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File No. 333-
File No. 811-8836
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
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Post-Effective Amendment No. [_]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [_]
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(Check appropriate box or boxes)
SBL VARIABLE ANNUITY ACCOUNT VIII
(VARIFLEX EXTRA CREDIT)
(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:
(785) 431-3000
Copies To:
Amy J. Lee, Associate General Counsel Jeffrey S. Puretz, Esq.
Security Benefit Group Building Dechert, Price & Rhoads
700 Harrison Street 1775 Eye Street, NW
Topeka, KS 66636-0001 Washington, DC 20005
(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective:
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on March 1, 2000, pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on March 1, 2000, pursuant to paragraph (a)(1) of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[_] on March 1, 2000, 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.
Title of Securities Being Registered: Interests in a separate account under
individual flexible premium deferred variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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VARIFLEX EXTRA CREDIT VARIABLE ANNUITY
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY: MAILING ADDRESS:
SECURITY BENEFIT LIFE SECURITY BENEFIT LIFE
INSURANCE COMPANY INSURANCE COMPANY
700 SW HARRISON STREET P.O. BOX 750497
TOPEKA, KANSAS 66636-0001 TOPEKA, KANSAS 66675-0497
1-800-888-2461
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This Prospectus describes the Variflex Extra Credit Variable Annuity--a
flexible purchase payment deferred variable annuity contract (the "Contract")
offered by Security Benefit Life Insurance Company ("Security Benefit"). The
Contract is available for individuals as a non-tax qualified retirement plan.
The Contract is also available for individuals in connection with a retirement
plan qualified under Section 401, 403(b), 408, 408A or 457 of the Internal
Revenue Code. The Contract is designed to give you flexibility in planning for
retirement and other financial goals.
You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of Security Benefit called the Variable Annuity
Account VIII, or to the Fixed Account. Each Subaccount invests in a
corresponding Series of the SBL Fund. The Subaccounts currently available under
the Contract are:
* Growth * Global Total Return
* Growth-Income * Managed Asset Allocation
* Money Market * Equity Income
* Worldwide Equity * High Yield
* High Grade Income * Social Awareness
* Enhanced Index * Value
* International * Small Cap
* Mid Cap * Select 25
* Global Strategic Income
Amounts allocated to the Fixed Account will accrue interest at rates that are
paid by Security Benefit as described in "The Fixed Account," page 26. Contract
Value in the Fixed Account is guaranteed by Security Benefit.
Amounts that you allocate to the Subaccounts under a Contract will vary based
on investment performance of the Subaccounts. No minimum amount of Contract
Value is guaranteed.
When you are ready to receive annuity payments, the Contract provides several
options for annuity payments. See "Annuity Options," page 25.
This Prospectus concisely sets forth information about the Contract and the
Separate Account that you should know before purchasing the Contract. The
"Statement of Additional Information," dated March __, 2000, which has been
filed with the Securities and Exchange Commission contains certain additional
information. The Statement of Additional Information, as it may be supplemented
from time to time, is incorporated by reference into this Prospectus and is
available at no charge, by writing Security Benefit at 700 Harrison Street,
Topeka, Kansas 66636 or by calling 1-800-888-2461. The table of contents of the
Statement of Additional Information is set forth on page 40 of this Prospectus.
The SEC maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference and other
information regarding companies that file electronically with the SEC.
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The Securities and Exchange Commission has not approved or disapproved these
securities or determined if the Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This Prospectus is accompanied by the current prospectus for the SBL Fund. You
should read the prospectuses carefully and retain them for future reference.
The Contract is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The value
of your Contract can go up and down and you could lose money.
Date: March __, 2000
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TABLE OF CONTENTS
Page
DEFINITIONS.............................................................. 5
SUMMARY.................................................................. 6
PURPOSE OF THE CONTRACT................................................ 6
THE SEPARATE ACCOUNT AND SBL FUND...................................... 6
FIXED ACCOUNT.......................................................... 6
PURCHASE PAYMENTS...................................................... 6
CREDIT ENHANCEMENT..................................................... 6
CONTRACT BENEFITS...................................................... 6
FREE-LOOK RIGHT........................................................ 6
CHARGES AND DEDUCTIONS................................................. 7
Contingent Deferred Sales Charge..................................... 7
Mortality and Expense Risk Charge.................................... 7
Administration Charge................................................ 7
Account Administration Charge........................................ 7
Premium Tax Charge................................................... 7
Other Expenses....................................................... 7
CONTACTING SECURITY BENEFIT............................................ 7
EXPENSE TABLE............................................................ 9
CONTRACTUAL EXPENSES................................................... 9
ANNUAL SEPARATE ACCOUNT EXPENSES....................................... 9
ANNUAL MUTUAL FUND EXPENSES............................................ 9
EXAMPLES............................................................... 10
CONDENSED FINANCIAL INFORMATION.......................................... 11
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND... 13
SECURITY BENEFIT LIFE INSURANCE COMPANY................................ 13
PUBLISHED RATINGS...................................................... 13
SEPARATE ACCOUNT....................................................... 14
SBL FUND............................................................... 14
Series A (Growth Series)............................................. 14
Series B (Growth-Income Series)...................................... 15
Series C (Money Market Series)....................................... 15
Series D (Worldwide Equity Series)................................... 15
Series E (High Grade Income Series).................................. 15
Series H (Enhanced Index Series)..................................... 15
Series I (International Series)...................................... 15
Series J (Mid Cap Series)............................................ 15
Series K (Global Strategic Income Series)............................ 15
Series M (Global Total Return Series)................................ 15
Series N (Managed Asset Allocation Series)........................... 15
Series O (Equity Income Series)...................................... 15
Series P (High Yield Series)......................................... 15
Series S (Social Awareness Series)................................... 15
Series V (Value Series).............................................. 15
Series X (Small Cap Series).......................................... 16
Series Y (Select 25 Series).......................................... 16
The Investment Adviser............................................... 16
THE CONTRACT............................................................. 16
GENERAL................................................................ 16
APPLICATION FOR A CONTRACT............................................. 16
PURCHASE PAYMENTS...................................................... 17
CREDIT ENHANCEMENT..................................................... 17
ALLOCATION OF PURCHASE PAYMENTS........................................ 17
DOLLAR COST AVERAGING OPTION........................................... 17
ASSET REALLOCATION OPTION.............................................. 18
TRANSFERS OF CONTRACT VALUE............................................ 19
CONTRACT VALUE......................................................... 19
DETERMINATION OF CONTRACT VALUE........................................ 19
FULL AND PARTIAL WITHDRAWALS........................................... 19
SYSTEMATIC WITHDRAWALS................................................. 20
FREE-LOOK RIGHT........................................................ 21
DEATH BENEFIT.......................................................... 21
DISTRIBUTION REQUIREMENTS.............................................. 22
DEATH OF THE ANNUITANT................................................. 22
CHARGES AND DEDUCTIONS................................................... 22
CONTINGENT DEFERRED SALES CHARGE....................................... 22
WAIVER OF WITHDRAWAL CHARGE............................................ 23
MORTALITY AND EXPENSE RISK CHARGE...................................... 23
ADMINISTRATION CHARGE.................................................. 24
ACCOUNT ADMINISTRATION CHARGE.......................................... 24
PREMIUM TAX CHARGE..................................................... 24
OTHER CHARGES.......................................................... 24
VARIATIONS IN CHARGES.................................................. 24
GUARANTEE OF CERTAIN CHARGES........................................... 24
SBL FUND EXPENSES...................................................... 24
ANNUITY PERIOD........................................................... 24
GENERAL................................................................ 24
ANNUITY OPTIONS........................................................ 25
Option 1--Life Income................................................ 25
Option 2--Life Income with Guaranteed Payment of 5,
10, 15 or 20 Years................................................. 25
Option 3--Life with Installment or Unit Refund Option................ 25
Option 4--Joint and Last Survivor.................................... 26
Option 5--Payments for a Specified Period............................ 26
Option 6--Payments of a Specified Amount............................. 26
Option 7--Period Certain............................................. 26
Option 8--Joint and Contingent Survivor Option....................... 26
Value of Variable Annuity Payments: Assumed Interest Rate............ 26
SELECTION OF AN OPTION................................................. 26
THE FIXED ACCOUNT........................................................ 26
INTEREST............................................................... 27
DEATH BENEFIT.......................................................... 27
CONTRACT CHARGES....................................................... 27
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT....................... 28
PAYMENTS FROM THE FIXED ACCOUNT........................................ 28
MORE ABOUT THE CONTRACT.................................................. 28
OWNERSHIP.............................................................. 28
Joint Owners......................................................... 28
DESIGNATION AND CHANGE OF BENEFICIARY.................................. 28
DIVIDENDS.............................................................. 29
PAYMENTS FROM THE SEPARATE ACCOUNT..................................... 29
PROOF OF AGE AND SURVIVAL.............................................. 29
MISSTATEMENTS.......................................................... 29
LOANS.................................................................. 29
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS....................... 30
FEDERAL TAX MATTERS...................................................... 30
INTRODUCTION........................................................... 30
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT................ 31
General.............................................................. 31
Charge for Security Benefit Taxes.................................... 31
Diversification Standards............................................ 31
INCOME TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS........... 32
Surrenders or Withdrawals Prior to the Annuity Start Date............ 32
Surrenders or Withdrawals on or after the Annuity Start Date......... 32
Penalty Tax on Certain Surrenders and Withdrawals.................... 32
ADDITIONAL CONSIDERATIONS.............................................. 33
Distribution-at-Death Rules.......................................... 33
Gift of Annuity Contracts............................................ 33
Contracts Owned by Non-Natural Persons............................... 33
Multiple Contract Rule............................................... 33
Possible Tax Changes................................................. 33
Transfers, Assignments or Exchanges of a Contract.................... 33
QUALIFIED PLANS........................................................ 33
Section 401.......................................................... 34
Section 403(b)....................................................... 35
Section 408 and 408A................................................. 35
Section 457.......................................................... 36
Rollovers............................................................ 36
Tax Penalties........................................................ 36
Withholding.......................................................... 37
OTHER INFORMATION........................................................ 37
VOTING OF SBL FUND SHARES.............................................. 37
SUBSTITUTION OF INVESTMENTS............................................ 37
CHANGES TO COMPLY WITH LAW AND AMENDMENTS.............................. 38
REPORTS TO OWNERS...................................................... 38
TELEPHONE TRANSFER PRIVILEGES.......................................... 38
LEGAL PROCEEDINGS...................................................... 39
LEGAL MATTERS.......................................................... 39
PERFORMANCE INFORMATION.................................................. 39
ADDITIONAL INFORMATION................................................... 40
REGISTRATION STATEMENT................................................. 40
FINANCIAL STATEMENTS................................................... 40
STATEMENT OF ADDITIONAL INFORMATION...................................... 40
APPENDIX A - IRA Disclosure Statement
APPENDIX B - Roth IRA Disclosure Statement
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You may not be able to purchase the Contract in your state. You should not
consider this Prospectus to be an offering if the Contract may not be lawfully
offered in your state. You should only rely upon information contained in this
Prospectus or that we have referred you to. We have not authorized anyone to
provide you with information that is different.
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DEFINITIONS
Various terms commonly used in this Prospectus are defined as follows:
ACCUMULATION PERIOD -- The period commencing on the Contract Date and ending
on the Annuity Start Date or, if earlier, when you terminate the Contract,
either through a full withdrawal, payment of charges, or payment of the death
benefit proceeds.
ACCUMULATION UNIT -- A unit of measure used to calculate Contract Value.
ANNUITANT -- The person that you designate to receive annuity payments. If
you designate Joint Annuitants, "Annuitant" means both Annuitants unless
otherwise stated.
ANNUITY -- A series of periodic income payments made by Security Benefit to
an Annuitant, Joint Annuitant, or Beneficiary during the period specified in the
Annuity Option.
ANNUITY OPTIONS -- Options under the Contract that prescribe the provisions
under which a series of annuity payments are made.
ANNUITY PERIOD -- The period beginning on the Annuity Start Date during which
annuity payments are made.
ANNUITY START DATE -- The date when annuity payments are to begin.
AUTOMATIC INVESTMENT PROGRAM -- A program pursuant to which purchase payments
are automatically paid from your bank account on a specified day of each month
or a salary reduction agreement.
CONTRACT DATE -- The date shown as the Contract Date in your Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that your initial purchase payment is credited to the Contract.
CONTRACT DEBT -- The unpaid loan balance including loan interest.
CONTRACTOWNER OR OWNER -- The person entitled to the ownership rights under
the Contract and in whose name the Contract is issued.
CONTRACT VALUE -- The total value of a Contract which includes amounts
allocated to the Subaccounts and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
CONTRACT YEAR -- Each twelve-month period measured from the Contract Date.
CREDIT ENHANCEMENT -- An amount added to Contract Value at the time a
Purchase Payment is applied.
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 are alive, the Owner's
Estate.
FIXED ACCOUNT -- An account that is part of Security Benefit's General
Account to which you may allocate all or a portion of your Contract Value to be
held for accumulation at fixed rates of interest (which may not be less than 3
percent) declared periodically by Security Benefit.
GENERAL ACCOUNT -- All assets of Security Benefit other than those allocated
to the Separate Account or to any other separate account of Security Benefit.
HOME OFFICE -- The Annuity Administration Department of Security Benefit,
P.O. Box 750497, Topeka, Kansas 66675-0497.
HOSPITAL -- An institution that is licensed as such by the Joint Commission
of Accreditation of Hospitals, or any lawfully operated institution that
provides in-patient treatment of sick and injured persons through medical,
diagnostic and surgical facilities directed by physicians and 24 hour nursing
services.
PARTICIPANT -- A Participant under a Qualified Plan.
PURCHASE PAYMENT -- An amount paid to Security Benefit as consideration for
the Contract.
QUALIFIED SKILLED NURSING FACILITY -- A facility licensed by the state to
provide on a daily basis convalescent or chronic care for in-patients who, by
reason of infirmity or illness, are not able to care for themselves.
SBL FUND -- A diversified, open-end management investment company commonly
referred to as a mutual fund.
SEPARATE ACCOUNT -- The Variable Annuity Account VIII. A separate account of
Security Benefit that consists of accounts, referred to as Subaccounts, each of
which invests in a corresponding Series of the SBL Fund.
SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of the SBL Fund. Currently, seventeen
Subaccounts are available under the Contract.
TERMINAL ILLNESS -- An incurable condition that with a degree of medical
certainty will result in death within one year.
VALUATION DATE -- Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUATION PERIOD -- A period used in measuring the investment experience of
each Subaccount of the Separate Account. The Valuation Period begins at the
close of one Valuation Date and ends at the close of the next succeeding
Valuation Date.
WITHDRAWAL VALUE -- The amount you will receive upon full withdrawal of the
Contract. It is equal to Contract Value less any Contract Debt, any applicable
withdrawal charges, any pro rata account administration charge and any
uncollected premium taxes.
SUMMARY
This summary provides a brief overview of the more significant aspects of the
Contract. Further detail is provided in this Prospectus, the Statement of
Additional Information, and the Contract. Unless the context indicates
otherwise, the discussion in this summary and the remainder of the Prospectus
relates to the portion of the Contract involving the Separate Account. The Fixed
Account is briefly described under "The Fixed Account," page 26 and in the
Contract.
PURPOSE OF THE CONTRACT -- The flexible purchase payment deferred variable
annuity contract ("Contract") described in this Prospectus is designed to give
you flexibility in planning for retirement and other financial goals.
You may purchase the Contract as a non-tax qualified retirement plan for an
individual ("Non-Qualified Plan"). You may also purchase the Contract, on an
individual basis, in connection with a retirement plan qualified under Section
401, 403(b), 408, 408A, or 457 of the Internal Revenue Code of 1986, as amended.
These plans are sometimes referred to in this Prospectus as "Qualified Plans."
THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently divided
into seventeen accounts referred to as Subaccounts. See "Separate Account," page
14. Each Subaccount invests exclusively in shares of a corresponding Series of
the SBL Fund. The Series of SBL Fund, each of which has a different investment
objective or objectives, are as follows: Growth Series, Growth-Income Series,
Money Market Series, Worldwide Equity Series, High Grade Income Series, Enhanced
Index Series, International Series, Mid Cap Series, Global Strategic Income
Series, Global Total Return Series, Managed Asset Allocation Series, Equity
Income Series, High Yield Series, Social Awareness Series, Value Series, Small
Cap Series and Select 25 Series. See "SBL Fund," page 14.
You may allocate all or part of your purchase payments to the Subaccounts.
Amounts that you allocate to the Subaccounts will increase or decrease in dollar
value depending on the investment performance of the Series of SBL Fund in which
such Subaccount invests. You bear the investment risk for amounts allocated to a
Subaccount.
FIXED ACCOUNT -- You may allocate all or part of your purchase payments to the
Fixed Account, which is part of Security Benefit's General Account. Amounts that
you allocate to the Fixed Account earn interest at rates determined at the
discretion of Security Benefit and are guaranteed to be at least an effective
annual rate of 3 percent. See "The Fixed Account," page 26.
PURCHASE PAYMENTS -- Your initial purchase payment must be at least $10,000.
Thereafter, you may choose the amount and frequency of purchase payments, except
that the minimum subsequent purchase payment is $500. See "Purchase Payments,"
page 17.
CREDIT ENHANCEMENT -- We will add an amount called a Credit Enhancement to your
Contract Value each time you make a Purchase Payment.
CONTRACT BENEFITS -- You may transfer Contract Value among the Subaccounts and
to and from the Fixed Account, subject to certain restrictions as described in
"The Contract," page 16 and "The Fixed Account," page 26.
At any time before the Annuity Start Date, you may surrender a Contract for
its Withdrawal Value, and may make partial withdrawals, including systematic
withdrawals, from Contract Value, subject to certain restrictions described in
"The Fixed Account," page 26. See "Full and Partial Withdrawals," page 19 and
"Federal Tax Matters," page 30 for more information about withdrawals, including
the 10 percent penalty tax that may be imposed upon full and partial withdrawals
(including systematic withdrawals) made prior to the Owner attaining age 59 1/2.
The Contract provides for a death benefit upon the death of the Owner prior
to the Annuity Start Date. See "Death Benefit," page 21 for more information.
The Contract provides for several Annuity Options on either a variable basis, a
fixed basis, or both. Security Benefit guarantees annuity payments under the
fixed Annuity Options. See "Annuity Period," page 24.
FREE-LOOK RIGHT -- You may return the Contract within the Free-Look Period,
which is generally a ten-day period beginning when you receive the Contract. In
this event, Security Benefit will refund to you purchase payments (not including
any Credit Enhancements) allocated to the Fixed Account. Security Benefit will
also refund any Contract Value allocated to the Subaccounts, plus any charges
deducted from such Contract Value, less the value of any Credit Enhancements.
Security Benefit will refund purchase payments allocated to the Subaccounts
rather than Contract Value in those states where it is required to do so.
CHARGES AND DEDUCTIONS -- Security Benefit does not deduct sales load from
purchase payments before allocating them to your Contract Value. Certain charges
will be deducted in connection with the Contract as described below.
CONTINGENT DEFERRED SALES CHARGE. If you withdraw Contract Value, Security
Benefit may deduct a contingent deferred sales charge (which may also be
referred to as a withdrawal charge). The amount of the withdrawal charge depends
on how long your Purchase Payment has been held under the Contract. The
withdrawal charge will be waived on withdrawals to the extent that total
withdrawals in a Contract Year, including systematic withdrawals, do not exceed
the Free Withdrawal amount defined as follows.
The Free Withdrawal amount is equal in the first Contract Year, to 10 percent
of Purchase Payments made during the year and, in any subsequent Contract Year,
to 10 percent of Contract Value as of the first day of that Contract Year. The
withdrawal charge applies to the portion of any withdrawal consisting of
Purchase Payments and corresponding Credit Enhancements that exceeds the Free
Withdrawal amount. The withdrawal charge does not apply to withdrawals of
earnings.
The amount of the charge will depend on how long your Purchase Payments have
been held under the Contract. Each Purchase Payment you make and its
corresponding Credit Enhancement is considered to have a certain "age,"
depending on the length of time since the Purchase Payment was effective. A
Purchase Payment is "age one" in the year beginning on the date the Purchase
Payment is received by Security Benefit and increases in age each year
thereafter. The withdrawal charge is calculated according to the following
schedule:
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PURCHASE PAYMENT AGE (IN YEARS) WITHDRAWAL CHARGE
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1 7%
2 7%
3 6%
4 6%
5 5%
6 5%
7 3%
8 and over 0%
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The amount of the withdrawal charge assessed against your Contract will never
exceed 7 percent of Purchase Payments paid, and Credit Enhancements added, under
the Contract. In addition, no withdrawal charge will be assessed upon: (1)
payment of death benefit proceeds; or (2) annuity options that provide for
payments for life, or a period of at least 7 years. Subject to insurance
department approval, Security Benefit will also waive the withdrawal charge on a
full or partial withdrawal if the Owner has been diagnosed with a medically
determinable condition which results in a life expectancy of one year or less,
or upon confinement to a Hospital or Qualified Skilled Nursing Facility for 90
consecutive days or more. See "Contingent Deferred Sales Charge," page 22.
MORTALITY AND EXPENSE RISK CHARGE. Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks equal to an
annual rate of 1.25 percent of each Subaccount's average daily net assets. See
"Mortality and Expense Risk Charge," page 23.
ADMINISTRATION CHARGE. Security Benefit deducts a daily administration charge
equal to an annual rate of 0.15 percent of each Subaccount's average daily net
assets. See "Administration Charge," page 24.
ACCOUNT ADMINISTRATION CHARGE. Security Benefit deducts an account
administration charge of $30.00 at each calendar year end. Security Benefit will
waive the charge if your Contract Value is $50,000 or more on the date the
charge is to be deducted. See "Account Administration Charge," page 24.
PREMIUM TAX CHARGE. Security Benefit assesses a premium tax charge to
reimburse itself for any premium taxes that it incurs with respect to this
Contract. This charge will usually be deducted on the Annuity Start Date or upon
full withdrawal if a premium tax was incurred by Security Benefit and is not
refundable. Partial withdrawals, including systematic withdrawals, may be
subject to a premium tax charge if a premium tax is incurred on the withdrawal
by Security Benefit and is not refundable. Security Benefit reserves the right
to deduct such taxes when due or anytime thereafter. Premium tax rates currently
range from 0 percent to 3.5 percent. See "Premium Tax Charge" on page 24.
OTHER EXPENSES. Security Benefit pays the operating expenses of the Separate
Account. Investment advisory fees and operating expenses of SBL Fund are paid by
the Fund and are reflected in the net asset value of the Fund shares. For a
description of these charges and expenses, see the Prospectus for SBL Fund.
CONTACTING SECURITY BENEFIT -- You should direct all written requests, notices,
and forms required by the Contract, and any questions or inquiries to Security
Benefit Life Insurance Company, P.O. Box 750497, Topeka, Kansas 66675-0497 or by
phone by calling (785) 431-3112 or 1-800-888-2461, extension 3112.
EXPENSE TABLE
The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly and indirectly if you allocate Contract
Value to the Subaccounts. The table reflects any contractual charges, expenses
of the Separate Account, and charges and expenses of SBL Fund. The table does
not reflect premium taxes that may be imposed by various jurisdictions. See
"Premium Tax Charge," page 24. The information contained in the table is not
generally applicable to amounts allocated to the Fixed Account.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 22. For a more complete description of the SBL Fund's
costs and expenses, see the SBL Fund prospectus, which accompanies this
Prospectus.
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CONTRACTUAL EXPENSES
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Sales Load on Purchase Payments........................................ None
Contingent Deferred Sales Charge
(as a percentage of amount withdrawn attributable to
Purchase Payments and Credit Enhancements)........................... 7%(1)
Transfer Fee (per transfer)............................................ None
Annual Account Administration Charge................................... $30(2)
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ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of each Subaccount's average daily net assets)
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Annual Mortality and Expense Risk Charge................................ 1.25%
Annual Administration Charge............................................ 0.15%
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Total Separate Account Annual Expenses.................................. 1.40%
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ANNUAL MUTUAL FUND EXPENSES
(as a percentage of each Series' average daily net assets)
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TOTAL
ADVISORY OTHER MUTUAL FUND
FEE(2) EXPENSES(3) EXPENSES(2)
Growth (Series A).................... 0.75% 0.06% 0.81%
Growth-Income (Series B)............. 0.75% 0.05% 0.80%
Money Market (Series C).............. 0.50% 0.07% 0.57%
Worldwide Equity (Series D).......... 1.00% 0.26% 1.26%
High Grade Income (Series E)......... 0.75% 0.08% 0.83%
Enhanced Index (Series H)............ 0.75% 0.22% 0.97%
International (Series I)............. 1.10% 0.57% 1.67%
Social Awareness (Series S).......... 0.75% 0.07% 0.82%
Mid Cap (Series J)................... 0.75% 0.07% 0.82%
Global Strategic Income (Series K)... 0.75% 0.91% 1.66%
Global Total Return (Series M)....... 1.00% 0.24% 1.24%
Managed Asset Allocation (Series N).. 1.00% 0.22% 1.22%
Equity Income (Series O)............. 1.00% 0.08% 1.08%
High Yield (Series P)................ 0.75% 0.18% 0.93%
Value (Series V)..................... 0.75% 0.14% 0.89%
Small Cap (Series X)................. 1.00% 0.59% 1.59%
Select 25 (Series Y)................. 0.75% 0.34% 1.09%
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1. The amount of the contingent deferred sales charge is determined by
reference to how long your Purchase Payments and corresponding Credit
Enhancements have been held under the Contract. A free withdrawal is
available in each Contract Year equal to (1) 10 percent of Purchase Payments
in the first Contract Year, and (2) 10 percent of Contract Value as of the
beginning of the Contract Year in each subsequent Contract Year. See "Full
and Partial Withdrawals," page 19 and "Contingent Deferred Sales Charge,"
page 22 for more information.
2. A pro rata Account administration charge is deducted (1) upon full
withdrawal of Contract Value; (2) when a Contract has been in force for less
than a full calendar year; (3) upon the Annuity Start Date if one of Annuity
Options 1 through 4, 7 or 8 is elected; and (4) upon payment of a death
benefit. The Account administration charge will be waived if your Contract
Value is $50,000 or more upon the date it is to be deducted.
3. During the fiscal year ended December 31, 1998, the Investment adviser
waived the advisory fees of Series P and Series X. There can be no assurance
that the Investment Adviser will continue to waive the Series advisory fees
after December 31, 1998. Expense information for Series P and X has been
restated to reflect the fees that would have been applicable had there been
no fee waiver.
4. Other Expenses for Series H, Series I and Series Y are based on estimated
amounts for the current fiscal year.
- --------------------------------------------------------------------------------
EXAMPLES -- The examples presented below show the expenses that you would pay at
the end of one, three, five or ten years (except for the Enhanced Index,
International and Select 25 Subaccounts which show expenses for only the one and
three year periods). The information presented applies if, at the end of those
time periods, the Contract is (1) surrendered, or (2) annuitized or otherwise
not surrendered. The examples show expenses based upon an allocation of $1,000
to each of the Subaccounts and a hypothetical return of 5 percent.
YOU SHOULD NOT CONSIDER THE EXAMPLES BELOW A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE 5
PERCENT RETURN ASSUMED IN THE EXAMPLES IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ACTUAL RETURNS, WHICH MAY BE
GREATER OR LESSER THAN THE ASSUMED AMOUNT.
Example -- You would pay the expenses shown below assuming full withdrawal of
the Contract at the end of the applicable time period:
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Growth Subaccount.................. $76 $114 $145 $254
Growth-Income Subaccount........... 76 114 145 253
Money Market Subaccount............ 74 107 133 230
Worldwide Equity Subaccount........ 81 127 168 299
High Grade Income Subaccount....... 77 114 146 256
Enhanced Index Subaccount.......... 78 119 --- ---
International Subaccount........... 79 122 --- ---
Mid Cap Subaccount................. 77 114 146 255
Global Strategic Income Subaccount. 85 139 187 337
Global Total Return Subaccount..... 81 127 167 297
Managed Asset Allocation Subaccount 81 126 166 295
Equity Income Subaccount........... 79 122 159 282
High Yield Subaccount.............. 78 117 151 267
Social Awareness Subaccount........ 77 114 146 255
Value Subaccount................... 77 116 149 263
Small Cap Subaccount............... 84 137 184 331
Select 25 Subaccount............... 79 122 --- ---
- --------------------------------------------------------------------------------
Example -- You would pay the expenses shown below assuming NO withdrawals:
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Growth Subaccount.................. $22 $69 $118 $254
Growth-Income Subaccount........... 22 69 118 253
Money Market Subaccount............ 20 62 106 230
Worldwide Equity Subaccount........ 27 83 141 299
High Grade Income Subaccount....... 23 70 119 256
Enhanced Index Subaccount.......... 24 74 --- ---
International Subaccount........... 31 95 --- ---
Mid Cap Subaccount................. 23 69 119 255
Global Strategic Income Subaccount. 31 95 161 337
Global Total Return Subaccount..... 27 82 140 297
Managed Asset Allocation Subaccount 27 81 139 295
Equity Income Subaccount........... 25 77 132 282
High Yield Subaccount.............. 24 73 125 267
Social Awareness Subaccount........ 23 69 119 255
Value Subaccount................... 23 72 123 263
Small Cap Subaccount............... 30 72 116 240
Select 25 Subaccount............... 25 78 ---- ---
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values for the years ended December 31, 1999, 1998, 1997 and 1996 and for the
period April 1, 1995 (date of inception) through December 31, 1995, as well as
ending accumulation units outstanding under each Subaccount.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997(1) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GROWTH SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $25.06 $20.26 $15.96 $13.20 $10.00
End of period.......................................... $25.06 $20.26 $15.96 $13.20
Accumulation units outstanding at the end of period....... 4,778,310 3,449,970 1,987,463 289,693
- ---------------------------------------------------------------------------------------------------------------------------
GROWTH-INCOME SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $19.58 $18.46 $14.80 $12.70 $10.00
End of period.......................................... $19.58 $18.46 $14.80 $12.70
Accumulation units outstanding at the end of period....... 3,161,657 2,571,374 1,388,519 248,974
- ---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $11.51 $11.12 $10.72 $10.35 $10.00
End of period.......................................... $11.51 $11.12 $10.72 $10.35
Accumulation units outstanding at the end of period....... 2,099,523 1,754,200 1,520,180 288,907
- ---------------------------------------------------------------------------------------------------------------------------
WORLDWIDE EQUITY SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $16.43 $13.87 $13.21 $11.42 $10.00
End of period.......................................... $16.43 $13.87 $13.21 $11.42
Accumulation units outstanding at the end of period....... 2,293,514 1,835,594 1,183,160 126,206
- ---------------------------------------------------------------------------------------------------------------------------
HIGH GRADE INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period.................................... $13.07 $12.27 $11.31 $11.56 $10.00
End of period.......................................... $13.07 $12.27 $11.31 $11.56
Accumulation units outstanding at the end of period....... 2,409,250 1,607,065 1,631,708 244,306
- ---------------------------------------------------------------------------------------------------------------------------
MID CAP SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $19.04 $16.37 $13.84 $11.89 $10.00
End of period.......................................... $19.04 $16.37 $13.84 $11.89
Accumulation units outstanding at the end of period....... 1,468,017 1,234,228 772,390 133,581
- ---------------------------------------------------------------------------------------------------------------------------
GLOBAL STRATEGIC INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period.................................... $13.10 $12.43 $11.96 $10.67 $10.00
End of period.......................................... $13.10 $12.43 $11.96 $10.67
Accumulation units outstanding at the end of period....... 364,793 382,445 328,077 86,477
- ---------------------------------------------------------------------------------------------------------------------------
GLOBAL TOTAL RETURN SUBACCOUNT
Accumulation unit value:
Beginning of period.................................... $13.90 $12.52 $11.96 $10.62 $10.00
End of period.......................................... $13.90 $12.52 $11.96 $10.62
Accumulation units outstanding at the end of period....... 1,063,148 1,454,825 1,361,078 471,091
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED ASSET ALLOCATION SUBACCOUNT
Accumulation unit value:
Beginning of period.................................... $16.14 $13.82 $11.84 $10.64 $10.00
End of period.......................................... $16.14 $13.82 $11.84 $10.64
Accumulation units outstanding at the end of period....... 1,927,318 1,213,323 715,033 231,852
- ---------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $18.69 $17.38 $13.73 $11.61 $10.00
End of period.......................................... $18.69 $17.38 $13.73 $11.61
Accumulation units outstanding at the end of period....... 3,562,159 3,117,060 1,764,015 267,317
- ---------------------------------------------------------------------------------------------------------------------------
HIGH YIELD SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $12.36 $11.84 $10.00 --- ---
End of period.......................................... $12.36 $11.84 --- ---
Accumulation units outstanding at the end of period....... 945,133 316,416 --- ---
- ---------------------------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $23.04 $17.78 $14.69 $12.56 $10.00
End of period.......................................... $23.04 $17.78 $14.69 $12.56
Accumulation units outstanding at the end of period....... 1,140,285 541,120 220,549 37,149
- ---------------------------------------------------------------------------------------------------------------------------
VALUE SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $14.96 $13.01 $10.00 --- ---
End of period.......................................... $14.96 $13.01 --- ---
Accumulation units outstanding at the end of period....... 1,108,840 372,693 --- ---
- ---------------------------------------------------------------------------------------------------------------------------
SMALL CAP SUBACCOUNT Accumulation unit value:
Beginning of period.................................... $10.50 $ 9.55 $10.00 --- ---
End of period.......................................... $10.50 $ 9.55 --- ---
Accumulation units outstanding at the end of period....... 280,763 25,182 --- ---
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
1. High Yield Subaccount and Value Subaccount for the period July 3, 1997 (inception) through December 31, 1997. Small Cap
Subaccount for the period October 15, 1997 (inception) through December 31, 1997.
