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File No. 333-93947
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. 1 [_]
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Post-Effective Amendment No. [_]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 14 [_]
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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
Amy J. Lee, Associate General Counsel
Security Benefit Group Building
700 Harrison Street
Topeka, KS 66636-0001
(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 May 1, 2000, pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on May 1, 2000, pursuant to paragraph (a)(1) of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[_] on May 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 403(b), 408, or 408A 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:
* Equity Subaccount (formerly Growth Subaccount)
* Large Cap Value Subaccount (formerly Growth-Income Subaccount)
* Money Market Subaccount
* Global Subaccount (formerly Worldwide Equity Subaccount)
* Diversified Income Subaccount (formerly High Grade Income Subaccount)
* Large Cap Growth Subaccount
* Enhanced Index Subaccount
* International Subaccount
* Mid Cap Growth Subaccount (formerly Mid Cap Subaccount)
* Global Strategic Income Subaccount
* Capital Growth Subaccount
* Global Total Return Subaccount
* Managed Asset Allocation Subaccount
* Equity Income Subaccount
* High Yield Subaccount
* Small Cap Value Subaccount
* Social Awareness Subaccount
* Technology Subaccount
* Mid Cap Value (formerly Value Subaccount)
* Main Street Growth and Income Subaccount
* Small Cap Growth Subaccount (formerly Small Cap Subaccount)
* Select 25 Subaccount
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 May 1, 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.
EXPENSES FOR THIS CONTRACT MAY BE HIGHER THAN EXPENSES FOR A CONTRACT WITHOUT
A CREDIT ENHANCEMENT. THE AMOUNT OF CREDIT ENHANCEMENT MAY BE MORE THAN OFFSET
BY ANY ADDITIONAL FEES AND CHARGES.
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: MAY 1, 2000
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TABLE OF CONTENTS
Page
DEFINITIONS.............................................................. 4
SUMMARY 5
PURPOSE OF THE CONTRACT............................................... 5
THE SEPARATE ACCOUNT AND SBL FUND..................................... 5
FIXED ACCOUNT......................................................... 5
PURCHASE PAYMENTS..................................................... 5
CREDIT ENHANCEMENT.................................................... 5
CONTRACT BENEFITS..................................................... 5
FREE-LOOK RIGHT....................................................... 5
CHARGES AND DEDUCTIONS................................................ 6
Contingent Deferred Sales Charge................................... 6
Mortality and Expense Risk Charge.................................. 6
Administration Charge.............................................. 6
Account Administration Charge...................................... 6
Premium Tax Charge................................................. 6
Other Expenses..................................................... 6
CONTACTING SECURITY BENEFIT........................................... 6
EXPENSE TABLE............................................................ 7
CONTRACTUAL EXPENSES.................................................. 7
ANNUAL SEPARATE ACCOUNT EXPENSES...................................... 7
ANNUAL MUTUAL FUND EXPENSES........................................... 8
EXAMPLES.............................................................. 8
CONDENSED FINANCIAL INFORMATION.......................................... 10
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND... 13
SECURITY BENEFIT LIFE INSURANCE COMPANY............................... 13
PUBLISHED RATINGS..................................................... 13
SEPARATE ACCOUNT...................................................... 13
SBL FUND.............................................................. 13
Series A (Equity Series)........................................... 14
Series B (Large Cap Value Series).................................. 14
Series C (Money Market Series)..................................... 14
Series D (Global Series)........................................... 14
Series E ( Diversified Income Series).............................. 14
Series G (Large Cap Growth Series)................................. 14
Series H (Enhanced Index Series)................................... 14
Series I (International Series).................................... 14
Series J (Mid Cap Growth Series)................................... 14
Series K (Global Strategic Income Series).......................... 15
Series L (Capital Growth 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 Q (Small Cap Value Series).................................. 15
Series S (Social Awareness Series)................................. 15
Series T (Technology Series)....................................... 15
Series V (Mid Cap Value Series).................................... 15
Series W (Main Street Growth and Income Series).................... 15
Series X (Small Cap Growth Series)................................. 15
Series Y (Select 25 Series)........................................ 15
