page 3. If the Contract Value is
held in the Separate Account, then the number of payments
will vary as a result of the investment performance of the
Subaccounts chosen. If all the Annuitants die before
receiving all the payments, any remaining payments will be
made to the Designated Beneficiary.
-18-
V6021 I (4-94)
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY OPTIONS (cont'd)
OPTION 7 AGE RECALCULATION OPTION: This option provides for
payments 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 Annuitant's
beneficiary's attained or adjusted age, if applicable) each
year. The payments are computed by reference to actuarial
tables prescribed by the Treasury Secretary. Payments are
made until the amount applied is exhausted. If the Contract
Value is held in the Fixed Account, then the number of
payments will vary as a result of the interest rate (as
adjusted periodically) credited on the Fixed Account. This
rate is guaranteed to be not less than the Guaranteed Rate
shown on page 3. If the Contract Value is held in the
Separate Account, then the number of payments will vary as
a result of the investment performance of the Subaccounts
chosen. If all the Annuitants die before receiving the
remaining payments, such payments will be made to the
Designated Beneficiary.
-19-
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
Table A
Guaranteed Minimum Amount
of Monthly Payment for
each $1,000 applied
SINGLE LIFE ANNUITY
- --------------------------------------------------------------------------------
AGE OF MONTHLY PAYMENTS CERTAIN INSTALLMENT
PAYEE 0 60 120 180 240 REFUND
- --------------------------------------------------------------------------------
MALE
55 4.45 4.44 4.41 4.37 4.30 4.31
56 4.52 4.51 4.48 4.43 4.36 4.37
57 4.60 4.59 4.56 4.50 4.42 4.44
58 4.68 4.67 4.64 4.57 4.47 4.51
59 4.77 4.76 4.72 4.65 4.53 4.58
60 4.87 4.85 4.81 4.72 4.60 4.65
61 4.97 4.95 4.90 4.80 4.66 4.73
62 5.07 5.05 5.00 4.89 4.72 4.82
63 5.19 5.17 5.10 4.97 4.79 4.90
64 5.31 5.29 5.20 5.06 4.85 5.00
65 5.44 5.41 5.32 5.15 4.92 5.09
66 5.58 5.55 5.44 5.24 4.98 5.20
67 5.73 5.69 5.56 5.34 5.05 5.30
68 5.89 5.84 5.69 5.44 5.11 5.41
69 6.06 6.00 5.82 5.54 5.17 5.53
70 6.24 6.17 5.97 5.64 5.23 5.66
FEMALE
55 4.11 4.11 4.10 4.08 4.05 4.05
56 4.17 4.17 4.16 4.14 4.10 4.10
57 4.23 4.23 4.22 4.19 4.15 4.15
58 4.30 4.29 4.28 4.25 4.21 4.21
59 4.37 4.36 4.35 4.32 4.27 4.27
60 4.44 4.44 4.42 4.38 4.33 4.34
61 4.52 4.51 4.49 4.45 4.39 4.40
62 4.60 4.59 4.57 4.52 4.45 4.47
63 4.69 4.68 4.65 4.60 4.52 4.55
64 4.78 4.77 4.74 4.68 4.58 4.63
65 4.88 4.87 4.84 4.76 4.65 4.71
66 4.99 4.98 4.93 4.85 4.72 4.80
67 5.10 5.09 5.04 4.94 4.79 4.89
68 5.23 5.21 5.15 5.04 4.86 4.99
69 5.36 5.34 5.27 5.14 4.94 5.09
70 5.50 5.48 5.39 5.24 5.01 5.20
RATES NOT SHOWN WILL BE PROVIDED ON REQUEST. THE GUARANTEED MINIMUM MONTHLY
PAYMENTS SHOWN APPLY TO THE INITIAL PAYMENT FOR VARIABLE ANNUITY PAYMENTS AND TO
EACH PAYMENT FOR FIXED ANNUITY PAYMENTS.
- --------------------------------------------------------------------------------
JOINT & LAST |
SURVIVOR ANNUITY |
TABLE B - MONTHLY FEMALE | MALE AGE
INSTALLEMNTS AGE | 55 60 62 65 70
- --------------------------------|-----------------------------------------------
Until last Death 55 | 3.85 3.93 3.95 3.99 4.03
of Two Payees 60 | 3.98 4.10 4.15 4.21 4.29
per $1,000 of 62 | 4.03 4.18 4.23 4.30 4.40
benefit amount 65 | 4.11 4.28 4.35 4.45 4.59
70 | 4.21 4.45 4.54 4.69 4.92
ANNUAL, SEMIANNUAL, OR QUARTERLY PAYMENTS CAN BE DETERMINED FROM TABLE A OR B BY
MULTIPLYING THE MONTHLY PAYMENTS BY 11.812854, 5.9572233, AND 2.9914201,
RESPECTIVELY.
-20-
V6021 J (4-94)
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Payout Date
or termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Payout Date according to
the Contract provisions.
* Annuity Payments begin on the Annuity Payout Date using the method as
specified in this Contract.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBG LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750440, Topeka, KS 66675-0440
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
1-800-469-6587 FOR CUSTOMER SERVICE
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
THE COMPANY'S PROMISE
In consideration for the Purchase Payments and the attached application,
Security Benefit Life Insurance Company (the "Company") will pay the benefits of
this Contract according to its provisions.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
IF FOR ANY REASON THE OWNER IS NOT SATISFIED WITH THIS CONTRACT, HE OR SHE MAY
RETURN IT TO THE COMPANY WITHIN 10 DAYS FROM THE DATE OF RECEIPT. IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO THE COMPANY. IF RETURNED, THIS CONTRACT
SHALL BE DEEMED VOID FROM THE CONTRACT DATE. THE COMPANY WILL REFUND ANY
PURCHASE PAYMENTS MADE AND ALLOCATED TO THE FIXED ACCOUNT AND WILL REFUND
SEPARATE ACCOUNT CONTRACT VALUE AS OF THE DATE THE RETURNED POLICY IS RECEIVED
BY THE COMPANY.
Signed for Security Benefit Life Insurance Company on the Contract Date.
ROGER K. VIOLA HOWARD R. FRICKE
Secretary President
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Payout Date
or termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Payout Date according to
the Contract provisions.