</FN>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND
SECURITY BENEFIT LIFE INSURANCE COMPANY -- Security Benefit is a life insurance
company organized under the laws of the State of Kansas. It was organized
originally as a fraternal benefit society and commenced business February 22,
1892. It became a mutual life insurance company under its present name on
January 2, 1950.
On July 31, 1998, Security Benefit converted from a mutual life insurance
company to a stock life insurance company ultimately controlled by Security
Benefit Mutual Holding Company, a Kansas mutual holding company. Membership
interests of persons who were Contractowners as of July 31, 1998 became
membership interests in Security Benefit Mutual Holding Company as of that date,
and persons who acquire policies from Security Benefit after that date
automatically become members in the mutual holding company.
Security Benefit offers 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 1999, Security Benefit had total assets of approximately $__
billion. Together with its subsidiaries, Security Benefit has total funds under
management of approximately $___ billion.
The Principal Underwriter for the Contracts is Security Distributors, Inc.
("SDI"), 700 SW Harrison Street, Topeka, Kansas 66636-0001. SDI is registered as
a broker/dealer with the SEC and is a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company wholly owned by
Security Benefit.
PUBLISHED RATINGS -- Security Benefit may from time to time publish in
advertisements, sales literature and reports to 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 Security Benefit
and should not be considered as bearing on the investment performance of assets
held in the Separate Account. Each year A. M. Best Company reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
Ratings. These ratings reflect their current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, the claims-paying
ability of Security Benefit as measured by Standard & Poor's Insurance Ratings
Services may be referred to in advertisements or sales literature or in reports
to 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 -- Security Benefit established the Separate Account under
Kansas law on September 12, 1994. The Contract provides that the income, gains,
or losses of the Separate Account, whether or not realized, are credited to or
charged against the assets of the Separate Account without regard to other
income, gains, or losses of Security Benefit. Kansas law provides that assets in
a separate account attributable to the reserves and other liabilities under the
contracts may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent the contracts so
provide. The Contract contains such a provision. Security Benefit owns the
assets in the Separate Account and is required to maintain sufficient assets in
the Separate Account to meet all Separate Account obligations under the
Contracts. Security Benefit may transfer to its General Account assets that
exceed anticipated obligations of the Separate Account. All obligations arising
under the Contracts are general corporate obligations of Security Benefit.
Security Benefit may invest its own assets in the Separate Account for other
purposes, but not to support contracts other than variable annuity contracts,
and may accumulate in the Separate Account proceeds from Contract charges and
investment results applicable to those assets.
The Separate Account is currently divided into seventeen Subaccounts. The
Contract provides that the income, gains and losses, whether or not realized,
are credited to, or charged against, the assets of each Subaccount without
regard to the income, gains or losses in the other Subaccounts. Each Subaccount
invests exclusively in shares of a specific Series of the SBL Fund. Security
Benefit may in the future establish additional Subaccounts of the Separate
Account, which may invest in other Series of the SBL Fund or in other
securities, mutual funds, or investment vehicles.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with the
SEC does not involve supervision by the SEC of the administration or investment
practices of the Separate Account or of Security Benefit.
SBL FUND -- SBL Fund is a diversified, open-end management investment company of
the series type. It is registered with the SEC under the 1940 Act. Such
registration does not involve supervision by the SEC of the investments or
investment policy of the Fund. SBL Fund currently has seventeen separate
portfolios ("Series"), each of which pursues different investment objectives and
policies.
Shares of the Fund currently are offered only for purchase by separate
accounts of Security Benefit to serve as an investment medium for variable life
insurance policies and variable annuity contracts issued by Security Benefit.
Thus, SBL Fund serves as an investment medium for both variable life insurance
policies and variable annuity contracts. This is called "mixed funding." Shares
of SBL Fund also may be sold in the future to separate accounts of other
insurance companies, both affiliated and not affiliated with Security Benefit.
This is called "shared funding." Security Benefit currently does not foresee any
disadvantages to Contractowners arising from either mixed or shared funding;
however, due to differences in tax treatment or other considerations, it is
theoretically possible that the interests of owners of various contracts for
which SBL Fund serves as an investment medium might at some time be in conflict.
However, Security Benefit, the Fund's Board of Directors, and any other
insurance companies that participate in SBL Fund in the future are required to
monitor events in order to identify any material conflicts that arise from the
use of the Fund for mixed and/or shared funding. SBL Fund's Board of Directors
is required to determine what action, if any, should be taken in the event of
such a conflict. If such a conflict were to occur, Security Benefit might be
required to withdraw the investment of one or more of its separate accounts from
SBL Fund. This might force the Fund to sell securities at disadvantageous
prices.
A summary of the investment objective of each Series of SBL Fund is set forth
below. We cannot assure that any Series will achieve its objective. More
detailed information is contained in the accompanying prospectus of SBL Fund,
including information on the risks associated with the investments and
investment techniques of each Series.
SBL FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
SERIES A (GROWTH SERIES) -- Amounts that you allocate to the Growth Subaccount
are invested in Series A. The investment objective of Series A is to seek
long-term capital growth by investing in a broadly diversified portfolio of
common stocks, securities convertible into common stocks, preferred stocks,
bonds and other debt securities.
SERIES B (GROWTH-INCOME SERIES) -- Amounts that you allocate to the
Growth-Income Subaccount are invested in Series B. Series B seeks long-term
growth of capital with secondary emphasis on income by investing in various
types of securities, including common stocks, convertible securities, preferred
stocks and debt securities. Series B's investments in debt securities may
include securities rated below investment grade. Series B may also temporarily
invest in government bonds or commercial paper.
SERIES C (MONEY MARKET SERIES) -- Amounts that you allocate to the Money Market
Subaccount are invested in Series C. The investment objective of Series C is to
provide as high a level of current income as is consistent with preserving
capital. It invests in high quality money market instruments with maturities of
not longer than thirteen months.
SERIES D (WORLDWIDE EQUITY SERIES) -- Amounts that you allocate to the Worldwide
Equity Subaccount are invested in Series D. The investment objective of Series D
is to seek long-term growth of capital primarily through investment in common
stocks and equivalents of companies domiciled in foreign countries and the
United States.
SERIES E (HIGH GRADE INCOME SERIES) -- Amounts that you allocate to the High
Grade Income Subaccount are invested in Series E. The investment objective of
Series E is to provide current income with security of principal. Series E seeks
to achieve this investment objective by investing in a broad range of debt
securities, including U.S. and foreign corporate debt securities and securities
issued by the U.S. and foreign governments.
SERIES H (ENHANCED INDEX SERIES) -- Amounts that you allocate to the Enhanced
Index Subaccount are invested in Series H. The investment objective of Series H
is to seek to outperform the S&P 500 Index through stock selection resulting in
different weightings of common stocks relative to the index.
SERIES I (INTERNATIONAL SERIES) -- Amounts that you allocate to the
International Subaccount are invested in Series I. The investment objective of
Series I is to seek long-term capital appreciation by investing primarily in
non-U.S. equity securities and other securities with equity characteristics.
SERIES J (MID CAP SERIES) -- Amounts that you allocate to the Mid Cap Subaccount
are invested in Series J. The investment objective of Series J is to seek
capital appreciation through investment in a broadly diversified portfolio of
securities which may include common stocks, preferred stocks, debt securities
and securities convertible into common stocks.
SERIES K (GLOBAL STRATEGIC INCOME SERIES) -- Amounts that you allocate to the
Global Strategic Income Subaccount are invested in Series K. The investment
objective of Series K is to seek high current income and, as a secondary
objective, capital appreciation by investing in a combination of foreign and
domestic high-yield, lower rated debt securities (commonly known as "junk
bonds").
SERIES M (GLOBAL TOTAL RETURN SERIES) -- Amounts that you allocate to the Global
Total Return Subaccount are invested in Series M. The investment objective of
Series M is to seek high total return consisting of capital appreciation and
current income. Series M seeks this objective through asset allocation and
security selection by investing in a diversified portfolio of global equity and
bond securities.
SERIES N (MANAGED ASSET ALLOCATION SERIES) -- Amounts that you allocate to the
Managed Asset Allocation Subaccount are invested in Series N. The investment
objective of Series N is to seek a high level of total return by investing
primarily in a diversified portfolio of debt and equity securities.
SERIES O (EQUITY INCOME SERIES) -- Amounts that you allocate to the Equity
Income Subaccount are invested in Series O. The investment objective of Series O
is to seek to provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of established
companies.
SERIES P (HIGH YIELD SERIES) -- Amounts that you allocate to the High Yield
Subaccount are invested in Series P. The investment objective of Series P is to
seek high current income. Capital appreciation is a secondary objective. Series
P seeks its objectives by investing primarily in higher yielding, higher risk
debt securities (commonly referred to as "junk bonds").
SERIES S (SOCIAL AWARENESS SERIES) -- Amounts that you allocate to the Social
Awareness Subaccount are invested in Series S. The investment objective of
Series S is to seek capital appreciation by investing in various types of
securities which meet certain social criteria established for the Series. Series
S will invest in a diversified portfolio of common stocks, convertible
securities, preferred stocks and debt securities. Series S may temporarily
invest in government bonds or commercial paper.
SERIES V (VALUE SERIES) -- Amounts that you allocate to the Value Subaccount are
invested in Series V. The investment objective of Series V is to seek long-term
growth of capital by investing in a diversified portfolio consisting primarily
of common stocks. The Series will invest in stocks that the Investment Adviser
believes are undervalued relative to assets, earnings, growth potential or cash
flow.
SERIES X (SMALL CAP SERIES) -- Amounts that you allocate to the Small Cap
Subaccount are invested in Series X. The investment objective of Series X is to
seek long-term growth of capital by investing primarily in domestic and foreign
equity securities of small capitalization companies (defined as companies with a
market capitalization substantially similar to that of companies in the Russell
2500 Index at the time of investment).
SERIES Y (SELECT 25 SERIES) -- Amounts that you allocate to the Select 25
Subaccount are invested in Series Y. The investment objective of Series Y is to
seek long-term growth of capital by concentrating its investments in a core
position of 20-30 common stocks of growth companies which have exhibited
consistent above average earnings growth.
THE INVESTMENT ADVISER -- Security Management Company, LLC, 700 SW Harrison
Street, Topeka, Kansas 66636, serves as Investment Adviser to each Series of SBL
Fund. The Investment Adviser is registered with the SEC as an investment
adviser. The Investment Adviser formulates and implements continuing programs
for the purchase and sale of securities in compliance with the investment
objectives, policies, and restrictions of each Series, and is responsible for
the day to day decisions to buy and sell securities for the Series except Series
D, H, I, K, M, N, O and X. See the accompanying SBL Fund prospectus for details.
The Investment Adviser has engaged OppenheimerFunds, Inc., Two World Trade
Center, New York, New York 10048-0203, to provide investment advisory services
to Series D; Bankers Trust Company, 130 Liberty Street, New York, New York
10006, to provide investment advisory services to Series H and I; T. Rowe Price
Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202, to provide
investment advisory services to Series N and O; Wellington Management Company
LLP, 75 State Street, Boston, MA 02109, to provide investment advisory services
to Series K and M; and Strong Capital Management Corporation, 100 Heritage
Reserve, Menomonee, Wisconsin 53051, to provide investment advisory services to
Series X.
THE CONTRACT
GENERAL -- Security Benefit issues the Contract offered by this Prospectus. It
is a flexible purchase payment deferred variable annuity. To the extent that you
allocate all or a portion of your Purchase Payments to the Subaccounts, the
Contract is significantly different from a fixed annuity contract in that it is
the Owner under a Contract who assumes the risk of investment gain or loss
rather than Security Benefit. When you are ready to begin receiving annuity
payments, the Contract provides several Annuity Options under which Security
Benefit will pay periodic annuity payments on a variable basis, a fixed basis or
both, beginning on the Annuity Start Date. The amount that will be available for
annuity payments will depend on the investment performance of the Subaccounts to
which you have allocated Purchase Payments and the amount of interest credited
on Contract Value that you have allocated to the Fixed Account.
The Contract is available for purchase by an individual as a non-tax
qualified retirement plan ("Non-Qualified Plan"). The Contract is also eligible
for purchase in connection with certain tax qualified retirement plans that meet
the requirements of Section 401, 403(b), 408, 408A, or 457 of the Internal
Revenue Code ("Qualified Plan"). Certain federal tax advantages are currently
available to retirement plans that qualify as (1) self-employed individuals'
retirement plans under Section 401, such as HR-10 and Keogh plans, (2) pension
or profit-sharing plans established by an employer for the benefit of its
employees under Section 401, (3) individual retirement accounts or annuities,
including those established by an employer as a simplified employee pension
plan, under Section 408, (4) annuity purchase plans of public school systems and
certain tax-exempt organizations under Section 403(b) or (5) deferred
compensation plans for employees established by a unit of a state or local
government or by a tax-exempt organization under Section 457. Joint Owners are
permitted only on a Contract issued pursuant to a Non-Qualified Plan.
APPLICATION FOR A CONTRACT -- If you wish to purchase a Contract, you may submit
an application and an initial purchase payment to Security Benefit, as well as
any other form or information that Security Benefit may require. Security
Benefit reserves the right to reject an application or Purchase Payment for any
reason, subject to Security Benefit's underwriting standards and guidelines and
any applicable state or federal law relating to nondiscrimination.
The maximum age of an Owner or Annuitant for which a Contract will be issued
is age 80. 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. Thereafter, you may choose the amount and frequency of
purchase payments, except that the minimum subsequent purchase payment is $500.
The minimum subsequent purchase payment if you elect an Automatic Investment
Program is $50. Security Benefit may reduce the minimum purchase payment
requirement under certain circumstances. A purchase payment exceeding $1 million
will not be accepted without prior approval of Security Benefit.
Security Benefit will apply the initial purchase payment not later than the
end of the second Valuation Date after the Valuation Date it is received by
Security Benefit; provided that the purchase payment is preceded or accompanied
by an application that contains sufficient information to establish an account
and properly credit such purchase payment. The application form will be provided
by Security Benefit. If Security Benefit does not receive a complete
application, Security Benefit will notify you that it does not have the
necessary information to issue a Contract. If you do not provide the necessary
information to Security Benefit within five Valuation Dates after the Valuation
Date on which Security Benefit first receives the initial purchase payment or if
Security Benefit determines it cannot otherwise issue the Contract, Security
Benefit will return the initial purchase payment to you unless you consent to
Security Benefit retaining the purchase payment until the application is made
complete.
Security Benefit will credit subsequent purchase payments as of the end of
the Valuation Period in which they are received by Security Benefit at its Home
Office. Purchase payments after the initial purchase payment may be made at any
time prior to the Annuity Start 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. The initial purchase payment
required must be paid before the Automatic Investment Program will be accepted
by Security Benefit.
CREDIT ENHANCEMENT -- Security Benefit will add a Credit Enhancement to your
Contract Value at the time each Purchase Payment is applied to this Contract.
The amount of a Credit Enhancement is determined at the time a Purchase Payment
is made as a percentage of each Purchase Payment applied to the Contract. The
Credit Enhancement will be allocated among the Subaccounts in the same
proportion as the applicable Purchase Payment. The amount returned if the Owner
exercises his or her right to return the Contract during the free look period
will be reduced by any Credit Enhancements applied. The amount of Credit
Enhancement for each Purchase Payment will be based upon the total Purchase
Payments made into the Contract, less the total withdrawals, including any
withdrawal charges, as of the date of the Purchase Payment, as shown in the
table below:
- --------------------------------------------------------------------------------
CREDIT
TOTAL PURCHASE PAYMENTS, LESS WITHDRAWALS AND WITHDRAWAL CHARGES ENHANCEMENT
- --------------------------------------------------------------------------------
Less than $10,000............................................... 0%
At least $10,000 but less than $1,000,000....................... 4%
$1,000,000 or more.............................................. 5%
- --------------------------------------------------------------------------------
ALLOCATION OF PURCHASE PAYMENTS -- In an application for a Contract, you select
the Subaccounts or the Fixed Account to which purchase payments and credit
enhancements will be allocated. Purchase payments and Credit Enhancements will
be allocated according to your instructions contained in the application or more
recent instructions received, if any, except that no purchase payment allocation
is permitted that would result in less than $25.00 per payment being allocated
to any one Subaccount or the Fixed Account. The allocations may be a whole
dollar amount or a whole percentage. Available allocation alternatives include
the seventeen Subaccounts and the Fixed Account.
You may change the purchase payment allocation instructions by submitting a
proper written request to Security Benefit's Home Office. A proper change in
allocation instructions will be effective upon receipt by Security Benefit at
its Home Office and will continue in effect until you submit a change in
instructions to the company. You may make changes in your purchase payment
allocation and changes to an existing Dollar Cost Averaging or Asset
Reallocation Option by telephone provided the Telephone Transfer section of the
application or an Authorization for Telephone Requests form is properly
completed, signed, and filed at Security Benefit's Home Office. Changes in the
allocation of future purchase payments have no effect on existing Contract
Value. You may, however, transfer Contract Value among the Subaccounts and the
Fixed Account in the manner described in "Transfers of Contract Value," page 19.
DOLLAR COST AVERAGING OPTION -- Prior to the Annuity Start Date, you may dollar
cost average your Contract Value by authorizing Security Benefit to make
periodic transfers of Contract Value from any one Subaccount to one or more of
the other Subaccounts. Dollar cost averaging is a systematic method of investing
in which securities are purchased at regular intervals in fixed dollar amounts
so that the cost of the securities gets averaged over time and possibly over
various market cycles. The option will result in the transfer of Contract Value
from one Subaccount to one or more of the other Subaccounts. Amounts transferred
under this option will be credited at the price of the Subaccount as of the end
of the Valuation Dates on which the transfers are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts transferred to a
Subaccount will result in the crediting of a greater number of units when the
price is low and a lesser number of units when the price is high. Similarly, the
amounts transferred from a Subaccount will result in a debiting of a greater
number of units when the price is low and a lesser number of units when the
price is high. Dollar cost averaging does not guarantee profits, nor does it
assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
you must designate whether Contract Value is to be transferred on the basis of a
specific dollar amount, fixed period or earnings only, the Subaccount or
Subaccounts to and from which the transfers will be made, the desired frequency
of the transfers, which may be on a monthly or quarterly basis, and the length
of time during which the transfers shall continue or the total amount to be
transferred over time.
After Security Benefit has received a Dollar Cost Averaging Request in proper
form at its Home Office, Security Benefit will transfer Contract Value in the
amounts you designate from the Subaccount from which transfers are to be made to
the Subaccount or Subaccounts you have chosen. Security Benefit will effect each
transfer on the date you specify or if no date is specified, on the monthly or
quarterly anniversary, whichever corresponds to the period selected, of the date
of receipt at the Home Office of a Dollar Cost Averaging Request in proper form.
Transfers will be made until the total amount elected has been transferred, or
until Contract Value in the Subaccount from which transfers are made has been
depleted. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," page 19.
You may instruct Security Benefit at any time to terminate the option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccount from which transfers were being made that has not been
transferred will remain in that Subaccount unless you instruct us otherwise. If
you wish to continue transferring on a dollar cost averaging basis after the
expiration of the applicable period, the total amount elected has been
transferred, 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 Home Office. Security Benefit requires that you wait
at least a month (or a quarter if transfers were made on a quarterly basis)
before reinstating Dollar Cost Averaging after it has been terminated for any
reason. Security Benefit may discontinue, modify, or suspend the Dollar Cost
Averaging Option at any time.
You may also dollar cost average Contract Value to or from the Fixed Account,
subject to certain restrictions described under "The Fixed Account," page 26.
ASSET REALLOCATION OPTION -- Prior to the Annuity Start Date, you may authorize
Security Benefit to automatically transfer Contract Value on a quarterly,
semiannual or annual basis to maintain a particular percentage allocation among
the Subaccounts. The Contract Value allocated to each Subaccount will grow or
decline in value at different rates during the selected period, and Asset
Reallocation automatically reallocates the Contract Value in the Subaccounts to
the allocation you selected on a quarterly, semiannual or annual basis, as you
select. Asset Reallocation is intended to transfer Contract Value from those
Subaccounts that have increased in value to those Subaccounts that have declined
in value. Over time, this method of investing may help you buy low and sell
high. This investment method does not guarantee profits, nor does it assure that
you will not have losses.
To elect this option an Asset Reallocation Request in proper form must be
received by Security Benefit at its Home Office. An Asset Reallocation Request
form is available upon request. On the form, you must indicate the applicable
Subaccounts, the applicable time period and the percentage of Contract Value to
be allocated to each Subaccount.
Upon receipt of the Asset Reallocation Request, Security Benefit will effect
a transfer or, in the case of a new Contract, will allocate the initial purchase
payment, among the Subaccounts based upon the percentages that you selected.
Thereafter, Security Benefit will transfer Contract Value to maintain that
allocation on each quarterly, semiannual or annual anniversary, as applicable,
of the date of Security Benefit's receipt of the Asset Reallocation Request in
proper form. The amounts transferred will be credited at the price of the
Subaccount as of the end of the Valuation Date on which the transfer is
effected. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value," page 19.
You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. In that event, the Contract
Value in the Subaccounts that has not been transferred will remain in those
Subaccounts regardless of the percentage allocation unless you instruct us
otherwise. If you wish to continue Asset Reallocation after it has been
canceled, a new Asset Reallocation Request form must be completed and sent to
Security Benefit's Home Office. Security Benefit may discontinue, modify, or
suspend, and reserves the right to charge a fee for the Asset Reallocation
Option at any time.
Contract Value allocated to the Fixed Account may be included in the Asset
Reallocation option, subject to certain restrictions described in "Transfers and
Withdrawals from the Fixed Account," page 28.
TRANSFERS OF CONTRACT VALUE -- Prior to the Annuity Start Date, you may transfer
Contract Value among the Subaccounts upon proper written request to Security
Benefit's Home Office. You may make transfers (other than transfers pursuant to
the Dollar Cost Averaging and Asset Reallocation Options) by telephone if the
Telephone Transfer section of the application or an Authorization for Telephone
Requests form has been properly completed, signed and filed at Security
Benefit's Home Office. The minimum transfer amount is $500, or the amount
remaining in a given Subaccount. The minimum transfer amount does not apply to
transfers under the Dollar Cost Averaging or Asset Reallocation Options.
You may also transfer Contract Value from the Subaccounts to the Fixed
Account; however, transfers from the Fixed Account to the Subaccounts are
restricted as described in "The Fixed Account," page 26.
Security Benefit generally does not limit the frequency of transfers,
although Security Benefit reserves the right at a future date to limit the
number of transfers to 14 in a Contract Year. Security Benefit also reserves the
right to limit the size and frequency of such transfers, and to discontinue
telephone transfers.
CONTRACT VALUE -- The Contract Value is the sum of the amounts under the
Contract held in each Subaccount and the Fixed Account as well as any amount set
aside in the loan account to secure loans as of any Valuation Date.
On each Valuation Date, the amount of Contract Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience of
that Subaccount. See "Determination of Contract Value," below. No minimum amount
of Contract Value is guaranteed. You bear the entire investment risk relating to
the investment performance of Contract Value allocated to the Subaccounts.
DETERMINATION OF CONTRACT VALUE -- The Contract Value will vary to a degree that
depends upon several factors, including investment performance of the
Subaccounts to which you have allocated Contract Value, payment of purchase
payments and any corresponding Credit Enhancements, the amount of any
outstanding Contract Debt, partial withdrawals, and the charges assessed in
connection with the Contract. The amounts allocated to the Subaccounts will be
invested in shares of the corresponding Series of SBL Fund. The investment
performance of the Subaccounts will reflect increases or decreases in the net
asset value per share of the corresponding Series and any dividends or
distributions declared by a Series. Any dividends or distributions from any
Series of the Fund will be automatically reinvested in shares of the same
Series, unless Security Benefit, on behalf of the Separate Account, elects
otherwise.
Assets in the Subaccounts are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's
interest in a Subaccount. When you allocate purchase payments to a Subaccount,
your Contract is credited with Accumulation Units. The number of Accumulation
Units to be credited is determined by dividing the dollar amount, including any
Credit Enhancements, allocated to the particular Subaccount by the price for the
Subaccount as of the end of the Valuation Period in which the purchase payment
is credited. In addition, other transactions including loans, full or partial
withdrawals, transfers, and assessment of certain charges against the Contract
affect the number of Accumulation Units credited to a Contract. The number of
units credited or debited in connection with any such transaction is determined
by dividing the dollar amount of such transaction by the price of the affected
Subaccount. The price of each Subaccount is determined on each Valuation Date.
The number of Accumulation Units credited to a Contract shall not be changed by
any subsequent change in the value of an Accumulation Unit, but the dollar value
of an Accumulation Unit may vary from Valuation Date to Valuation Date depending
upon the investment experience of the Subaccount and charges against the
Subaccount.
The price of each Subaccount's units initially was $10. The price of a
Subaccount on any Valuation Date takes into account the following: (1) the
investment performance of the Subaccount, which is based upon the investment
performance of the corresponding Series of SBL Fund, (2) any dividends or
distributions paid by the corresponding Series, (3) the charges, if any, that
may be assessed by Security Benefit for taxes attributable to the operation of
the Subaccount, (4) the mortality and expense risk charge under the Contract,
and (5) the administration charge under the Contract.
FULL AND PARTIAL WITHDRAWALS -- A Contractowner may make a partial withdrawal of
Contract Value, or surrender the Contract for its Withdrawal Value. A full or
partial withdrawal, including a systematic withdrawal, may be taken from
Contract Value at any time while the Owner is living and before the Annuity
Start Date, subject to limitations under the applicable plan for Qualified Plans
and applicable law. A full or partial withdrawal request will be effective as of
the end of the Valuation Period that a proper written request is received by
Security Benefit at its Home Office. A proper written request must include the
written consent of any effective assignee or irrevocable Beneficiary, if
applicable.
The proceeds received upon a full withdrawal will be the Contract's
Withdrawal Value. The Withdrawal Value is equal to the Contract Value as of the
end of the Valuation Period during which a proper withdrawal request is received
by Security Benefit at its Home Office, less any outstanding Contract Debt, any
applicable withdrawal charges, any pro rata account charge and any uncollected
premium taxes.
Security Benefit requires the signature of all Owners on any request for
withdrawal, and a guarantee of all such signatures to effect the transfer or
exchange of all or part of the Contract for another investment. The signature
guarantee must be provided by an eligible guarantor, such as a bank, broker,
credit union, national securities exchange or savings association. Security
Benefit further requires that any request to transfer or exchange all or part of
the Contract for another investment be made upon a transfer form provided by
Security Benefit which is available upon request.
A partial withdrawal may be requested for a specified percentage or dollar
amount of Contract Value. Each partial withdrawal must be at least $500 except
systematic withdrawals discussed below. A request for a partial withdrawal will
result in a payment by Security Benefit of the amount specified in the partial
withdrawal request provided there is sufficient Contract Value to meet the
request. Upon payment, the Contract Value will be reduced by an amount equal to
the payment and any applicable withdrawal charge and premium tax. If a partial
withdrawal is requested after the first Contract Year that would leave the
Withdrawal Value in the Contract less than $5,000, Security Benefit reserves the
right to treat the partial withdrawal as a request for a full withdrawal.
Security Benefit will deduct the amount of a partial withdrawal from the
Contract Value in the Subaccounts and the Fixed Account, according to the
Contractowner's instructions to Security Benefit. If a Contractowner does not
specify the allocation, Security Benefit will deduct the withdrawal from the
Contract Value in the Subaccounts and the Fixed Account in the following order:
Money Market Subaccount, High Grade Income Subaccount, High Yield Subaccount,
Global Strategic Income Subaccount, Growth-Income Subaccount, Equity Income
Subaccount, Managed Asset Allocation Subaccount, Global Total Return Subaccount,
Enhanced Index Subaccount, Growth Subaccount, Select 25 Subaccount, Value
Subaccount, Worldwide Equity Subaccount, International Subaccount, Social
Awareness Subaccount, Mid Cap Subaccount, and Small Cap Subaccount and then from
the Fixed Account. The value of each account will be depleted before the next
account is charged.
A full or partial withdrawal, including a systematic withdrawal, may be
subject to a withdrawal charge if a withdrawal is made from Purchase Payments
that have been held in the contract for less than seven years and may be subject
to a premium tax charge to reimburse Security Benefit for any tax on premiums on
a Contract that may be imposed by various states and municipalities. See
"Contingent Deferred Sales Charge," page 22, and "Premium Tax Charge," page 24.
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 percent penalty tax. In the case of
Contracts issued in connection with retirement plans that meet the requirements
of Section 401(a), 403(b), 408 or 457 of the Internal Revenue Code, reference
should be made to the terms of the particular Qualified Plan for any limitations
or restrictions on withdrawals. For more information, see "Restrictions on
Withdrawals from Qualified Plans," page 30. The tax consequences of a withdrawal
under the Contract should be carefully considered. See "Federal Tax Matters,"
page 30.
SYSTEMATIC WITHDRAWALS -- Security Benefit currently offers a feature under
which you may select systematic withdrawals. Under this feature, a Contractowner
may elect to receive systematic withdrawals while the Owner is living and before
the Annuity Start Date by sending a properly completed Systematic Withdrawal
Request form to Security Benefit at its Home Office. This option may be elected
at any time. A Contractowner may designate the systematic withdrawal amount as a
percentage of Contract Value allocated to the Subaccounts and/or Fixed Account,
as a fixed period, as level payments, as a specified dollar amount, as all
earnings in the Contract, or based upon the life expectancy of the Owner or the
Owner and a Beneficiary. A Contractowner also may designate the desired
frequency of the systematic withdrawals, which may be monthly, quarterly,
semiannually or annually. The Contractowner may stop or modify systematic
withdrawals upon proper written request received by Security Benefit at its Home
Office at least 30 days in advance of the requested date of termination or
modification. A proper request must include the written consent of any effective
assignee or irrevocable Beneficiary, if applicable.
Each systematic withdrawal must be at least $100. Upon payment, your Contract
Value will be reduced by an amount equal to the payment proceeds plus any
applicable withdrawal charge and premium tax. Any systematic withdrawal that
equals or exceeds the Withdrawal Value will be treated as a full withdrawal. In
no event will payment of a systematic withdrawal exceed the Withdrawal Value.
The Contract will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.
Security Benefit will effect each systematic withdrawal as of the end of the
Valuation Period during which the withdrawal is scheduled. The deduction caused
by the systematic withdrawal, including any applicable withdrawal charge, will
be allocated from the Contractowner's Contract Value in the Subaccounts and the
Fixed Account, as directed by the Contractowner. If a Contractowner does not
specify the allocation, the systematic withdrawal will be deducted from the
Contract Value in the Subaccounts and the Fixed Account in the following order:
Money Market Subaccount, High Grade Income Subaccount, High Yield Subaccount,
Global Strategic Income Subaccount, Growth-Income Subaccount, Equity Income
Subaccount, Managed Asset Allocation Subaccount, Global Total Return Subaccount,
Enhanced Index Subaccount, Growth Subaccount, Select 25 Subaccount, Value
Subaccount, Worldwide Equity Subaccount, International Subaccount, Social
Awareness Subaccount, Mid Cap Subaccount, and Small Cap Subaccount and then from
the Fixed Account. The value of each account will be depleted before the next
account is charged.