The Investment Adviser............................................. 15
THE CONTRACT............................................................. 16
GENERAL............................................................... 16
APPLICATION FOR A CONTRACT............................................ 16
PURCHASE PAYMENTS..................................................... 16
CREDIT ENHANCEMENT.................................................... 17
ALLOCATION OF PURCHASE PAYMENTS....................................... 17
DOLLAR COST AVERAGING OPTION.......................................... 18
ASSET REALLOCATION OPTION............................................. 18
TRANSFERS OF CONTRACT VALUE........................................... 19
CONTRACT VALUE........................................................ 19
DETERMINATION OF CONTRACT VALUE....................................... 19
FULL AND PARTIAL WITHDRAWALS.......................................... 20
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................................................. 23
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.................................. 25
Option 5--Payments for a Specified Period.......................... 25
Option 6--Payments of a Specified Amount........................... 25
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.............................................................. 26
DEATH BENEFIT......................................................... 27
CONTRACT CHARGES...................................................... 27
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT...................... 27
PAYMENTS FROM THE FIXED ACCOUNT....................................... 28
MORE ABOUT THE CONTRACT.................................................. 28
OWNERSHIP............................................................. 28
Joint Owners....................................................... 28
DESIGNATION AND CHANGE OF BENEFICIARY................................. 28
DIVIDENDS............................................................. 28
PAYMENTS FROM THE SEPARATE ACCOUNT.................................... 28
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............... 30
General............................................................ 30
Charge for Security Benefit Taxes.................................. 31
Diversification Standards.......................................... 31
INCOME TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS.......... 31
Surrenders or Withdrawals Prior to the Annuity Start Date.......... 31
Surrenders or Withdrawals on or after the Annuity Start Date....... 32
Penalty Tax on Certain Surrenders and Withdrawals.................. 32
ADDITIONAL CONSIDERATIONS............................................. 32
Distribution-at-Death Rules........................................ 32
Gift of Annuity Contracts.......................................... 32
Contracts Owned by Non-Natural Persons............................. 32
Multiple Contract Rule............................................. 33
Possible Tax Changes............................................... 33
Transfers, Assignments or Exchanges of a Contract.................. 33
QUALIFIED PLANS....................................................... 33
Section 401........................................................ 33
Section 403(b)..................................................... 34
Section 408 and 408A............................................... 35
Section 457........................................................ 35
Rollovers.......................................................... 36
Tax Penalties...................................................... 36
Withholding........................................................ 36
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..................................................... 38
LEGAL MATTERS......................................................... 38
PERFORMANCE INFORMATION.................................................. 38
ADDITIONAL INFORMATION................................................... 39
REGISTRATION STATEMENT................................................ 39
FINANCIAL STATEMENTS.................................................. 39
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, twenty-two
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
("Qualified Plan").
THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently divided
into twenty-two accounts referred to as Subaccounts. See "Separate Account,"
page 13. 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: Equity Series, Large Cap
Value Series, Money Market Series, Global Series, Diversified Income Series,
Large Cap Growth Series, Enhanced Index Series, International Series, Mid Cap
Growth Series, Global Strategic Income Series, Capital Growth Series, Global
Total Return Series, Managed Asset Allocation Series, Equity Income Series, High
Yield Series, Small Cap Value Series, Social Awareness Series, Technology
Series, Mid Cap Value Series, Main Street Growth and Income Series, Small Cap
Growth Series and Select 25 Series. See "SBL Fund," page 13.
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 16.
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 20 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 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 23.