* Annuity Payments begin on the Annuity Payout Date using the method specified
in this Contract.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBG LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750440, Topeka, KS 66675-0440
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
1-800-469-6587 FOR CUSTOMER SERVICE
Form V6021 (4-94)U
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
CONTRACT SPECIFICATIONS ............................................... 3
DEFINITIONS ........................................................... 4-6
GENERAL PROVISIONS .................................................... 7, 8
THE CONTRACT ....................................................... 7
COMPLIANCE ......................................................... 7
MISSTATEMENT OF AGE ............................................... 7
EVIDENCE OF SURVIVAL ............................................... 7
INCONTESTABILITY ................................................... 7
ASSIGNMENT ......................................................... 7
EXCHANGES .......................................................... 8
CLAIMS OF CREDITORS ................................................ 8
NONFORFEITURE VALUES ............................................... 8
PARTICIPATION ...................................................... 8
STATEMENTS ......................................................... 8
OWNERSHIP, ANNUITANT AND
BENEFICIARY PROVISIONS ................................................ 9
OWNERSHIP .......................................................... 9
JOINT OWNERSHIP .................................................... 9
ANNUITANT .......................................................... 9
PRIMARY AND SECONDARY BENEFICIARIES ................................ 9
OWNERSHIP AND BENEFICIARY CHANGES .................................. 9
PURCHASE PAYMENT PROVISIONS ........................................... 10
FLEXIBLE PURCHASE PAYMENTS ......................................... 10
PURCHASE PAYMENT LIMITATIONS ....................................... 10
PURCHASE PAYMENT ALLOCATION ........................................ 10
PLACE OF PAYMENT ................................................... 10
CONTRACT VALUE AND EXPENSE PROVISIONS ................................. 10-12
CONTRACT VALUE ..................................................... 10
FIXED ACCOUNT CONTRACT VALUE ....................................... 10
FIXED ACCOUNT INTEREST CREDITING ................................... 11
SEPARATE ACCOUNT CONTRACT VALUE .................................... 11
ACCUMULATION UNIT VALUE ............................................ 11
DETERMINING ACCUMULATION UNITS ..................................... 11
MORTALITY AND EXPENSE RISK CHARGE .................................. 12
PREMIUM TAX EXPENSE ................................................ 12
MUTUAL FUND EXPENSES ............................................... 12
WITHDRAWAL PROVISIONS ................................................. 12, 13
WITHDRAWALS ........................................................ 12
WITHDRAWAL VALUE ................................................... 13
SYSTEMATIC WITHDRAWALS ............................................. 13
DATE OF REQUEST .................................................... 13
PAYMENT OF WITHDRAWAL BENEFITS ..................................... 13
DEATH BENEFIT PROVISIONS .............................................. 14, 15
DEATH BENEFIT ...................................................... 14
PROOF OF DEATH ..................................................... 14
DISTRIBUTION RULES ................................................. 14, 15
ANNUITY PAYMENT PROVISIONS ............................................ 15-19
ANNUITY PAYOUT DATE ................................................ 15
CHANGE OF ANNUITY PAYOUT DATE ...................................... 15
ANNUITY PAYOUT AMOUNT .............................................. 15
ANNUITY TABLES ..................................................... 16
ANNUITY PAYMENTS ................................................... 16
CHANGE OF ANNUITY OPTION ........................................... 16
FIXED ANNUITY PAYMENTS ............................................. 16
VARIABLE ANNUITY PAYMENTS .......................................... 16
ANNUITY UNITS ...................................................... 16, 17
NET INVESTMENT FACTOR .............................................. 17
ALTERNATE ANNUITY OPTION RATES ..................................... 17
ANNUITY OPTIONS .................................................... 18, 19
ANNUITY TABLES ........................................................ 20
AMENDMENTS OR ENDORSEMENTS, IF ANY
-2-
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT
The T. Rowe Price Variable Annuity Account is a Separate
Account established and maintained by the Company under
Kansas law. The Separate Account is registered with the
Securities and Exchange Commission under the Investment
Company Act of 1940 as a Unit Investment Trust. It was
established by the Company to support variable annuity
contracts. The Company owns the assets of the Separate
Account and maintains them apart from the assets of its
general account and its other separate accounts. The assets
held in the Separate Account equal to the reserves and
other Contract liabilities with respect to the Separate
Account may not be charged with liabilities arising from
any other business the Company may conduct.
Income and realized and unrealized gains and losses from
assets in the Separate Account are credited to, or charged
against, the Separate Account without regard to the income,
gains or losses from the Company's general account or its
other separate accounts. The Separate Account is divided
into Subaccounts shown on page 3. Income and realized and
unrealized gains and losses from assets in each Subaccount
are credited to, or charged against, the Subaccount without
regard to income, gains or losses in the other Subaccounts.
The Company has the right to transfer to its general
account any assets of the Separate Account that are in
excess of the reserves and other Contract liabilities with
respect to the Separate Account. The value of the assets
in the Separate Account on each Valuation Date are
determined at the end of each Valuation Date.
SUBACCOUNT NET
ASSET VALUE
The Subaccount Net Asset Value is equal to: (1) the net
asset value of all shares of the underlying mutual fund
held by the Subaccount; plus (2) any cash or other assets;
less (3) all liabilities of the Subaccount.
SUBACCOUNTS
The Separate Account is divided into Subaccounts which
invest in shares of mutual funds. Each Subaccount may
invest its assets in a separate class or series of a
designated mutual fund or funds. The Subaccounts are shown
on page 3. Subject to the regulatory requirements then in
force, the Company reserves the right to:
1. change or add designated mutual funds or other
investment vehicles;
2. add, remove or combine Subaccounts;
3. add, delete or make substitutions for securities that
are held or purchased by the Separate Account or any
Subaccount;
4. operate the Separate Account as a management investment
company;
5. combine the assets of the Separate Account with other
Separate Accounts of the Company or an affiliate
thereof;
6. restrict or eliminate any voting rights of the Owner
with respect to the Separate Account or other persons
who have voting rights as to the Separate Account; and
7. terminate and liquidate any Subaccount.
If any of these changes result in a material change to the
Separate Account or a Subaccount, the Company will notify
the Owner of the change. The Company will not change the
investment policy of any Subaccount in any material respect
without complying with the filing and other procedures of
the insurance regulators of the state of issue.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange
and the Company's Home Office are open for business.
VALUATION PERIOD
A Valuation Period is the interval of time from one
Valuation Date to the next Valuation Date.
-6-
V6021 C (4-94)U
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire Contract between the Owner and the Company
consists of this Contract, the attached Application, and
any Amendments, Endorsements or Riders to the Contract. All
statements made in the Application will, in the absence of
fraud, as ruled by a court of competent jurisdiction, be
deemed representations and not warranties. The Company will
use no statement made by or on behalf of the Owner or the
Annuitant to void this Contract unless it is in the written
Application. Any change in the Contract can be made only
with the written consent of the President, a Vice
President, or the Secretary of the Company.
The Purchase Payment(s) and the Application must be
acceptable to the Company under its rules and practices. If
they are not, the Company's liability shall be limited to a
return of the Purchase Payment(s).
COMPLIANCE
The Company reserves the right to make any change to the
provisions of this Contract to comply with or give the
Owner the benefit of any federal or state statute, rule or
regulation. This includes, but is not limited to,
requirements for annuity contracts under the Internal
Revenue Code or the laws of any state. The Company will
provide the Owner with a copy of any such change and will
also file such a change with the insurance regulatory
officials of the state in which the Contract is delivered.
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, payments
shall be adjusted, when allowed by law, to the amount which
would have been provided for the correct age. Proof of the
age of an Annuitant may be required at any time, in a form
suitable to the Company. If payments have already commenced
and the misstatement has caused an underpayment, the full
amount due will be paid with the next scheduled payment. If
the misstatement has caused an overpayment, the amount due
will be deducted from one or more future payments.
EVIDENCE OF SURVIVAL
When any payments under this Contract depend on the payee
being alive on a given date, proof that the payee is living
may be required by the Company. Such proof must be in a
form accepted by the Company, and may be required prior to
making the payments.
INCONTESTABILITY
This Contract will not be contested after it has been in
force for two years from the Issue Date during the life of
the Owner.