Security Benefit may, at any time, discontinue, modify, suspend or charge a
fee for systematic withdrawals. You should consider carefully the tax
consequences of a systematic withdrawal, including the 10 percent penalty tax
which may be imposed on withdrawals made prior to the Owner attaining age 59
1/2. See "Federal Tax Matters," page 30.
FREE-LOOK RIGHT -- You may return a Contract within the Free-Look Period, which
is generally a ten-day period beginning when you receive the Contract. Security
Benefit will then deem void the returned Contract and will refund to you any
purchase payments allocated to the Fixed Account plus the Contract Value in the
Subaccounts less the value of any Credit Enhancements as of the end of the
Valuation Period during which the returned Contract is received by Security
Benefit. Security Benefit will refund purchase payments allocated to the
Subaccounts rather than Contract Value in those states and circumstances that
require it to do so.
DEATH BENEFIT -- If the Owner dies prior to the Annuity Start Date, Security
Benefit will pay the death benefit proceeds to the Designated Beneficiary upon
receipt of due proof of the Owner's 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
prior to the Annuity Start Date 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" below. 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 prior to the Annuity Start Date and instructions
regarding payment. If the death of the Owner occurs on or after the Annuity
Start Date, any death benefit will be determined according to the terms of the
Annuity Option. See "Annuity Options," page 25.
The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt, any pro rata account charge and any uncollected
premium tax. If an Owner dies during the Accumulation Period, the amount of the
death benefit will be the greater of:
1. The sum of all Purchase Payments (not including Credit Enhancements), less
any reductions caused by previous withdrawals, or
2. The Contract Value on the date due proof of death and instructions regarding
payment are received by Security Benefit less any Credit Enhancements
applied during the 12 months prior to the date of the Owner's death.
If an Owner dies during the Accumulation Period and due proof of death and
instructions regarding payment are not received by Security Benefit at its Home
Office within six months of the date of the Owner's death, the death benefit
will be as set forth in item 2 above.
The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as elected by the Designated
Beneficiary. If the Designated Beneficiary is to receive annuity payments under
an Annuity Option, there may be limits under applicable law on the amount and
duration of payments that the Beneficiary may receive, and requirements
respecting timing of payments. A tax adviser should be consulted in considering
Annuity Options. See "Federal Tax Matters," page 30 and "Distribution
Requirements," below 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 this Contract in force
until the earliest of the spouse's death or the Annuity Start Date or 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 such 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 the
particular 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 Start 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,
Security Benefit will designate the Owner as Annuitant. On the death of the
Annuitant after the Annuity Start Date, any guaranteed payments remaining unpaid
will continue to be paid to the Designated Beneficiary pursuant to the Annuity
Option in force at the date of death.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE -- Security Benefit does not deduct sales
charges from purchase payments before allocating them to Contract Value.
However, except as set forth below, Security Benefit may assess a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on
a full or partial withdrawal, including systematic withdrawals, depending on how
long your purchase payments have been held under the Contract.
Security Benefit will waive the withdrawal charge on withdrawals to the
extent that total withdrawals in a Contract Year, including systematic
withdrawals, do not exceed the Free Withdrawal amount. The Free Withdrawal
amount is equal in the first Contract Year, to 10 percent of purchase payments
made during the year and for any subsequent Contract Year, to 10 percent of
Contract Value as of the first day of that Contract Year.
The withdrawal charge applies to the portion of any withdrawal, consisting of
Purchase Payments and corresponding Credit Enhancements, that exceeds the Free
Withdrawal amount. The withdrawal charge does not apply to withdrawals of
earnings. For the purpose of determining any withdrawal charge, Security Benefit
deems any withdrawals that are subject to the withdrawal charge to be made first
from purchase payments and a proportionate amount of the applicable Credit
Enhancement, then from earnings. Free withdrawal amounts do not reduce purchase
payments and Credit Enhancements for the purpose of determining future
withdrawal charges.
The amount of the charge will depend on how long your purchase payments have
been held under the Contract. Each purchase payment you make and its
corresponding credit enhancement is considered to have a certain "age,"
depending on the length of time since the purchase payment was effective. A
purchase payment is "age one" in the year beginning on the date the purchase
payment is received by Security Benefit and increases in age each year
thereafter. The withdrawal charge is calculated according to the following
schedule:
--------------------------------------------------------
PURCHASE PAYMENT AGE (IN YEARS) WITHDRAWAL CHARGE
--------------------------------------------------------
1 7%
2 7%
3 6%
4 6%
5 5%
6 5%
7 3%
8 and over 0%
--------------------------------------------------------
In no event will the amount of any withdrawal charge, when added to such
charge previously assessed against any amount withdrawn from the Contract,
exceed 7 percent of purchase payments paid and Credit Enhancements added under
the Contract. In addition, no withdrawal charge will be imposed upon: (1)
payment of death benefit proceeds; or (2) annuity options that provide for
payments for life, or a period of at least 7 years. Subject to insurance
department approval, the withdrawal charge also will be waived on a full or
partial withdrawal if the Owner has been diagnosed with a terminal illness, or
upon confinement to a hospital or qualified skilled nursing facility for 90
consecutive days or more. See "Waiver of Withdrawal Charge," below. Security
Benefit will assess the withdrawal charge against the Subaccounts and the Fixed
Account in the same proportion as the withdrawal proceeds are allocated.
Security Benefit pays sales commissions to broker-dealers and other expenses
associated with the promotion and sales of the Contracts. The withdrawal charge
is designed to reimburse Security Benefit for these costs, although it is
expected that actual expenses will be greater than the amount of the charge. To
the extent that all sales expenses are not recovered from the charge, such
expenses may be recovered from other charges, including amounts derived
indirectly from the charge for mortality and expense risk. Broker-dealers may
receive aggregate commissions of up to 5 percent of aggregate purchase payments.
Aggregate commission calculations do not include Credit Enhancements. Security
Benefit also may pay override payments, expense allowances, bonuses, wholesaler
fees and training allowances. Registered representatives earn commissions from
the broker-dealers with which they are affiliated and such arrangements will
vary.
WAIVER OF WITHDRAWAL CHARGE -- Security Benefit will waive the withdrawal charge
on any full or partial withdrawal in the event of confinement of the Owner to a
hospital or nursing facility or diagnosis of a terminal illness, as discussed
below.
Security Benefit will waive the withdrawal charge in the event of confinement
to a hospital or nursing facility, provided the following conditions are met:
(1) the Contractowner has been confined to a "hospital" or "qualified skilled
nursing facility" (as defined on page 5) for at least 90 consecutive days prior
to the date of the withdrawal; (2) the Contractowner is so confined when
Security Benefit receives the waiver request and became so confined after the
date the Contract was issued; and (3) the request for waiver submitted to
Security Benefit is accompanied by a properly completed claim form which may be
obtained from Security Benefit and a written physician's statement acceptable to
Security Benefit certifying that such confinement is a medical necessity and is
due to illness or infirmity.
Security Benefit will waive the surrender charge due to terminal illness
provided the following conditions are met: (1) the Contractowner has been
diagnosed by a licensed physician with a "terminal illness" (as defined on page
5); (2) such illness was first diagnosed after the Contract was issued; and (3)
a request for waiver is submitted to Security Benefit accompanied by a properly
completed claim form that may be obtained from Security Benefit and a written
statement by a licensed physician certifying that the Owner has been diagnosed
with a terminal illness and the date such diagnosis was first made.
In the event of a withdrawal under these terms you would forfeit all or part
of any Credit Enhancements applied during the 12 months preceding the
withdrawal. The amount of Credit Enhancements to be forfeited is a percentage
determined by dividing the amount of the withdrawal by the total purchase
payments made in the 12 months preceding the withdrawal. For example a
withdrawal of $50,000 relative to $100,000 in Purchase Payments made in the 12
months preceding the withdrawal would result in forfeiture of 50 percent of the
Credit Enhancements applied during that 12-month period. The maximum percentage
that may be forfeited is 100 percent of Credit Enhancements earned during the 12
months preceding the withdrawal.
Security Benefit reserves the right to have the Contractowner examined by a
physician of its choice and at its expense to determine if the Contractowner is
eligible for a waiver. The waivers are not available in certain states pending
department of insurance approval. If a waiver is later approved by the insurance
department of a state, Security Benefit intends to make the waiver available to
all Contractowners in that state at that time, but there can be no assurance
that the waiver will be approved. The terminal illness waiver is not available
to Contractholders residing in New Jersey. Prospective Contractowners should
contact their agent concerning availability of the waivers in their state.
MORTALITY AND EXPENSE RISK CHARGE -- Security Benefit deducts a daily charge
from the assets of each Subaccount for mortality and expense risks assumed by
Security Benefit under the Contracts. The charge is equal to an annual rate of
1.25 percent of each Subaccount's average daily net assets. This amount is
intended to compensate Security Benefit for certain mortality and expense risks
Security Benefit assumes in offering and administering the Contracts and in
operating the Subaccounts.
The expense risk is the risk that Security Benefit's actual expenses in
issuing and administering the Contracts and operating the Subaccounts will be
more than the charges assessed for such expenses. The mortality risk borne by
Security Benefit is the risk that Annuitants, as a group, will live longer than
Security Benefit's actuarial tables predict. In this event, Security Benefit
guarantees that annuity payments will not be affected by a change in mortality
experience that results in the payment of greater annuity income than assumed
under the Annuity Options in the Contract. Security Benefit also assumes a
mortality risk in connection with the death benefit under the Contract.
Security Benefit may ultimately realize a profit from this charge to the
extent it is not needed to cover mortality and administrative expenses, but
Security Benefit may realize a loss to the extent the charge is not sufficient.
Security Benefit may use any profit derived from this charge for any lawful
purpose, including distribution expenses.
ADMINISTRATION CHARGE -- Security Benefit deducts a daily administration charge
equal to an annual rate of .15 percent of each Subaccount's average daily net
assets. The purpose of this charge is to reimburse Security Benefit for the
expenses associated with administration of the Contracts and operation of the
Subaccounts.
ACCOUNT ADMINISTRATION CHARGE -- Security Benefit deducts an account
administration charge of $30.00 at each calendar year end. Security Benefit will
waive the charge if your Contract Value is $50,000 or more on the date the
charge is to be deducted. Security Benefit will deduct a pro rata account
administration charge (1) upon a full withdrawal; (2) when the contract has been
in force for less than a full calendar year; (3) upon the Annuity Start Date if
one of the Annuity Options 1 through 4, 7 or 8 is chosen; and (4) upon payment
of a death benefit. The purpose of the charge is to reimburse Security Benefit
for the expenses associated with administration of the Contracts.
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
Security Benefit's status in a particular state. Security Benefit assesses a
premium tax charge to reimburse itself for premium taxes that it incurs in
connection with a Contract. Security Benefit currently deducts this charge upon
the Annuity Start Date or upon full or partial withdrawal if a premium tax was
incurred and is not refundable. Security Benefit reserves the right to deduct
premium taxes when due or any time thereafter. Premium tax rates currently range
from 0 percent to 3.5 percent, but are subject to change by a governmental
entity.
OTHER CHARGES -- Security Benefit may charge the Separate Account or the
Subaccounts for the federal, state, or local taxes incurred by Security Benefit
that are attributable to the Separate Account or the Subaccounts, or to the
operations of Security Benefit 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 Security Benefit and the
Separate Account" and "Charge for Security Benefit Taxes."
VARIATIONS IN CHARGES -- Security Benefit may reduce or waive the amount of the
contingent deferred sales charge and administrative charge for a Contract where
the expenses associated with the sale of the Contract or the administrative and
maintenance costs associated with the Contract are reduced for reasons such as
the amount of the initial purchase payment or projected purchase payments or the
Contract is sold in connection with a group or sponsored arrangement.
GUARANTEE OF CERTAIN CHARGES -- Security Benefit guarantees that: (1) the charge
for mortality and expense risks will not exceed an annual rate of 1.25 percent
of each Subaccount's average daily net assets; (2) the administration charge
will not exceed an annual rate of .15 percent of each Subaccount's average daily
net assets; and (3) the account administration charge will not exceed $30 per
year.
SBL FUND EXPENSES -- Each Subaccount of the Separate Account purchases shares at
the net asset value of the corresponding Series of SBL Fund. Each Series' net
asset value reflects the investment advisory fee and other expenses that are
deducted from the assets of the Series. These fees and expenses are not deducted
from the Subaccounts, but are paid from the assets of the corresponding Series.
As a result, the Owner indirectly bears a pro rata portion of such fees and
expenses. The advisory fees and other expenses, if any, which are more fully
described in SBL Fund's prospectus, are not specified or fixed under the terms
of the Contract.
ANNUITY PERIOD
GENERAL -- You select the Annuity Start Date at the time of application. The
Annuity Start Date may not be prior to the third annual Contract anniversary and
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 that you start
annuity payments at an earlier age. If you do not select an Annuity Start Date,
the Annuity Start Date will be the later of the Annuitant's 70th birthday or the
tenth annual Contract Anniversary. See "Selection of an Option," page 26. If
there are Joint Annuitants, the birthdate of the older Annuitant will be used to
determine the latest Annuity Start Date.
On the Annuity Start Date, the proceeds under the Contract will be applied to
provide an annuity under one of the options described below. Each option is
available in two forms--either as a variable annuity for use with the
Subaccounts or as a fixed annuity for use with the Fixed Account. A combination
variable and fixed annuity is also available. Variable annuity payments will
fluctuate with the investment performance of the applicable Subaccounts while
fixed annuity payments will not. Unless you direct otherwise, proceeds derived
from Contract Value allocated to the Subaccounts will be applied to purchase a
variable annuity and proceeds derived from Contract Value allocated to the Fixed
Account will be applied to purchase a fixed annuity. The proceeds under the
Contract will be equal to your Contract Value in the Subaccounts and the Fixed
Account as of the Annuity Start Date, reduced by any applicable premium taxes
and withdrawal charges, any outstanding Contract Debt and, for Options 1 through
4, 7 and 8, a pro rata account administration charge, if applicable.
The Contracts provide for eight Annuity Options. Security Benefit may make
other Annuity Options available upon request. Annuity payments under Annuity
Options 1 through 4, 7 and 8 are based upon annuity rates that vary with the
Annuity Option selected. In the case of Options 1 through 4 and 8, the annuity
rates will vary based on the age and sex of the Annuitant, except that unisex
rates are available where required by law. The annuity rates reflect your life
expectancy based upon your age as of the Annuity Start Date and your gender,
unless unisex rates apply. The annuity rates are based upon the 1983(a)
mortality table and are adjusted to reflect an assumed interest rate of 3.5
percent, compounded annually. In the case of Options 5 and 6 as described below,
annuity payments are based upon Contract Value without regard to annuity rates.
If no Annuity Option has been selected, annuity payments will be made to the
Annuitant under an automatic option which shall be an annuity payable during the
lifetime of the Annuitant with payments guaranteed to be made for 120 months
under Option 2.
Annuity Options 1 through 4 and 8 provide for payments to be made during the
lifetime of the Annuitant. Annuity payments under such options cease in the
event of the Annuitant's death, unless the option provides for a guaranteed
minimum number of payments, for example a life income with guaranteed payments
of 5, 10, 15 or 20 years. The level of annuity payments will be greater for
shorter guaranteed periods and less for longer guaranteed periods. Similarly,
payments will be greater for life annuities than for joint and survivor
annuities, because payments for life annuities are expected to be made for a
shorter period.
You may elect to receive annuity payments on a monthly, quarterly,
semiannual, or annual basis, although no payments will be made for less than
$100. If the frequency of payments selected would result in payments of less
than $100, Security Benefit reserves the right to change the frequency.
You may designate or change an Annuity Start Date, Annuity Option, or
Annuitant, provided proper written notice is received by Security Benefit at its
Home Office at least 30 days prior to the Annuity Start Date set forth in the
Contract. The date selected as the new Annuity Start Date must be at least 30
days after the date written notice requesting a change of Annuity Start Date is
received at Security Benefit's Home Office.
Once annuity payments have commenced under Annuity Options 1 through 4 and 8,
an Annuitant or Owner cannot change the Annuity Option and cannot surrender his
or her annuity and receive a lump-sum settlement in lieu thereof. Under Annuity
Options 5 through 7, full or partial withdrawals may be made after the Annuity
Start Date, subject to any applicable withdrawal charge. The Contract specifies
annuity tables for Annuity Options 1 through 4, 7 and 8, described below. The
tables contain the guaranteed minimum dollar amount (per $1,000 applied) of the
FIRST annuity payment for a variable annuity and each annuity payment for a
fixed annuity.
ANNUITY OPTIONS --
OPTION 1 -- LIFE INCOME. Periodic annuity payments will be made during the
lifetime of the Annuitant. It is possible under this Option for any Annuitant to
receive only one annuity payment if the Annuitant's death occurred prior to the
due date of the second annuity payment, two if death occurred prior to the due
date of the third annuity payment, etc. THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS WILL CEASE UPON THE DEATH OF THE
ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 2 -- LIFE INCOME WITH GUARANTEED PAYMENTS OF 5, 10, 15 OR 20 YEARS.
Periodic annuity payments will be made during the lifetime of the Annuitant with
the promise that if, at the death of the Annuitant, payments have been made for
less than a stated period, which may be five, ten, fifteen or twenty years, as
elected by the Owner, annuity payments will be continued during the remainder of
such period to the Designated Beneficiary. Upon the Annuitant's death after the
period certain, no further annuity payments will be made.
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. Annuity payments will be made as long as
either Annuitant is living. Upon the death of one Annuitant, Annuity Payments
continue to the surviving Annuitant at the same or a reduced level of 75
percent, 66 2/3 percent or 50 percent of Annuity Payments as elected by the
Owner at the time the Annuity Option is selected. With respect to Fixed Annuity
Payments, the amount of the Annuity Payment, and with respect to Variable
Annuity Payments, the number of Annuity Units used to determine the Annuity
Payment, is reduced as of the first Annuity Payment following the Annuitant's
death. 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 to the third annuity payment due date, etc. AS IN THE CASE OF
OPTION 1, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT, REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
OPTION 5 -- PAYMENTS FOR SPECIFIED PERIOD. Periodic annuity payments will be
made for a fixed period, which may be from 5 to 20 years, as elected by the
Owner. If, at the death of all Annuitants, payments have been made for less than
the selected fixed period, the remaining unpaid payments will be paid to the
Designated Beneficiary.
OPTION 6 -- PAYMENTS OF A SPECIFIED AMOUNT. Periodic annuity payments of the
amount elected by the Owner will be made until Contract Value is exhausted, with
the guarantee that, if, at the death of all Annuitants, all guaranteed payments
have not yet been made, the remaining unpaid payments will be paid to the
Designated Beneficiary.
OPTION 7 -- PERIOD CERTAIN. Periodic annuity payments will be made for a
stated period which may be 5, 10, 15 or 20 years, as elected by the Owner. If
the Annuitant dies prior to the end of the period, the remaining payments will
be made to the Designated Beneficiary.
OPTION 8 -- JOINT AND CONTINGENT SURVIVOR OPTION. Periodic annuity payments
will be made during the life of the primary Annuitant. Upon the death of the
primary Annuitant, payments will be made to the contingent Annuitant during his
or her life. If the contingent Annuitant is not living upon the death of the
Primary Annuitant, no payments will be made to the contingent Annuitant. It is
possible under this Option for only one annuity payment to be made if both
Annuitants died prior to the second annuity payment due date, two if both died
prior to the third annuity payment due date, etc. AS IN THE CASE OF OPTIONS 1
AND 4, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT, REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
VALUE OF VARIABLE ANNUITY PAYMENTS: ASSUMED INTEREST RATE. The annuity tables
in the Contract which are used to calculate variable annuity payments for
Annuity Options 1 through 4, 7 and 8 are based on an "assumed interest rate" of
3 1/2 percent, compounded annually. Variable annuity payments generally increase
or decrease from one annuity payment date to the next based upon the performance
of the applicable Subaccounts during the interim period adjusted for the assumed
interest rate. If the performance of the Subaccount selected is equal to the
assumed interest rate, the annuity payments will remain constant. If the
performance of the Subaccounts is greater than the assumed interest rate, the
annuity payments will increase and if it is less than the assumed interest rate,
the annuity payments will decline. A higher assumed interest rate would mean a
higher initial annuity payment but the amount of the annuity payment would
increase more slowly in a rising market (or the amount of the annuity payment
would decline more rapidly in a declining market). A lower assumption would have
the opposite effect.
SELECTION OF AN OPTION -- You should carefully review the Annuity Options with
your financial or tax advisers. For Contracts used in connection with a
Qualified Plan, reference should be made to the terms of the particular plan and
the requirements of the Internal Revenue Code for pertinent limitations
respecting annuity payments and other matters. For instance, Qualified Plans
generally require that annuity payments begin no later than April 1 of the
calendar year following the year in which the Annuitant reaches age 70 1/2. In
addition, under Qualified Plans, the period elected for receipt of annuity
payments under Annuity Options (other than Life Income) generally may be no
longer than the joint life expectancy of the Annuitant and beneficiary in the
year that the Annuitant reaches age 70 1/2, and must be shorter than such joint
life expectancy if the beneficiary is not the Annuitant's spouse and is more
than ten years younger than the Annuitant. For Non-Qualified Plans, SBL does not
allow annuity payments to be deferred beyond the Annuitant's 90th birthday.
THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments and transfer
Contract Value to the Fixed Account. Purchase payments allocated to the Fixed
Account will earn Credit Enhancements on the same basis as those allocated to
the Subaccounts. Amounts allocated to the Fixed Account become part of Security
Benefit's General Account, which supports Security Benefit's insurance and
annuity obligations. The General Account is subject to regulation and
supervision by the Kansas Department of Insurance and is also subject to the
insurance laws and regulations of other jurisdictions in which the Contract is
distributed. In reliance on certain exemptive and exclusionary provisions,
interests in the Fixed Account have not been registered as securities under the
Securities Act of 1933 (the "1933 Act") and the Fixed Account has not been
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"). Accordingly, neither the Fixed Account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act.
Security Benefit has been advised that the staff of the SEC has not reviewed the
disclosure in this Prospectus relating to the Fixed Account. This disclosure,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in the Prospectus. This Prospectus is generally intended to serve as a
disclosure document only for aspects of a Contract involving the Separate
Account and contains only selected information regarding the Fixed Account. For
more information regarding the Fixed Account, see "The Contract," page 16.
Amounts allocated to the Fixed Account become part of the General Account of
Security Benefit, which consists of all assets owned by Security Benefit other
than those in the Separate Account and other separate accounts of Security
Benefit. Subject to applicable law, Security Benefit has sole discretion over
investment of the assets of its General Account.
INTEREST -- Contract Value allocated to the Fixed Account earns interest at a
fixed rate or rates that are paid by Security Benefit. The Contract Value in the
Fixed Account earns interest at an interest rate that is guaranteed to be at
least an annual effective rate of 3 percent which will accrue daily ("Guaranteed
Rate"). Such interest will be paid regardless of the actual investment
experience of the Fixed Account. In addition, Security Benefit may in its
discretion pay interest at a rate ("Current Rate") that exceeds the Guaranteed
Rate. Security Benefit will determine the Current Rate, if any, from time to
time.
Contract Value allocated or transferred to the Fixed Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Contract Value is allocated or transferred to the Fixed Account. The Current
Rate paid on any such portion of Contract Value allocated or transferred to the
Fixed Account will be guaranteed for rolling periods of one or more years (each
a "Guarantee Period"). Security Benefit 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 on the first day of the
new Guarantee Period.
Contract Value allocated or transferred to the Fixed Account at one point in
time may be credited with a different Current Rate than amounts allocated or
transferred to the Fixed Account at another point in time. For example, amounts
allocated to the Fixed Account in June may be credited with a different current
rate than amounts allocated to the Fixed Account in July. In addition, if
Guarantee Periods of different durations are offered, Contract Value allocated
or transferred to the Fixed Account for a Guarantee Period of one duration may
be credited with a different Current Rate than amounts allocated or transferred
to the Fixed Account for a Guarantee Period of a different duration. Therefore,
at any time, various portions of your Contract Value in the Fixed Account may be
earning interest at different Current Rates depending upon the point in time
such portions were allocated or transferred to the Fixed Account and the
duration of the Guarantee Period. Security Benefit bears the investment risk for
the Contract Value allocated to the Fixed Account and for paying interest at the
Guaranteed Rate on amounts allocated to the Fixed Account.
For purposes of determining the interest rates to be credited on Contract
Value in the Fixed Account, withdrawals, or transfers from the Fixed Account
will be deemed to be taken in the following order: (1) from any portion of
Contract Value allocated to the Fixed Account for which the Guarantee Period
expires during the calendar month in which the withdrawal, loan, or transfer is
effected; (2) 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 (3) ending with that portion which has the least amount of
time remaining before the end of its Guarantee Period. For more information
about transfers and withdrawals from the Fixed Account, see "Transfers and
Withdrawals From the Fixed Account," below.
DEATH BENEFIT -- The death benefit under the Contract will be determined in the
same fashion for a Contract that has Contract Value in the Fixed Account as for
a Contract that has Contract Value allocated to the Subaccounts. See "Death
Benefit," page 21.
CONTRACT CHARGES -- Premium taxes and the account administration and withdrawal
charges will be the same for Contractowners who allocate purchase payments or
transfer Contract Value to the Fixed Account as for those who allocate purchase
payments or transfer Contract Value to the Subaccounts. The charges for
mortality and expense risks and the administration charge will not be assessed
against the Fixed Account, and any amounts that Security Benefit pays for income
taxes allocable to the Subaccounts will not be charged against the Fixed
Account. In addition, you will not pay directly or indirectly the investment
advisory fees and operating expenses of the SBL Fund to the extent Contract
Value is allocated to the Fixed Account; however, you also will not participate
in the investment experience of the Subaccounts.
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT -- You may transfer amounts
from the Subaccounts to the Fixed Account and from the Fixed Account to the
Subaccounts, subject to the following limitations. Transfers from the Fixed
Account are allowed only (1) during the calendar month in which the applicable
Guarantee Period expires, (2) pursuant to the Dollar Cost Averaging Option,
provided that such transfers are scheduled to be made over a period of not less
than one year, and (3) pursuant to the Asset Reallocation Option, provided that,
upon receipt of the Asset Reallocation Request, Contract Value is allocated
among the Fixed Account and the Subaccounts in the percentages selected by the
Contractowner without violating the restrictions on transfers from the Fixed
Account set forth in (1) above. Accordingly, if you desire to implement the
Asset Reallocation Option, you should do so at a time when Contract Value may be
transferred from the Fixed Account to the Subaccounts without violating the
restrictions on transfers from the Fixed Account. Once you implement an Asset
Reallocation Option, the restrictions on transfers will not apply to transfers
made pursuant to the Option.
The minimum amount that you may transfer from the Fixed Account to the
Subaccounts is the lesser of (i) $500 or (ii) the amount of Contract Value for
which the Guarantee Period expires in the calendar month that the transfer is
effected. Transfers of Contract Value pursuant to the Dollar Cost Averaging and
Asset Reallocation Options are not currently subject to any minimums. The
Company reserves the right to limit the number of transfers permitted each
Contract Year to 14 transfers, to suspend transfers and to limit the amount that
may be subject to transfers.
If purchase payments are allocated (except purchase payments made pursuant to
an Automatic Investment Program), or Contract Value is transferred, to the Fixed
Account, any transfers from the Fixed Account in connection with the Dollar Cost
Averaging or Asset Reallocation Options will automatically terminate as of the
date of such purchase payment or transfer. You may reestablish Dollar Cost
Averaging or Asset Reallocation by submitting a written request to Security
Benefit. However, if for any reason a Dollar Cost Averaging option is canceled,
you may only reestablish the option after the expiration of the next monthly or
quarterly anniversary that corresponds to the period selected in establishing
the option.
You may also make full or partial withdrawals to the same extent as if you
had allocated Contract Value to the Subaccounts. However, no partial withdrawal
request will be processed which would result in the withdrawal of Contract Value
from the Loan Account. See "Full and Partial Withdrawals," page 19 and
"Systematic Withdrawals," page 20. In addition, to the same extent as
Contractowners with Contract Value in the Subaccounts, the Owner of a Contract
used in connection with a Qualified Plan may obtain a loan if so permitted under
the terms of the Qualified Plan. See "Loans," page 29.
PAYMENTS FROM THE FIXED ACCOUNT -- Full and partial withdrawals, loans, and
transfers from the Fixed Account may be delayed for up to six months after a
written request in proper form is received by Security Benefit at its Home
Office. During the period of deferral, interest at the applicable interest rate
or rates will continue to be credited to the amounts allocated to the Fixed
Account. However, payment of any amounts will not be deferred if they are to be
used to pay premiums on any policies or contracts issued by Security Benefit.
MORE ABOUT THE CONTRACT
OWNERSHIP -- The Contractowner is the person named as such in the application or
in any later change shown in Security Benefit's records. While living, the
Contractowner alone has the right to receive all benefits and exercise all
rights that the Contract grants or Security Benefit 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 30.
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 Designated Beneficiary is the
person having the right to the death benefit, if any, payable upon the death of
the Owner or 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 are alive, the Owner's estate. The Primary Beneficiary is the individual
named as such in the application or any later change shown in Security Benefit's
records. The Primary Beneficiary will receive the death benefit of the Contract
only if he or she is alive on the date of death of both the Owner and any Joint
Owner during the Accumulation Period. Because the death benefit of the Contract
goes to the first person on the above list who is alive on the date of death of
any Owner, careful consideration should be given to the manner in which the
Contract is registered, as well as the designation of the Primary Beneficiary.
The Contractowner may change the Primary Beneficiary at any time while the
Contract is in force by written request on forms provided by Security Benefit
and received by Security Benefit at its Home Office. The change will not be
binding on Security Benefit until it is received and recorded at its Home
Office. The change will be effective as of the date this form is signed subject
to any payments made or other actions taken by Security Benefit before the
change is received and recorded. A Secondary Beneficiary may be designated. The
Owner may designate a permanent Beneficiary whose rights under the Contract
cannot be changed without his or her consent.
Reference should be made to the terms of a particular Qualified Plan and any
applicable law for any restrictions or limitations on the designation of a
Beneficiary.
DIVIDENDS -- The Contract does not share in the surplus earnings of Security
Benefit, and no dividends will be paid.
PAYMENTS FROM THE SEPARATE ACCOUNT -- Security Benefit will pay any full or
partial withdrawal benefit or death benefit proceeds from Contract Value
allocated to the Subaccounts, and will effect a transfer between Subaccounts or
from a Subaccount to the Fixed Account on the Valuation Date a proper request is
received at Security Benefit's Home Office. However, Security Benefit can
postpone the calculation or payment of such a payment or transfer of amounts
from the Subaccounts to the extent permitted under applicable law, which is
currently permissible only for any period:
* During which the New York Stock Exchange is closed other than customary
weekend and holiday closings,
* During which trading on the New York Stock Exchange is restricted as
determined by the SEC,
* During which an emergency, as determined by the SEC, exists as a result of
which (i) disposal of securities held by the Separate Account is not
reasonably practicable, or (ii) it is not reasonably practicable to determine
the value of the assets of the Separate Account, or
* For such other periods as the SEC may by order permit for the protection of
investors.
PROOF OF AGE AND SURVIVAL -- Security Benefit may require proof of age or
survival of any person on whose life annuity payments depend.
MISSTATEMENTS -- If you misstate the age or sex of an Annuitant or age of an
Owner, the correct amount paid or payable by Security Benefit under the Contract
shall be such as the Contract Value would have provided for the correct age or
sex (unless unisex rates apply).
LOANS -- If you own a Contract issued in connection with a retirement plan that
is qualified under Section 403(b) of the Internal Revenue Code, you may borrow
money under your Contract using the Contract Value as the only security for the
loan. You may obtain a loan by submitting a proper written request to Security
Benefit. A loan must be taken prior to the Annuity Start Date. The minimum loan
that may be taken is $1,000. The maximum loan that can be taken is generally
equal to the lesser of: (1) $50,000 reduced by the excess of: (a) the highest
outstanding loan balance within the preceding 12-month period ending on the day
before the date the loan is made; over (b) the outstanding loan balance on the
date the loan is made; or (2) 50 percent of the Contract Value or $10,000,
whichever is greater. The Internal Revenue Code requires aggregation of all
loans made to an individual employee under a single employer plan. However,
since Security Benefit has no information concerning outstanding loans with
other providers, we will only use information available under annuity contracts
issued by us. Reference should be made to the terms of your particular Qualified
Plan for any additional loan restrictions.