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(3) EXPENSES(4) EXPENSES(3)
Equity (Series A).................... 0.75% 0.06% 0.81%
Large Cap Value (Series B)........... 0.75% 0.07% 0.82%
Money Market (Series C).............. 0.50% 0.07% 0.57%
Global (Series D).................... 1.00% 0.21% 1.21%
Diversified Income (Series E)........ 0.75% 0.07% 0.82%
Large Cap Growth (Series G).......... 1.00% 0.36% 1.36%
Enhanced Index (Series H)............ 0.75% 0.29% 1.04%
International (Series I)............. 1.10% 1.15% 2.25%
Mid Cap Growth (Series J)............ 0.75% 0.07% 0.82%
Global Strategic Income (Series K)... 0.75% 0.87% 1.62%
Capital Growth (Series L)............ 1.00% 0.36% 1.36%
Global Total Return (Series M)....... 1.00% 0.36% 1.36%
Managed Asset Allocation (Series N).. 1.00% 0.17% 1.17%
Equity Income (Series O)............. 1.00% 0.09% 1.09%
High Yield (Series P)................ 0.75% 0.11% 0.86%
Small Cap Value (Series Q)........... 1.00% 0.36% 1.36%
Social Awareness (Series S).......... 0.75% 0.07% 0.82%
Technology (Series T)................ 1.00% 0.95% 1.95%
Mid Cap Value (Series V)............. 0.75% 0.09% 0.84%
Main Street Growth and Income
(Series W)......................... 1.00% 0.22% 1.22%
Small Cap Growth (Series X).......... 1.00% 0.33% 1.33%
Select 25 (Series Y)................. 0.75% 0.22% 0.97%
- --------------------------------------------------------------------------------
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 20 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, 1999, 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, 1999. 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 G, Series H, Series I, Series L, Series Q, Series
T, Series W 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 Large Cap Growth,
Enhanced Index, International, Capital Growth, Small Cap Value, Technology, Main
Street Growth & Income 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
- --------------------------------------------------------------------------------
Equity Subaccount.................... $ 90 $135 $182 $277
Large Cap Value Subaccount........... 90 136 182 278
Money Market Subaccount.............. 88 128 170 252
Global Subaccount.................... 94 147 202 318
Diversified Income Subaccount........ 90 136 182 278
Large Cap Growth Subaccount.......... 96 152 --- ---
Enhanced Index Subaccount............ 93 142 --- ---
International Subaccount............. 105 178 --- ---
Mid Cap Growth Subaccount............ 90 136 182 278
Global Strategic Income Subaccount... 99 159 222 359
Capital Growth Subaccount............ 96 152 --- ---
Global Total Return Subaccount....... 96 152 209 334
Managed Asset Allocation Subaccount.. 94 146 200 314
Equity Income Subaccount............. 93 144 196 306
High Yield Subaccount................ 91 137 184 282
Small Cap Value Subaccount........... 96 152 --- ---
Social Awareness Subaccount.......... 90 136 182 278
Technology Subaccount................ 102 169 --- ---
Mid Cap Value Subaccount............. 91 136 183 280
Main Street Growth and Income
Subaccount......................... 95 148 --- ---
Small Cap Growth Subaccount.......... 96 151 208 331
Select 25 Subaccount................. 92 140 --- ---
- --------------------------------------------------------------------------------
Example -- You would pay the expenses shown below assuming NO withdrawals:
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Equity Subaccount.................... $25 $ 76 $130 $277
Large Cap Value Subaccount........... 25 76 130 278
Money Market Subaccount.............. 22 68 117 252
Global Subaccount.................... 29 89 151 318
Diversified Income Subaccount........ 25 76 130 278
Large Cap Growth Subaccount.......... 30 93 --- ---
Enhanced Index Subaccount............ 27 83 --- ---
International Subaccount............. 40 120 --- ---
Mid Cap Growth Subaccount............ 25 76 130 278
Global Strategic Income Subaccount... 33 101 172 359
Capital Growth Subaccount............ 30 93 --- ---
Global Total Return Subaccount....... 30 93 158 334
Managed Asset Allocation Subaccount.. 28 87 149 314
Equity Income Subaccount............. 28 85 145 306
High Yield Subaccount................ 25 78 133 282
Small Cap Value Subaccount........... 30 93 --- ---
Social Awareness Subaccount.......... 25 76 130 278
Technology Subaccount................ 37 111 --- ---
Mid Cap Value Subaccount............. 25 76 130 277
Main Street Growth and Income
Subaccount......................... 29 89 --- ---
Small Cap Growth Subaccount.......... 30 92 157 331
Select 25 Subaccount................. 26 81 ---- ---
- --------------------------------------------------------------------------------
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(3) 1998 1997(2) 1996(1) 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITY SUBACCOUNT Accumulation unit value:
Beginning of period................................. $25.06 $20.26 $15.96 $13.20 $10.00
End of period....................................... $26.71 $25.06 $20.26 $15.96 $13.20
Accumulation units outstanding at the end of period... 5,225,093 4,778,310 3,449,970 1,987,463 289,693
- ------------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SUBACCOUNT
Accumulation unit value:
Beginning of period................................. $19.58 $18.46 $14.80 $12.70 $10.00
End of period....................................... $19.65 $19.58 $18.46 $14.80 $12.70