ASSIGNMENT
Please refer to page 3 to see if this Contract may be
assigned. If it may be assigned, no Assignment under this
Contract is binding unless Received by the Company in
writing. The Company assumes no responsibility for the
validity, legality, or tax status of any Assignment. The
Assignment will be subject to any payment made or other
action taken by the Company before the Assignment is
Received by the Company. Once filed, the rights of the
Owner, Annuitant and Beneficiary are subject to the
Assignment. Any claim is subject to proof of interest of
the assignee.
-7-
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY TABLES
The Annuity Tables show the guaranteed minimum amount of
monthly Annuity Payment that applies to the first payment
for Variable Annuity Payments and to each payment for Fixed
Annuity Payments for each $1,000 of Annuity Payout Amount
for each of Annuity Options 1 through 4. The amount of each
Annuity Payment for Annuity Options 1 through 4 will depend
on the Annuitant's age on the Annuity Payout Date. The
Annuity Tables state values for the exact ages shown. The
values will be interpolated based on the Annuitant's exact
age on the Annuity Payout Date. On request the Company will
furnish the amount of monthly Annuity Payment per $1,000
applied for any ages not shown.
The Company bases the Tables for Annuity Options 1 through
4 on: (1) the 1983 Table "A" Mortality Table projected for
mortality improvement for 45 years using Projection Scale
G; and (2) an interest rate of 3 1/2% a year.
For Annuity Options 5 through 7, age is not considered.
Annuity Payments for these options are computed without
reference to the Annuity Tables.
ANNUITY PAYMENTS
The Annuity Option is shown on page 3. The Owner may choose
any form of Annuity Option that is allowed by the Company.
The Owner may choose an Annuity Option by written request.
This request must be Received by the Company at least 30
days prior to the Annuity Payout Date. Several Annuity
Options are listed on pages 18 and 19. No Annuity Option
can be selected that requires the Company to make periodic
payments of less than $100.00. If no Annuity Option is
chosen prior to the Annuity Payout Date, the Company will
use Life with 10-Year Fixed Period Option. Each Annuity
Option allows for making Annuity Payments annually,
semiannually, quarterly or monthly.
CHANGE OF ANNUITY
OPTION
Prior to the Annuity Payout Date, the Owner may change the
Annuity Option chosen. The Owner must request the change in
writing. This request must be Received by the Company at
least 30 days prior to the Annuity Payout Date.
FIXED ANNUITY
PAYMENTS
With respect to Fixed Annuity Payments, the amounts shown
on the Tables are the guaranteed minimum for each Annuity
Payment for Annuity Options 1 through 4.
VARIABLE ANNUITY
PAYMENTS
With respect to Variable Annuity Payments, the amounts
shown on the Tables are the first Annuity Payment, based on
the assumed interest rate of 3 1/2% for Annuity Options 1
through 4. The amount of each Annuity Payment after the
first for these options is computed by means of Annuity
Units.
ANNUITY UNITS
The number of Annuity Units is found by dividing the first
Annuity Payment by the Annuity Unit Value for the selected
Subaccount on the Annuity Payout Date. The number of
Annuity Units for the Subaccount then remains constant,
unless an Exchange of Annuity Units is made. After the
first Annuity Payment, the dollar amount of each subsequent
Annuity Payment is equal to the number of Annuity Units
times the Annuity Unit Value for the Subaccount on the due
date of the Annuity Payment.
-16-
V6021 H (4-94)U
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY UNITS (Cont'd)
The Annuity Unit Value for each Subaccount was first set at
$1.00. The Annuity Unit Value for any subsequent Valuation
Date is equal to (a) times (b) times (c), where:
(a) is the Annuity Unit Value on the immediately preceding
Valuation Date;
(b) is the Net Investment Factor for the day;
(c) is a factor used to adjust for an assumed interest rate
of 3 1/2% per year used to determine the Annuity
Payment amounts. The assumed interest rate is reflected
in the Annuity Tables.
NET INVESTMENT
FACTOR
The Net Investment Factor for any Subaccount at the end of
any Valuation Period is found by dividing (1) by (2) and
subtracting (3) from the result, where:
1. is equal to:
a. the net asset value per share of the mutual fund
held in the Subaccount, found at the end of the
current Valuation Period; plus
b. the per share amount of any dividend or capital gain
distributions paid by the Subaccount's underlying
mutual fund that is not included in the net asset
value per share; plus or minus
c. a per share charge or credit for any taxes reserved
for, which the Company deems to have resulted from
the operation of the Subaccount.
2. is the net asset value per share of the Subaccount's
underlying mutual fund as found at the end of the prior
Valuation Period.
3. is a factor representing the Mortality and Expense Risk
Charge deducted from the Separate Account.
Underlying mutual funds may declare dividends on a daily
basis and pay such dividends once a month. The Net
Investment Factor allows for the monthly reinvestment of
these daily dividends. As described above, the gains and
losses from each Subaccount are credited or charged against
the Subaccount without regard to the gains or losses in the
Company or other Subaccounts.
ALTERNATE ANNUITY
OPTION RATES
The Company may, at the time of election of an Annuity
Option, offer more favorable rates in lieu of the
guaranteed rates shown in the Annuity Tables.
-17-
<PAGE>
ANNUITY TABLES
- --------------------------------------------------------------------------------
Table A
Guaranteed Minimum Amount
of Monthly Payment for
each $1,000 applied
SINGLE LIFE ANNUITY
- --------------------------------------------------------------------------------
AGE OF MONTHLY PAYMENTS CERTAIN INSTALLMENT
PAYEE 0 60 120 180 240 REFUND
- --------------------------------------------------------------------------------
UNISEX
55 4.11 4.11 4.10 4.08 4.05 4.05
56 4.17 4.17 4.16 4.14 4.10 4.10
57 4.23 4.23 4.22 4.19 4.15 4.15
58 4.30 4.29 4.28 4.25 4.21 4.21
59 4.37 4.36 4.35 4.32 4.27 4.27
60 4.44 4.44 4.42 4.38 4.33 4.34
61 4.52 4.51 4.49 4.45 4.39 4.40
62 4.60 4.59 4.57 4.52 4.45 4.47
63 4.69 4.68 4.65 4.60 4.52 4.55
64 4.78 4.77 4.74 4.68 4.58 4.63
65 4.88 4.87 4.84 4.76 4.65 4.71
66 4.99 4.98 4.93 4.85 4.72 4.80
67 5.10 5.09 5.04 4.94 4.79 4.89
68 5.23 5.21 5.15 5.04 4.86 4.99
69 5.36 5.34 5.27 5.14 4.94 5.09
70 5.50 5.48 5.39 5.24 5.01 5.20
RATES NOT SHOWN WILL BE PROVIDED ON REQUEST. THE GUARANTEED MINIMUM MONTHLY
PAYMENTS SHOWN APPLY TO THE INITIAL PAYMENT FOR VARIABLE ANNUITY PAYMENTS AND TO
EACH PAYMENT FOR FIXED ANNUITY PAYMENTS.
- --------------------------------------------------------------------------------
JOINT & LAST |
SURVIVOR ANNUITY |
TABLE B - MONTHLY | AGE
INSTALLEMNTS AGE | 55 60 62 65 70
- --------------------------------|-----------------------------------------------
Until last Death 55 | 3.77 3.87 3.90 3.95 4.00
of Two Payees 60 | 3.87 4.01 4.06 4.13 4.24
per $1,000 of 62 | 3.90 4.06 4.12 4.21 4.34
benefit amount 65 | 3.95 4.13 4.21 4.32 4.49
70 | 4.00 4.24 4.34 4.49 4.75
ANNUAL, SEMIANNUAL, OR QUARTERLY PAYMENTS CAN BE DETERMINED FROM TABLE A OR B BY
MULTIPLYING THE MONTHLY PAYMENTS BY 11.812854, 5.9572233, AND 2.9914201,
RESPECTIVELY.