When an eligible contractowner takes a loan, Contract Value in an amount
equal to the loan amount is transferred from the Subaccounts and/or the Fixed
Account into an account called the "Loan Account." Amounts allocated to the Loan
Account earn 3 percent, the minimum rate of interest guaranteed under the Fixed
Account. In addition, ten percent of the loaned amount will be held in the Fixed
Account as security for the loan and will earn the Current Rate.
Interest will be charged for the loan and will accrue on the loan balance
from the effective date of any loan. The loan interest rate will be 5.5 percent.
Because the Contract Value maintained in the Loan Account (which will earn 3
percent) will always be equal in amount to the outstanding loan balance, the net
cost of a loan is 2.5 percent.
Loans must be repaid within five years, unless Security Benefit determines
that the loan is to be used to acquire your principal residence, in which case
the loan must be repaid within 30 years. You must make loan repayments on at
least a quarterly basis, and you may prepay your loan at any time. Upon receipt
of a loan payment, Security Benefit will transfer Contract Value from the Loan
Account to the Fixed Account and/or the Subaccounts according to your current
instructions with respect to purchase payments in an amount equal to the amount
by which the payment reduces the amount of the loan outstanding.
If you do not make any required loan payment within 30 days of the due date
for loans with a monthly repayment schedule or within 90 days of the due date
for loans with a quarterly repayment schedule, your total outstanding loan
balance will be deemed to be in default for tax reporting purposes. The entire
loan balance, with any accrued interest, will be reported as income to the
Internal Revenue Service ("IRS"). Once a loan has gone into default, regularly
scheduled payments will not be accepted. No new loans will be allowed while a
loan is in default. Interest will continue to accrue on a loan in default and if
such interest is not paid by December 31 of each year, it will be added to the
outstanding balance of the loan and will be reported to the IRS. Contract Value
equal to the amount of the accrued interest will be transferred to the Loan
Account. If a loan continues to be in default, the total outstanding balance
will be deducted from Contract Value upon the Contractowner's attaining age 59
1/2. The Contract will be automatically terminated if the outstanding loan
balance on a loan in default equals or exceeds the Withdrawal Value. The
proceeds from the Contract will be used to repay the debt and any applicable
withdrawal charge. Because of the adverse tax consequences associated with
defaulting on a loan, you should carefully consider your ability to repay the
loan and should consult with a tax advisor before requesting a loan.
While the amount to secure the loan is held in the Loan Account, you forego
the investment experience of the Subaccounts and the Current Rate of interest on
the Fixed Account. Outstanding Contract Debt will reduce the amount of proceeds
paid upon full withdrawal, upon payment of the death benefit, and upon
annuitization. In addition, no partial withdrawal will be processed which would
result in the withdrawal of Contract Value from the Loan Account.
You should consult with your tax adviser on the effect of a loan.
Loans are not available in certain states pending department of insurance
approval. If loans are later approved by the insurance department of a state,
Security Benefit intends to make loans available to all Owners of 403(b)
contracts in that state at that time, but there can be no assurance that loans
will be approved. Prospective Contractowners should contact their agent
concerning availability of loans in their state.
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS -- Generally, a Qualified Plan
may not provide for the distribution or withdrawal of amounts accumulated under
the Plan until after a fixed number of years, the attainment of a stated age or
upon the occurrence of a specific event such as hardship, disability,
retirement, death or termination of employment. Therefore, if you own a Contract
purchased in connection with a Qualified Plan, you may not be entitled to make a
full or partial withdrawal, as described in this Prospectus, unless one of the
above-described conditions has been satisfied. For this reason, you should refer
to the terms of your particular Qualified Plan, the Internal Revenue Code and
other applicable law for any limitation or restriction on distributions and
withdrawals, including the 10 percent penalty tax that may be imposed in the
event of a distribution from a Qualified Plan before the participant reaches age
59 1/2. See the discussion under "Tax Penalties," page 36.
Section 403(b) imposes restrictions on certain distributions from
tax-sheltered annuity contracts meeting the requirements of Section 403(b). The
restrictions apply to tax years beginning on or after January 1, 1989. Section
403(b) requires that distributions from Section 403(b) tax-sheltered annuities
that are attributable to employee contributions made after December 31, 1988
under a salary reduction agreement begin only after the employee (i) reaches age
59 1/2, (ii) separates from service, (iii) dies, (iv) becomes disabled, or (v)
incurs a hardship. Furthermore, distributions of gains attributable to such
contributions accrued after December 31, 1988 may not be made on account of
hardship. Hardship, for this purpose, is generally defined as an immediate and
heavy financial need, such as paying for medical expenses, the purchase of a
residence, or paying certain tuition expenses, that may ONLY be met by the
distribution.
If you own a Contract purchased as a tax-sheltered Section 403(b) annuity
contract, you will not, therefore, be entitled to make a full or partial
withdrawal, as described in this Prospectus, in order to receive proceeds from
the Contract attributable to contributions under a salary reduction agreement or
any gains credited to such Contract after December 31, 1988 unless one of the
above-described conditions has been satisfied. In the case of transfers of
amounts accumulated in a different Section 403(b) contract to this Contract
under a Section 403(b) program, the withdrawal constraints described above would
not apply to the amount transferred to the Contract attributable to the Owner's
December 31, 1988 account balance under the old contract, provided the amounts
transferred between contracts qualified as a tax-free exchange under the
Internal Revenue Code. An Owner of a Contract may be able to transfer the
Contract's Withdrawal Value to certain other investment alternatives meeting the
requirements of Section 403(b) that are available under an employer's Section
403(b) arrangement.
The distribution or withdrawal of amounts under a Contract purchased in
connection with a Qualified Plan may result in the receipt of taxable income to
the Owner or Annuitant and in some instances may also result in a penalty tax.
Therefore, you should carefully consider the tax consequences of a distribution
or withdrawal under a Contract and you should consult a competent tax adviser.
See "Federal Tax Matters," below.
FEDERAL TAX MATTERS
INTRODUCTION -- The Contract described in this Prospectus is designed for use by
individuals in retirements 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, if any, for which the
Contract is purchased, the tax and employment status of the individuals involved
and a number of other factors. The discussion contained herein and in the
Statement of Additional Information is general in nature and is not intended to
be an exhaustive discussion of all questions that might arise in connection with
a Contract. It is based upon Security Benefit's understanding of the present
federal income tax laws as currently interpreted by the 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 with a qualified tax adviser regarding the purchase of a
Contract, the selection of an Annuity Option under a Contract, the receipt of
annuity payments under a Contract or any other transaction involving a Contract.
SECURITY BENEFIT DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF, OR TAX
CONSEQUENCES ARISING FROM, ANY CONTRACT OR ANY TRANSACTION INVOLVING THE
CONTRACT.
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT --
GENERAL. Security Benefit intends to be taxed as a life insurance company
under Part I, Subchapter L of the Code. Because the operations of the Separate
Account form a part of Security Benefit, Security Benefit will be responsible
for any federal income taxes that become payable with respect to the income of
the Separate Account and its Subaccounts.
CHARGE FOR SECURITY BENEFIT TAXES. A charge may be made for any federal taxes
incurred by Security Benefit that are attributable to the Separate Account, the
Subaccounts or to the operations of Security Benefit with respect to the
Contracts or attributable to payments, premiums, or acquisition costs under the
Contracts. Security Benefit will review the question of a charge to the Separate
Account, the Subaccounts or the Contracts for Security Benefit's federal taxes
periodically. Charges may become necessary if, among other reasons, the tax
treatment of Security Benefit or of income and expenses under the Contracts is
ultimately determined to be other than what Security Benefit currently believes
it to be, if there are changes made in the federal income tax treatment of
variable annuities at the insurance company level, or if there is a change in
Security Benefit's tax status.
Under current laws, Security Benefit may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, Security Benefit reserves the right to charge the Separate Account or the
Subaccounts for such taxes, if any, attributable to the Separate Account or
Subaccounts.
DIVERSIFICATION STANDARDS. Each Series of the SBL Fund will be required to
adhere to regulations adopted by the Treasury Department pursuant to Section
817(h) of the Code prescribing asset diversification requirements for investment
companies whose shares are sold to insurance company separate accounts funding
variable contracts. Pursuant to these regulations, on the last day of each
calendar quarter (or on any day within 30 days thereafter), no more than 55
percent of the total assets of a Series may be represented by any one
investment, no more than 70 percent may be represented by any two investments,
no more than 80 percent may be represented by any three investments, and no more
than 90 percent may be represented by any four investments. For purposes of
Section 817(h), securities of a single issuer generally are treated as one
investment but obligations of the U.S. Treasury and each U.S. Governmental
agency or instrumentality generally are treated as securities of separate
issuers. The Separate Account, through the Series, intends to comply with the
diversification requirements of Section 817(h).
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contractowner's gross income. The IRS has stated in published rulings that a
variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Contractowner),
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, Security Benefit does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Security Benefit therefore reserves the right to
modify the Contract, as it deems appropriate, to attempt to prevent a
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 Series will be able to operate as
currently described in the Prospectus, or that the SBL Fund will not have to
change any Series' 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 33 and "Diversification Standards" above.
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 Security Benefit of that election.
SURRENDERS OR WITHDRAWALS PRIOR TO THE ANNUITY START DATE. Code Section 72
provides that amounts received upon a total or partial withdrawal (including
systematic withdrawals) from a Contract prior to the Annuity Start Date
generally will be treated as gross income to the extent that the cash value of
the Contract immediately before the withdrawal (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.
SURRENDERS OR WITHDRAWALS ON OR AFTER THE ANNUITY START DATE. Upon a complete
surrender, the receipt is taxable to the extent that the cash value of the
Contract exceeds the investment in the Contract. The taxable portion of such
payments will be taxed at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment generally is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed at ordinary income rates. For variable annuity
payments, the taxable portion of each payment is determined by using a formula
known as the "excludable amount," which establishes the non-taxable portion of
each payment. The non-taxable portion is a fixed dollar amount for each payment,
determined by dividing the investment in the Contract by the number of payments
to be made. The remainder of each variable annuity payment is taxable. Once the
excludable portion of annuity payments to date equals the investment in the
Contract, the balance of the annuity payments will be fully taxable.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS. With respect to amounts
withdrawn or distributed before the taxpayer reaches age 59 1/2, a penalty tax
is imposed equal to 10 percent of the portion of such amount which is includable
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 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 Start 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 Start 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 Designated Beneficiary is the
deceased owner's spouse.
GIFT OF ANNUITY CONTRACTS. Generally, gifts of non-tax qualified Contracts
prior to the Annuity Start 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 percent 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
includable 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 an
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 includable in gross income, all Non-Qualified annuity contracts issued by the
same insurer to the same Contractowner during any calendar year are to be
aggregated and treated as one contract. Thus, any amount received under any such
contract prior to the contract's Annuity Start Date, such as a partial
surrender, dividend, or loan, will be taxable (and possibly subject to the 10
percent 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 Start 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 percent 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, and
President Clinton's fiscal-year 1999 Budget proposal includes a provision that,
if adopted, would impose new taxation on owners of variable 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 Start 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 competent tax adviser with respect to the
potential effects of such a transaction.
QUALIFIED PLANS -- The Contract may be used with Qualified Plans that meet the
requirements of Section 401, 403(b), 408 or 457 of the Code. The tax rules
applicable to participants in such Qualified Plans vary according to the type of
plan and the terms and conditions of the plan itself. No attempt is made herein
to provide more than general information about the use of the Contract with the
various types of Qualified Plans. These Qualified Plans may permit the purchase
of the Contracts to accumulate retirement savings under the plans. Adverse tax
or other legal consequences to the plan, to the participant or to both may
result if this Contract is assigned or transferred to any individual as a means
to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the Contract.
Contractowners, Annuitants, and Beneficiaries, are cautioned that the rights of
any person to any benefits under such Qualified Plans may be subject to the
terms and conditions of the plans themselves or limited by applicable law,
regardless of the terms and conditions of the Contract issued in connection
therewith. For example, Security Benefit may accept beneficiary designations and
payment instructions under the terms of the Contract without regard to any
spousal consents that may be required under the Employee Retirement Income
Security Act of 1974 (ERISA). Consequently, a Contractowner's Beneficiary
designation or elected payment option may not be enforceable.
The amounts that may be contributed to Qualified Plans are subject to
limitations that vary depending on the type of Plan. In addition, early
distributions from most Qualified Plans may be subject to penalty taxes, or in
the case of distributions of amounts contributed under salary reduction
agreements, could cause the Plan to be disqualified. Furthermore, distributions
from most Qualified Plans are subject to certain minimum distribution rules.
Failure to comply with these rules could result in disqualification of the Plan
or subject the 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 requirements may not be
incorporated into Security Benefit's Contract administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
The following are brief descriptions of the various types of Qualified Plans
and the use of the Contract therewith:
SECTION 401. Code Section 401 permits employers to establish various types of
retirement plans (e.g., pension, profit sharing and 401(k) plans) for their
employees. For this purpose, self-employed individuals (proprietors or partners
operating a trade or business) are treated as employees and therefore eligible
to participate in such plans. Retirement plans established in accordance with
Section 401 may permit the purchase of Contracts to provide benefits thereunder.
In order for a retirement plan to be "qualified" under Code Section 401, it
must: (i) meet certain minimum standards with respect to participation, coverage
and vesting; (ii) not discriminate in favor of "highly compensated" employees;
(iii) provide contributions or benefits that do not exceed certain limitations;
(iv) prohibit the use of plan assets for purposes other than the exclusive
benefit of the employees and their beneficiaries covered by the plan; (v)
provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.
A retirement plan qualified under Code Section 401 may be funded by employer
contributions, employee contributions or a combination of both. Plan
participants are not subject to tax on employer contributions until such amounts
are actually distributed from the plan. Depending upon the terms of the
particular plan, employee contributions may be made on a pre-tax or after-tax
basis. In addition, plan participants are not taxed on plan earnings derived
from either employer or employee contributions until such earnings are
distributed.
Each employee's interest in a retirement plan qualified under Code Section
401 must generally be distributed or begin to be distributed not later than
April 1 of the calendar year following the later of the calendar year in which
the employee reaches age 70 1/2 or retires ("required beginning date"). Periodic
distributions must not extend beyond the life of the employee or the lives of
the employee and a designated beneficiary (or over a period extending beyond the
life expectancy of the employee or the joint life expectancy of the employee and
a designated beneficiary).
If an employee dies before reaching his or her required beginning date, the
employee's entire interest in the plan must generally be distributed within five
years of the employee's death. However, the five-year rule will be deemed
satisfied, if distributions begin before the close of the calendar year
following the year of the employee's death to a designated beneficiary and are
made over the life of the beneficiary (or over a period not extending beyond the
life expectancy of the beneficiary). If the designated beneficiary is the
employee's surviving spouse, distributions may be delayed until the employee
would have reached age 70 1/2.
If an employee dies after reaching his or her required beginning date, the
employee's interest in the plan must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
employee's death.
Annuity payments distributed from a retirement plan qualified under Code
Section 401 are taxable under Section 72 of the Code. Section 72 provides that
the portion of each payment attributable to contributions that were taxable to
the employee in the year made, if any, is excluded from gross income as a return
of the employee's investment. The portion so excluded is determined by dividing
the employee's investment in the plan by (1) the number of anticipated payments
determined under a table set forth in Section 72 of the Code or (2) in the case
of a contract calling for installment payments, the number of monthly annuity
payments under such contract. The portion of each payment in excess of the
exclusion amount is taxable as ordinary income. Once the employee's investment
has been recovered, the full annuity payment will be taxable. If the employee
should die prior to recovering his entire investment, the unrecovered investment
will be allowed as a deduction on his final return. If the employee made no
contributions that were taxable when made, the full amount of each annuity
payment is taxable to him as ordinary income.
A "lump-sum" distribution from a retirement plan qualified under Code Section
401 is eligible for favorable tax treatment. A "lump-sum" distribution means the
distribution within one taxable year of the balance to the credit of the
employee which becomes payable: (i) on account of the employee's death, (ii)
after the employee attains age 59 1/2, (iii) on account of the employee's
termination of employment (in the case of a common law employee only) or (iv)
after the employee has become disabled (in the case of a self-employed person
only).
As a general rule, a lump-sum distribution is fully taxable as ordinary
income except for an amount equal to the employee's investment, if any, which is
recovered tax-free. However, special five-year averaging may be available,
provided the employee has reached age 59 1/2 and has not previously elected to
use income averaging. (Special five-year averaging has been repealed for
distributions after 1999.) Special ten-year averaging and capital-gains
treatment may be available to an employee who reached age 50 before 1986.
Distributions from a retirement plan qualified under Code Section 401 may be
eligible for a tax-free rollover to either another qualified retirement plan or
to an individual retirement account or annuity (IRA). See "Rollovers" on page
36.
SECTION 403(B). Code Section 403(b) permits public school employees and
employees of certain types of charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Code to purchase annuity
contracts, and, subject to certain limitations, to exclude the amount of
purchase payments from gross income for tax purposes. The Contract may be
purchased in connection with a Section 403(b) annuity program.
Section 403(b) annuities must generally be provided under a plan which meets
certain minimum participation, coverage, and nondiscrimination requirements.
Section 403(b) annuities are generally subject to minimum distribution
requirements similar to those applicable to retirement plans qualified under
Section 401 of the Code. See "Section 401" on page 34.
A Section 403(b) annuity contract may be purchased with employer
contributions, employee contributions or a combination of both. An employee's
rights under a Section 403(b) contract must be nonforfeitable. Numerous
limitations apply to the amount of contributions that may be made to a Section
403(b) annuity contract. The applicable limit will depend upon, among other
things, whether the annuity contract is purchased with employer or employee
contributions.
Amounts used to purchase Section 403(b) annuities generally are excludable
from the taxable income of the employee. As a result, all distributions from
such annuities are normally taxable in full as ordinary income to the employee.
A Section 403(b) annuity contract must prohibit the distribution of employee
contributions (including earnings thereon) until the employee: (i) attains age
59 1/2, (ii) terminates employment; (iii) dies; (iv) becomes disabled; or (v)
incurs a financial hardship (earnings may not be distributed in the event of
hardship).
Distributions from a Section 403(b) annuity contract may be eligible for a
tax-free rollover to either another Section 403(b) annuity contract or to an
individual retirement account or annuity (IRA). See "Rollovers" page 36.
SECTIONS 408 AND 408A. INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the
Code permits eligible individuals to establish individual retirement programs
through the purchase of Individual Retirement Annuities ("traditional IRAs").
The Contract may be purchased as an IRA. The IRAs described in this paragraph
are called "traditional IRAs" to distinguish them from the new "Roth IRAs" which
became available in 1998. (Roth IRAs are described below.)
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 a
traditional IRA may be made on a deductible or non-deductible 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 (except in the case of a rollover contribution). Any refund of
premium must be applied to the payment of future premiums or the purchase of
additional benefits.
Sale of the Contract for use with IRAs may be subject to special requirements
imposed by the Internal Revenue Service. Purchasers of the Contract for such
purposes will be provided with such supplementary information as may be required
by the Internal Revenue Service or other appropriate agency, and will have the
right to revoke the Contract under certain circumstances. See the IRA Disclosure
Statement that accompanies this Prospectus.
In general, traditional IRAs are subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code; however, the required beginning date for traditional IRAs is generally
the date that the Contractowner reaches age 70 1/2--the Contractowner's
retirement date, if any, will not affect his or her required beginning date. See
"Section 401" on page 34. 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.
Distributions from a traditional IRA may be eligible for a tax-free rollover
to another traditional IRA. In certain cases, a distribution from a traditional
IRA may be eligible to be rolled over to a retirement plan qualified under Code
Section 401(a) or a Section 403(b) annuity contract. See "Rollovers" on page 36.
ROTH IRAS. Section 408A of the Code permits eligible individuals to establish
a Roth IRA, a new type of IRA which became available in 1998. The Contract may
be purchased as a Roth IRA. Contributions to a Roth IRA are not deductible, but
withdrawals that meet certain requirements are not subject to federal income
tax. Sale of the contract for use with Roth IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the Contract
for such purposes will be provided with such supplementary information as may be
required by the Internal Revenue Service or other appropriate agency, and will
have the right to revoke the Contract under certain requirements. Unlike a
traditional IRA, Roth IRAs are not subject to minimum required distribution
rules during the Contractowner's lifetime. Generally, however, the amount in a
remaining Roth IRA must be distributed by the end of the fifth year after the
death of the Contractowner.
The Internal Revenue Service has not reviewed the Contract for qualification
as a Roth 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
Roth IRA qualification requirements.
SECTION 457. Section 457 of the Code permits employees of state and local
governments and units and agencies of state and local governments as well as
tax-exempt organizations described in Section 501(c)(3) of the Code to defer a
portion of their compensation without paying current taxes if those employees
are participants in an eligible deferred compensation plan. A Section 457 plan
may permit the purchase of Contracts to provide benefits thereunder.
Although a participant under a Section 457 plan may be permitted to direct or
choose methods of investment in the case of a tax-exempt employer sponsor, all
amounts deferred under the plan, and any income thereon, remain solely the
property of the employer and subject to the claims of its general creditors,
until paid to the participant. The assets of a Section 457 plan maintained by a
state or local government employer must be held in trust (or custodial account
or an annuity contract) for the exclusive benefit of plan participants, who will
be responsible for taxes upon distribution. A Section 457 plan must not permit
the distribution of a participant's benefits until the participant attains age
70 1/2, terminates employment or incurs an "unforeseeable emergency."
Section 457 plans are generally subject to minimum distribution requirements
similar to those applicable to retirement plans qualified under Section 401 of
the Code. See "Section 401" on page 34. Since under a Section 457 plan,
contributions are generally excludable from the taxable income of the employee,
the full amount received will usually be taxable as ordinary income when annuity
payments commence or other distributions are made. Distributions from a Section
457 plan are not eligible for tax-free rollovers.
ROLLOVERS. A "rollover" is the tax-free transfer of a distribution from one
Qualified Plan to another. Distributions which are rolled over are not included
in the employee's gross income until some future time.
If any portion of the balance to the credit of an employee in a Section 401
plan or Section 403(b) plan is paid to the employee in an "eligible rollover
distribution" and the employee transfers any portion of the amount received to
an "eligible retirement plan," then the amount so transferred is not includable
in income. An "eligible rollover distribution" generally means any distribution
that is not one of a series of periodic payments made for the life of the
distributee or for a specified period of at least ten years. In addition, a
required minimum distribution will not qualify as an eligible rollover
distribution. A rollover must be completed within 60 days after receipt of the
distribution.
In the case of a Section 401 plan, an "eligible retirement plan" will be
another retirement plan qualified under Code Section 401 or an individual
retirement account or annuity under Code Section 408. With respect to a Section
403(b) plan, an "eligible retirement plan" will be another Section 403(b) plan
or an individual retirement account or annuity described in Code Section 408.
A Section 401 plan and a Section 403(b) plan must generally provide a
participant receiving an eligible rollover distribution, the option to have the
distribution transferred directly to another eligible retirement plan.
The owner of an IRA may make a tax-free rollover of any portion of the IRA.
The rollover must be completed within 60 days of the distribution and generally
may only be made to another IRA. However, an individual may receive a
distribution from his or her IRA and within 60 days roll it over into a
retirement plan qualified under Code Section 401(a) if all of the funds in the
IRA are attributable to a rollover from a Section 401(a) plan. Similarly, a
distribution from an IRA may be rolled over to a Section 403(b) plan only if all
of the funds in the IRA are attributable to a rollover from a Section 403(b)
annuity.
TAX PENALTIES. PREMATURE DISTRIBUTION TAX. Distributions from a Qualified
Plan before the participant reaches age 59 1/2 are generally subject to an
additional tax equal to 10 percent of the taxable portion of the distribution.
The 10 percent penalty tax does not apply to distributions: (i) made on or after
the death of the employee; (ii) attributable to the employee's disability; (iii)
which are part of a series of substantially equal periodic payments made (at
least annually) for the life (or life expectancy) of the employee or the joint
lives (or joint life expectancies) of the employee and a designated beneficiary
and which begin after the employee terminates employment; (iv) made to an
employee after termination of employment after reaching age 55; (v) made to pay
for certain medical expenses; (vi) that are exempt withdrawals of an excess
contribution; (vii) that is rolled over or transferred in accordance with Code
requirements; or (viii) that is transferred pursuant to a decree of divorce or
separate maintenance or written instrument incident to such a decree.
The exception to the 10 percent penalty tax described in item (iv) above is
not applicable to IRAs. However, distributions from an IRA to unemployed
individuals can be made without application of the 10 percent penalty tax to pay
health insurance premiums in certain cases. In addition, the 10 percent penalty
tax is generally not applicable to distributions from a Section 457 plan.
Starting January 1, 1998, there are two additional exceptions to the 10 percent
penalty tax on withdrawals from IRAs before age 59 1/2: withdrawals made to pay
"qualified" higher education expenses and withdrawals made to pay certain
"eligible first-time home buyer expenses."
MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan is
less than the minimum required distribution for the year, the participant is
subject to a 50 percent tax on the amount that was not properly distributed.
EXCESS DISTRIBUTION/ACCUMULATION TAX. The penalty tax of 15 percent which was
imposed (in addition to any ordinary income tax) on large plan distributions and
the "excess retirement accumulations" of an individual has been repealed,
effective January 1, 1997.
WITHHOLDING. Periodic distributions (e.g., annuities and installment
payments) from a Qualified Plan that will last for a period of ten or more years
are generally subject to voluntary income tax withholding. The amount withheld
on such periodic distributions is determined at the rate applicable to wages.
The recipient of a periodic distribution may generally elect not to have
withholding apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than ten years) from a Qualified Plan (other than IRA and
Section 457 plans) are generally subject to mandatory 20 percent income tax
withholding. However, no withholding is imposed if the distribution is
transferred directly to another eligible Qualified Plan. Nonperiodic
distributions 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 of the different
types of Qualified Plans which may be funded by the Contract offered by this
Prospectus is only a brief summary and is not intended as tax advice. The rules
governing the provisions of Qualified Plans are extremely complex and often
difficult to comprehend. Anything less than full compliance with the applicable
rules, all of which are subject to change, may have adverse tax consequences. A
prospective Contractowner considering adoption of a Qualified Plan and purchase
of a Contract in connection therewith should first consult a qualified and
competent tax adviser, with regard to the suitability of the Contract as an
investment vehicle for the Qualified Plan.
OTHER INFORMATION
VOTING OF SBL FUND SHARES -- Security Benefit is the legal owner of the shares
of SBL Fund held by the Subaccounts. Security Benefit will exercise voting
rights attributable to the shares of each Series of the Fund held in the
Subaccounts at any regular and special meetings of the shareholders of the Fund
on matters requiring shareholder voting under the 1940 Act. In accordance with
its view of presently applicable law, Security Benefit will exercise its voting
rights based on instructions received from persons having the voting interest in
corresponding Subaccounts. However, if the 1940 Act or any regulations
thereunder should be amended, or if the present interpretation thereof should
change, and as a result Security Benefit determines that it is permitted to vote
the shares of the SBL Fund in its own right, it may elect to do so.
The person having the voting interest under a Contract is the Owner. Unless
otherwise required by applicable law, the number of shares of a particular
Series as to which voting instructions may be given to Security Benefit is
determined by dividing your Contract Value in the corresponding Subaccount on a
particular date by the net asset value per share of the Series as of the same
date. Fractional votes will be counted. The number of votes as to which voting
instructions may be given will be determined as of the same date established by
SBL Fund for determining shareholders eligible to vote at the meeting of the
Fund. If required by the SEC, Security Benefit reserves the right to determine
in a different fashion the voting rights attributable to the shares of SBL Fund.
Voting instructions may be cast in person or by proxy.
Voting rights attributable to your Contract Value in a Subaccount for which
no timely voting instructions are received will be voted by Security Benefit in
the same proportion as the voting instructions that are received in a timely
manner for all Contracts participating in that Subaccount. Security Benefit will
also exercise the voting rights from assets in each Subaccount that are not
otherwise attributable to Contractowners, if any, in the same proportion as the
voting instructions that are received in a timely manner for all Contracts
participating in that Subaccount. Security Benefit generally will exercise
voting rights attributable to shares of the Series of SBL Fund held in its
General Account, if any, in the same proportion as votes cast with respect to
shares of the Series of the Fund held by the Separate Account and other separate
accounts of Security Benefit, in the aggregate.
SUBSTITUTION OF INVESTMENTS -- Security Benefit reserves the right, subject to
compliance with the law as then in effect, to make additions to, deletions from,
substitutions for, or combinations of the securities that are held by the
Separate Account or any Subaccount or that the Separate Account or any
Subaccount may purchase. If shares of any or all of the Series of SBL Fund
should no longer be available for investment, or if Security Benefit management
believes further investment in shares of any or all of the Series of SBL Fund
should become inappropriate in view of the purposes of the Contract, Security
Benefit may substitute shares of another Series of SBL Fund or of a different
fund for shares already purchased, or to be purchased in the future under the
Contract. Security Benefit may also purchase, through the Subaccount, other
securities for other classes or contracts, or permit a conversion between
classes of contracts on the basis of requests made by Owners.
In connection with a substitution of any shares attributable to an Owner's
interest in a Subaccount or the Separate Account, Security Benefit will, to the
extent required under applicable law, provide notice, seek Owner approval, seek
prior approval of the SEC, and comply with the filing or other procedures
established by applicable state insurance regulators.
Security Benefit also reserves the right to establish additional Subaccounts
of the Separate Account that would invest in a new Series of SBL Fund or in
shares of another investment company, a series thereof, or other suitable
investment vehicle. Security Benefit may establish new Subaccounts in its sole
discretion, and will determine whether to make any new Subaccount available to
existing Owners. Security Benefit may also eliminate or combine one or more
Subaccounts if, in its sole discretion, marketing, tax, or investment conditions
so warrant.
Subject to compliance with applicable law, Security Benefit may transfer
assets to the General Account. Security Benefit also reserves the right, subject
to any required regulatory approvals, to transfer assets of any Subaccount to
another separate account or Subaccount.
In the event of any such substitution or change, Security Benefit may, by
appropriate endorsement, make such changes in these and other contracts as may
be necessary or appropriate to reflect such substitution or change. If Security
Benefit believes it to be in the best interests of persons having voting rights
under the Contracts, the Separate Account may be operated as a management
investment company under the 1940 Act or any other form permitted by law. The
Separate Account may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with other separate
accounts of Security Benefit or an affiliate thereof. Subject to compliance with
applicable law, Security Benefit also may combine one or more Subaccounts and
may establish a committee, board, or other group to manage one or more aspects
of the operation of the Separate Account.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS -- Security Benefit reserves the
right, without the consent of 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.
REPORTS TO OWNERS -- Security Benefit will send you annually a statement 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 Account
and the Subaccounts and any other information required by law. Security Benefit
will also send confirmations upon purchase payments, transfers, loans, loan
repayments, and full and partial withdrawals. Security Benefit may confirm
certain transactions on a quarterly basis. These transactions include purchases
under an Automatic Investment Program, transfers under the Dollar Cost Averaging
and Asset Reallocation Options, systematic withdrawals and annuity payments.
You will also receive an annual and semiannual report containing financial
statements for SBL Fund, which will include a list of the portfolio securities
of each Series, as required by the 1940 Act, and/or such other reports as may be
required by federal securities laws.
TELEPHONE TRANSFER PRIVILEGES -- You may request a transfer of Contract Value
and may make changes to an existing Dollar Cost Averaging or Asset Reallocation
option by telephone if the Telephone Transfer section of the application or an
Authorization for Telephone Requests form ("Telephone Authorization") has been
completed, signed, and filed at Security Benefit's Home Office. Security Benefit
has established procedures to confirm that instructions communicated by
telephone are genuine and will not be liable for any losses due to fraudulent or
unauthorized instructions provided it complies with its procedures. Security
Benefit's procedures require that any person requesting a transfer by telephone
provide the account number and the Owner's tax identification number and such
instructions must be received on a recorded line. Security Benefit reserves the
right to deny any telephone transfer request. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), you may not be able to request transfers by telephone and would
have to submit written requests.
By authorizing telephone transfers, you authorize Security Benefit to accept
and act upon telephonic instructions for transfers involving your Contract. You
agree that neither Security Benefit, any of its affiliates, nor SBL Fund, will
be liable for any loss, damages, cost, or expense (including attorneys' fees)
arising out of any telephone requests; provided that Security Benefit effects
such request in accordance with its procedures. As a result of this policy on
telephone requests, you bear the risk of loss arising from the telephone
transfer privilege. Security Benefit may discontinue, modify, or suspend the
telephone transfer privilege at any time. LEGAL PROCEEDINGS -- There are no
legal proceedings pending to which the Separate Account is a party, or which
would materially affect the Separate Account.