Accumulation units outstanding at the end of period... 3,145,165 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....................................... $11.89 $11.51 $11.12 $10.72 $10.35
Accumulation units outstanding at the end of period... 2,554,229 2,099,523 1,754,200 1,520,180 288,907
- ------------------------------------------------------------------------------------------------------------------------
GLOBAL SUBACCOUNT Accumulation unit value:
Beginning of period................................. $16.43 $13.87 $13.21 $11.42 $10.00
End of period....................................... $24.88 $16.43 $13.87 $13.21 $11.42
Accumulation units outstanding at the end of period... 2,659,740 2,293,514 1,835,594 1,183,160 126,206
- ------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED INCOME SUBACCOUNT Accumulation unit value:
Beginning of period................................. $13.07 $12.27 $11.31 $11.56 $10.00
End of period....................................... $12.40 $13.07 $12.27 $11.31 $11.56
Accumulation units outstanding at the end of period... 2,665,337 2,409,250 1,607,065 1,631,708 244,306
- ------------------------------------------------------------------------------------------------------------------------
ENHANCE INDEX SUBACCOUNT Accumulation unit value:
Beginning of period................................. $10.00 --- --- --- ---
End of period....................................... $11.13 --- --- --- ---
Accumulation units outstanding at the end of period... 525,132 --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SUBACCOUNT Accumulation unit value:
Beginning of period................................. $10.00 --- --- --- ---
End of period....................................... $12.88 --- --- --- ---
Accumulation units outstanding at the end of period... 130,239 --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SUBACCOUNT
Accumulation unit value:
Beginning of period................................. $19.04 $16.37 $13.84 $11.89 $10.00
End of period....................................... $30.38 $19.04 $16.37 $13.84 $11.89
Accumulation units outstanding at the end of period... 1,782,076 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....................................... $13.07 $13.10 $12.43 $11.96 $10.67
Accumulation units outstanding at the end of period... 316,616 364,793 382,445 328,077 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....................................... $15.63 $13.90 $12.52 $11.96 $10.62
Accumulation units outstanding at the end of period... 891,708 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....................................... $17.46 $16.14 $13.82 $11.84 $10.64
Accumulation units outstanding at the end of period... 2,496,544 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....................................... $19.00 $18.69 $17.38 $13.73 $11.61
Accumulation units outstanding at the end of period... 3,406,579 3,562,159 3,117,060 1,764,015 267,317
- ------------------------------------------------------------------------------------------------------------------------
HIGH YIELD SUBACCOUNT Accumulation unit value:
Beginning of period................................. $12.36 $11.84 $10.60 $10.00 ---
End of period....................................... $12.35 $12.36 $11.84 $10.60 ---
Accumulation units outstanding at the end of period... 1,097,807 945,133 316,416 --- ---
- ------------------------------------------------------------------------------------------------------------------------
SOCIAL AWARENESS SUBACCOUNT Accumulation unit value:
Beginning of period................................. $23.04 $17.78 $14.69 $12.56 $10.00
End of period....................................... $26.64 $23.04 $17.78 $14.69 $12.56
Accumulation units outstanding at the end of period... 1,693,412 1,140,285 541,120 220,549 37,149
- ------------------------------------------------------------------------------------------------------------------------
MID CAP VALUE SUBACCOUNT
Accumulation unit value:
Beginning of period................................. $14.96 $13.01 $10.00 --- ---
End of period....................................... $17.53 $14.96 $13.01 --- ---
Accumulation units outstanding at the end of period... 1,674,949 1,108,840 372,693 --- ---
- ------------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH SUBACCOUNT
Accumulation unit value:
Beginning of period................................. $10.50 $9.55 $10.00 --- ---
End of period....................................... $19.39 $10.50 $9.55 --- ---
Accumulation units outstanding at the end of period... 955,644 280,763 25,182 --- ---
- ------------------------------------------------------------------------------------------------------------------------
SELECT 25 SUBACCOUNT Accumulation unit value:
Beginning of period................................. $10.00 --- --- --- ---
End of period....................................... $12.25 --- --- --- ---
Accumulation units outstanding at the end of period... 1,016,866 --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
<FN>
1. High Yield Subaccount for the period August 5, 1996 (inception) through December 31, 1996.
2. Mid Cap Value Subaccount for the period May 1, 1997 (inception) through December 31, 1997. Small Cap Growth
Subaccount for the period October 15, 1997 (inception) through December 31, 1997.
3. Enhanced Index Subaccount, International Subaccount and Select 25 Subaccount for the period May 3, 1999 (inception)
through December 31, 1999.