-20-
V6021 J (4-94)U
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Purchase Payments may be made until the earlier of the Annuity Payout Date
or termination of the Contract.
* A Death Benefit may be paid prior to the Annuity Payout Date according to
the Contract provisions.
* Annuity Payments begin on the Annuity Payout Date using the method as
specified in this Contract.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THERE ARE NO
GUARANTEED MINIMUM PAYMENTS OR CASH VALUES. (SEE "CONTRACT VALUE AND EXPENSE
PROVISIONS" AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBG LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
P.O. Box 750440, Topeka, KS 66675-0440
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
1-800-469-6587 FOR CUSTOMER SERVICE
15-60210-12
BP 6021D4
<PAGE>
ENDORSEMENT
- --------------------------------------------------------------------------------
ANNUITY LOAN PROVISIONS
- --------------------------------------------------------------------------------
LOAN ENDORSEMENT
This endorsement is attached to and made part of your Contract as of
its Issue Date or, if later, the date shown below. Notwithstanding any
other provision of the Contract to the contrary, the following
provisions shall apply.
GENERAL PROVISIONS
Prior to the start of retirement annuity installments (the "maturity
date"), the Company shall lend an amount applied for to the Owner
subject to the limitations, interest rates, and repayment procedures
set forth herein and in the loan agreement between the Owner and the
Company. Any loan applied for must be for a minimum of $1,000. Only two
loans shall be permitted per contract year. All loans must be repaid as
specified herein before the maturity date. Except for loans that
qualify under the Code for a longer repayment period, as determined by
the Company, all loans must be repaid within five years of approval.
All loan repayments must be scheduled to be paid in equal amounts on
the same day of each month or quarter. For monthly repayments the first
scheduled repayment may not be later than 30 days after the date of
approval of the loan application by the Company. For quarterly
repayments the first scheduled repayment may not be later than 90 days
after the date of approval of the loan application by the Company.
Before a loan is permitted a written application and loan agreement on
a form acceptable to the Company must be Received by the Company. The
Company may postpone final approval or disapproval of a loan for up to
six months after the application for a loan is received.
TAX CONSEQUENCES
The Company makes no representations or guarantees as to the tax
consequences of a loan to the Owner. The Owner should consult his or
her tax counsel for specific advice.
MAXIMUM LOAN AMOUNT
The maximum loan amount for all contracts combined, is generally equal
to the lesser of: (1) $50,000 reduced by the excess of: (a) the highest
outstanding loan balance within the preceding 12-month period ending on
the day before the date the loan is made; over (b) the outstanding loan
balance on the date the loan is made; or (2) 50% of your account value
or $10,000, whichever is greater. However, in no case can you borrow
more than your account value.
LOAN ACCOUNT, AND INTEREST EARNED ON LOAN ACCOUNT
When your loan is approved, the Company will transfer to an account
within the Fixed Amount, referred to as the Loan Account, an amount
equal to the loan amount. Amounts allocated to the Loan Account earn
the Minimum Guaranteed Interest Rate specified in the Contract.
LOAN INTEREST RATE
The Owner must pay interest on the outstanding loan balance. Interest
shall accrue on the loan balance from the effective date of any loan.
The loan interest rate shall be the Minimum guaranteed Interest Rate
plus 2.5%
LOAN PAYMENTS
Each loan payment must be labeled as such. If not labeled as a loan
payment, amounts received by the Company will be treated as Purchase
Payments. Each loan payment will reduce the Loan Account by the amount
the payment reduces the outstanding loan balance. Amounts which are no
longer needed in the Loan Account will be transferred to the Fixed
Account and/or the Subaccounts in accordance with current allocation
instructions for purchase payments. The loan may be repaid in full at
any time, in which event, the Loan Account shall be reduced to $0.
V 6846 (R1-97) NON-ERISA
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY LOAN PROVISIONS (Continued)
- --------------------------------------------------------------------------------
FAILURE TO MAKE PAYMENTS
If any required loan payment is not paid, within 30 days of the due
date for loans with a monthly repayment schedule or within 90 days of
the due date for loans with a quarterly repayment schedule, the TOTAL
OUTSTANDING LOAN BALANCE will be deemed to be in default. The entire
loan balance, with any accrued interest, will be reported to the
Internal Revenue Service ("IRS") on Form 1099-R for the year the
default occurred. Once a loan has gone into default, regularly
scheduled payments will not be accepted. However, the principal plus
accrued interest may be paid in full at any time. Notwithstanding any
other provision of the Contract or this endorsement to the contrary,
no new loans will be allowed when there is a loan in default.
Interest will continue to accrue on a loan in default. You may pay
accrued interest each year when notified by SBL. If such interest is
not paid by December 31st of each year, it will be added to the
outstanding balance of the loan and will be reported to the IRS on Form
1099-R. Account value equal to the amount of the accrued interest will
be transferred to the Loan Account. If a loan continues to be in
default when you attain age 59 1/2, the total outstanding balance will
be deducted from your account value. The Contract will be automatically
terminated if the outstanding loan balance on a loan in default equals
or exceeds the amount for which the Contract may be surrendered. The
proceeds from the Contract will be used to repay the debt.
WITHDRAWAL VALUE, ANNUITY PAYOUT AMOUNT, AND DEATH BENEFIT
If the Contract is surrendered, or if a death benefit becomes payable,
the amount otherwise receivable will be reduced by the amount of the
outstanding loan, plus any accrued interest. In addition, no partial
withdrawal request will be processed which would result in the
withdrawal of account value from the Loan Account.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ----------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
ENDORSEMENT
- --------------------------------------------------------------------------------
ANNUITY LOAN PROVISIONS
- --------------------------------------------------------------------------------
LOAN ENDORSEMENT
This endorsement is attached to and made a part of your
Contract as of its Issue Date or, if later, the date shown
below. Notwithstanding any other provision of the Contract
to the contrary, the following provisions shall apply.
GENERAL PROVISIONS
Prior to the Annuity Payout Date, the Company shall lend an
amount applied for to the Owner subject to the limitations,
interest rates, and repayment procedures set forth herein
and in the loan agreement between the Owner and the
Company. Any loan applied for must be for a minimum of
$1,000. Only two loans shall be permitted per Contract
Year. All loans must be repaid as specified herein before
the Annuity Payout Date. The Annuity Payout Date may not be
changed so that it would occur prior to the time that any
outstanding loan balance is scheduled to be repaid in full.
Except for loans that qualify under the Code for a longer
repayment period, as determined by the Company, all loans
must be repaid within five years of approval. All loan
repayments must be scheduled to be paid in equal amounts on
the same day of each month or quarter. For monthly
repayments the first scheduled repayment may not be later
than 30 days after the date of approval of the loan
application by the Company. For quarterly repayments the
first scheduled repayment may not be later than 90 days
after the date of approval of the loan application by the
Company. Before a loan is permitted a written application
and loan agreement on a form acceptable to the Company must
be Received by the Company. The Company may postpone final
approval or disapproval of a loan for up to six months
after the application for a loan is received.