LEGAL MATTERS -- Amy J. Lee, Esq., Associate General Counsel, Security Benefit,
has passed upon legal matters in connection with the issue and sale of the
Contracts described in this Prospectus, Security Benefit's authority to issue
the Contracts under Kansas law, and the validity of the forms of the Contracts
under Kansas law.
PERFORMANCE INFORMATION
Performance information for the Subaccounts, including the yield and
effective yield of the Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts may appear in
advertisements, reports, and promotional literature to current or prospective
Owners.
Current yield for the Money Market Subaccount will be based on income
received by a hypothetical investment over a given 7-day period (less expenses
accrued during the period), and then "annualized" (i.e., assuming that the 7-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Money Market Subaccount is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings.
For the remaining Subaccounts, quotations of yield will be based on all
investment income per Accumulation Unit earned during a given 30-day period,
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of an Accumulation Unit
on the last day of the period. Quotations of average annual total return for any
Subaccount will be expressed in terms of the average annual compounded rate of
return on a hypothetical investment in a Contract over a period of one, five,
and ten years (or, if less, up to the life of the Subaccount), and will reflect
the deduction of the administrative charge, mortality and expense risk charge
and contingent deferred sales charge and may simultaneously be shown for other
periods.
Quotations of yield and effective yield do not reflect deduction of the
contingent deferred sales charge, and total return figures may be quoted that do
not reflect deduction of the charge. If reflected, the performance figures
quoted would be lower. Such performance information will be accompanied by total
return figures that reflect deduction of the contingent deferred sales charge
that would be imposed if Contract Value were withdrawn at the end of the period
for which total return is quoted.
Although the Contracts were not available for purchase until March __, 2000,
the underlying investment vehicle of the Separate Account, SBL Fund, has been in
existence since May 26, 1977. Performance information for the Subaccounts may
also include quotations of total return for periods beginning prior to the
availability of the Contracts that incorporate the performance of SBL Fund.
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donaghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index or other indices measuring
performance of a pertinent group of securities so that investors may compare a
Subaccount's results with those of a group of securities widely regarded by
investors as representative of the securities markets in general or
representative of a particular type of security: (ii) other variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other ratings services, companies, publications, or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Contract.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Contract Value is allocated to a Subaccount
during a particular time period on which the calculations are based. Performance
information should be considered in light of the investment objectives and
policies, characteristics, and quality of the Series in which the Subaccount
invests, and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Subaccounts, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on overall
performance or other criteria, (ii) the effect of tax-deferred compounding on a
Subaccount's investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a comparison, at various
points in time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with the
return on a taxable basis, and (iii) Security Benefit's rating or a rating of
Security Benefit's claim-paying ability as determined by firms that analyze and
rate insurance companies and by nationally recognized statistical rating
organizations.
ADDITIONAL INFORMATION
REGISTRATION STATEMENT -- A Registration Statement under the 1933 Act has been
filed with the SEC relating to the offering described in this Prospectus. This
Prospectus does not include all the information included in the Registration
Statement, certain portions of which, including the Statement of Additional
Information, have been omitted pursuant to the rules and regulations of the SEC.
The omitted information may be obtained at the SEC's principal office in
Washington, DC, upon payment of the SEC's prescribed fees and may also be
obtained from the SEC's web site (http://www.sec.gov).
FINANCIAL STATEMENTS -- Consolidated financial statements of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, and the financial
statements of the Separate Account at December 31, 1999 and for each of the two
years in the period ended December 31, 1999 are contained in the Statement of
Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to Security Benefit Life Insurance Company and
Subsidiaries. The Table of Contents of the Statement of Additional Information
is set forth below:
TABLE OF CONTENTS --
Page
GENERAL INFORMATION AND HISTORY............................................ 1
Safekeeping of Assets................................................... 1
DISTRIBUTION OF THE CONTRACT............................................... 1
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS...... 1
Section 401............................................................. 1
Section 403(b).......................................................... 1
Section 408............................................................. 2
Section 457............................................................. 2
EXPERTS.................................................................... 3
PERFORMANCE INFORMATION.................................................... 3
FINANCIAL STATEMENTS....................................................... 6
<PAGE>
VARIFLEX EXTRA CREDIT VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: MARCH __, 2000
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
ISSUED BY
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON STREET
TOPEKA, KANSAS 66636-0001
1-800-888-2461
MAILING ADDRESS:
SECURITY BENEFIT LIFE INSURANCE COMPANY
P.O. BOX 750497
TOPEKA, KANSAS 66675-0497
1-800-888-2461
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current Prospectus for the Variflex Extra Credit
Variable Annuity dated March __, 2000, as it may be supplemented from time to
time. A copy of the Prospectus may be obtained from Security Benefit by calling
1-800-888-2461 or by writing P.O. Box 750497, Topeka, Kansas 66675-0497.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY............................................. 3
Safekeeping of Assets.................................................... 3
DISTRIBUTION OF THE CONTRACT................................................ 3
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS....... 3
Section 401.............................................................. 3
Section 403(b)........................................................... 3
Section 408.............................................................. 3
Section 457.............................................................. 4
PERFORMANCE INFORMATION..................................................... 4
FINANCIAL STATEMENTS........................................................ 6
<PAGE>
GENERAL INFORMATION AND HISTORY
For a description of the Flexible Purchase Payment Deferred Variable Annuity
Contract (the "Contract"), Security Benefit Life Insurance Company ("Security
Benefit"), and the Variable Annuity Account VIII (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 -- Security Benefit is responsible for the safekeeping of
the assets of the Subaccounts. These assets, which consist of shares of the
Series of SBL Fund in non-certificated form, are held separate and apart from
the assets of Security Benefit's General Account and its other separate
accounts.
DISTRIBUTION OF THE CONTRACT
Security Distributors, Inc. ("SDI") is Principal Underwriter of the Contract.
SDI is registered as a broker/dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The offering of the
Contracts is continuous.
Subject to arrangements with Security Benefit, the Contract is sold by
independent broker/dealers who are members of the NASD and who become licensed
to sell variable annuities for SBL, and by certain financial institutions. SDI
acts as principal underwriter on behalf of Security Benefit for the distribution
of the Contract. SDI is not compensated under its Distribution Agreement with
Security Benefit.
The compensation payable by SDI under these arrangements may vary, but is not
expected to exceed in the aggregate 5% of purchase payments.
LIMITS ON PURCHASE PAYMENTS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
SECTION 401 -- The applicable annual limits on purchase payments for a Contract
used in connection with a retirement plan that is qualified under Section 401 of
the Internal Revenue Code depend upon the type of plan. Total purchase payments
on behalf of a participant to all defined contribution plans maintained by an
employer are limited under Section 415(c) of the Internal Revenue Code to the
lesser of (a) $30,000, or (b) 25% of the participant's annual compensation.
Salary reduction contributions to a cash-or-deferred arrangement under a profit
sharing plan are subject to additional annual limits. Contributions to a defined
benefit pension plan are actuarially determined based upon the amount of
benefits the participants will receive under the plan formula. The maximum
annual benefit any individual may receive under an employer's defined benefit
plan is limited under Section 415(b) of the Internal Revenue Code. The limits
determined under Section 415(b) and (c) of the Internal Revenue Code are further
reduced for an individual who participates in a defined contribution plan and a
defined benefit plan maintained by the same employer. Rollover contributions are
not subject to the annual limitations described above.
SECTION 403(B) -- Contributions to 403(b) annuities are excludable from an
employee's gross income if they do not exceed the smallest of the limits
calculated under Sections 402(g), 403(b)(2), and 415 of the Code. The applicable
limit will depend upon whether the annuities are purchased with employer or
employee contributions. Rollover contributions are not subject to these annual
limits.
Section 402(g) generally limits an employee's salary reduction contributions to
a 403(b) annuity to $10,000 a year. The $10,000 limit will be reduced by salary
reduction contributions to other types of retirement plans. An employee with at
least 15 years of service for a "qualified employer" (i.e., an educational
organization, hospital, home health service agency, health and welfare service
agency, church or convention or association of churches) generally may exceed
the $10,000 limit by $3,000 per year, subject to an aggregate limit of $15,000
for all years.
Section 403(b)(2) provides an overall limit on employer and employee salary
reduction contributions that may be made to a 403(b) annuity. Section 403(b)(2)
generally provides that the maximum amount of contributions an employee may
exclude from his or her gross income in any taxable year is equal to the excess,
if any, of:
(i) the amount determined by multiplying 20% of the employee's includable
compensation by the number of his or her years of service with the
employer, over
(ii) the total amount contributed to retirement plans sponsored by the
employer, that were excludable from his or her gross income in prior
years.
Section 415(c) also provides an overall limit on the amount of employer and
employee salary reduction contributions to a Section 403(b) annuity that will be
excludable from an employee's gross income in a given year. The Section 415(c)
limit is the lesser of (i) $30,000, or (ii) 25% of the employee's annual
compensation.
SECTION 408 -- Premiums (other than rollover contributions) 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 (other than rollover
contributions) to an IRA are limited to the lesser of $2,000 per year or the
Owner's annual compensation. Spousal IRAs allow an owner and his or her spouse
to contribute up to $2,000 to their respective IRAs so long as joint tax return
is filed and joint income is $4,000 or more. The maximum amount the higher
compensated spouse may contribute for the year is the lesser of $2,000 or 100%
of that spouse's compensation. The maximum the lower compensated spouse may
contribute is the lesser of (i) $2,000 or (ii) 100% of that spouse's
compensation plus the amount by which the higher compensated spouse's
compensation exceeds the amount the higher compensated spouse contributes to his
or her IRA. 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 participate in an 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 in the Plan, or (b) $30,000. Salary reduction
contributions, if any, are subject to additional annual limits.
SECTION 457 -- Contributions on behalf of an employee to a Section 457 plan
generally are limited to the lesser of (i) $8,000 or (ii) 33 1/3% of the
employee's includable compensation. The $8,000 limit is indexed for inflation
(in $500 increments) for tax years beginning after December 31, 1996; thus the
dollar limit is adjusted only when the sum of the inflation adjustment equals or
exceeds $500. If the employee participates in more than one Section 457 plan,
the $8,000 limit applies to contributions to all such programs. The $8,000 limit
is reduced by the amount of any salary reduction contribution the employee makes
to a 403(b) annuity, an IRA or a retirement plan qualified under Section 401.
The Section 457 limit may be increased during the last three years ending before
the employee reaches his or her normal retirement age. In each of these last
three years, the plan may permit a "catch-up" amount in addition to the regular
amount to be deferred. The maximum combined amount which may be deferred in each
of these three years is $15,000 reduced by any amount excluded from the
employee's income for the taxable year as a contribution to another plan.
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 Money Market Subaccount will be based on the change
in the value, exclusive of capital changes and income other than investment
income, 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 Money Market 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
For the seven-day period ended December 31, 1998, the yield for the Money Market
Subaccount was 2.47% and the effective yield was 2.50%.
Quotations of yield for the Subaccounts, other than the Money Market 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:
YIELD = 2[(a-b + 1)^6 - 1]
---
cd
where a = net investment income earned during the period by the Series
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.
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 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). Quotations
of total return may simultaneously be shown for other periods and will include
total return for periods beginning prior to availability of the Contract. Such
total return figures are based upon the performance of the respective Series of
SBL Fund, adjusted to reflect the charges imposed under the Contract.
Average annual total return figures reflect the deduction of the mortality and
expense risk and administration charges and the contingent deferred sales
charge. Total return figures may be quoted that do not reflect deduction of the
contingent deferred sales charge. Such charges if reflected would lower the
level of return quoted. Total return figures that do not reflect deduction of
the contingent deferred sales charge will be accompanied by total return figures
that reflect such charge. The performance figures herein for the Global
Strategic Income Subaccount, the High Yield Subaccount, the Value Subaccount and
the Small Cap Subaccount reflect the reimbursement of certain expenses by the
Investment Adviser. In the absence of such reimbursement, the performance
figures would be reduced.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
(WITH CONTINGENT DEFERRED SALES
CHARGE AND ADMINISTRATIVE FEE)
----------------------------------
1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------------
Growth Series............................... 21.72% 23.36% 25.26%(1)
Growth-Income Series........................ 3.40% 14.77% 17.45%(1)
Worldwide Equity Series..................... 16.33% 12.37% 12.84%(1)
High Grade Income Series.................... 3.93% 3.44% 5.75%(1)
Mid Cap Series.............................. 14.11% 16.42% 17.29%(1)
Global Strategic Income Series.............. 2.75% 6.33% 7.16%(2)
Global Total Return Series.................. 8.60% 8.76% 9.06%(2)
Managed Asset Allocation Series............. 14.61% 14.33% 13.77%(2)
Equity Income Series........................ 4.92% 16.48% 18.42%(2)
High Yield Series........................... 1.72% 8.40%(3) ---
Social Awareness Series..................... 27.96% 22.06% 23.15%(1)
Value Series................................ 12.66% 25.64%(4) ---
Small Cap Series............................ 7.49% 2.13%(5) ---
- --------------------------------------------------------------------------------
1. From April 4, 1995 (Subaccount date of inception) to December 31, 1998.
2. From June 1, 1995 (Subaccount date of inception) to December 31, 1998.
3. From August 5, 1996 (Subaccount date of inception) to December 31, 1998.
4. From May 1, 1997 (Subaccount date of inception) to December 31, 1998.
5. From October 15, 1997 (Subaccount date of inception) to December 31, 1998.
- --------------------------------------------------------------------------------
Quotations of total return for any Subaccount of the Separate Account will be
based on a hypothetical investment in an Account over a certain period and will
be computed by subtracting the initial value of the investment from the ending
value and dividing the remainder by the initial value of the investment. Such
quotations of total return will reflect the deduction of all applicable charges
to the contract and the separate account (on an annual basis) except the
applicable contingent deferred sales charge. The total return figures set forth
below would be lower if the contingent deferred sales charge was deducted.
For the fiscal years ended 1998 through 1988, the total return for each
Subaccount was the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Subaccount.................. 23.63% 26.93% 20.96% 34.91% (3.02)% 12.12% 9.61% 34.18% (11.80)% 33.05%
Growth-Income Subaccount........... 6.01% 24.80% 16.59% 28.26% (4.33)% 8.08% 4.78% 35.89% (5.79)% 26.61%
Money Market Subaccount............ 3.69% 3.73% 3.59% 3.90% 2.28% 1.15% 1.80% 4.18% 6.35% 7.53%
Worldwide Equity Subaccount........ 18.44% 4.91% 15.81% 9.34% 1.31% 29.80% (3.98)% 2.96%(1) --- ---
High Grade Income Subaccount....... 6.52% 8.49% (2.11)% 16.92% (8.23)% 11.06% 5.95% 15.34% 5.19% 10.32%
Mid Cap Subaccount................. 16.31% 18.28% 16.38% 17.82% (6.42)% 12.07% 24.34%(2) --- --- ---
Global Strategic Income Subaccount. 5.39% 3.93% 12.09% 6.74%(3) --- --- --- --- --- ---
Global Total Return Subaccount..... 11.10% 4.68% 12.63% 6.23%(3) --- --- --- --- --- ---
Managed Asset Allocation Subaccount 16.79% 16.72% 11.21% 6.43%(3) --- --- --- --- --- ---
Equity Income Subaccount........... 7.48% 26.57% 18.35% 16.05%(3) --- --- --- --- --- ---
High Yield Subaccount.............. 4.39% 11.70% 6.00%(4) --- --- --- --- --- --- ---
Social Awareness Subaccount........ 29.62% 20.94% 17.15% 26.02% (5.15)% 10.33% 14.76% 4.56%(5) --- ---
Value Subaccount................... 14.91% 29.20%(6) --- --- --- --- --- --- --- ---
Small Cap Subaccount............... 9.95% (4.50)%(7) --- --- --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1. On May 1, 1991 the Worldwide Equity Subaccount changed its investment objective from high current income to long-term capital
growth through investment in common stocks and equivalents of companies domiciled in foreign countries and the United States.
The performance information set forth above reflects performance after the change in investment objective.
2. From October 1, 1992 to December 31, 1992.
3. From June 1, 1995 to December 31, 1995.
4. From August 5, 1996 to December 31, 1996.
5. From May 1, 1991 to December 31, 1991.
6. From May 1, 1997 to December 31, 1997
7. From October 1, 1997 to December 31, 1997
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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, insurance products 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 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 Series of the Mutual
Fund 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 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 balance sheets of Security Benefit Life Insurance Company and
Subsidiaries as of December 31, 1999, and 1998 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, 1999, and the financial statements of the
Separate Account at December 31, 1999, and for each of the two years ended
December 31, 1999, are set forth herein, starting on page 8.
The consolidated financial statements of Security Benefit Life Insurance Company
and Subsidiaries, 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.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
To be filed by amendment.
(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) (a) Service Facilities Agreement(b)
(b) Variable Annuity Sales Agreement(e)
(4) (a) Individual Contract (Form V6028 12-99)
(b) Individual Contract-Unisex (Form V6028 12-99)
(c) Tax-Sheltered Annuity Endorsement
(Form 6832A R9-96)(a)
(d) Withdrawal Charge Waiver Endorsement
(Form V6051 3-96)(a)
(e) Waiver of Withdrawal Charge for Terminal Illness
Endorsement (Form V6051 TI 2-97)(a)
(f) Simple Individual Retirement Annuity Endorsement
(Form 4453C-5S 2-97)(a)
(g) Individual Retirement Annuity Endorsement
(Form V6849A 1-97)(c)
(h) Annuity Loan Provisions (Form V6846-1 7-97)(b)
(i) Roth IRA Endorsement (Form V6851 10-97)(c)
(j) Section 457 Endorsement (Form V6054 1-98)(c)
(k) 403a Endorsement (Form V6057 10-98)(f)
(5) (a) Form of Application (Form V9492 12-99)
(b) Form of Application - Unisex (Form V9492 12-99)
(6) (a) Articles of Incorporation of SBL(d)
(b) Bylaws of SBL(d)
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) To be filed by amendment
(14) Powers of Attorney of Howard R. Fricke, Thomas R.
Clevenger, Sister Loretto Marie Colwell, John C. Dicus,
William W. Hanna, John E. Hayes, Jr., Kris A. Robbins,
Frank C. Sabatini and Robert C. Wheeler
(a) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature Initial Registration Statement No. 333-23723 (March 21, 1997).
(b) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature '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. 333-23723 (October 15, 1997).
(c) Incorporated herein by reference to the Exhibits filed with Variflex
Signature'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 333-23723 (April 30, 1998).
(d) Incorporated herein by reference to Exhibits filed with the Variflex
Separate Account Post-Effective Amendment No. 20 under the Securities Act
of 1933 and Amendment No. 19 under the Investment company Act of 1940 to
Registration Statement No. 2-89328 (November 1, 1998).
(e) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature's Post-Effective Amendment No. 3 under the Securities Act of 1933
and Amendment No. 4 under the Investment Company Act of 1940 to the
Registration Statement 333-23723 (March 1, 1999).
(f) Incorporated herein by reference to the Exhibits filed with the Variflex
Signature's Post-Effective Amendment No. 4 under the Securities Act of 1933
and Amendment No. 5 under the Investment Company Act of 1940 to the
Registration Statement 333-23723 (April 30, 1999).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
------------------ ------------------------------------
Howard R. Fricke* Chairman of the Board,
Chief Executive Officer and Director
Kris A. Robbins* President, Chief Operating
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
Steven J. Douglass Director
3231 East 6th Street
Topeka, KS 66607
William W. Hanna Director
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes, Jr. Director
200 Gulf Blvd.
Belleair Shore, FL 33786
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
Roger K. Viola* Senior Vice President,
General Counsel and Secretary
Malcolm E. Robinson* Senior Vice President and
Assistant to the President
John D. Cleland* Senior Vice President
Greg Garvin* Senior Vice President
Terry A. Milberger* Senior Vice President
Richard K Ryan* Senior Vice President
Amy J. Lee* Associate General Counsel, Vice
President and Assistant Secretary
Venette Davis* Senior Vice President
James R. Schmank* Senior Vice President
J. Craig Anderson* Senior Vice President
*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" or "the
Company"), is owned by Security Benefit Corp. through the ownership of
700,000 of SBL's 700,010 issued and outstanding shares of common
stock. One share of SBL's issued and outstanding common stock is owned
by each director of SBL, in accordance with the requirements of Kansas
law. Security Benefit Corp. is wholly-owned by Security Benefit Mutual
Holding Company ("SBMHC"), which in turn is controlled by SBL
policyholders. No one person holds more than approximately 0.0004% of
the voting power of SBMHC. The Registrant is a segregated asset
account of SBL.
The following chart indicates the persons controlled by or under
common control with SBL Variable Annuity Account VIII or SBMHC:
<TABLE>
<CAPTION>
PERCENT OF VOTING
SECURITIES OWNED OR
JURISDICTION OF CONTROLLED BY SBMHC
NAME INCORPORATION (DIRECTLY OR INDIRECTLY)
---- --------------- ------------------------
<S> <C> <C>
Security Benefit Corp. Kansas 100%
(Holding Company)
Security Benefit Life Insurance Company Kansas 100%
(Stock Life Insurance Company)
Security Benefit Group, Inc. Kansas 100%
(Holding 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. Kansas 100%
(Daycare Company)
Security Financial Resources, Inc. Kansas 100%
(Financial Services)
First Advantage Insurance Agency, Inc. Kansas 100%
(Insurance Agency)
First Security Benefit Life Insurance New York 100%
and Annuity Company of New York
</TABLE>
SBL is also the depositor of the following separate accounts: SBL
Variable Annuity Accounts I, III, IV, X, XI, and Variflex, SBL
Variable Life Insurance Account Varilife, Security Varilife Separate
Account, Parkstone Variable Annuity Separate Account and T. Rowe Price
Variable Annuity Account.
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 Growth and Income Fund 39.0% SBL Fund 100.0%
Security Ultra Fund 32.0% Advisor's Fund 100.0%
ITEM 27. NUMBER OF CONTRACT OWNERS
As of December 1, 1999, there were no owners of the contract described
in this registration statement.
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) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
his or her fiduciary duty as a director, provided that nothing
contained in this Article shall eliminate or limit the liability of
a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (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. If the General
Corporation Code of the State of Kansas is amended after the filing
of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the General Corporation Code of the State of Kansas, as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
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 by the Depositor of expenses
incurred or paid by a director, officer or controlling person of the
Depositor 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) Security Distributors, Inc. ("SDI"), a subsidiary of SBL, acts as
distributor of the SBL Variable Annuity Account VIII contracts.
SDI receives no compensation for its distribution function in
excess of the commissions it pays to selling broker/dealers. SDI
performs similar functions for SBL Variable Annuity Accounts I,
III, IV, X and XI, Variflex, SBL Variable Life Insurance Account
Varilife, Security Varilife Separate Account and Parkstone
Variable Annuity Separate Account. SDI also acts as principal
underwriter for the following management investment companies for
which Security Management Company, LLC acts as investment
adviser: Security Equity Fund, Security Income Fund, Security
Growth and Income Fund, Security Municipal Bond Fund and Security
Ultra Fund.
(b) NAME AND PRINCIPAL
BUSINESS ADDRESS* POSITION AND OFFICES WITH UNDERWRITER
------------------ -------------------------------------
Richard K Ryan President and Director
John D. Cleland Vice President and Director
James R. Schmank Vice President and Director
Mark E. Young Vice President and Director
Amy J. Lee Secretary
Brenda M. Harwood Treasurer and Director
*700 Harrison, Topeka, Kansas 66636-0001
(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 include as part of the SBL
Variable Annuity Account VIII contract application a space that
an applicant can check to request a Statement of Additional
Information.
(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) SBL, sponsor of the unit investment trust, SBL Variable Annuity
Account VIII, hereby represents that it is relying upon American
Council of Life Insurance, SEC No-Action Letter, [1988-1989
Transfer Binder] Fed. Sec. L. Rep. (CCH) Paragraph 78,904 (Nov.
28, 1988), and that it has complied with the provisions of
paragraphs (1)-(4) of such no-action letter which are
incorporated herein by reference.
(f) Depositor 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 Depositor.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Topeka, State of Kansas on this 30th day of December,
1999.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman of (The Depositor)
the Board, and Chief
Executive Officer
By: Roger K. Viola
Kris A. Robbins --------------------------------------------
Director, President and Roger K. Viola, Senior Vice President,
Chief Operating Officer General Counsel and Secretary as
Attorney-In-Fact for the Officers and
Thomas R. Clevenger Directors Whose Names Appear Opposite
Director
Sister Loretto Marie Colwell SBL VARIABLE ANNUITY ACCOUNT VIII
Director (The Registrant)
John C. Dicus By: SECURITY BENEFIT LIFE INSURANCE COMPANY
Director (The Depositor)
William W. Hanna
Director By: Howard R. Fricke
--------------------------------------------
John E. Hayes, Jr. Howard R. Fricke, Chief Executive Officer
Director
Laird G. Noller By: Donald J. Schepker
Director --------------------------------------------
Donald J. Schepker, Senior Vice President,
Frank C. Sabatini Chief Financial Officer and Treasurer
Director
Robert C. Wheeler (ATTEST): Roger K. Viola
Director --------------------------------------
Roger K. Viola, Senior Vice President,
General Counsel and Secretary
Date: December 30, 1999
<PAGE>
EXHIBIT INDEX
(1) None
(2) None
(3) (a) None
(b) None
(4) (a) Individual Contract (Form V6028 12-99)
(b) Individual Contract - Unisex (Form V6028 12-99)
(c) None
(d) None
(e) None
(f) None
(g) None
(h) None
(i) None
(j) None
(k) None
(5) (a) Form of Application (Form V9492 12-99)
(b) Form of Application - Unisex (Form V9492 12-99)
(6) (a) None
(b) None
(7) None
(8) None
(9) Opinion of Counsel
(10) None
(11) None
(12) None
(13) None
(14) Powers of Attorney
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACT
SBL'S PROMISE
In consideration of the Purchase Payments and the application (which is
incorporated herein by reference), Security Benefit Life Insurance Company
("SBL") will pay the benefits of this Contract according to its terms.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between you, the
Owner, and us, SBL. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
YOU MAY RETURN THIS CONTRACT WITHIN 10 DAYS AFTER YOU RECEIVE IT. YOU MAY RETURN
THE CONTRACT BY DELIVERING OR MAILING IT TO SBL. THIS CONTRACT WILL THEN BE
DEEMED VOID FROM THE BEGINNING. NO WITHDRAWAL CHARGE WILL BE IMPOSED, AND WE
WILL REFUND YOUR CONTRACT VALUE, INCLUDING ANY FEES AND/OR CHARGES FOR PREMIUM
TAX THAT WERE DEDUCTED FROM THAT CONTRACT VALUE, LESS THE VALUE OF ANY CREDIT
ENHANCEMENTS MADE INTO THE CONTRACT, AS OF THE DATE WE RECEIVE THE RETURNED
CONTRACT.
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.
* Investment Experience is Reflected in Benefits
* Variable and Fixed Accumulation Before the Annuity Start Date; Variable and
Fixed Annuity Payments Thereafter
* Death Benefit Proceeds are Payable Before the Annuity Start Date
* This Contract is Non-Participating
BENEFITS AND VALUES PROVIDED BY THIS CONTRACT MAY BE ON A VARIABLE BASIS.
AMOUNTS DIRECTED INTO ONE OR MORE OF THE SUBACCOUNTS WILL REFLECT THE INVESTMENT
EXPERIENCE OF THOSE SUBACCOUNTS. THESE AMOUNTS MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO DOLLAR AMOUNT. (SEE "CONTRACT VALUE AND EXPENSE PROVISIONS"
AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
V6028 (12-99)
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
CONTRACT SPECIFICATIONS................................................... 3
DEFINITIONS............................................................... 4
GENERAL PROVISIONS........................................................ 8
The Contract............................................................ 8
Compliance.............................................................. 8
Misstatement of Age or Sex.............................................. 8
Evidence of Survival.................................................... 8
Incontestability........................................................ 8
Assignment.............................................................. 8
Ownership of Assets..................................................... 9
Transfers............................................................... 9
Claims of Creditors..................................................... 9
Basis of Values......................................................... 9
Participation........................................................... 9
Statements.............................................................. 10
Delay of Payment........................................................ 10
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS........................... 10
Ownership............................................................... 10
Joint Ownership......................................................... 10
Annuitant............................................................... 10
Primary and Secondary Beneficiaries..................................... 11
Ownership and Beneficiary Changes....................................... 11
PURCHASE PAYMENT PROVISIONS............................................... 11
Flexible Purchase Payments.............................................. 11
Purchase Payments Limitations........................................... 11
Purchase Payment Allocation............................................. 11
Place of Payment........................................................ 11
Credit Enhancement...................................................... 12
CONTRACT VALUE AND EXPENSE PROVISIONS..................................... 12
Contract Value.......................................................... 12
Fixed Account Contract Value............................................ 12
Fixed Account Interest Crediting........................................ 12
Separate Account Contract Value......................................... 13
Accumulation Unit Value................................................. 13
Net Investment Factor................................................... 13
Determining Accumulation Units.......................................... 14
Mortality and Expense Risk Charge....................................... 14
Administration Charge................................................... 14
Account Administration Charge........................................... 14
Premium Tax Expense..................................................... 14
Withdrawal Charges...................................................... 14
Free Withdrawals........................................................ 15
Withdrawal Charge Waivers............................................... 15
Mutual Fund Expenses.................................................... 16
WITHDRAWAL PROVISIONS..................................................... 16
Withdrawals............................................................. 16
Partial Withdrawals..................................................... 16
Systematic Withdrawals.................................................. 16
Withdrawal Value........................................................ 17
DEATH BENEFIT PROVISIONS.................................................. 17
Death Benefit........................................................... 17
Proof of Death.......................................................... 17
Distribution Rules...................................................... 18
ANNUITY BENEFIT PROVISIONS................................................ 18
Annuity Start Date...................................................... 18
Change of Annuity Start Date............................................ 18
Annuity Options......................................................... 18
Annuity Start Amount.................................................... 20
Fixed Annuity Payments.................................................. 20
Variable Annuity Payments............................................... 20
Annuity Tables.......................................................... 21
Annuity Payments........................................................ 21
Annuity Units........................................................... 21
Annuity Unit Value...................................................... 22
Alternate Annuity Option Rates.......................................... 22
AMENDMENTS OR ENDORSEMENTS, if any
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: CONTRACT NUMBER:
Jane Doe 123456789
JOINT OWNER NAME: CONTRACT DATE:
John Doe 7-01-1999
ANNUITANT NAME: ANNUITY START DATE:
Jane Doe 10-5-2030
ANNUITANT DATE OF BIRTH: PLAN:
10/5/60 Non-Qualified
ANNUITANT'S SEX: ASSIGNMENT:
Female This Contract may be assigned.
See assignment provision.
PRIMARY BENEFICIARY NAME: ANNUITY OPTION:
Jenny Doe Option 2
- --------------------------------------------------------------------------------
FIRST PURCHASE PAYMENT........................... $10,000
MINIMUM SUBSEQUENT PURCHASE PAYMENT.............. $500 ($50 under an automatic
investment program)
FREE WITHDRAWAL PERCENTAGE....................... 10%
GUARANTEED RATE.................................. 3%
SEPARATE ACCOUNT................................. Variable Annuity Account VIII
MORTALITY AND EXPENSE RISK CHARGE................ 1.25% Annually
ADMINISTRATION CHARGE............................ 0.15% Annually
ACCOUNT ADMINISTRATION CHARGE.................... $30 Annually*
WITHDRAWAL CHARGE
Age of Purchase Payment in Years............... 1 2 3 4 5 6 7 8
------------------------------
Withdrawal Charge.............................. 7% 7% 6% 6% 5% 5% 3% 0%
CREDIT ENHANCEMENT
Total Purchase Payments Less
Withdrawals and Withdrawal Charges
Less than $10,000.......................... 0%
At least $10,000 but less than $1,000,000.. 4%
$1,000,000 or more......................... 5%
BASIS OF ANNUITY TABLES.......................... 1983 (a) Mortality Table with
mortality improvement under
Projection Scale G
ASSUMED INTEREST RATE............................ 3.5% annually
SUBACCOUNTS:
1. Money Market 7. Managed Asset Allocation 13. Worldwide Equity
2. High Grade Income 8. Global Total Return 14. International
3. High Yield 9. Enhanced Index 15. Social Awareness
4. Global Strategic Income 10. Growth 16. Mid Cap
5. Growth Income 11. Select 25 17. Small Cap
6. Equity Income 12. Value
METHOD FOR DEDUCTIONS:
Deductions for the Account Administration Charge ("Account Charge"), Premium
Tax and certain Withdrawals will be made from the first Subaccount on the list
above to which the Owner has allocated Contract Value. Each Subaccount will be
depleted before the next is charged. The Fixed Account is the last Account
Charged.