</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 $8.3
billion. Together with its subsidiaries, Security Benefit has total funds under
management of approximately $9.9 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 a
contract may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent the contract so
provides. 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
Contract. 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 twenty-two 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 an 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 twenty-two 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 (EQUITY SERIES) -- Amounts that you allocate to the Equity 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 (LARGE CAP VALUE SERIES) -- Amounts that you allocate to the Large Cap
Value 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 (GLOBAL SERIES) -- Amounts that you allocate to the Global 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 (DIVERSIFIED INCOME SERIES) -- Amounts that you allocate to the
Diversified 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 G (LARGE CAP GROWTH SERIES) -- Amounts that you allocate to the Large Cap
Growth Subaccount are invested in Series G. The investment objective of Series G
is to seek long-term capital growth by investing primarily in equity securities
of large capitalization companies (defined as companies whose total market value
is at least $5 billion at the time of purchase).
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 GROWTH SERIES) -- Amounts that you allocate to the Mid Cap
Growth 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 L (CAPITAL GROWTH SERIES)-- Amounts that you allocate to the Capital
Growth Series are invested in Series L. The investment objective of Series L is
to seek growth of capital by pursuing aggressive investment policies primarily
in equity securities of U. S. companies.
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 Q (SMALL CAP VALUE SERIES) -- Amounts that you allocate to the Small Cap
Value Series are invested in Series Q. The investment objective of Series Q is
to seek capital growth by investing in 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 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. The
Series also may invest in companies that are included in the Domini 400 Social
IndexSM, which companies will be deemed to comply with the Series' social
criteria. 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 T (TECHNOLOGY SERIES) -- Amounts that you allocate to the Technology
Subaccount are invested in Series T. The investment objective of Series T is to
seek long-term capital appreciation by investing in the equity securities of
technology companies.
SERIES V (MID CAP VALUE SERIES) -- Amounts that you allocate to the Mid Cap
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 W (MAIN STREET GROWTH AND INCOME SERIES) -- Amounts that you allocate to
the Main Street Growth and Income Subaccount are invested in Series W. The
investment objective of Series W is to seek high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities.
SERIES X (SMALL CAP GROWTH SERIES) -- Amounts that you allocate to the Small Cap
Growth 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
Global, Enhanced Index, International, Global Strategic Income, Capital Growth,
Global Total Return, Managed Asset Allocation, Equity Income, Small Cap Value,
Technology, Main Street Growth and Income, and Small Cap Growth Series. 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 Global Series and Main Street Growth
and Income Series; Bankers Trust Company, 130 Liberty Street, New York, New York
10006, to provide investment advisory services to Enhanced Index Series and
International Series; T. Rowe Price Associates, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202, to provide investment advisory services to Managed
Asset Allocation Series and Equity Income Series; Wellington Management Company
LLP, 75 State Street, Boston, MA 02109, to provide investment advisory services
to Global Strategic Income Series, Global Total Return Series and Technology
Series; Strong Capital Management Corporation, 100 Heritage Reserve, Menomonee,
Wisconsin 53051, to provide investment advisory services to Small Cap Value
Series and Small Cap Growth Series; and Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105 to provide investment advisory
services to Capital Growth Series.
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 may add a Credit Enhancement to your
Contract Value at the time each Purchase Payment is applied to the Contract. Any
Credit Enhancement will be allocated among the Subaccounts in the same
proportion as the applicable Purchase Payment. The amount of a Credit
Enhancement is determined at the time each Purchase Payment is applied as a
percentage of that Purchase Payment. The percentage applicable to each Purchase
Payment is based upon the total Purchase Payments made into the Contract,
including the current Purchase Payment, less the total withdrawals, including
any withdrawal charges, as of the date of the Purchase Payment. The applicable
percentage is set forth 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%
- --------------------------------------------------------------------------------
For example, if you make an initial Purchase Payment of $10,000, SBL would
add to your Contract Value a Credit Enhancement of $400 (I.E. 4% of $10,000). If
you later made a Withdrawal of $5,000 and then made a Purchase Payment of
$1,000, no Credit Enhancement would be paid on that Purchase Payment, because
your total Purchase Payments of $11,000 less withdrawals of $5,000 would be less
than $10,000. Under the table above, no Credit Enhancement would be payable.
The Credit Enhancement will be forfeited under certain circumstances. The
amount returned if you exercise your right to return the Contract during the
free look period will be reduced by the value of any Credit Enhancements
applied. See "Free-Look Right," page 5. In the event of a withdrawal under the
terms of the nursing home or terminal illness waivers, you will forfeit all or
part of any Credit Enhancements applied during the 12 months preceding such a
withdrawal. See "Waiver of Withdrawal Charge," page 23. Death benefit proceeds
may exclude all or part of any Credit Enhancements. See "Death Benefit," page
21.