TAX CONSEQUENCES
The Company makes no representations or guarantees as to
the tax consequences of a loan to the Owner. The Owner
should consult his or her tax counsel for specific advice.
MAXIMUM LOAN
AMOUNT
For Contracts with Contract Value of $20,000 or less, the
maximum loan that may be taken is the amount that produces
a loan balance immediately after the loan that is the
lesser of $10,000 or 75% of the Contract Value. For
Contracts with Contract Value over $20,000 the maximum loan
that may be taken is the amount that produces a loan
balance immediately after the loan that is the lesser of:
(1) $50,000 reduced by the excess of (a) the highest
outstanding loan balance during the preceding 12 month
period ending on the day before the date the loan is made
over (b) the outstanding loan balance on the date the loan
is made; or (2) 50% of the Contract Value. The aggregate of
all loans may not exceed the limitations set forth above.
LOAN ACCOUNT, AND
INTEREST EARNED ON
LOAN ACCOUNT
When your loan is approved, the Company will transfer
Contract Value from the Subaccounts or allocate Fixed
Account Contract Value to an account called the Loan
Account in an amount equal to the loan amount. Any such
transfer shall be allocated proportionately to the Owner's
Contract Value in the Subaccounts and the Fixed Account,
unless otherwise directed by the Owner. The Loan Account is
part of the Fixed Account and amounts allocated to the Loan
Account earn the Minimum Guaranteed Interest Rate specified
in the Contract.
LOAN INTEREST RATE
The Owner must pay interest on the outstanding loan
balance. Interest shall accrue on the loan balance from the
effective date of any loan. The loan interest rate shall be
the Minimum Guaranteed Interest Rate plus 1.55%.
V6843 (4-94)
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY LOAN PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
LOAN PAYMENTS
Each loan payment must be labeled as such. If not labeled
as a loan payment, amounts received by the Company will
treated as Purchase Payments. Loan payments will be applied
first to accrued interest and then to the principal amount
of the outstanding loan balance. Upon receipt of a loan
payment, we will transfer Contract Value from the Loan
Account to the Fixed Account and/or the Subaccounts
according to the Owner's current allocation instructions
with respect to Purchase Payments. The amount of Contract
Value transferred from the Loan Account shall be equal to
the amount by which the payment reduces the outstanding
principal loan balance, plus the amount of accrued interest
credited on the Loan Account at the Minimum Guaranteed
Interest Rate as of the date of the payment. The loan may
be repaid in full at any time, in which event, the Loan
Account shall be reduced to $0.
FAILURE TO MAKE
PAYMENTS
If a loan payment is not made when due, the loan payment
may be treated as a taxable distribution and may be subject
to a tax penalty for early withdrawal. If a loan payment is
not made as specified and scheduled herein and in the loan
agreement, the Company shall withdraw the amount of
Contract Value necessary to make the payment, including
interest accrued thereon. The amount withdrawn will be
treated as a loan payment as described above. Any such
withdrawal shall be allocated proportionately to the
Owner's Contract Value in the Subaccounts and the Fixed
Account. Withdrawals from Fixed Account Contract Value to
make a loan payment will be made in the order prescribed
under "Withdrawal Provisions" in the Contract. In the event
that the amount of a loan repayment equals or exceeds the
Owner's Contract Value less the amount in the Loan Account
at any time, the full amount of the outstanding loan
balance, including accrued interest, shall become due and
payable on the next scheduled repayment date.
WITHDRAWAL VALUE,
ANNUITY PAYOUT
AMOUNT, AND
DEATH BENEFIT
Before calculating the Withdrawal Value, the Annuity Payout
Amount or the Death Benefit under the Contract, the Company
shall withdraw that amount of Contract Value necessary to
reduce the outstanding loan balance to $0. As a result, the
Contract Value shall be reduced by the amount of the
withdrawal. The Contract Value remaining after the
withdrawal shall be used to calculate the Withdrawal Value,
Annuity Payout Amount or Death Benefit as set forth in the
Contract.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
___________________________________________
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
ENDORSEMENT
- --------------------------------------------------------------------------------
SIMPLE INDIVIDUAL RETIREMENT ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
SIMPLE INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Contract is established as a Savings Incentive Match Plan for
Employees of Small Employers Individual Retirement Annuity ("SIMPLE
IRA") as defined in Section 408 of the Internal Revenue Code of 1986,
as amended (the "Code") or any successor provision pursuant to the
Owner's request in the Application. Accordingly, this endorsement is
attached to and made part of the Contract as of its Issue Date or, if
later, the date shown below. Notwithstanding any other provisions of
the Contract to the contrary, the following provisions shall apply.
RESTRICTIONS ON SIMPLE INDIVIDUAL RETIREMENT ANNUITY
To ensure treatment as a SIMPLE IRA, this Contract will be subject to
the applicable requirements of Code Section 408, which are briefly
summarized below:
1. The Contract is established for the exclusive benefit of the Owner
or his or her beneficiaries. The Owner shall be the Annuitant.
2. The Contract shall be nontransferable and the entire interest of
the Owner in the Contract is nonforfeitable.
3. Notwithstanding any provision of the Contract to the contrary, the
distribution of the Owner's interest shall be made in accordance
with the minimum distribution requirements of Section 401(a)(9) of
the Internal Revenue Code and the regulations thereunder,
including the incidental death benefit provisions of Section
1.401(a)(9)-2 of the proposed regulations, all of which are herein
incorporated by reference.
The Owner's entire interest in the Contract must be distributed,
or begin to be distributed, by the Owner's required beginning
date, which is the April 1 following the calendar year in which
the Owner reaches age 70 1/2. For each succeeding year, a
distribution must be made on or before December 31. By the
required beginning date, the Owner may elect to have the balance
in the account distributed in one of the following forms:
1) A single lump sum payment;
2) Equal or substantially equal monthly, quarterly, or annual
payments over the life of the Owner or over the joint and
last survivor lives of the Owner and his or her Designated
Beneficiary; or
3) Equal or substantially equal annual payments over a specified
period that may not be longer than the Owner's life
expectancy or the joint and last survivor life expectancy of
the Owner and his or her Designated Beneficiary.
An Annuity Option may not be elected with a Fixed Period that will
guarantee Annuity Payments beyond the life expectancy of the
Annuitant and Beneficiary and Annuity Payments must be made at
least annually and in equal amounts.
4. If the Owner dies before his or her entire interest is
distributed, the entire remaining interest will be distributed as
follows:
a. If the Owner dies on or after distributions have begun under
Section 3, the entire remaining interest must be distributed
at least as rapidly as provided under Section 3.
4453C-5S (2-97)
<PAGE>
- --------------------------------------------------------------------------------
SIMPLE INDIVIDUAL RETIREMENT ANNUITY PROVISIONS (Continued)
- --------------------------------------------------------------------------------
RESTRICTIONS ON SIMPLE INDIVIDUAL RETIREMENT ANNUITY (continued)
b. If the Owner dies before distributions have begun under
Section 3, the entire remaining interest must be distributed
as elected by the Owner or, if the Owner has not so elected,
as elected by the Designated Beneficiary or Beneficiaries as
follows:
1) By December 31 of the year containing the fifth
anniversary of the Owner's death; or
2) In equal or substantially equal payments over the life
or life expectancy of the Designated Beneficiary or
Beneficiaries starting by December 31 of the year
following the year of the Owner's death. If, however,
the Designated Beneficiary is the Owner's surviving
spouse, then this Distribution is not required to begin
until December 31 of the later of (1) the calendar year
immediately following the calendar year in which the
Owner died; or (2) the calendar year in which the Owner
would have attained age 70 1/2.