*The Account Charge is deducted at each calendar year end. A pro rata Account
Charge is deducted: (1) upon a full Withdrawal of Contract Value; (2) when a
Contract has been in force for less than a full calendar year; (3) upon the
Annuity Start Date if one of Annuity Options 1 through 4, 7 or 8 is chosen;
and (4) upon payment of a death benefit. The Account Charge will be waived if
Contract Value is $50,000 or more upon the date the Account Charge is to be
deducted.
<PAGE>
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DEFINITIONS
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ACCOUNT
One of the Subaccounts or the Fixed Account.
ACCUMULATION UNIT
A unit of measure used to compute Separate Account Contract Value.
ANNUITANT
The person you name on whose life Annuity Payments may be determined. Please see
"Annuity Benefit Provisions" on page 18.
ANNUITY START AMOUNT
Contract Value as of the Annuity Start Date, less any Premium Tax and any pro
rata Account Charge.
ANNUITY OPTION
A set of provisions that form the basis for making Annuity Payments. Please see
"Annuity Options" on page 18.
ANNUITY PAYMENTS
Payments made beginning on the Annuity Start Date according to the provisions of
the Annuity Option selected. Annuity Payments are made on the same day of each
month, on a monthly, quarterly, semiannual or annual basis.
ANNUITY START DATE
The date on which Annuity Payments begin as elected by the Owner.
ANNUITY UNIT
A unit of measure used to compute Variable Annuity Payments.
AUTOMATIC TRANSFERS
Transfers among the Subaccounts and the Fixed Account made automatically. SBL
makes Automatic Transfers on a periodic basis at the written request of the
Owner. SBL may discontinue, modify or suspend Automatic Transfers.
COMPANY
Security Benefit Life Insurance Company, 700 SW Harrison Street, Topeka, Kansas
66636-0001.
CONTRACT ANNIVERSARY
The same date in each subsequent year as your Contract Date.
CONTRACT DATE
The date the Contract begins. The Contract Date is shown on page 3.
CONTRACT VALUE
The total value of your Contract, which includes amounts allocated to the
Subaccounts and the Fixed Account. SBL determines Contract Value as of each
Valuation Date.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CREDIT ENHANCEMENT
An amount added to Contract Value at the time a Purchase Payment is applied.
CURRENT INTEREST
SBL 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.
The Designated Beneficiary receives a death benefit upon the death of the Owner
prior to the Annuity Start Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 10 and "Death Benefit Provisions" on page 17.
FIXED ACCOUNT
An account that is part of SBL's General Account. SBL guarantees that it will
credit interest on Contract Value allocated to the Fixed Account at an annual
rate at least equal to the Guaranteed Rate set forth on page 3.
GUARANTEE PERIOD
Current Interest, if declared, is fixed for rolling periods of one or more
years, referred to as Guarantee Periods. SBL 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 SBL; or (b) a
Transfer 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 transferred 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.
GENERAL ACCOUNT
All assets of SBL other than those allocated to the Separate Account or any
other separate account of SBL.
HOME OFFICE
The address of SBL's Home Office is Security Benefit Life Insurance Company, 700
SW Harrison Street, Topeka, Kansas 66636-0001.
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 10.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or corporation.
OWNER
The person(s) who has (have) all rights under this Contract. The Owner as of the
Contract Date is named on page 3. Please see "Ownership" provisions on page 10
and the definition of "Joint Owner," above.
PREMIUM TAX
Any Premium Tax levied by a state or other governmental entity. When Premium Tax
is assessed after the Purchase Payment is applied, it will be deducted as shown
on page 3A.
PURCHASE PAYMENT
Money Received by SBL and applied to the Contract.
RECEIVED BY SBL
Receipt by SBL in good order at its Home Office, 700 SW Harrison Street, Topeka,
Kansas 66636-0001.
SEPARATE ACCOUNT
A separate account established and maintained by SBL under Kansas law. The
Separate Account as set forth on page 3 is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a Unit
Investment Trust. It was established by SBL to support variable annuity
contracts. SBL 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 SBL 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 SBL'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 Subaccounts without regard to income, gains
or losses in the other Subaccounts. SBL 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 is determined on each Valuation Date as of
the end of each Valuation Date.
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, SBL 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 SBL 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, SBL will notify you of the change. SBL 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.
TRANSFER
A Transfer of Contract Value of one Subaccount or the Fixed Account for the
equivalent dollar amount of Contract Value of another Subaccount or the Fixed
Account.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and SBL'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.
WITHDRAWAL
A Withdrawal of Contract Value in the dollar amount specified by the Owner.
Withdrawals include Systematic Withdrawals. See "Withdrawal Provisions" on page
16.
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GENERAL PROVISIONS
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THE CONTRACT
The entire Contract between the Owner and SBL consists of this Contract, the
Application (which is incorporated herein by reference), 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. SBL will use no statement made by or
on behalf of the Owner 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 SBL.
The Purchase Payment(s) and the Application must be acceptable to SBL under its
rules and practices. If they are not, SBL's liability shall be limited to a
return of the Purchase Payment(s).
COMPLIANCE
SBL 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. SBL 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 OR 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 SBL. If payments have already started 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
full amount due will be deducted from one or more future payments.
EVIDENCE OF SURVIVAL
Before SBL makes a payment, it has the right to require proof of the life or
death of any person whose life or death determines whether, or to whom, or how
much SBL must pay under this Contract.
INCONTESTABILITY
SBL will not contest the validity of this Contract.
ASSIGNMENT
No Assignment under this Contract is binding unless Received by SBL in writing.
SBL 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 SBL before the Assignment is Received by SBL. Once filed, the rights of
the Owner are subject to the Assignment. Any claim is subject to proof of
interest of the assignee. If the Contract has been absolutely assigned, the
assignee becomes the Owner.
OWNERSHIP OF ASSETS
SBL is the sole owner of the assets of the Fixed Account. SBL has the sole right
to control, manage or administer such assets.
TRANSFERS
The Owner may Transfer Contract Value among the Fixed Account and Subaccounts
upon your written request or under other methods allowed by SBL, subject to the
following.
SBL reserves the right to: (1) limit the amount that may be subject to Transfer
to $1,000,000 per Transfer without Home Office approval; (2) limit the number of
Transfers per Contract Year to 14; and (3) suspend Transfers. Transfers must be
at least $500 or if less: (1) the amount remaining in the Subaccount; or (2) the
amount of Fixed Account Contract Value, the Guarantee Period of which expires in
the calendar month in which the Transfer is effected.
Contract Value may be transferred from the Fixed Account only: (1) during the
calendar month in which the applicable Guarantee Period expires; or (2) pursuant
to an Automatic Transfer. In the event of an Automatic Transfer, Transfers of
Contract Value from the Fixed Account shall be made: (1) first from Fixed
Account Contract Value for which the Guarantee Period expires during the
calendar month during which the Transfer is effected; (2) then in the order that
starts with Fixed Account Contract Value that has the longest amount of time
remaining before its Guarantee Period expires; and (3) ends with that which has
the least amount of time remaining before its Guarantee Period expires.
SBL will effect a Transfer to or from a Subaccount on the basis of Accumulation
Unit Value determined as of the end of the Valuation Period in which the
Transfer request is Received by SBL. SBL will effect a Transfer from the Fixed
Account on the basis of Fixed Account Contract Value as of the end of the
Valuation Period in which the Transfer request is Received by SBL. Transfers are
effected as of the close of the Valuation Period in which all information
required to make the Transfer is Received by SBL.
After the Annuity Start Date, you may Transfer Annuity Units only among the
Subaccounts.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors to the extent allowed by law.
BASIS OF VALUES
A detailed statement showing how values are determined has been filed with the
state insurance departments. All values and reserves are at least equal to those
required by the laws of the state in which this Contract is issued.
PARTICIPATION
This Contract is not participating.
STATEMENTS
At least once per year prior to the Annuity Start Date, SBL will send you a
report that will show your Contract Value and any other information required by
law. After the Annuity Start Date, we will send you any information that may be
required.
DELAY OF PAYMENT
Generally, payments and Transfers will be made within seven days from receipt of
the payment and/or request in a form satisfactory to us. SBL reserves the right
to suspend a Transfer or delay payment of a Withdrawal from Separate Account
Contract Value 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. SBL may delay payments or
Transfers from the Fixed Account (which would include payment of your Withdrawal
proceeds and Transfers from the Fixed Account, loans, fixed annuity payments and
lump sum death benefit payments unless state law requires otherwise) for up to
six months after the requested effective date of the transaction. Any amount
delayed will, as long as it is held under the Fixed Account, continue to earn
interest at the Current Rate then in effect until the applicable Guarantee
Period in effect has ended, and not less than the Guaranteed Rate on an annual
basis thereafter.
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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 80 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, SBL 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 10 and the "Death
Benefit Provisions" on page 17.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Start Date. The request for this change must be made in writing and
Received by SBL at least 30 days prior to the Annuity Start Date. No Annuitant
may be named who is more than 80 years old on the Contract Date. When the
Annuitant dies prior to the Annuity Start Date, the Owner must name a new
Annuitant within 30 days or, if sooner, by the Annuity Start 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 is 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, you may name a new owner, a new
Primary Beneficiary or a new Secondary Beneficiary; provided that you may not
change or remove an irrevocable Beneficiary without obtaining his or her written
consent in a form acceptable to us. 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 SBL
prior to the time it was recorded. SBL may require the Contract be returned so
these changes may be made.
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PURCHASE PAYMENT PROVISIONS
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FLEXIBLE PURCHASE PAYMENTS
This Contract will not be in force until we receive at our Home Office the
initial Purchase Payment. You may make additional Purchase Payments at any time
before the Annuity Start Date, while the Owner is living, and this Contract is
in force. Purchase Payments are payable in U.S. dollars and checks should be
made payable to SBL.
PURCHASE PAYMENTS LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by SBL. The Minimum Subsequent Purchase Payment amount is shown on page
3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments will be allocated among the Fixed Account and the Subaccounts.
The allocations may be a whole dollar amount or a whole percentage and no less
than $25 per Purchase Payment may be allocated to any Account. Purchase Payments
will be allocated according to the Owner's instructions in the Application or
more recent instructions, if any. The Owner may change the allocations by
written notice to SBL.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to SBL at its Home
Office. Purchase Payments after the initial Purchase Payment are applied as of
the end of the Valuation Period during which they are Received by SBL.
CREDIT ENHANCEMENT
SBL will add a Credit Enhancement to your Contract Value at the time each
Purchase Payment is applied to this Contract. The amount of a Credit Enhancement
is determined at the time the Purchase Payment is made as a percentage of the
Purchase Payment to be applied to this Contract. The Credit Enhancement will be
applied at the time the Purchase Payment is effective. The Credit Enhancement
will be allocated among the Accounts in the same proportion as the applicable
Purchase Payment.
The amount of Credit Enhancement for each Purchase Payment will be based upon
the total Purchase Payments made into this Contract, less the total Withdrawals,
including any Withdrawal Charges, as of the date of the Purchase Payment. The
Credit Enhancement, as a percentage of the Purchase Payment, is shown on page 3.
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CONTRACT VALUE AND EXPENSE PROVISIONS
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CONTRACT VALUE
Your Contract Value on any Valuation Date is the sum of: (1) your Separate
Account Contract Value on that date; and (2) your Fixed Account Contract Value
on that date. At any time after the first Contract Year, SBL reserves the right
to pay to the Owner the Contract Value as a lump sum if it is below $5,000.
FIXED ACCOUNT CONTRACT VALUE
On any Valuation Date, the Fixed Account Contract Value is equal to the amount
of the initial Purchase Payment allocated under the Contract to the Fixed
Account,
PLUS:
1. any other Purchase Payments, including Credit Enhancements, allocated
under the Contract to the Fixed Account;
2. any Transfers from the Separate Account to the Fixed Account; and
3. any Current Interest credited to the Fixed Account.
LESS:
1. any Withdrawals, including Withdrawal Charges, deducted from the Fixed
Account;
2. any Transfers from the Fixed Account to the Separate Account;
3. any amount applied as Annuity Start Amount under Annuity Options 1
through 4, 7 or 8;
4. any Annuity Payments under Annuity Options 5 and 6;
5. any Premium Tax and Account Charge; and
6. any Credit Enhancements waived as set forth under "Withdrawal Charge
Waivers."
FIXED ACCOUNT INTEREST CREDITING
SBL shall credit Current Interest on Fixed Account Contract Value on a daily
basis. Current Interest will be credited from the Valuation Date on which a
Purchase Payment is applied to the date of Withdrawal, Transfer, or application
as Annuity Start Amount.
SBL shall credit interest on Fixed Account Contract Value at an annual rate at
least equal to the Guaranteed Rate shown on page 3. Also, SBL 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 SBL on the first day of the
Guarantee Period.
SBL may credit Current Interest on Contract Value that was allocated or
transferred to the Fixed Account during one period at a different rate than
amounts allocated or transferred to the Fixed Account in another period. Also,
SBL 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 transferred 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. For example, if 100 Accumulation Units were allocated to each of
the Money Market and Growth Subaccounts as of June 1, Separate Account Contract
Value as of that date would be determined as follows:
NUMBER OF ACCUMULATION UNIT
SUBACCOUNT ACCUMULATION UNITS VALUE AS OF JUNE 1 SUBACCOUNT VALUE
- ---------- ------------------ ------------------ ----------------
Money Market 100 $10 $1,000
Growth 100 $12 $1,200
-----
Separate Account Contract Value as of June 1................... $2,200
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Subaccount was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1) times
(2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor as of the Valuation Date with respect to
which Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount as of the end of any Valuation
Period is determined 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 as of 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 SBL
deems to have resulted from the operation of the Separate Account or
the Subaccounts; operations of SBL with respect to the Contract; or
the payment of premiums or acquisition costs under the Contract.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as of the end of the prior Valuation Period.
3. is a daily factor representing the Mortality and Expense Risk Charge and
Administration Charge which is deducted from the Separate Account.
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, or deducted from, the
Subaccount; by (2) the Accumulation Unit Value for the Subaccount as of the end
of the Valuation Period during which the amount is allocated or deducted 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 and Credit Enhancements that are applied to the
Subaccount;
2. Contract Value that is Transferred into or out of the Subaccount;
3. Withdrawals and Withdrawal Charges, if any, that are deducted from the
Subaccount;
4. Annuity Payments made from the Subaccount under Annuity Options 5 and 6;
5. Annuity Start Amount applied from the Subaccount to one of Annuity
Options 1 through 4, 7 or 8;
6. Premium Tax and Account Charges that are deducted from the Subaccount;
and
7. Credit Enhancements that are waived as set forth under "Withdrawal Charge
Waivers."
MORTALITY AND EXPENSE RISK CHARGE
SBL 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.
ADMINISTRATION CHARGE
SBL will deduct the Administration Charge shown on pages 3 and 3A. 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.
ACCOUNT ADMINISTRATION CHARGE
SBL will deduct the Account Administration Charge ("Account Charge") shown on
pages 3 and 3A. This charge will be computed and deducted from Contract Value as
of each calendar year end. The Account Charge and other charges may be waived or
reduced uniformly on all Contracts issued under certain plans or arrangements
which are expected to result in administrative cost savings.
PREMIUM TAX EXPENSE
SBL reserves the right to deduct Premium Tax when due or any time thereafter.
Any Premium Tax will be allocated as shown on page 3A.
WITHDRAWAL CHARGES
Purchase Payments and Credit Enhancements are subject to a Withdrawal Charge,
which is shown on page 3. The Withdrawal Charge may apply to amounts you
withdraw under your Contract prior to the Annuity Start Date, depending on the
length of time each Purchase Payment and Credit Enhancement has been allocated
to your Contract and the amount you withdraw.
SBL does not apply the Withdrawal Charge on:
* Death benefit proceeds;
* Annuity Payments under one of Annuity Options 1 through 4 or 8;
* Annuity Payments under one of Annuity Options 5 through 7; provided that
Annuity Payments are made for a period of at least 7 years.
The amount of the Withdrawal Charge depends on how long your Purchase Payments
and Credit Enhancements are held under the Contract. Each Purchase Payment you
make (and its corresponding Credit Enhancement) is considered to have a certain
"age," depending on the length of time since that Purchase Payment was
effective. A Purchase Payment is "age one" in the year beginning on the date the
purchase payment is received by Security Benefit and increases in age each year
thereafter. When you withdraw an amount, the "age" of any Purchase Payment you
withdraw determines the level(s) of Withdrawal Charge as shown on page 3. For
the purpose of calculating Withdrawal Charges, SBL assumes that withdrawal
amounts will be applied to Purchase Payments first (and a proportionate amount
of the applicable Credit Enhancement) in the order Purchase Payments (and
corresponding Credit Enhancements) were received. The Withdrawal Charge will be
deducted proportionately from each Account selected for Withdrawal.
FREE WITHDRAWALS
During a Contract Year, you may make Free Withdrawals, which are Withdrawals
that are not subject to the Withdrawal Charge. The amount of Free Withdrawals
available in any Contract Year is determined as follows. In the first Contract
Year, the amount is equal to: (1) cumulative purchase payments (excluding Credit
Enhancements); times (2) the Free Withdrawal percentage shown on page 3; less
(3) any Free Withdrawals made during the Contract Year. The amount of Free
Withdrawals in subsequent Contract Years is equal to: (1) Contract Value as of
the first day of the current Contract Year; times (2) the Free Withdrawal
percentage shown on page 3; less (3) any Free Withdrawals made during the
Contract Year. Unused Free Withdrawal amounts are not carried from one Contract
Year to the next. Free Withdrawals do not reduce Purchase Payments and Credit
Enhancements for purposes of calculating the Withdrawal Charge on future
Withdrawals.
WITHDRAWAL CHARGE WAIVERS
One or more endorsements providing for a waiver of Withdrawal Charge under
certain circumstances may be attached to your Contract. In the event of a
Withdrawal under the terms of such an endorsement, you will forfeit all or part
of any Credit Enhancements applied during the 12 months preceding the
Withdrawal. The percentage of Credit Enhancements to be forfeited is determined
by dividing the amount of the Withdrawal by the amount of total Purchase
Payments during the 12 months preceding such Withdrawal. That percentage is
multiplied by the total amount of Credit Enhancements credited during the 12
months preceding the Withdrawal to determine the amount to be forfeited. The
maximum percentage that may be forfeited is 100% of Credit Enhancements earned
during the 12 months preceding the Withdrawal.
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 or partial Withdrawal of Separate Account Contract Value is allowed at
any time prior to the Annuity Start Date while the Owner is living. Withdrawals
will be effected as of the end of the Valuation Period in which the Withdrawal
request is Received by SBL, and payment will be made within the time frame
required by applicable law. Withdrawals normally will be effective as of the
close of the Valuation Period during which we receive your proper request. Any
Withdrawal will reduce Contract Value by the amount of the Withdrawal, any
Withdrawal Charges attributable to the Withdrawal, and any Premium Tax and pro
rata Account Charge.
Upon the Owner's request for a full Withdrawal, SBL will pay the Withdrawal
Value in a lump sum, and the Contract will terminate. If you make a full
withdrawal, we require return of your Contract or a signed Lost Contract
Affidavit with your proper request.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by SBL in writing or under
other methods allowed by SBL, if any;
2. The Owner must apply prior to the Annuity Start Date while this Contract
is in force, unless one of Annuity Options 5, 6 or 7 is elected; and
3. The amount withdrawn must be at least $500, except upon a full
Withdrawal.
PARTIAL WITHDRAWALS
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, SBL will deduct the
Withdrawal from the Accounts in the order shown on page 3A, "Method for
Deductions." If your partial Withdrawal causes your Contract Value to be less
than $5,000 immediately after the Withdrawal, we may terminate your Contract and
send you the Withdrawal proceeds.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from Contract Value in
substantially equal amounts prior to the Annuity Start Date. To start Systematic
Withdrawals, you must make the request in writing, stating the type of payment,
its frequency and allocations for such Withdrawals. If no allocation is
specified, SBL will deduct each Systematic Withdrawal from the Accounts in the
order shown on page 3A, "Method for Deductions."
The type of payment may be: (1) in a fixed amount; (2) in Level Payments
calculated by SBL; (3) for a specified period; (4) a specified percentage; (5)
earnings only; or (6) 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. The minimum Systematic Withdrawal amount is $100
per payment. You may stop or change Systematic Withdrawals upon proper written
request Received by SBL at least 30 days in advance of the requested date of
termination or change. SBL reserves the right to stop, modify or suspend
Systematic Withdrawals at any time.
WITHDRAWAL VALUE
The Withdrawal Value is the amount available for Withdrawal. The Withdrawal
Value as of the close of any Valuation Date is the Contract Value less: (1) any
Withdrawal Charges; (2) any pro rata Account Charge; and (3) any Premium Tax due
or paid by SBL.
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
A Death Benefit will be paid upon the death of the Owner prior to the Annuity
Start Date while this Contract is in force. The Death Benefit will be paid to
the Designated Beneficiary when due Proof of Death and instructions regarding
payment are Received by SBL.
The Death Benefit is equal to the greater of: (1) the sum of all Purchase
Payments made by the Owner (not including Credit Enhancements), less any Premium
Tax due or paid by SBL with respect to your Contract, less any pro rata Account
Charge, and less the sum of all partial Withdrawals and Withdrawal Charges
deducted from your Contract Value; or (2) your Contract Value as of the date due
Proof of Death and instructions regarding payment are Received by SBL, less any
Premium Tax due or paid by SBL with respect to your Contract, less any pro rata
Account Charge, and less any Credit Enhancements applied during the 12 months
preceding the date of the Owner's death.
Notwithstanding the foregoing, if due proof of death and instructions regarding
payment are not Received by SBL within six months of the date of the Owner's
death, the Death Benefit will be as described under (2) above without reference
to (1) above.
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.
PROOF OF DEATH
Any of the following will serve as Proof of Death of the Owner:
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 SBL.
DISTRIBUTION RULES
In the event of an Owner's death prior to the Annuity Start Date, the entire
Death Benefit shall be paid within 5 years after the death of the Owner, except
as provided below. In the event that the Beneficiary elects an Annuity Option,
the length of time for payment of the benefit may be longer than 5 years if:
1. The Designated Beneficiary is a natural person;
2. The Death Benefit is paid out under one of Annuity Options 1 through 8;
3. Payments are made over a period that does not exceed the life or life
expectancy of the Beneficiary; and
4. 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
Start Date; or (2) receive the Death Benefit.
If any Owner dies on or after the Annuity Start Date, Annuity Payments shall
continue to be paid at least as quickly 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 change in, the Annuitant. This Contract
is deemed to include 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 include any other provision of the Code deemed necessary by SBL
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 SBL 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) or 403(b); (2) an
individual retirement annuity or provided under an individual retirement account
or annuity; or (3) otherwise exempt from the Code section 72(s) distribution
rules.
- --------------------------------------------------------------------------------
ANNUITY BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY START DATE
The Annuity Start Date is the date as of which the first Annuity Payment is
computed under one of the Annuity Options. The Annuity Start Date shall not
precede the third Contract Anniversary. The Owner may elect the Annuity Start
Date at the time of application. If no Annuity Start Date is selected, SBL will
use the later of the: (1) the oldest Annuitant's seventieth birthday; or (2) the
tenth Contract Anniversary. The Annuity Start Date must be prior to the oldest
Annuitant's 90th birthday.
CHANGE OF ANNUITY START DATE
The Owner may change the Annuity Start Date. A request for the change must be
made in writing. The written request must be received by SBL at least 30 days
prior to the new Annuity Start Date as well as 30 days prior to the previous
Annuity Start Date.
ANNUITY OPTIONS
The Contract provides for Annuity Payments to be made under one of eight Annuity
Options. Your Annuity Option is shown on page 3. Options 1 through 4 and 8
generally provide for payments to be made during the life of the Annuitant or
Joint Annuitants. Under Options 5 through 7, Annuity Payments are made to the
Annuitant and in the event of the Annuitant's death, to the Designated
Beneficiary.
Options 1 through 8 are available as either a Fixed or Variable Annuity or a
combination Fixed and Variable Annuity. The Annuity Options are shown below.
Prior to the Annuity Start Date, the Owner may change the Annuity Option
selected. The Owner must request the change in writing. This request must be
Received by SBL at least 30 days prior to the Annuity Start Date.
OPTION 1 LIFE INCOME OPTION:
This option provides Annuity Payments for the life of the Annuitant. Upon the
Annuitant's death, no further Annuity Payments will be made.
OPTION 2 LIFE INCOME WITH PERIOD CERTAIN OPTION:
This option provides Annuity Payments for the life of the Annuitant. A fixed
period of 5, 10, 15 or 20 years may be chosen. Annuity 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 of the Annuity Payments
during the fixed period, the remaining Annuity Payments will be made to the
Designated Beneficiary. Upon the Annuitant's death after the period certain,
no further Annuity Payments will be made.
OPTION 3 LIFE INCOME WITH INSTALLMENT OR UNIT REFUND OPTION:
This option provides Annuity Payments for the life of the Annuitant, with a
period certain determined by dividing the Annuity Start Amount by the amount
of the first Annuity Payment. A fixed number of Annuity Payments will be made
even if the Annuitant dies. If the Annuitant dies before receiving the fixed
number of Annuity Payments, any remaining Annuity Payments will be made to
the Designated Beneficiary. If the Annuitant dies after receiving the fixed
number of Annuity Payments, no further Annuity Payments will be made.
OPTION 4 JOINT AND LAST SURVIVOR OPTION:
This option provides Annuity Payments for the lives of the Annuitant and
Joint Annuitant. Annuity Payments will be made as long as either is living.
Upon the death of one Annuitant, Annuity Payments continue to the surviving
Joint Annuitant at the same or a reduced level of 75%, 66 2/3% or 50% of
Annuity Payments, as elected by the Owner. With respect to Fixed Annuity
Payments, the amount of the Annuity Payment, and with respect to Variable
Annuity Payments, the number of Annuity Units used to determine the Annuity
Payment, is reduced as of the first Annuity Payment following the Annuitant's
death. In the event of the death of one Annuitant, the surviving Joint
Annuitant has the right to exercise all rights under the Contract. Upon the
death of the last Annuitant, no further Annuity Payments will be made.
OPTION 5 FIXED PERIOD OPTION:
This option provides Annuity 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 Annuity Payments will vary as a result of the interest rate (as
adjusted periodically) credited on Fixed Account Contract Value. This rate is
guaranteed to be no less than the Guaranteed Rate set forth on page 3. The
amount of each Fixed Annuity Payment is determined by dividing Fixed Account
Contract Value on the Annuity Payment date by the number of remaining Annuity
Payments. If the Contract Value is held in the Separate Account, then the
amount of the Annuity Payments will vary as a result of the investment
performance of the Subaccounts chosen. The amount of each Variable Annuity
Payment is determined by multiplying the Accumulation Unit Value on the
Annuity Payment date by the result of dividing total Accumulation Units by
the number of remaining Annuity Payments. If the Annuitant dies before
receiving the fixed number of Annuity Payments, any remaining Annuity
Payments will be made to the Designated Beneficiary.
OPTION 6 FIXED PAYMENT OPTION:
This option provides for Annuity Payments of a fixed amount selected by the
Owner. This amount is paid until Contract Value is exhausted. If the Contract
Value is held in the Fixed Account, then the number of Annuity Payments will
vary as a result of the interest rate (as adjusted periodically) credited on
Fixed Account Contract Value. This rate is guaranteed to be no less then the
Guaranteed Rate set forth on page 3. If the Contract Value is held in the
Separate Account, then the number of Annuity Payments will vary as a result
of the investment performance of the Subaccounts chosen. If the Annuitant
dies before receiving all of the Annuity Payments, any remaining Annuity
Payments will be made to the Designated Beneficiary.
OPTION 7 PERIOD CERTAIN OPTION:
This option provides Annuity Payments for a fixed period of 5, 10, 15 or 20
years. Annuity Payments will be made until the end of this period. If the
Annuitant dies prior to the end of the period, the remaining Annuity Payments
will be made to the Designated Beneficiary.
OPTION 8 JOINT AND CONTINGENT SURVIVOR OPTION:
This option provides Annuity Payments for the life of the primary Annuitant.
Annuity Payments will be made to the primary Annuitant as long as he or she
is living. Upon the death of the primary Annuitant, Annuity Payments will be
made to the contingent Annuitant as long as he or she is living. If the
contingent Annuitant is not living upon the death of the primary Annuitant,
no further payments will be made.
ANNUITY START AMOUNT
Annuity Start Amount allocated to the Fixed Account is applied to purchase a
Fixed Annuity and that allocated to the Subaccounts is applied to purchase a
Variable Annuity. For Annuity Options 1 through 4, 7 and 8, the Annuity Start
Amount is divided by $1,000, and the result is multiplied by the applicable
amount in the Annuity Tables to determine the minimum guaranteed monthly Annuity
Payment with respect to a Fixed Annuity or the first monthly Annuity Payment
with respect to a Variable Annuity.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amount set forth in the Annuity
Tables as adjusted for the rate of interest credited by SBL, is the amount of
each monthly Annuity Payment for Annuity Options 1 through 4, 7 and 8. For
Options 5 through 7, Fixed Annuity Payments are based on Contract Value.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the amount set forth in the Annuity
Tables, as adjusted for the Assumed Interest Rate, is the amount of the FIRST
monthly Annuity Payment for Annuity Options 1 through 4, 7 and 8. The amount of
each Annuity Payment after the first for these options is computed by means of
Annuity Units. For Options 5 through 7, Variable Annuity Payments are based on
Contract Value. Variable Annuity Payments will increase or decrease with the
performance of the Subaccount(s).
ANNUITY TABLES
The amounts set forth in the Annuity Tables for Annuity Options 1 through 4 and
8 depend on the sex (unless unisex rates apply) and age of the Annuitant or the
Joint Annuitants on the Annuity Start Date. The Annuity Tables are modified to
reflect (1) the Assumed Interest Rate for Variable Annuity Payments; or (2) the
rate of interest in effect on the Annuity Start Date for Fixed Annuity Payments.
The rate of interest for Fixed Annuity Payments is guaranteed not to be less
than the Guaranteed Rate set forth on page 3. The Annuity Tables contain the
amount of monthly Annuity Payment per $1,000 of Annuity Start Amount. The
Annuity Tables state values for the exact ages shown. The values will be
interpolated based on the exact age(s) of the Annuitant or Joint Annuitants on
the Annuity Start Date. The basis of the Annuity Tables for Options 1 through 4
and 8 and the Assumed Interest Rate are set forth on page 3. The Annuity Table
for Option 7 is determined without reference to the age or sex of the Annuitant
and is based upon the Assumed Interest Rate. Annuity Payments for Options 5 and
6 are computed without reference to the Annuity Tables. The Annuity Tables are
used in accordance with generally accepted actuarial principles.
ANNUITY PAYMENTS
No Annuity Option can be selected that requires SBL to make Annuity Payments of
less than $100.00. Each Annuity Option allows for making Annuity Payments
annually, semiannually, quarterly or monthly. Annuity Payments due on a date
other than a Valuation Date, are paid as of the end of the next following
Valuation Date.
ANNUITY UNITS
On the Annuity Start Date, the amount of the first Variable Annuity Payment is
divided by the Annuity Unit Value as of that date to determine the number of
Annuity Units to be used in calculating subsequent Annuity Payments. If the
Annuity Start Amount was allocated to more than one Subaccount, the first
Variable Annuity Payment will be allocated to each Subaccount in the percentage
corresponding to the allocation of Annuity Start Amount. The number of Annuity
Units for each Subaccount is then found by dividing the amount of the first
Variable Annuity Payment allocated to that Subaccount by the Annuity Unit Value
for the Subaccount on the Annuity Start Date.