Security Benefit expects to make a profit from the Credit Enhancement. Credit
Enhancements are funded by a higher withdrawal charge and a less generous death
benefit relative to certain other contracts issued by Security Benefit. If this
Contract is surrendered you may incur higher withdrawal charges for a longer
period of time than would have been the case with a contract without a Credit
Enhancement. In addition, a contract without a Credit Enhancement might offer a
greater death benefit than that available under this Contract.
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 twenty-two 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, a 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 27.
TRANSFERS OF CONTRACT VALUE -- 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.
Security Benefit effects transfers between Subaccounts at their respective
accumulation unit values as of the close of the Valuation Period during which
the transfer request is received.
You may also transfer Contract Value 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, Diversified Income Subaccount, High Yield Subaccount,
Global Strategic Income Subaccount, Managed Asset Allocation Subaccount, Equity
Income Subaccount, Global Total Return Subaccount, Large Cap Value Subaccount,
Main Street Growth and Income Subaccount, Equity Subaccount, Large Cap Growth
Subaccount, Enhanced Index Subaccount, Capital Growth Subaccount, Select 25
Subaccount, Social Awareness Subaccount, Mid Cap Value Subaccount, Mid Cap
Growth Subaccount, Global Subaccount, International Subaccount, Technology
Subaccount, Small Cap Value and Small Cap Growth 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 to 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, Diversified Income Subaccount, High Yield Subaccount,
Global Strategic Income Subaccount, Managed Asset Allocation Subaccount, Equity
Income Subaccount, Global Total Return Subaccount, Large Cap Value Subaccount,
Main Street Growth and Income Subaccount, Equity Subaccount, Large Cap Growth
Subaccount, Enhanced Index Subaccount, Capital Growth Subaccount, Select 25
Subaccount, Social Awareness Subaccount, Mid Cap Value Subaccount, Mid Cap
Growth Subaccount, Global Subaccount, International Subaccount, Technology
Subaccount, Small Cap Value and Small Cap Growth 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 a
Non-Qualified Plan, 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 a Qualified Plan, 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 4) 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
4); (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 account administration 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 a Qualified Plan, 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 a Non-Qualified Plan, 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, transfers from the Fixed Account pursuant to the
Dollar Cost Averaging or Asset Reallocation Options 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 20 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.
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 32 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 33.
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 33. 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 33. 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
any credit enhancement and the deduction of the account administration charge,
administration 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 May 1, 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........................................... 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
EXPERTS................................................................... 4
PERFORMANCE INFORMATION................................................... 4
FINANCIAL STATEMENTS...................................................... 7
<PAGE>
VARIFLEX EXTRA CREDIT VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: MAY 1, 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 May 1, 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
EXPERTS.................................................................... 4
PERFORMANCE INFORMATION.................................................... 4
FINANCIAL STATEMENTS....................................................... 7
<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.
EXPERTS
The consolidated financial statements for 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
for the Separate Account at December 31, 1999 and for each of the two year
periods in the period ended December 31, 1999, appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing on page 8 herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of the Separate Account, including
the yield and total return of all Subaccounts, may appear in advertisements,
reports, and promotional literature provided to current or prospective Owners.
Quotations of yield for the 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, 1999, the yield for the Money Market
Subaccount was 4.02% and the effective yield was 4.10%.
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 any credit enhancement and the
deduction of the account administration, 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 the High Yield Subaccount, and
the Small Cap Growth 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
- --------------------------------------------------------------------------------
Equity Series 4.04% 17.98% 20.86%(1)
Large Cap Value Series (2.43)% 9.09% 13.54%(1)
Global Series (2.98)% 23.31% 20.31%(1)
Diversified Income Series (7.83)% 2.18% 3.16%(1)
Enhanced Index Series 14.58%(6) --- ---
International Series 44.67%(6) --- ---
Mid Cap Growth Series 59.14% 29.93% 25.48%(1)
Global Strategic Income Series (3.06)% 2.16% 5.39%(2)
Global Total Return Series 10.01% 8.69% 9.74%(2)
Managed Asset Allocation Series 5.65% 13.12% 10.56%(2)
Equity Income Series (1.07)% 10.62% 14.44%(2)
High Yield Series (2.99)% 4.36%(3) 5.60%(3)
Social Awareness Series 13.29% 21.30% 21.34%(1)
Mid Cap Value Series 15.10% 22.51%(4) ---
Small Cap Growth Series 85.20% 35.06%(5) ---
Select 25 Series 33.56%(6) --- ---
- --------------------------------------------------------------------------------