5. An individual may satisfy the minimum distribution requirements
under Section 401(a)(9) of the Code by receiving a distribution
from one IRA that is equal to the amount required to satisfy the
minimum distribution requirements for two or more IRAs. For this
purpose, the Owner of two or more IRAs may use the "alternative
method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above.
6. Any refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the calendar
year following the year of the refund toward the payment of future
premiums or the purchase of additional benefits.
7. The annual premium shall not exceed amounts allowable under the
terms of the SIMPLE plan described in Section 408(p) of the Code
or any successor provision in which the Owner is a participant.
8. Transfers and rollovers from other SIMPLE IRAs are permitted and
are excluded from the limit set forth in Section 7.
9. Notwithstanding any Contract provisions to the contrary, no amount
may be borrowed under the Contract and no portion may be used as
security for a loan.
10. Annuity Payments may not begin before the Annuitant attains the
age of 59 1/2 without incurring a penalty tax except in the
situations described in Section 72(t) of the Code.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ----------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
TAX-SHELTERED ANNUITY
ENDORSEMENT
TAX-SHELTERED ANNUITY ENDORSEMENT
This Contract is established as a Tax-Sheltered Annuity ("TSA") under
Section 403(b) of the Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision, pursuant to the Owner's request in
the application. Accordingly, this Endorsement is attached to and made
part of the Contract as of its issue date or, if later, the date shown
below. If this is a group contract, references to the "Owner" and to
the "Contract" shall, respectively, be deemed to include the
Participant and the Participant's Certificate where appropriate.
TAX-SHELTERED ANNUITY PROVISIONS
To ensure treatment as a TSA, this Contract will be subject to the
requirements of Code Section 403(b), which are briefly summarized
below:
(a) Purchase Payments made on behalf of the Owner pursuant to a
salary reduction agreement when added to "elective deferral"
contributions under all other plans, contracts or arrangements
in which the Owner participates, may not exceed the annual
limitation on such contributions as provided in Code Section
401(a)(30).
(b) Purchase Payments applied to the Contract on behalf of the
Owner which exceed the applicable "exclusion allowance"
(within the meaning of Code Section 403(b)(2)) or the
limitations contained in Code Section 415 shall not be
excludable from gross income.
(c) Purchase Payments that exceed any of the foregoing limitations
may be returned, distributed or otherwise corrected using any
method permissible under the Code.
NONDISCRIMINATION REQUIREMENTS
(a) Except if this Contract is purchased by a "church" (within the
meaning of Code Section 3121(w)), the Plan must satisfy the
nondiscrimination requirements of Code Section 403(b)(12).
(b) Purchase Payments not made pursuant to a salary reduction
agreement will satisfy the nondiscrimination requirements of
Code Section 403(b)(12) provided they satisfy the requirements
of Code Section 401(a)(4) (nondiscrimination in
contributions), Code Section 401(a)(5) (permitted disparity),
Code Section 401(a)(17) (annual limit on compensation), Code
Section 401(m) (average contribution percentage test) and Code
Section 410(b) (coverage).
(c) Purchase Payments made pursuant to a salary reduction
agreement will satisfy the nondiscrimination requirements of
Code Section 403(b)(12) provided that every employee of the
Employer sponsoring the Plan, may elect to make Purchase
Payments of more than $200 pursuant to a salary reduction
agreement.
6832 A (R9-96) -1-
<PAGE>
DISTRIBUTION RESTRICTIONS AND REQUIREMENTS
(a) Distributions attributable to Purchase Payments made pursuant
to a salary reduction agreement may be made only when the
Owner attains age 59 1/2, separates from service, dies,
becomes "disabled" (within the meaning of Code Section
403(b)(11)) or incurs a hardship. A distribution made due to a
hardship may not include income attributable to such Purchase
Payments.
(b) Distributions from this Contract must comply with the minimum
distribution and incidental death benefit requirements of Code
Section 403(b)(10). Accordingly, an Owner's entire interest
under the Contract generally must be distributed (or begin to
be distributed) by April 1 of the calendar year following the
later of (i) the calendar year in which the Owner attains age
70 1/2, or (ii) the calendar year in which the Owner retires
(the "Required Beginning Date").
Distributions commencing not later than the Required Beginning
Date may be made over the life of the Owner or over the lives
of the Owner and his or her Designated Beneficiary (or over a
period not extending beyond the life expectancy of the Owner
or the life expectancy of the Owner and his or her Designated
Beneficiary).
(c) If the Owner dies before distribution of his or her interest
in the Contract has begun in accordance with paragraph (b)
above, the Owner's entire interest must be distributed within
five years, unless: (i) such interest is distributed to a
Designated Beneficiary over his or her life (or over a period
not extending beyond such Designated Beneficiary's life
expectancy); and (ii) such distribution begins not later than
one year after the Owner's death. If the Designated
Beneficiary is the Owner's surviving spouse, the date on which
the distributions are required to begin shall not be earlier
than the date on which the Owner would have attained age 70
1/2.
(d) If the Owner dies after distribution of his or her interest in
this Contract has begun in accordance with paragraph (b) above
but before his or her entire interest has been distributed,
the remaining interest must be distributed at least as rapidly
as under the method of distribution being used prior to the
Owner's death.
(e) All distributions must comply with a method of distribution
offered by the Company under this Contract.
(f) If the Owner receives a distribution from this Contract that
qualifies as an "eligible rollover distribution" (within the
meaning of Code Section 402(f)(2)(A)) and elects to have such
distribution paid directly to an "eligible retirement plan"
(within the meaning of Code Section 402(c)), such distribution
shall be made in the form of a direct transfer to the eligible
retirement plan. The Company may establish reasonable
administrative rules applicable to such direct transfers.
NONFORFEITABILITY
(a) The Owner's rights under this Contract shall be nonforfeitable
except for failure to pay future Premiums.
(b) This Contract may not be transferred, sold, assigned or
pledged as collateral for a loan or as security for the
performance of an obligation or for any other purposes to any
person other than the Company.
<PAGE>
MULTIPLE CONTRACTS
(a) If for any taxable year an Owner is covered by this Contract
and any other TSA, all such contracts shall be treated as a
single contract.
PLAN PROVISIONS
The Plan, including certain Plan provisions required by the Employee
Retirement Income Security Act of 1974 or other applicable law, may
limit the Owner's rights under this Contract. The Plan provisions may:
(a) Limit the Owner's right to make Purchase Payments;
(b) Restrict the time when the Owner may elect to receive payments
under this Contract;
(c) Require the consent of the Owner's spouse before the Owner may
elect to receive payments under this Contract;
(d) Require that all distributions be made in the form of a joint
and survivor annuity for the Owner and the Owner's spouse
unless both consent to a different form of distribution;
(e) Require that the Owner's spouse be the Designated Beneficiary;
(f) Require that the Owner remain employed by the Employer
sponsoring the Plan for a specified period of time before the
Owner's rights under this Contract become fully vested; or
(g) Otherwise restrict the Owner's exercise of rights under the
Contract or give the Employer sponsoring the Plan (or a Plan
representative) the right to exercise certain rights on the
Owner's behalf.