The number of Annuity Units for the Subaccount then remains constant, unless a
Transfer of Annuity Units is made. After the first Variable Annuity Payment, the
dollar amount of each subsequent Annuity Payment is equal to the sum of the
payment amount determined for each Subaccount. The payment amount for each
Subaccount is equal to the number of Annuity Units allocated to that Subaccount
multiplied by the Annuity Unit Value as of the date of the Annuity Payment. An
example of an initial Variable Annuity Payment calculation for a male, age 60 is
as follows:
Annuity Start Amount = $100,000 $100,000
-------- = 100
$1,000
Amount determined by reference in 1999 to Annuity
Table for a male, age 60 under Option 1 $4.00
First Variable Annuity Payment 100 x $4.00 = $400
NUMBER OF
FIRST ANNUITY
VARIABLE ANNUITY UNITS USED
ANNUITY ANNUITY UNIT VALUE TO DETERMINE
START AMOUNT PAYMENT ON ANNUITY SUBSEQUENT
SUBACCOUNT ALLOCATION ALLOCATION START DATE PAYMENTS
- ---------- ------------ ---------- ---------- ------------
Growth 50% $200.00 / $1.51 = 132.4503
Growth-Income 50% $200.00 / $1.02 = 196.0784
An example of a subsequent Variable Annuity Payment calculation using the
assumptions above is as follows:
ANNUITY UNIT
VALUE ON DATE OF NEW ANNUITY
SUBACCOUNT ANNUITY UNITS SUBSEQUENT PAYMENT PAYMENT AMOUNT
- ---------- ------------- ------------------ --------------
Growth 132.4503 x $1.60 = $211.92
Growth-Income 196.0784 x $1.10 = $215.69
------
$427.61
ANNUITY UNIT VALUE
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 the Assumed Interest Rate set forth on
the page 3 which is used to determine Variable Annuity Payment amounts.
ALTERNATE ANNUITY OPTION RATES
SBL 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.
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Investment Experience is Reflected in Benefits
* Variable and Fixed Accumulation Before the Annuity Start Date; Variable and
Fixed Annuity Payments Thereafter
* Death Benefit Proceeds are Payable Before the Annuity Start Date
* This Contract is Non-Participating
BENEFITS AND VALUES PROVIDED BY THIS CONTRACT MAY BE ON A VARIABLE BASIS.
AMOUNTS DIRECTED INTO ONE OR MORE OF THE SUBACCOUNTS WILL REFLECT THE INVESTMENT
EXPERIENCE OF THOSE SUBACCOUNTS. THESE AMOUNTS MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO DOLLAR AMOUNT. (SEE "CONTRACT VALUE AND EXPENSE PROVISIONS"
AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACT
SBL'S PROMISE
In consideration of the Purchase Payments and the application (which is
incorporated herein by reference), Security Benefit Life Insurance Company
("SBL") will pay the benefits of this Contract according to its terms.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between you, the
Owner, and us, SBL. The Contract's table of contents is on page 2.
FREE LOOK PERIOD-RIGHT TO CANCEL
YOU MAY RETURN THIS CONTRACT WITHIN 10 DAYS AFTER YOU RECEIVE IT. YOU MAY RETURN
THE CONTRACT BY DELIVERING OR MAILING IT TO SBL. THIS CONTRACT WILL THEN BE
DEEMED VOID FROM THE BEGINNING. NO WITHDRAWAL CHARGE WILL BE IMPOSED, AND WE
WILL REFUND YOUR CONTRACT VALUE, INCLUDING ANY FEES AND/OR CHARGES FOR PREMIUM
TAX THAT WERE DEDUCTED FROM THAT CONTRACT VALUE, LESS THE VALUE OF ANY CREDIT
ENHANCEMENTS MADE INTO THE CONTRACT, AS OF THE DATE WE RECEIVE THE RETURNED
CONTRACT.
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.
* Investment Experience is Reflected in Benefits
* Variable and Fixed Accumulation Before the Annuity Start Date; Variable and
Fixed Annuity Payments Thereafter
* Death Benefit Proceeds are Payable Before the Annuity Start Date
* This Contract is Non-Participating
BENEFITS AND VALUES PROVIDED BY THIS CONTRACT MAY BE ON A VARIABLE BASIS.
AMOUNTS DIRECTED INTO ONE OR MORE OF THE SUBACCOUNTS WILL REFLECT THE INVESTMENT
EXPERIENCE OF THOSE SUBACCOUNTS. THESE AMOUNTS MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO DOLLAR AMOUNT. (SEE "CONTRACT VALUE AND EXPENSE PROVISIONS"
AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
V6028 (12-99)U
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
CONTRACT SPECIFICATIONS................................................... 3
DEFINITIONS............................................................... 4
GENERAL PROVISIONS........................................................ 8
The Contract............................................................ 8
Compliance.............................................................. 8
Misstatement of Age..................................................... 8
Evidence of Survival.................................................... 8
Incontestability........................................................ 8
Assignment.............................................................. 8
Ownership of Assets..................................................... 9
Transfers............................................................... 9
Claims of Creditors..................................................... 9
Basis of Values......................................................... 9
Participation........................................................... 9
Statements.............................................................. 10
Delay of Payment........................................................ 10
OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS........................... 10
Ownership............................................................... 10
Joint Ownership......................................................... 10
Annuitant............................................................... 10
Primary and Secondary Beneficiaries..................................... 11
Ownership and Beneficiary Changes....................................... 11
PURCHASE PAYMENT PROVISIONS............................................... 11
Flexible Purchase Payments.............................................. 11
Purchase Payments Limitations........................................... 11
Purchase Payment Allocation............................................. 11
Place of Payment........................................................ 11
Credit Enhancement...................................................... 12
CONTRACT VALUE AND EXPENSE PROVISIONS..................................... 12
Contract Value.......................................................... 12
Fixed Account Contract Value............................................ 12
Fixed Account Interest Crediting........................................ 12
Separate Account Contract Value......................................... 13
Accumulation Unit Value................................................. 13
Net Investment Factor................................................... 13
Determining Accumulation Units.......................................... 14
Mortality and Expense Risk Charge....................................... 14
Administration Charge................................................... 14
Account Administration Charge........................................... 14
Premium Tax Expense..................................................... 14
Withdrawal Charges...................................................... 14
Free Withdrawals........................................................ 15
Withdrawal Charge Waivers............................................... 15
Mutual Fund Expenses.................................................... 16
WITHDRAWAL PROVISIONS..................................................... 16
Withdrawals............................................................. 16
Partial Withdrawals..................................................... 16
Systematic Withdrawals.................................................. 16
Withdrawal Value........................................................ 17
DEATH BENEFIT PROVISIONS.................................................. 17
Death Benefit........................................................... 17
Proof of Death.......................................................... 17
Distribution Rules...................................................... 18
ANNUITY BENEFIT PROVISIONS................................................ 18
Annuity Start Date...................................................... 18
Change of Annuity Start Date............................................ 18
Annuity Options......................................................... 18
Annuity Start Amount.................................................... 20
Fixed Annuity Payments.................................................. 20
Variable Annuity Payments............................................... 20
Annuity Tables.......................................................... 21
Annuity Payments........................................................ 21
Annuity Units........................................................... 21
Annuity Unit Value...................................................... 22
Alternate Annuity Option Rates.......................................... 22
AMENDMENTS OR ENDORSEMENTS, if any
<PAGE>
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CONTRACT SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: CONTRACT NUMBER:
Jane Doe 123456789
JOINT OWNER NAME: CONTRACT DATE:
John Doe 7-01-1999
ANNUITANT NAME: ANNUITY START DATE:
Jane Doe 10-5-2030
ANNUITANT DATE OF BIRTH: PLAN:
10/5/60 Non-Qualified
ASSIGNMENT:
This Contract may be assigned.
See assignment provision.
PRIMARY BENEFICIARY NAME: ANNUITY OPTION:
Jenny Doe Option 2
- --------------------------------------------------------------------------------
FIRST PURCHASE PAYMENT........................... $10,000
MINIMUM SUBSEQUENT PURCHASE PAYMENT.............. $500 ($50 under an automatic
investment program)
FREE WITHDRAWAL PERCENTAGE....................... 10%
GUARANTEED RATE.................................. 3%
SEPARATE ACCOUNT................................. Variable Annuity Account VIII
MORTALITY AND EXPENSE RISK CHARGE................ 1.25% Annually
ADMINISTRATION CHARGE............................ 0.15% Annually
ACCOUNT ADMINISTRATION CHARGE.................... $30 Annually*
WITHDRAWAL CHARGE
Age of Purchase Payment in Years............... 1 2 3 4 5 6 7 8
------------------------------
Withdrawal Charge.............................. 7% 7% 6% 6% 5% 5% 3% 0%
CREDIT ENHANCEMENT
Total Purchase Payments Less
Withdrawals and Withdrawal Charges
Less than $10,000.......................... 0%
At least $10,000 but less than $1,000,000.. 4%
$1,000,000 or more......................... 5%
BASIS OF ANNUITY TABLES.......................... 1983 (a) Mortality Table with
mortality improvement under
Projection Scale G
ASSUMED INTEREST RATE............................ 3.5% annually
SUBACCOUNTS:
1. Money Market 7. Managed Asset Allocation 13. Worldwide Equity
2. High Grade Income 8. Global Total Return 14. International
3. High Yield 9. Enhanced Index 15. Social Awareness
4. Global Strategic Income 10. Growth 16. Mid Cap
5. Growth Income 11. Select 25 17. Small Cap
6. Equity Income 12. Value
METHOD FOR DEDUCTIONS:
Deductions for the Account Administration Charge ("Account Charge"), Premium
Tax and certain Withdrawals will be made from the first Subaccount on the list
above to which the Owner has allocated Contract Value. Each Subaccount will be
depleted before the next is charged. The Fixed Account is the last Account
Charged.
*The Account Charge is deducted at each calendar year end. A pro rata Account
Charge is deducted: (1) upon a full Withdrawal of Contract Value; (2) when a
Contract has been in force for less than a full calendar year; (3) upon the
Annuity Start Date if one of Annuity Options 1 through 4, 7 or 8 is chosen;
and (4) upon payment of a death benefit. The Account Charge will be waived if
Contract Value is $50,000 or more upon the date the Account Charge is to be
deducted.
<PAGE>
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DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT
One of the Subaccounts or the Fixed Account.
ACCUMULATION UNIT
A unit of measure used to compute Separate Account Contract Value.
ANNUITANT
The person you name on whose life Annuity Payments may be determined. Please see
"Annuity Benefit Provisions" on page 18.
ANNUITY START AMOUNT
Contract Value as of the Annuity Start Date, less any Premium Tax and any pro
rata Account Charge.
ANNUITY OPTION
A set of provisions that form the basis for making Annuity Payments. Please see
"Annuity Options" on page 18.
ANNUITY PAYMENTS
Payments made beginning on the Annuity Start Date according to the provisions of
the Annuity Option selected. Annuity Payments are made on the same day of each
month, on a monthly, quarterly, semiannual or annual basis.
ANNUITY START DATE
The date on which Annuity Payments begin as elected by the Owner.
ANNUITY UNIT
A unit of measure used to compute Variable Annuity Payments.
AUTOMATIC TRANSFERS
Transfers among the Subaccounts and the Fixed Account made automatically. SBL
makes Automatic Transfers on a periodic basis at the written request of the
Owner. SBL may discontinue, modify or suspend Automatic Transfers.
COMPANY
Security Benefit Life Insurance Company, 700 SW Harrison Street, Topeka, Kansas
66636-0001.
CONTRACT ANNIVERSARY
The same date in each subsequent year as your Contract Date.
CONTRACT DATE
The date the Contract begins. The Contract Date is shown on page 3.
CONTRACT VALUE
The total value of your Contract, which includes amounts allocated to the
Subaccounts and the Fixed Account. SBL determines Contract Value as of each
Valuation Date.
CONTRACT YEAR
Contract Years are measured from the Contract Date.
CREDIT ENHANCEMENT
An amount added to Contract Value at the time a Purchase Payment is applied.
CURRENT INTEREST
SBL 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.
The Designated Beneficiary receives a death benefit upon the death of the Owner
prior to the Annuity Start Date. Please see "Ownership, Annuitant, and
Beneficiary Provisions" on page 10 and "Death Benefit Provisions" on page 17.
FIXED ACCOUNT
An account that is part of SBL's General Account. SBL guarantees that it will
credit interest on Contract Value allocated to the Fixed Account at an annual
rate at least equal to the Guaranteed Rate set forth on page 3.
GUARANTEE PERIOD
Current Interest, if declared, is fixed for rolling periods of one or more
years, referred to as Guarantee Periods. SBL 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 SBL; or (b) a
Transfer 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 transferred 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.
GENERAL ACCOUNT
All assets of SBL other than those allocated to the Separate Account or any
other separate account of SBL.
HOME OFFICE
The address of SBL's Home Office is Security Benefit Life Insurance Company, 700
SW Harrison Street, Topeka, Kansas 66636-0001.
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 10.
NONNATURAL PERSON
Any group or entity that is not a living person, such as a trust or corporation.
OWNER
The person(s) who has (have) all rights under this Contract. The Owner as of the
Contract Date is named on page 3. Please see "Ownership" provisions on page 10
and the definition of "Joint Owner," above.
PREMIUM TAX
Any Premium Tax levied by a state or other governmental entity. When Premium Tax
is assessed after the Purchase Payment is applied, it will be deducted as shown
on page 3A.
PURCHASE PAYMENT
Money Received by SBL and applied to the Contract.
RECEIVED BY SBL
Receipt by SBL in good order at its Home Office, 700 SW Harrison Street, Topeka,
Kansas 66636-0001.
SEPARATE ACCOUNT
A separate account established and maintained by SBL under Kansas law. The
Separate Account as set forth on page 3 is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a Unit
Investment Trust. It was established by SBL to support variable annuity
contracts. SBL 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 SBL 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 SBL'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 Subaccounts without regard to income, gains
or losses in the other Subaccounts. SBL 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 is determined on each Valuation Date as of
the end of each Valuation Date.
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, SBL 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 SBL 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, SBL will notify you of the change. SBL 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.
TRANSFER
A Transfer of Contract Value of one Subaccount or the Fixed Account for the
equivalent dollar amount of Contract Value of another Subaccount or the Fixed
Account.
VALUATION DATE
A Valuation Date is each day the New York Stock Exchange and SBL'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.
WITHDRAWAL
A Withdrawal of Contract Value in the dollar amount specified by the Owner.
Withdrawals include Systematic Withdrawals. See "Withdrawal Provisions" on page
16.
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GENERAL PROVISIONS
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THE CONTRACT
The entire Contract between the Owner and SBL consists of this Contract, the
Application (which is incorporated herein by reference), 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. SBL will use no statement made by or
on behalf of the Owner 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 SBL.
The Purchase Payment(s) and the Application must be acceptable to SBL under its
rules and practices. If they are not, SBL's liability shall be limited to a
return of the Purchase Payment(s).
COMPLIANCE
SBL 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. SBL 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 SBL. If payments have already started 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 full amount due will
be deducted from one or more future payments.
EVIDENCE OF SURVIVAL
Before SBL makes a payment, it has the right to require proof of the life or
death of any person whose life or death determines whether, or to whom, or how
much SBL must pay under this Contract.
INCONTESTABILITY
SBL will not contest the validity of this Contract.
ASSIGNMENT
No Assignment under this Contract is binding unless Received by SBL in writing.
SBL 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 SBL before the Assignment is Received by SBL. Once filed, the rights of
the Owner are subject to the Assignment. Any claim is subject to proof of
interest of the assignee. If the Contract has been absolutely assigned, the
assignee becomes the Owner.
OWNERSHIP OF ASSETS
SBL is the sole owner of the assets of the Fixed Account. SBL has the sole right
to control, manage or administer such assets.
TRANSFERS
The Owner may Transfer Contract Value among the Fixed Account and Subaccounts
upon your written request or under other methods allowed by SBL, subject to the
following.
SBL reserves the right to: (1) limit the amount that may be subject to Transfer
to $1,000,000 per Transfer without Home Office approval; (2) limit the number of
Transfers per Contract Year to 14; and (3) suspend Transfers. Transfers must be
at least $500 or if less: (1) the amount remaining in the Subaccount; or (2) the
amount of Fixed Account Contract Value, the Guarantee Period of which expires in
the calendar month in which the Transfer is effected.
Contract Value may be transferred from the Fixed Account only: (1) during the
calendar month in which the applicable Guarantee Period expires; or (2) pursuant
to an Automatic Transfer. In the event of an Automatic Transfer, Transfers of
Contract Value from the Fixed Account shall be made: (1) first from Fixed
Account Contract Value for which the Guarantee Period expires during the
calendar month during which the Transfer is effected; (2) then in the order that
starts with Fixed Account Contract Value that has the longest amount of time
remaining before its Guarantee Period expires; and (3) ends with that which has
the least amount of time remaining before its Guarantee Period expires.
SBL will effect a Transfer to or from a Subaccount on the basis of Accumulation
Unit Value determined as of the end of the Valuation Period in which the
Transfer request is Received by SBL. SBL will effect a Transfer from the Fixed
Account on the basis of Fixed Account Contract Value as of the end of the
Valuation Period in which the Transfer request is Received by SBL. Transfers are
effected as of the close of the Valuation Period in which all information
required to make the Transfer is Received by SBL.
After the Annuity Start Date, you may Transfer Annuity Units only among the
Subaccounts.
CLAIMS OF CREDITORS
The Contract Value and other benefits under this Contract are exempt from the
claims of creditors to the extent allowed by law.
BASIS OF VALUES
A detailed statement showing how values are determined has been filed with the
state insurance departments. All values and reserves are at least equal to those
required by the laws of the state in which this Contract is issued.
PARTICIPATION
This Contract is not participating.
STATEMENTS
At least once per year prior to the Annuity Start Date, SBL will send you a
report that will show your Contract Value and any other information required by
law. After the Annuity Start Date, we will send you any information that may be
required.
DELAY OF PAYMENT
Generally, payments and Transfers will be made within seven days from receipt of
the payment and/or request in a form satisfactory to us. SBL reserves the right
to suspend a Transfer or delay payment of a Withdrawal from Separate Account
Contract Value 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. SBL may delay payments or
Transfers from the Fixed Account (which would include payment of your Withdrawal
proceeds and Transfers from the Fixed Account, loans, fixed annuity payments and
lump sum death benefit payments unless state law requires otherwise) for up to
six months after the requested effective date of the transaction. Any amount
delayed will, as long as it is held under the Fixed Account, continue to earn
interest at the Current Rate then in effect until the applicable Guarantee
Period in effect has ended, and not less than the Guaranteed Rate on an annual
basis thereafter.
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OWNERSHIP, ANNUITANT AND BENEFICIARY PROVISIONS
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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 80 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, SBL 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 10 and the "Death
Benefit Provisions" on page 17.
ANNUITANT
The Annuitant is named on page 3. The Owner may change the Annuitant prior to
the Annuity Start Date. The request for this change must be made in writing and
Received by SBL at least 30 days prior to the Annuity Start Date. No Annuitant
may be named who is more than 80 years old on the Contract Date. When the
Annuitant dies prior to the Annuity Start Date, the Owner must name a new
Annuitant within 30 days or, if sooner, by the Annuity Start 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 is 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, you may name a new owner, a new
Primary Beneficiary or a new Secondary Beneficiary; provided that you may not
change or remove an irrevocable Beneficiary without obtaining his or her written
consent in a form acceptable to us. 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 SBL
prior to the time it was recorded. SBL may require the Contract be returned so
these changes may be made.
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PURCHASE PAYMENT PROVISIONS
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FLEXIBLE PURCHASE PAYMENTS
This Contract will not be in force until we receive at our Home Office the
initial Purchase Payment. You may make additional Purchase Payments at any time
before the Annuity Start Date, while the Owner is living, and this Contract is
in force. Purchase Payments are payable in U.S. dollars and checks should be
made payable to SBL.
PURCHASE PAYMENTS LIMITATIONS
Purchase Payments exceeding $1,000,000 will not be accepted without prior
approval by SBL. The Minimum Subsequent Purchase Payment amount is shown on page
3.
PURCHASE PAYMENT ALLOCATION
Purchase Payments will be allocated among the Fixed Account and the Subaccounts.
The allocations may be a whole dollar amount or a whole percentage and no less
than $25 per Purchase Payment may be allocated to any Account. Purchase Payments
will be allocated according to the Owner's instructions in the Application or
more recent instructions, if any. The Owner may change the allocations by
written notice to SBL.
PLACE OF PAYMENT
All Purchase Payments under this Contract are to be paid to SBL at its Home
Office. Purchase Payments after the initial Purchase Payment are applied as of
the end of the Valuation Period during which they are Received by SBL.
CREDIT ENHANCEMENT
SBL will add a Credit Enhancement to your Contract Value at the time each
Purchase Payment is applied to this Contract. The amount of a Credit Enhancement
is determined at the time the Purchase Payment is made as a percentage of the
Purchase Payment to be applied to this Contract. The Credit Enhancement will be
applied at the time the Purchase Payment is effective. The Credit Enhancement
will be allocated among the Accounts in the same proportion as the applicable
Purchase Payment.
The amount of Credit Enhancement for each Purchase Payment will be based upon
the total Purchase Payments made into this Contract, less the total Withdrawals,
including any Withdrawal Charges, as of the date of the Purchase Payment. The
Credit Enhancement, as a percentage of the Purchase Payment, is shown on page 3.
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CONTRACT VALUE AND EXPENSE PROVISIONS
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CONTRACT VALUE
Your Contract Value on any Valuation Date is the sum of: (1) your Separate
Account Contract Value on that date; and (2) your Fixed Account Contract Value
on that date. At any time after the first Contract Year, SBL reserves the right
to pay to the Owner the Contract Value as a lump sum if it is below $5,000.
FIXED ACCOUNT CONTRACT VALUE
On any Valuation Date, the Fixed Account Contract Value is equal to the amount
of the initial Purchase Payment allocated under the Contract to the Fixed
Account,
PLUS:
1. any other Purchase Payments, including Credit Enhancements, allocated
under the Contract to the Fixed Account;
2. any Transfers from the Separate Account to the Fixed Account; and
3. any Current Interest credited to the Fixed Account.
LESS:
1. any Withdrawals, including Withdrawal Charges, deducted from the Fixed
Account;
2. any Transfers from the Fixed Account to the Separate Account;
3. any amount applied as Annuity Start Amount under Annuity Options 1
through 4, 7 or 8;
4. any Annuity Payments under Annuity Options 5 and 6;
5. any Premium Tax and Account Charge; and
6. any Credit Enhancements waived as set forth under "Withdrawal Charge
Waivers."
FIXED ACCOUNT INTEREST CREDITING
SBL shall credit Current Interest on Fixed Account Contract Value on a daily
basis. Current Interest will be credited from the Valuation Date on which a
Purchase Payment is applied to the date of Withdrawal, Transfer, or application
as Annuity Start Amount.
SBL shall credit interest on Fixed Account Contract Value at an annual rate at
least equal to the Guaranteed Rate shown on page 3. Also, SBL 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 SBL on the first day of the
Guarantee Period.
SBL may credit Current Interest on Contract Value that was allocated or
transferred to the Fixed Account during one period at a different rate than
amounts allocated or transferred to the Fixed Account in another period. Also,
SBL 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 transferred 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. For example, if 100 Accumulation Units were allocated to each of
the Money Market and Growth Subaccounts as of June 1, Separate Account Contract
Value as of that date would be determined as follows:
NUMBER OF ACCUMULATION UNIT
SUBACCOUNT ACCUMULATION UNITS VALUE AS OF JUNE 1 SUBACCOUNT VALUE
- ---------- ------------------ ------------------ ----------------
Money Market 100 $10 $1,000
Growth 100 $12 $1,200
-----
Separate Account Contract Value as of June 1................... $2,200
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Subaccount was set at $10. The
Accumulation Unit Value for any subsequent Valuation Date is equal to (1) times
(2) where:
1. is the Accumulation Unit Value determined on the immediately preceding
Valuation Date; and
2. is the Net Investment Factor as of the Valuation Date with respect to
which Accumulation Unit Value is being determined.
NET INVESTMENT FACTOR
The Net Investment Factor for any Subaccount as of the end of any Valuation
Period is determined 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 as of 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 SBL
deems to have resulted from the operation of the Separate Account or
the Subaccounts; operations of SBL with respect to the Contract; or
the payment of premiums or acquisition costs under the Contract.
2. is the net asset value per share of the Subaccount's underlying mutual
fund as of the end of the prior Valuation Period.
3. is a daily factor representing the Mortality and Expense Risk Charge and
Administration Charge which is deducted from the Separate Account.
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, or deducted from, the
Subaccount; by (2) the Accumulation Unit Value for the Subaccount as of the end
of the Valuation Period during which the amount is allocated or deducted 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 and Credit Enhancements that are applied to the
Subaccount;
2. Contract Value that is Transferred into or out of the Subaccount;
3. Withdrawals and Withdrawal Charges, if any, that are deducted from the
Subaccount;
4. Annuity Payments made from the Subaccount under Annuity Options 5 and 6;
5. Annuity Start Amount applied from the Subaccount to one of Annuity
Options 1 through 4, 7 or 8;
6. Premium Tax and Account Charges that are deducted from the Subaccount;
and
7. Credit Enhancements that are waived as set forth under "Withdrawal Charge
Waivers."
MORTALITY AND EXPENSE RISK CHARGE
SBL 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.
ADMINISTRATION CHARGE
SBL will deduct the Administration Charge shown on pages 3 and 3A. 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.
ACCOUNT ADMINISTRATION CHARGE
SBL will deduct the Account Administration Charge ("Account Charge") shown on
pages 3 and 3A. This charge will be computed and deducted from Contract Value as
of each calendar year end. The Account Charge and other charges may be waived or
reduced uniformly on all Contracts issued under certain plans or arrangements
which are expected to result in administrative cost savings.
PREMIUM TAX EXPENSE
SBL reserves the right to deduct Premium Tax when due or any time thereafter.
Any Premium Tax will be allocated as shown on page 3A.
WITHDRAWAL CHARGES
Purchase Payments and Credit Enhancements are subject to a Withdrawal Charge,
which is shown on page 3. The Withdrawal Charge may apply to amounts you
withdraw under your Contract prior to the Annuity Start Date, depending on the
length of time each Purchase Payment and Credit Enhancement has been allocated
to your Contract and the amount you withdraw.
SBL does not apply the Withdrawal Charge on:
* Death benefit proceeds;
* Annuity Payments under one of Annuity Options 1 through 4 or 8;
* Annuity Payments under one of Annuity Options 5 through 7; provided that
Annuity Payments are made for a period of at least 7 years.
The amount of the Withdrawal Charge depends on how long your Purchase Payments
and Credit Enhancements are held under the Contract. Each Purchase Payment you
make (and its corresponding Credit Enhancement) is considered to have a certain
"age," depending on the length of time since that Purchase Payment was
effective. A Purchase Payment is "age one" in the year beginning on the date the
purchase payment is received by Security Benefit and increases in age each year
thereafter. When you withdraw an amount, the "age" of any Purchase Payment you
withdraw determines the level(s) of Withdrawal Charge as shown on page 3. For
the purpose of calculating Withdrawal Charges, SBL assumes that withdrawal
amounts will be applied to Purchase Payments first (and a proportionate amount
of the applicable Credit Enhancement) in the order Purchase Payments (and
corresponding Credit Enhancements) were received. The Withdrawal Charge will be
deducted proportionately from each Account selected for Withdrawal.
FREE WITHDRAWALS
During a Contract Year, you may make Free Withdrawals, which are Withdrawals
that are not subject to the Withdrawal Charge. The amount of Free Withdrawals
available in any Contract Year is determined as follows. In the first Contract
Year, the amount is equal to: (1) cumulative purchase payments (excluding Credit
Enhancements); times (2) the Free Withdrawal percentage shown on page 3; less
(3) any Free Withdrawals made during the Contract Year. The amount of Free
Withdrawals in subsequent Contract Years is equal to: (1) Contract Value as of
the first day of the current Contract Year; times (2) the Free Withdrawal
percentage shown on page 3; less (3) any Free Withdrawals made during the
Contract Year. Unused Free Withdrawal amounts are not carried from one Contract
Year to the next. Free Withdrawals do not reduce Purchase Payments and Credit
Enhancements for purposes of calculating the Withdrawal Charge on future
Withdrawals.
WITHDRAWAL CHARGE WAIVERS
One or more endorsements providing for a waiver of Withdrawal Charge under
certain circumstances may be attached to your Contract. In the event of a
Withdrawal under the terms of such an endorsement, you will forfeit all or part
of any Credit Enhancements applied during the 12 months preceding the
Withdrawal. The percentage of Credit Enhancements to be forfeited is determined
by dividing the amount of the Withdrawal by the amount of total Purchase
Payments during the 12 months preceding such Withdrawal. That percentage is
multiplied by the total amount of Credit Enhancements credited during the 12
months preceding the Withdrawal to determine the amount to be forfeited. The
maximum percentage that may be forfeited is 100% of Credit Enhancements earned
during the 12 months preceding the Withdrawal.
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.
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WITHDRAWAL PROVISIONS
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WITHDRAWALS
A full or partial Withdrawal of Separate Account Contract Value is allowed at
any time prior to the Annuity Start Date while the Owner is living. Withdrawals
will be effected as of the end of the Valuation Period in which the Withdrawal
request is Received by SBL, and payment will be made within the time frame
required by applicable law. Withdrawals normally will be effective as of the
close of the Valuation Period during which we receive your proper request. Any
Withdrawal will reduce Contract Value by the amount of the Withdrawal, any
Withdrawal Charges attributable to the Withdrawal, and any Premium Tax and pro
rata Account Charge.
Upon the Owner's request for a full Withdrawal, SBL will pay the Withdrawal
Value in a lump sum, and the Contract will terminate. If you make a full
withdrawal, we require return of your Contract or a signed Lost Contract
Affidavit with your proper request.
All Withdrawals must meet the following conditions.
1. The request for Withdrawal must be Received by SBL in writing or under
other methods allowed by SBL, if any;
2. The Owner must apply prior to the Annuity Start Date while this Contract
is in force, unless one of Annuity Options 5, 6 or 7 is elected; and
3. The amount withdrawn must be at least $500, except upon a full
Withdrawal.
PARTIAL WITHDRAWALS
A partial Withdrawal request must state the allocations for deducting the
Withdrawal from each Account. If no allocation is specified, SBL will deduct the
Withdrawal from the Accounts in the order shown on page 3A, "Method for
Deductions." If your partial Withdrawal causes your Contract Value to be less
than $5,000 immediately after the Withdrawal, we may terminate your Contract and
send you the Withdrawal proceeds.
SYSTEMATIC WITHDRAWALS
Systematic Withdrawals are automatic periodic Withdrawals from Contract Value in
substantially equal amounts prior to the Annuity Start Date. To start Systematic
Withdrawals, you must make the request in writing, stating the type of payment,
its frequency and allocations for such Withdrawals. If no allocation is
specified, SBL will deduct each Systematic Withdrawal from the Accounts in the
order shown on page 3A, "Method for Deductions."
The type of payment may be: (1) in a fixed amount; (2) in Level Payments
calculated by SBL; (3) for a specified period; (4) a specified percentage; (5)
earnings only; or (6) 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. The minimum Systematic Withdrawal amount is $100
per payment. You may stop or change Systematic Withdrawals upon proper written
request Received by SBL at least 30 days in advance of the requested date of
termination or change. SBL reserves the right to stop, modify or suspend
Systematic Withdrawals at any time.
WITHDRAWAL VALUE
The Withdrawal Value is the amount available for Withdrawal. The Withdrawal
Value as of the close of any Valuation Date is the Contract Value less: (1) any
Withdrawal Charges; (2) any pro rata Account Charge; and (3) any Premium Tax due
or paid by SBL.
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT
A Death Benefit will be paid upon the death of the Owner prior to the Annuity
Start Date while this Contract is in force. The Death Benefit will be paid to
the Designated Beneficiary when due Proof of Death and instructions regarding
payment are Received by SBL.
The Death Benefit is equal to the greater of: (1) the sum of all Purchase
Payments made by the Owner (not including Credit Enhancements), less any Premium
Tax due or paid by SBL with respect to your Contract, less any pro rata Account
Charge, and less the sum of all partial Withdrawals and Withdrawal Charges
deducted from your Contract Value; or (2) your Contract Value as of the date due
Proof of Death and instructions regarding payment are Received by SBL, less any
Premium Tax due or paid by SBL with respect to your Contract, less any pro rata
Account Charge, and less any Credit Enhancements applied during the 12 months
preceding the date of the Owner's death.
Notwithstanding the foregoing, if due proof of death and instructions regarding
payment are not Received by SBL within six months of the date of the Owner's
death, the Death Benefit will be as described under (2) above without reference
to (1) above.
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.
PROOF OF DEATH
Any of the following will serve as Proof of Death of the Owner:
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 SBL.
DISTRIBUTION RULES
In the event of an Owner's death prior to the Annuity Start Date, the entire
Death Benefit shall be paid within 5 years after the death of the Owner, except
as provided below. In the event that the Beneficiary elects an Annuity Option,
the length of time for payment of the benefit may be longer than 5 years if:
1. The Designated Beneficiary is a natural person;
2. The Death Benefit is paid out under one of Annuity Options 1 through 8;
3. Payments are made over a period that does not exceed the life or life
expectancy of the Beneficiary; and
4. 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
Start Date; or (2) receive the Death Benefit.