1. From April 4, 1995 (Subaccount date of inception) to December 31, 1999.
2. From June 1, 1995 (Subaccount date of inception) to December 31, 1999.
3. From August 5, 1996 (Subaccount date of inception) to December 31, 1999.
4. From May 1, 1997 (Subaccount date of inception) to December 31, 1999.
5. From October 15, 1997 (Subaccount date of inception) to December 31, 1999.
6. From May 3, 1999 (Subaccount date of inception) to December 31, 1999.
- --------------------------------------------------------------------------------
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 1999 through 1989, the total return for each
Subaccount was the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Subaccount......... 6.62% 23.63% 26.93% 20.99% 34.83% (2.97)% 12.11% 9.62% 34.15% (11.05)%
Large Cap Value
Subaccount.............. 0.41% 6.01% 24.80% 16.54% 28.28% (4.35)% 8.04% 4.81% 35.81% (5.74)%
Money Market Subaccount... 3.12% 3.69% 3.73% 3.57% 3.92% 2.26% 1.14% 1.80% 4.18% 6.32%
Global Subaccount......... 51.52% 18.44% 4.91% 15.85% 9.28% 1.36% 29.85% (3.99)% 2.99%(1) ---
Diversified Income
Subaccount.............. (5.13)% 6.52% 8.49% (2.16)% 17.01% (8.26)% 11.03% 6.01% 15.24% 5.31%
Enhanced Index Subaccount. 11.30%(8) --- --- --- --- --- --- --- --- ---
International Subaccount.. 28.80%(8) --- --- --- --- --- --- --- --- ---
Mid Cap Growth Subaccount. 59.61% 16.31% 18.28% 16.40% 17.84% (6.49)% 12.05% 24.42%(2) --- ---
Global Strategic
Income Subaccount....... (0.23)% 5.39% 3.93% 12.09% 6.70%(3) --- --- --- --- ---
Global Total
Return Subaccount....... 12.37% 11.10% 4.68% 12.62% 6.20%(3) --- --- --- --- ---
Managed Asset
Allocation Subaccount... 8.18% 16.79% 16.72% 11.28% 6.40%(3) --- --- --- --- ---
Equity Income Subaccount.. 1.71% 7.48% 26.56% 18.35% 16.10%(3) --- --- --- --- ---
High Yield Subaccount..... (0.16)% 4.39% 11.70% 6.00%(4) --- --- --- --- --- ---
Social Awareness
Subaccount.............. 15.52% 29.62% 20.94% 17.12% 25.98% (5.14)% 10.40% 14.70% 4.53%(5) ---
Mid Cap Value Subaccount.. 17.26% 14.91% 30.10%(6) --- --- --- --- --- --- ---
Small Cap Growth
Subaccount.............. 84.29% 9.95% (4.50)%(7) --- --- --- --- --- --- ---
Select 25 Subaccount...... 22.50%(8) --- --- --- --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1. On May 1, 1991 the Global 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.