No such Plan provision shall limit an Owner's rights under this
Contract, unless the Employer sponsoring the Plan has provided the
Company with written notification of such provision. In no event shall
any such Plan provision enlarge the Company's obligations under this
Contract.
TAX CONSEQUENCES
(a) The Company will not incur any liability or be responsible for
the timing, purpose or propriety of any contribution or
distribution; any tax or penalty imposed on account of any
such contribution or distribution; or any other failure, in
whole or in part, by the Owner or the Employer to comply with
the provisions set forth in the Code or any other law.
ADMINISTRATION
The Company does not act as the Administrator of the Plan. Accordingly,
the Company will not incur any liability or be responsible for
interpreting the Plan or deciding any question arising thereunder.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- ----------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
ENDORSEMENT
INDIVIDUAL RETIREMENT ANNUITY PROVISIONS
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Contract is established as an Individual Retirement Annuity
("IRA") as defined in Section 408 of the Internal Revenue Code of 1986,
as amended (the "Code") or any successor provision pursuant to the
Owner's request in the Application. Accordingly, this endorsement is
attached to and made part of the Contract as of its Issue Date or, if
later, the date shown below. Notwithstanding any other provisions of
the Contract to the contrary, the following provisions shall apply.
RESTRICTIONS ON INDIVIDUAL RETIREMENT ANNUITY
To ensure treatment as an IRA, this Contract will be subject to the
requirements of Code Section 408, which are briefly summarized below:
1. The Contract is established for the exclusive benefit of the
Owner or his or her beneficiaries. The Owner shall be the
Annuitant.
2. The Contract shall be nontransferable and the entire interest
of the Owner in the Contract is nonforfeitable.
3. Notwithstanding any provision of the Contract to the contrary,
the distribution of the Owner's interest shall be made in
accordance with the minimum distribution requirements of
Section 401(a)(9) of the Internal Revenue Code and the
regulations thereunder, including the incidental death benefit
provisions of Section 1.401(a)(9)-2 of the proposed
regulations, all of which are herein incorporated by
reference.
The Owner's entire interest in the Contract must be
distributed, or begin to be distributed, by the Owner's
required beginning date, which is the April 1 following the
calendar year in which the Owner reaches age 70 1/2. For each
succeeding year, a distribution must be made on or before
December 31. By the required beginning date, the Owner may
elect to have the balance in the account distributed in one of
the following forms:
1) A single lump sum payment;
2) Equal or substantially equal monthly,
quarterly, or annual payments over the life
of the Owner or over the joint and last
survivor lives of the Owner and his or her
Designated Beneficiary; or
3) Equal or substantially equal annual payments
over a specified period that may not be
longer than the Owner's life expectancy or
the joint and last survivor life expectancy
of the Owner and his or her Designated
Beneficiary.
An Annuity Option may not be elected with a Fixed Period that
will guarantee Annuity Payments beyond the life expectancy of
the Annuitant and Beneficiary and Annuity Payments must be
made at least annually and in equal amounts.
4. If the Owner dies before his or her entire interest is
distributed, the entire remaining interest will be distributed
as follows:
a. If the Owner dies on or after distributions have
begun under Section 3, the entire remaining interest
must be distributed at least as rapidly as provided
under Section 3.
V 6842A (1-97)
<PAGE>
INDIVIDUAL RETIREMENT ANNUITY PROVISIONS (Continued)
RESTRICTIONS ON INDIVIDUAL RETIREMENT ANNUITY (continued)
b. If the Owner dies before distributions have begun
under Section 3, the entire remaining interest must
be distributed as elected by the Owner or, if the
Owner has not so elected, as elected by the
Designated Beneficiary or Beneficiaries as follows:
1) by December 31 of the year containing the
fifth anniversary of the Owner's death; or
2) in equal or substantially equal payments
over the life or life expectancy of the
Designated Beneficiary or Beneficiaries
starting by December 31 of the year
following the year of the Owner's death. If,
however, the Designated Beneficiary is the
Owner's surviving spouse, then this
Distribution is not required to begin until
December 31 of the later of: (1) the
calendar year immediately following the
calendar year in which the Owner died; or
(2) the calendar year in which the Owner
would have attained age 70 1/2.
5. An individual may satisfy the minimum distribution
requirements under Section 401(a)(9) of the Code by receiving
a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements of
two or more IRAs. For this purpose, the Owner of two or more
IRAs may use the "alternative method" described in Notice
88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements described above.
6. Any refund of premiums (other than those attributable to
excess contributions) will be applied before the close of the
calendar year following the year of the refund toward the
payment of future premiums or the purchase of additional
benefits.
7. The annual premium shall not exceed the lesser of $2,000 or
100 percent of compensation ($4,000 or 100 percent of
compensation for Spousal IRAs however, no more than $2,000 can
be contributed to either spouse's IRA), except for plans
defined in Section 408(k) of the Code, for which annual
premiums shall not exceed $30,000.
8. Rollover contributions from other qualified plans permitted by
the Internal Revenue Code Sections 402(c), 403(a)(4),
403(b)(8), and 408(d)(3), are excluded from the limit set
forth in Section 8.
9. Notwithstanding any Contract provisions to the contrary, no
amount may be borrowed under the Contract and no portion may
be used as security for a loan.
10. Annuity Payments may not begin before the Annuitant attains
the age of 59 1/2 without incurring a penalty tax except in
the situations described in Section 72(t) of the Code.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
- -----------------------------
Endorsement Effective Date
(If Other Than Issue Date)
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 7, 1997, with respect to the financial
statements of Security Benefit Life Insurance Company and the financial
statements of T. Rowe Price Variable Annuity Account included in the
Registration Statement on Form N-4 and the related Statement of Additional
Information accompanying the Prospectus of T. Rowe Price No-Load Variable
Annuity.
Ernst & Young LLP
Kansas City, Missouri
April 24, 1997
<PAGE>
Item 24.b Exhibit (13)
EQUITY INCOME
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
1 Year
1000 (1+T) 1. = 1,189.32
((1+T) 1.)1. = (1.1893).1
1+T = 1.1893
T = .1893
2.75 Years (From Date of Inception 3/31/94)
1000 (1+T) 2.75 = 1,659.14
((1+T) 2.75) 2.75 = (1.6591) 2.75
1+T = 1.2021
T = .2021
INTERNATIONAL STOCK
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
1 Year
1000 (1+T) 1. = 1,141.20
((1+T) 1.)1. = (1.1412)1
1+T = 1.1412
T = 0.1412
2.75 Years (From Date of Inception 3/31/94)
1000 (1+T) 2.75 = 1,279.56
((1+T) 2.75)2.75 = (1.2796) 2.75
1+T = 1.0938
T = 0.0938
<PAGE>
Item 24.b Exhibit (13)
LIMITED-TERM BOND
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
1 Year
1000 (1+T) 1. = 1,027.26
((1+T) 1.)1. = (1.0273)1.