If any Owner dies on or after the Annuity Start Date, Annuity Payments shall
continue to be paid at least as quickly 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 change in, the Annuitant. This Contract
is deemed to include 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 include any other provision of the Code deemed necessary by SBL
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 SBL 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) or 403(b); (2) an
individual retirement annuity or provided under an individual retirement account
or annuity; or (3) otherwise exempt from the Code section 72(s) distribution
rules.
- --------------------------------------------------------------------------------
ANNUITY BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY START DATE
The Annuity Start Date is the date as of which the first Annuity Payment is
computed under one of the Annuity Options. The Annuity Start Date shall not
precede the third Contract Anniversary. The Owner may elect the Annuity Start
Date at the time of application. If no Annuity Start Date is selected, SBL will
use the later of the: (1) the oldest Annuitant's seventieth birthday; or (2) the
tenth Contract Anniversary. The Annuity Start Date must be prior to the oldest
Annuitant's 90th birthday.
CHANGE OF ANNUITY START DATE
The Owner may change the Annuity Start Date. A request for the change must be
made in writing. The written request must be received by SBL at least 30 days
prior to the new Annuity Start Date as well as 30 days prior to the previous
Annuity Start Date.
ANNUITY OPTIONS
The Contract provides for Annuity Payments to be made under one of eight Annuity
Options. Your Annuity Option is shown on page 3. Options 1 through 4 and 8
generally provide for payments to be made during the life of the Annuitant or
Joint Annuitants. Under Options 5 through 7, Annuity Payments are made to the
Annuitant and in the event of the Annuitant's death, to the Designated
Beneficiary.
Options 1 through 8 are available as either a Fixed or Variable Annuity or a
combination Fixed and Variable Annuity. The Annuity Options are shown below.
Prior to the Annuity Start Date, the Owner may change the Annuity Option
selected. The Owner must request the change in writing. This request must be
Received by SBL at least 30 days prior to the Annuity Start Date.
OPTION 1 LIFE INCOME OPTION:
This option provides Annuity Payments for the life of the Annuitant. Upon the
Annuitant's death, no further Annuity Payments will be made.
OPTION 2 LIFE INCOME WITH PERIOD CERTAIN OPTION:
This option provides Annuity Payments for the life of the Annuitant. A fixed
period of 5, 10, 15 or 20 years may be chosen. Annuity 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 of the Annuity Payments
during the fixed period, the remaining Annuity Payments will be made to the
Designated Beneficiary. Upon the Annuitant's death after the period certain,
no further Annuity Payments will be made.
OPTION 3 LIFE INCOME WITH INSTALLMENT OR UNIT REFUND OPTION:
This option provides Annuity Payments for the life of the Annuitant, with a
period certain determined by dividing the Annuity Start Amount by the amount
of the first Annuity Payment. A fixed number of Annuity Payments will be made
even if the Annuitant dies. If the Annuitant dies before receiving the fixed
number of Annuity Payments, any remaining Annuity Payments will be made to
the Designated Beneficiary. If the Annuitant dies after receiving the fixed
number of Annuity Payments, no further Annuity Payments will be made.
OPTION 4 JOINT AND LAST SURVIVOR OPTION:
This option provides Annuity Payments for the lives of the Annuitant and
Joint Annuitant. Annuity Payments will be made as long as either is living.
Upon the death of one Annuitant, Annuity Payments continue to the surviving
Joint Annuitant at the same or a reduced level of 75%, 66 2/3% or 50% of
Annuity Payments, as elected by the Owner. With respect to Fixed Annuity
Payments, the amount of the Annuity Payment, and with respect to Variable
Annuity Payments, the number of Annuity Units used to determine the Annuity
Payment, is reduced as of the first Annuity Payment following the Annuitant's
death. In the event of the death of one Annuitant, the surviving Joint
Annuitant has the right to exercise all rights under the Contract. Upon the
death of the last Annuitant, no further Annuity Payments will be made.
OPTION 5 FIXED PERIOD OPTION:
This option provides Annuity 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 Annuity Payments will vary as a result of the interest rate (as
adjusted periodically) credited on Fixed Account Contract Value. This rate is
guaranteed to be no less than the Guaranteed Rate set forth on page 3. The
amount of each Fixed Annuity Payment is determined by dividing Fixed Account
Contract Value on the Annuity Payment date by the number of remaining Annuity
Payments. If the Contract Value is held in the Separate Account, then the
amount of the Annuity Payments will vary as a result of the investment
performance of the Subaccounts chosen. The amount of each Variable Annuity
Payment is determined by multiplying the Accumulation Unit Value on the
Annuity Payment date by the result of dividing total Accumulation Units by
the number of remaining Annuity Payments. If the Annuitant dies before
receiving the fixed number of Annuity Payments, any remaining Annuity
Payments will be made to the Designated Beneficiary.
OPTION 6 FIXED PAYMENT OPTION:
This option provides for Annuity Payments of a fixed amount selected by the
Owner. This amount is paid until Contract Value is exhausted. If the Contract
Value is held in the Fixed Account, then the number of Annuity Payments will
vary as a result of the interest rate (as adjusted periodically) credited on
Fixed Account Contract Value. This rate is guaranteed to be no less then the
Guaranteed Rate set forth on page 3. If the Contract Value is held in the
Separate Account, then the number of Annuity Payments will vary as a result
of the investment performance of the Subaccounts chosen. If the Annuitant
dies before receiving all of the Annuity Payments, any remaining Annuity
Payments will be made to the Designated Beneficiary.
OPTION 7 PERIOD CERTAIN OPTION:
This option provides Annuity Payments for a fixed period of 5, 10, 15 or 20
years. Annuity Payments will be made until the end of this period. If the
Annuitant dies prior to the end of the period, the remaining Annuity Payments
will be made to the Designated Beneficiary.
OPTION 8 JOINT AND CONTINGENT SURVIVOR OPTION:
This option provides Annuity Payments for the life of the primary Annuitant.
Annuity Payments will be made to the primary Annuitant as long as he or she
is living. Upon the death of the primary Annuitant, Annuity Payments will be
made to the contingent Annuitant as long as he or she is living. If the
contingent Annuitant is not living upon the death of the primary Annuitant,
no further payments will be made.
ANNUITY START AMOUNT
Annuity Start Amount allocated to the Fixed Account is applied to purchase a
Fixed Annuity and that allocated to the Subaccounts is applied to purchase a
Variable Annuity. For Annuity Options 1 through 4, 7 and 8, the Annuity Start
Amount is divided by $1,000, and the result is multiplied by the applicable
amount in the Annuity Tables to determine the minimum guaranteed monthly Annuity
Payment with respect to a Fixed Annuity or the first monthly Annuity Payment
with respect to a Variable Annuity.
FIXED ANNUITY PAYMENTS
With respect to Fixed Annuity Payments, the amount set forth in the Annuity
Tables as adjusted for the rate of interest credited by SBL, is the amount of
each monthly Annuity Payment for Annuity Options 1 through 4, 7 and 8. For
Options 5 through 7, Fixed Annuity Payments are based on Contract Value.
VARIABLE ANNUITY PAYMENTS
With respect to Variable Annuity Payments, the amount set forth in the Annuity
Tables, as adjusted for the Assumed Interest Rate, is the amount of the FIRST
monthly Annuity Payment for Annuity Options 1 through 4, 7 and 8. The amount of
each Annuity Payment after the first for these options is computed by means of
Annuity Units. For Options 5 through 7, Variable Annuity Payments are based on
Contract Value.
Variable Annuity Payments will increase or decrease with the performance of the
Subaccount(s).
ANNUITY TABLES
The amounts set forth in the Annuity Tables for Annuity Options 1 through 4 and
8 depend on the age of the Annuitant or the Joint Annuitants on the Annuity
Start Date. The Annuity Tables are modified to reflect (1) the Assumed Interest
Rate for Variable Annuity Payments; or (2) the rate of interest in effect on the
Annuity Start Date for Fixed Annuity Payments. The rate of interest for Fixed
Annuity Payments is guaranteed not to be less than the Guaranteed Rate set forth
on page 3. The Annuity Tables contain the amount of monthly Annuity Payment per
$1,000 of Annuity Start Amount. The Annuity Tables state values for the exact
ages shown. The values will be interpolated based on the exact age(s) of the
Annuitant or Joint Annuitants on the Annuity Start Date. The basis of the
Annuity Tables for Options 1 through 4 and 8 and the Assumed Interest Rate are
set forth on page 3. The Annuity Table for Option 7 is determined without
reference to the age of the Annuitant and is based upon the Assumed Interest
Rate. Annuity Payments for Options 5 and 6 are computed without reference to the
Annuity Tables. The Annuity Tables are used in accordance with generally
accepted actuarial principles.
ANNUITY PAYMENTS
No Annuity Option can be selected that requires SBL to make Annuity Payments of
less than $100.00. Each Annuity Option allows for making Annuity Payments
annually, semiannually, quarterly or monthly. Annuity Payments due on a date
other than a Valuation Date, are paid as of the end of the next following
Valuation Date.
ANNUITY UNITS
On the Annuity Start Date, the amount of the first Variable Annuity Payment is
divided by the Annuity Unit Value as of that date to determine the number of
Annuity Units to be used in calculating subsequent Annuity Payments. If the
Annuity Start Amount was allocated to more than one Subaccount, the first
Variable Annuity Payment will be allocated to each Subaccount in the percentage
corresponding to the allocation of Annuity Start Amount. The number of Annuity
Units for each Subaccount is then found by dividing the amount of the first
Variable Annuity Payment allocated to that Subaccount by the Annuity Unit Value
for the Subaccount on the Annuity Start Date.
The number of Annuity Units for the Subaccount then remains constant, unless a
Transfer of Annuity Units is made. After the first Variable Annuity Payment, the
dollar amount of each subsequent Annuity Payment is equal to the sum of the
payment amount determined for each Subaccount. The payment amount for each
Subaccount is equal to the number of Annuity Units allocated to that Subaccount
multiplied by the Annuity Unit Value as of the date of the Annuity Payment. An
example of an initial Variable Annuity Payment calculation for a male, age 60 is
as follows:
Annuity Start Amount = $100,000 $100,000
-------- = 100
$1,000
Amount determined by reference in 1999 to Annuity
Table for a male, age 60 under Option 1 $4.00
First Variable Annuity Payment 100 x $4.00 = $400
NUMBER OF
FIRST ANNUITY
VARIABLE ANNUITY UNITS USED
ANNUITY ANNUITY UNIT VALUE TO DETERMINE
START AMOUNT PAYMENT ON ANNUITY SUBSEQUENT
SUBACCOUNT ALLOCATION ALLOCATION START DATE PAYMENTS
- ---------- ------------ ---------- ---------- ------------
Growth 50% $200.00 / $1.51 = 132.4503
Growth-Income 50% $200.00 / $1.02 = 196.0784
An example of a subsequent Variable Annuity Payment calculation using the
assumptions above is as follows:
ANNUITY UNIT
VALUE ON DATE OF NEW ANNUITY
SUBACCOUNT ANNUITY UNITS SUBSEQUENT PAYMENT PAYMENT AMOUNT
- ---------- ------------- ------------------ --------------
Growth 132.4503 x $1.60 = $211.92
Growth-Income 196.0784 x $1.10 = $215.69
------
$427.61
ANNUITY UNIT VALUE
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 the Assumed Interest Rate set forth on
the page 3 which is used to determine Variable Annuity Payment amounts.
ALTERNATE ANNUITY OPTION RATES
SBL 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.
<PAGE>
A BRIEF DESCRIPTION OF THIS CONTRACT
This is a FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT.
* Investment Experience is Reflected in Benefits
* Variable and Fixed Accumulation Before the Annuity Start Date; Variable and
Fixed Annuity Payments Thereafter
* Death Benefit Proceeds are Payable Before the Annuity Start Date
* This Contract is Non-Participating
BENEFITS AND VALUES PROVIDED BY THIS CONTRACT MAY BE ON A VARIABLE BASIS.
AMOUNTS DIRECTED INTO ONE OR MORE OF THE SUBACCOUNTS WILL REFLECT THE INVESTMENT
EXPERIENCE OF THOSE SUBACCOUNTS. THESE AMOUNTS MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO DOLLAR AMOUNT. (SEE "CONTRACT VALUE AND EXPENSE PROVISIONS"
AND "ANNUITY PAYMENT PROVISIONS" FOR DETAILS.)
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 SW Harrison Street, Topeka, KS 66636-0001
1-800-888-2461
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE
INSURANCE COMPANY ("SBL")
- --------------------------------------------------------------------------------
Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
VARIABLE ANNUITY APPLICATION
================================================================================
1. OWNER (APPLICANT)
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ [_] MALE ___________________________
Date of Birth [_] FEMALE SSN
________________________________________________________________________________
Telephone E-mail
================================================================================
2. JOINT OWNER
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ [_] MALE ___________________________
Date of Birth [_] FEMALE SSN
________________________________________________________________________________
Telephone E-mail
================================================================================
3. ALLOCATION OF PURCHASE PAYMENTS
Small Cap Subaccount _____%
Mid Cap Subaccount _____%
Social Awareness Subaccount _____%
International Subaccount _____%
Worldwide Equity Subaccount _____%
Value Subaccount _____%
Select 25 Subaccount _____%
Growth Subaccount _____%
Enhanced Index Subaccount _____%
Global Total Return Subaccount _____%
Managed Asset Allocation Subaccount _____%
Equity Income Subaccount _____%
Growth Income Subaccount _____%
Global Strategic Income Subaccount _____%
High Yield Subaccount _____%
High Grade Income Subaccount _____%
Money Market Subaccount _____%
Fixed Account _____%
100%
================================================================================
4. ANNUITANT (IF DIFFERENT FROM OWNER)
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ [_] MALE ___________________________
Date of Birth [_] FEMALE SSN
================================================================================
5. PRIMARY BENEFICIARY
First Last DOB Relationship to Owner
1. ____________________________________________________________________________
2. ____________________________________________________________________________
================================================================================
6. SECONDARY BENEFICIARY
First Last DOB Relationship to Owner
1. ____________________________________________________________________________
2. ____________________________________________________________________________
================================================================================
7. TYPE OF ANNUITY CONTRACT
[_] Non Qualified [_] 403(b)
[_] 408(b) IRA [_] Roth IRA
[_] 408(k) SEP-IRA CONTRIBUTION YEAR __________
================================================================================
8. ELECTRONIC TRANSFER PRIVILEGE
SBL will make transfers, account changes, and various other transactions
based on instructions received via telephone, Internet, or other available
electronic means. If you do not wish to use Electronic Transfers, you must
check this box. [_]
================================================================================
9. BILLING INFORMATION
Payment Amount $_____________________
[_] Salary Savings, SBL bill number, if known ________
Billing Statement Required: No [_] Yes [_]
Frequency: Weekly [_] Every 2 weeks [_]
Monthly [_] Twice Monthly [_]
Quarterly [_] Semiannual [_]
Annual [_]
Employer Name_______________________________________________________________
Employer Address____________________________________________________________
Employer Phone _____________________________________________________________
[_] Secur-O-Matic Bank Draft [_] Checking [_] Savings
Frequency: Monthly [_] Semiannual [_]
Quarterly [_] Annual [_]
Bank Name___________________________________________________________________
Bank Address________________________________________________________________
Bank Phone Number___________________________________________________________
Bank Account Number_________________________________________________________
Routing Transit Number______________________________________________________
I authorize SBL to make withdrawals from my checking account maintained at
the Bank. I authorize the Bank to charge my account for any withdrawals made
by SBL for this purpose. This authority remains in effect until I revoke it
in writing and SBL and the Bank receive such notice.
================================================================================
10. REPLACEMENT
Will this proposed Contract replace or change any existing annuity or
insurance policy? [_] No [_] Yes If yes, please list company and policy
number ___________________________________________________________________
================================================================================
11. DOLLAR COST AVERAGING
Please establish an Automatic Transfer
Frequency [_] Monthly [_] Quarterly
From: ________________________ To: ________________________
(Subaccount) ________________________
________________________
(Subaccount)
Indicate dollar or percentage if going to two or more Accounts.
Option:
[_] Fixed Amount $________ over _____ months/years;
[_] Fixed Period of ________ months/ years;
(this option will transfer the entire account value)
[_] Interest/Earnings only over _____ months/years. (Earnings will accrue
for a one time period from the effective date before a transfer.)
I understand that Automatic Transfers from the Fixed Account are limited as
described in the Contract.
================================================================================
12. ASSET REALLOCATION REQUEST Please establish the quarterly Asset
Reallocation as follows:
Small Cap _____%
Mid Cap _____%
Social Awareness _____%
International _____%
Worldwide Equity _____%
Value _____%
Select 25 _____%
Growth _____%
Enhanced Index _____%
Global Total Return _____%
Managed Asset Allocation _____%
Equity Income _____%
Growth-Income _____%
Global Strategic Income _____%
High Yield _____%
High Grade Income _____%
Money Market _____%
Fixed Account _____%
Effective date of my first transfer: ____________________________
Month Day Year
The Fixed Account may not be used if the reallocation would violate the
Transfer provisions of the Fixed Account as stated in the Contract. Initial
purchase payments will be allocated based on instructions in Section 3,
unless otherwise indicated.
================================================================================
13. STATEMENT OF UNDERSTANDING
I have been given a current prospectus that describes the contract for
which I am applying and a current prospectus for the funds which underlie
each Subaccount above. If my annuity contract qualifies under section
403(b), I declare that I know: (1) the limits on redemption imposed by
Section 403(b)(11) of the Internal Revenue Code; and (2) the investment
choices available under my employer's Section 403(b) plan to which I may
elect to transfer my account balance. I KNOW THAT ANNUITY PAYMENTS AND
WITHDRAWAL VALUES, IF ANY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT OF SBL ARE VARIABLE AND DOLLAR AMOUNTS ARE NOT GUARANTEED.
The amount paid and the application must be acceptable to SBL under its
rules and practices. If they are, the Contract applied for will be in
effect on the Contract Date. If they are not, SBL will be liable only for
the return of the amount paid.
================================================================================
14. TAX IDENTIFICATION NUMBER CERTIFICATION
Under penalties of perjury I certify that (1) The number shown on this form
is my correct taxpayer identification number (or I am waiting for a number
to be issued to me; and (2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding
as a result of a failure to report all interest or dividends or the IRS has
notified me that I am no longer subject to backup withholding.*
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
___________________________________________________________________________
SIGNATURE OF OWNER SIGNED AT (CITY/STATE) DATE: MONTH DAY YEAR
________________________
SIGNATURE OF JOINT OWNER
*You must cross out item (2) above if you have been notified by the IRS
that you are currently subject to backup withholding because of
underreporting of interest or dividends on your tax return. For
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign
the certification, but you must provide your correct Tax Identification
Number.
================================================================================
15. REGISTERED REPRESENTATIVE/DEALER INFORMATION
Representative's Statement - To the best of my knowledge, this application
is not involved in the replacement of any life insurance or annuity
contract, as defined in Insurance Department Regulations, except as stated
in question 10 above. I have complied with the requirements for disclosure
and/or replacement.
___________________________________________________________________________
SIGNATURE OF REPRESENTATIVE REP NUMBER
___________________________________________________________________________
PRINT NAME OF REPRESENTATIVE PRINT NAME OF TELEPHONE NUMBER
BROKER/DEALER
<PAGE>
STATE DISCLOSURES
ALL JURISDICTIONS EXCEPT AR, AZ, CT, DC, FL, KS, KY, MN, NJ, NM, OH, OK, PA, TX
AND VA.
Any person who, with intent to defraud or knowing that he/she is facilitating
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
NEW JERSEY ONLY
Any person who includes any false or misleading information on an application
for an insurance policy is subject to criminal and civil penalties.
OKLAHOMA ONLY
WARNING: Any person who knowingly and with intent to injure, defraud or deceive
any insurer, makes a claim for the proceeds of an insurance policy containing
any false, incomplete or misleading information is guilty of insurance fraud.
AR, DC, KY, ME, NM, OH AND PA ONLY
Any person who, knowingly and with intent to defraud any insurance company or
other person, files an application for insurance or statement of claim
containing materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to criminal
and civil penalties.
CONNECTICUT AND TEXAS ONLY
Any person who, with intent to defraud or knowing that he/she is facilitating a
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud, as determined by a
court of competent jurisdiction.
ARIZONA, FLORIDA AND MINNESOTA ONLY
Do Not Use this form. Use state specific form.
V9492 (12-99)
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE
INSURANCE COMPANY ("SBL")
- --------------------------------------------------------------------------------
Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
VARIABLE ANNUITY APPLICATION
================================================================================
1. OWNER (APPLICANT)
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ ___________________________
Date of Birth SSN
________________________________________________________________________________
Telephone E-mail
================================================================================
2. JOINT OWNER
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ ___________________________
Date of Birth SSN
________________________________________________________________________________
Telephone E-mail
================================================================================
3. ALLOCATION OF PURCHASE PAYMENTS
Small Cap Subaccount _____%
Mid Cap Subaccount _____%
Social Awareness Subaccount _____%
International Subaccount _____%
Worldwide Equity Subaccount _____%
Value Subaccount _____%
Select 25 Subaccount _____%
Growth Subaccount _____%
Enhanced Index Subaccount _____%
Global Total Return Subaccount _____%
Managed Asset Allocation Subaccount _____%
Equity Income Subaccount _____%
Growth Income Subaccount _____%
Global Strategic Income Subaccount _____%
High Yield Subaccount _____%
High Grade Income Subaccount _____%
Money Market Subaccount _____%
Fixed Account _____%
100%
================================================================================
4. ANNUITANT (IF DIFFERENT FROM OWNER)
________________________________________________________________________________
First MI Last
________________________________________________________________________________
Street Address APT
________________________________________________________________________________
City State Zip
___________________________ ___________________________
Date of Birth SSN
================================================================================
5. PRIMARY BENEFICIARY
First Last DOB Relationship to Owner
1. ____________________________________________________________________________
2. ____________________________________________________________________________
================================================================================
6. SECONDARY BENEFICIARY
First Last DOB Relationship to Owner
1. ____________________________________________________________________________
2. ____________________________________________________________________________
================================================================================
7. TYPE OF ANNUITY CONTRACT
[_] Non Qualified [_] 403(b)
[_] 408(b) IRA [_] Roth IRA
[_] 408(k) SEP-IRA CONTRIBUTION YEAR __________
================================================================================
8. ELECTRONIC TRANSFER PRIVILEGE
SBL will make transfers, account changes, and various other transactions
based on instructions received via telephone, Internet, or other available
electronic means. If you do not wish to use Electronic Transfers, you must
check this box. [_]
================================================================================
9. BILLING INFORMATION
Payment Amount $_____________________
[_] Salary Savings, SBL bill number, if known ________
Billing Statement Required: No [_] Yes [_]
Frequency: Weekly [_] Every 2 weeks [_]
Monthly [_] Twice Monthly [_]
Quarterly [_] Semiannual [_]
Annual [_]
Employer Name_______________________________________________________________
Employer Address____________________________________________________________
Employer Phone _____________________________________________________________
[_] Secur-O-Matic Bank Draft [_] Checking [_] Savings
Frequency: Monthly [_] Semiannual [_]
Quarterly [_] Annual [_]
Bank Name___________________________________________________________________
Bank Address________________________________________________________________
Bank Phone Number___________________________________________________________
Bank Account Number_________________________________________________________
Routing Transit Number______________________________________________________
I authorize SBL to make withdrawals from my checking account maintained at
the Bank. I authorize the Bank to charge my account for any withdrawals made
by SBL for this purpose. This authority remains in effect until I revoke it
in writing and SBL and the Bank receive such notice.
================================================================================
10. REPLACEMENT
Will this proposed Contract replace or change any existing annuity or
insurance policy? [_] No [_] Yes If yes, please list company and policy
number ___________________________________________________________________
================================================================================
11. DOLLAR COST AVERAGING
Please establish an Automatic Transfer
Frequency [_] Monthly [_] Quarterly
From: ________________________ To: ________________________
(Subaccount) ________________________
________________________
(Subaccount)
Indicate dollar or percentage if going to two or more Accounts.
Option:
[_] Fixed Amount $________ over _____ months/years;
[_] Fixed Period of ________ months/ years;
(this option will transfer the entire account value)
[_] Interest/Earnings only over _____ months/years. (Earnings will accrue
for a one time period from the effective date before a transfer.)
I understand that Automatic Transfers from the Fixed Account are limited as
described in the Contract.
================================================================================
12. ASSET REALLOCATION REQUEST Please establish the quarterly Asset
Reallocation as follows:
Small Cap _____%
Mid Cap _____%
Social Awareness _____%
International _____%
Worldwide Equity _____%
Value _____%
Select 25 _____%
Growth _____%
Enhanced Index _____%
Global Total Return _____%
Managed Asset Allocation _____%
Equity Income _____%
Growth-Income _____%
Global Strategic Income _____%
High Yield _____%
High Grade Income _____%
Money Market _____%
Fixed Account _____%
Effective date of my first transfer: ____________________________
Month Day Year
The Fixed Account may not be used if the reallocation would violate the
Transfer provisions of the Fixed Account as stated in the Contract. Initial
purchase payments will be allocated based on instructions in Section 3,
unless otherwise indicated.
================================================================================
13. STATEMENT OF UNDERSTANDING
I have been given a current prospectus that describes the contract for
which I am applying and a current prospectus for the funds which underlie
each Subaccount above. If my annuity contract qualifies under section
403(b), I declare that I know: (1) the limits on redemption imposed by
Section 403(b)(11) of the Internal Revenue Code; and (2) the investment
choices available under my employer's Section 403(b) plan to which I may
elect to transfer my account balance. I KNOW THAT ANNUITY PAYMENTS AND
WITHDRAWAL VALUES, IF ANY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT OF SBL ARE VARIABLE AND DOLLAR AMOUNTS ARE NOT GUARANTEED.
The amount paid and the application must be acceptable to SBL under its
rules and practices. If they are, the Contract applied for will be in
effect on the Contract Date. If they are not, SBL will be liable only for
the return of the amount paid.
================================================================================
14. TAX IDENTIFICATION NUMBER CERTIFICATION
Under penalties of perjury I certify that (1) The number shown on this form
is my correct taxpayer identification number (or I am waiting for a number
to be issued to me; and (2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding
as a result of a failure to report all interest or dividends or the IRS has
notified me that I am no longer subject to backup withholding.*
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
___________________________________________________________________________
SIGNATURE OF OWNER SIGNED AT (CITY/STATE) DATE: MONTH DAY YEAR
________________________
SIGNATURE OF JOINT OWNER
*You must cross out item (2) above if you have been notified by the IRS
that you are currently subject to backup withholding because of
underreporting of interest or dividends on your tax return. For
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign
the certification, but you must provide your correct Tax Identification
Number.
================================================================================
15. REGISTERED REPRESENTATIVE/DEALER INFORMATION
Representative's Statement - To the best of my knowledge, this application
is not involved in the replacement of any life insurance or annuity
contract, as defined in Insurance Department Regulations, except as stated
in question 10 above. I have complied with the requirements for disclosure
and/or replacement.
___________________________________________________________________________
SIGNATURE OF REPRESENTATIVE REP NUMBER
___________________________________________________________________________
PRINT NAME OF REPRESENTATIVE PRINT NAME OF TELEPHONE NUMBER
BROKER/DEALER
<PAGE>
STATE DISCLOSURES
ALL JURISDICTIONS EXCEPT AR, AZ, CT, DC, FL, KS, KY, MN, NJ, NM, OH, OK, PA, TX
AND VA.
Any person who, with intent to defraud or knowing that he/she is facilitating
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
NEW JERSEY ONLY
Any person who includes any false or misleading information on an application
for an insurance policy is subject to criminal and civil penalties.
OKLAHOMA ONLY
WARNING: Any person who knowingly and with intent to injure, defraud or deceive
any insurer, makes a claim for the proceeds of an insurance policy containing
any false, incomplete or misleading information is guilty of insurance fraud.
AR, DC, KY, ME, NM, OH AND PA ONLY
Any person who, knowingly and with intent to defraud any insurance company or
other person, files an application for insurance or statement of claim
containing materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to criminal
and civil penalties.
CONNECTICUT AND TEXAS ONLY
Any person who, with intent to defraud or knowing that he/she is facilitating a
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud, as determined by a
court of competent jurisdiction.
ARIZONA, FLORIDA AND MINNESOTA ONLY
Do Not Use this form. Use state specific form.
V9492 (12-99)U
<PAGE>
[SBG LOGO]
- --------------------------------------------------------------------------------
Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
December 30, 1999
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66636-0001
Re: SBL Variable Annuity Account VIII
Dear Sir/Madam:
This letter is with reference to the Registration Statement of SBL Variable
Annuity Account VIII of which Security Benefit Life Insurance Company
(hereinafter "SBL") is the Depositor. Said Registration Statement is being filed
with the Securities and Exchange Commission for the purpose of registering the
variable annuity contract issued by SBL and the interests in Variable Annuity
Account VIII under such variable annuity contract which will be sold pursuant to
an indefinite registration.
I have examined the Articles of Incorporation and Bylaws of SBL, minutes of the
meetings of its Board of Directors and other records, and pertinent provisions
of the Kansas insurance laws, together with applicable certificates of public
officials and other documents which I have deemed relevant. Based on the
foregoing, it is my opinion that:
1. SBL is duly organized and validly existing as a stock life insurance company
under the laws of Kansas.
2. Variable Annuity Account VIII has been validly created as a Separate Account
in accordance with the pertinent provisions of the insurance laws of Kansas.
3. SBL has the power, and has validly and legally exercised it, to create and
issue the variable annuity contract which is administered within and by
means of Variable Annuity Account VIII.
4. The amount of the variable annuity contract to be sold pursuant to the
indefinite registration, when issued, will represent binding obligations of
SBL in accordance with their terms providing said contract was issued for
the considerations set forth therein and evidenced by appropriate policies
and certificates.
I hereby consent to the inclusion in the Registration Statement of my foregoing
opinion.
Respectfully submitted,
AMY J. LEE
Amy J. Lee
Vice President and Associate General Counsel
Security Benefit Life Insurance Company
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SEDGWICK)
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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
THOMAS R. CLEVENGER
------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
ANNETTE E. CRIPPS
------------------------------
Notary Public
My Commission Expires:
7/8/2001
- ------------------------------
<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 SECURITY VARIABLE ANNUITY
ACCOUNT VIII (EXTRA CREDIT) 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 16th day of December, 1999.
SISTER LORETTO MARIE COLWELL
------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 16th day of December, 1999.
JULIA A. SMRHA
------------------------------
Notary Public
My Commission Expires:
7-8-2000
- ------------------------------
<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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
JOHN C. DICUS
------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
MARY R. FALTER
------------------------------
Notary Public
My Commission Expires:
1-30-00
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Steven J. Douglass, 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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
STEVEN J. DOUGLASS
------------------------------
Steven J. Douglass
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
NANCY A. LEWIS
------------------------------
Notary Public
My Commission Expires:
10-16-03
- ------------------------------
<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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT) 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 14th day of December, 1999.
HOWARD R. FRICKE
------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 14th day of December, 1999.
ANNETTE E. CRIPPS
------------------------------
Notary Public
My Commission Expires:
7/8/2001
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, William 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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
WILLIAM W. HANNA
------------------------------
William W. Hanna
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
DOROTHY A. HERR
------------------------------
Notary Public
My Commission Expires:
8-21-2002
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF FLORIDA )
) ss.
COUNTY OF PINELLAS)
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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
JOHN E. HAYES, JR.
------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
EMMA IMHOFF
------------------------------
Notary Public
My Commission Expires:
7-29-2000
- ------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Kris A. Robbins, 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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 16th day of December, 1999.
KRIS A. ROBBINS
------------------------------
Kris A. Robbins
SUBSCRIBED AND SWORN to before me this 16th day of December, 1999.
ANNETTE E. CRIPPS
------------------------------
Notary Public
My Commission Expires:
7/8/2001
- ------------------------------
<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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 17th day of December, 1999.
FRANK C. SABATINI
------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 17th day of December, 1999.
PATRICIA A. CLARK
------------------------------
Notary Public
My Commission Expires:
3/5/2002
- ------------------------------
<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 SECURITY VARIABLE ANNUITY ACCOUNT VIII (EXTRA CREDIT)
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 15th day of December, 1999.
ROBERT C. WHEELER
------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 15th day of December, 1999.
PATRICIA A. MORELOCK
------------------------------
Notary Public
My Commission Expires:
1-23-2000
- ------------------------------