1+T = 1.0273
T = .0273
2.64 Years (From Date of Inception 5/13/94)
1000 (1+T) 2.64 = 1,148.11
((1+T) 2.64) 2.64 = (1.1481) 2.64
1+T = 1.0537
T = .0537
NEW AMERICA GROWTH
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
1 Year
1000 (1+T) 1. = 1,194.03
((1+T) 1.)1. = (1.1940)1.
1+T = 1.1940
T = .1940
2.75 Years (From Date of Inception 3/31/94)
1000 (1+T) 2.75 = 1,803.83
((1+T) 2.75)2.75 = (1.8038)2.75
1+T = 1.2393
T = .2393
<PAGE>
Item 24.b Exhibit (13)
PERSONAL STRATEGY BALANCED
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
1 Year
1000 (1+T) 1. = 1,135.29
((1+T) 1.)1. = (1.1353)1.
1+T = 1.1353
T = .1353
2 Years (From Date of Inception 12/30/94)
1000 (1+T) 2 = 1,452.69
((1+T) 2)2 = (1.4527)2
1+T = 1.2053
T = .2053
LIMITED - TERM BOND
YIELD CALCULATION AS OF SEPTEMBER 30, 1996
[ [ (22,854.38 - 0) ]6 ]
2 [ [ ---------------------------- + 1] ] - 1
[ [ (421,201.191 x 10.93) ] ]
[ ( (22,854.38 ) )6 ]
2 [ (------------------------------- + 1) ] - 1
[ ( (4,603,729.01) ) ]
2 [(( .00496431913 + 1)6 ) - 1]
2 [(( 1.00496431913 ) 6 ) - 1]
2 [( 1.0302 ) - 1]
2 ( .0302)
= .0604 or 6.04% December 31, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANN.
<SERIES>
<NUMBER> 001
<NAME> NEW AMERICA GROWTH SUBACCT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 23,716
<INVESTMENTS-AT-VALUE> 25,570
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,570
<PAYABLE-FOR-SECURITIES> 25,570
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 25,570
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,598
<SHARES-COMMON-PRIOR> 334
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,675
<NET-ASSETS> 25,570
<DIVIDEND-INCOME> 36
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 89
<NET-INVESTMENT-INCOME> (53)
<REALIZED-GAINS-CURRENT> 840
<APPREC-INCREASE-CURRENT> 1,675
<NET-CHANGE-FROM-OPS> 2,462
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,494
<NUMBER-OF-SHARES-REDEEMED> 230
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,264
<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> 89
<AVERAGE-NET-ASSETS> 15,022
<PER-SHARE-NAV-BEGIN> 13.40
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 2.65
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.00
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANN.
<SERIES>
<NUMBER> 002
<NAME> EQUITY INCOME SUBACCOUNT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 25,720
<INVESTMENTS-AT-VALUE> 27,983
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,983
<PAYABLE-FOR-SECURITIES> 27,983
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 27,983
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,904
<SHARES-COMMON-PRIOR> 366
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,087
<NET-ASSETS> 27,983
<DIVIDEND-INCOME> 534
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 88
<NET-INVESTMENT-INCOME> 446
<REALIZED-GAINS-CURRENT> 471
<APPREC-INCREASE-CURRENT> 2,087
<NET-CHANGE-FROM-OPS> 3,004
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,686
<NUMBER-OF-SHARES-REDEEMED> 148
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,538
<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> 88
<AVERAGE-NET-ASSETS> 16,253
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.70
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANN
<SERIES>
<NUMBER> 003
<NAME> PERSONAL STRATEGY BALNCD SUB
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,722
<INVESTMENTS-AT-VALUE> 8,121
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,121
<PAYABLE-FOR-SECURITIES> 8,121
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 8,121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 601
<SHARES-COMMON-PRIOR> 148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 359
<NET-ASSETS> 8,121
<DIVIDEND-INCOME> 185
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 28
<NET-INVESTMENT-INCOME> 157
<REALIZED-GAINS-CURRENT> 222
<APPREC-INCREASE-CURRENT> 359
<NET-CHANGE-FROM-OPS> 738
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 534
<NUMBER-OF-SHARES-REDEEMED> 81
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 453
<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> 28
<AVERAGE-NET-ASSETS> 4,943
<PER-SHARE-NAV-BEGIN> 11.90
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> 1.19
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.51
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANN
<SERIES>
<NUMBER> 004
<NAME> LIMITED-TERM BOND SUBACCOUNT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,840
<INVESTMENTS-AT-VALUE> 4,865
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,865
<PAYABLE-FOR-SECURITIES> 4,865
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 4,865
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 445
<SHARES-COMMON-PRIOR> 87
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18
<NET-ASSETS> 4,865
<DIVIDEND-INCOME> 164
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 15
<NET-INVESTMENT-INCOME> 149
<REALIZED-GAINS-CURRENT> (37)
<APPREC-INCREASE-CURRENT> 18
<NET-CHANGE-FROM-OPS> 130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 604
<NUMBER-OF-SHARES-REDEEMED> 246
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 358
<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> 15
<AVERAGE-NET-ASSETS> 2,895
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> (.27)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000928971
<NAME> T. ROWE PRICE VARIABLE ANN
<SERIES>
<NUMBER> 005
<NAME> INTERNATIONAL STOCK SUBACCT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 13,554
<INVESTMENTS-AT-VALUE> 14,362
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,362
<PAYABLE-FOR-SECURITIES> 14,362
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 14,362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,125
<SHARES-COMMON-PRIOR> 218
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 731
<NET-ASSETS> 14,362
<DIVIDEND-INCOME> 132
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 49
<NET-INVESTMENT-INCOME> 83
<REALIZED-GAINS-CURRENT> 302
<APPREC-INCREASE-CURRENT> 731
<NET-CHANGE-FROM-OPS> 1,116
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,044
<NUMBER-OF-SHARES-REDEEMED> 137
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 907
<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> 49
<AVERAGE-NET-ASSETS> 8,403
<PER-SHARE-NAV-BEGIN> 11.19
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 1.46
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.77
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Thomas R. Clevenger, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
Thomas R. Clevenger
---------------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Sister Loretto Marie Colwell, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by SECURITY BENEFIT LIFE INSURANCE COMPANY and any 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 4th day of March, 1997.
Sister Loretto Marie Colwell
---------------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John C. Dicus, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
John C. Dicus
---------------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
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 4th day of March, 1997.
Melanie S. Fannin
---------------------------------------
Melanie S. Fannin
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint James R. Schmank and
Roger K. Viola, and each of them, my true and lawful attorneys, each with full
power and authority for me and in my name and behalf to sign Registration
Statements, any amendments thereto and any applications for exemptive relief
filed pursuant to the Investment Company Act of 1940 or the Securities Act of
1933, as amended, and any instrument or document filed as part thereof, or in
connection therewith or in any way related thereto, in connection with Variable
Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE INSURANCE
COMPANY and any 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 4th day of March, 1997.
Howard R. Fricke
---------------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, W. W. Hanna, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
W. W. Hanna
---------------------------------------
W. W. Hanna
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
John E. Hayes, Jr.
---------------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Laird G. Noller, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
Laird G. Noller
---------------------------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Frank C. Sabatini, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
Frank C. Sabatini
---------------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Robert C. Wheeler, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any 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 4th day of March, 1997.
Robert C. Wheeler
---------------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 4th day of March, 1997.
L. Charmaine Lucas
---------------------------------------
Notary Public
My Commission Expires:
April 1, 1998
- -------------------------------------