8. From May 3, 1999 to December 31, 1999.
</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 stockholder 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>
Variable Annuity Account VIII
Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
PAGE
Report of Independent Auditors........................................... 9
Audited Financial Statements
Balance Sheet.......................................................... 10
Statements of Operations and Changes in Net Assets..................... 12
Notes to Financial Statements.......................................... 14
<PAGE>
Report of Independent Auditors
The Contract Owners of Variable Annuity Account VIII and the
Board of Directors of Security Benefit Life Insurance Company
We have audited the accompanying individual and combined balance sheets of
Variable Annuity Account VIII (comprised of the individual series as indicated
therein) as of December 31, 1999, and the related statements of operations and
changes in net assets for each of the two years in the period then ended, except
for those individual series operating for portions of such periods as disclosed
in the financial statements. These financial statements are the responsibility
of Security Benefit Life Insurance Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of December 31, 1999,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
individual series of Variable Annuity Account VIII at December 31, 1999, and the
individual and combined results of their operations and changes in their net
assets for the periods described above in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
February 4, 2000
<PAGE>
Variable Annuity Account VIII
Balance Sheets
December 31, 1999
(DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 3,931,698 shares at net
asset value of $35.51 per share (cost, $131,345)............... $139,615
Series B (Growth-Income Series) - 2,535,426 shares at
net asset value of $24.39 per share (cost, $70,213)............ 61,840
Series C (Money Market Series) - 2,529,840 shares at
net asset value of $12.04 per share (cost, $31,580)............ 30,460
Series D (Worldwide Equity Series) - 7,291,536 shares
at net asset value of $9.08 per share (cost, $50,226).......... 66,207
Series E (High Grade Income Series) - 3,138,393 shares
at net asset value of $10.55 per share (cost, $36,564)......... 33,110
Series J (Mid Cap Series) - 1,795,683 shares at net
asset value of $30.15 per share (cost, $39,517)................ 54,140
Series K (Global Strategic Income Series) - 431,332 shares
at net asset value of $9.61 per share (cost, $4,306)........... 4,145
Series M (Global Total Return Series) - 1,069,288 shares
at net asset value of $13.09 per share (cost, $13,392)......... 13,997
Series N (Managed Asset Allocation Series) - 2,577,097 shares
at net asset value of $16.94 per share (cost, $40,294)......... 43,656
Series O (Equity Income Series) - 3,754,724 shares at
net asset value of $17.27 per share (cost, $67,179)............ 64,844
Series P (High Yield Series) - 877,852 shares at net
asset value of $15.51 per share (cost, $14,865)................ 13,616
Series S (Social Awareness Series) - 1,422,593 shares at
net asset value of $31.71 per share (cost, $40,819)............ 45,110
Series V (Value Series) - 1,755,522 shares at net
asset value of $16.73 per share (cost, $26,599)................ 29,370
Series X (Small Cap Series) - 955,125 shares at net
asset value of $19.40 per share (cost, $13,468)................ 18,529
Series H (Enhanced Index Series) - 524,023 shares at
net asset value of $11.15 per share (cost, $5,450)............. 5,843
Series I (International Series) - 129,020 shares at
net asset value of $13.00 per share (cost, $1,382)............. 1,677
Series Y (Select 25 Series) - 1,007,296 shares at net
asset value of $12.37 per share (cost, $11,315)................ 12,460
-------
Combined assets...................................................... $638,619
=======
<PAGE>
NUMBER UNIT
OF UNITS VALUE AMOUNT
-----------------------------
NET ASSETS
Net assets are represented by
(NOTE 3):
Growth Series:
Accumulation units................. 5,225,093 $26.71 $139,589
Annuity units...................... 990 26.71 26 $139,615
-------
Growth-Income Series:
Accumulation units................. 3,145,165 19.65 61,815
Annuity units...................... 1,250 19.65 25 61,840
-------
Money Market Series:
Accumulation units................. 2,554,229 11.89 30,375
Annuity units...................... 7,193 11.89 85 30,460
-------
Worldwide Equity Series:
Accumulation units................. 2,659,740 24.88 66,188
Annuity units...................... 786 24.88 19 66,207
-------
High Grade Income Series:
Accumulation units................. 2,665,337 12.40 33,054
Annuity units...................... 4,505 12.40 56 33,110
-------
Mid Cap Series:
Accumulation units................. 1,782,076 30.38 54,140
Global Strategic Income Series:
Accumulation units................. 316,616 13.07 4,138
Annuity units...................... 511 13.07 7 4,145
-------
Global Total Return Series:
Accumulation units................. 891,708 15.63 13,936
Annuity units...................... 3,898 15.63 61 13,997
-------
Managed Asset Allocation Series:
Accumulation units................. 2,496,544 17.46 43,597
Annuity units...................... 3,351 17.46 59 43,656
--------
Equity Income Series:
Accumulation units................. 3,406,579 19.00 64,733
Annuity units...................... 5,858 19.00 111 64,844
-------
High Yield Series:
Accumulation units................. 1,097,807 12.35 13,553
Annuity units...................... 5,082 12.35 63 13,616
-------
Social Awareness Series:
Accumulation units................. 1,693,412 26.64 45,110
Value Series:
Accumulation units................. 1,674,949 17.53 29,354
Annuity units...................... 915 17.53 16 29,370
-------
Small Cap Series:
Accumulation units................. 955,644 19.39 18,529
Enhanced Index Series:
Accumulation units................. 525,132 11.13 5,843
International Series:
Accumulation units................. 130,239 12.88 1,677
Select 25 Series:
Accumulation units................. 1,016,866 12.25 12,460
-------
Combined net assets.................. $638,619
=======
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
Variable Annuity Account VIII
Statements of Operations and Changes in Net Assets
Year ended December 31, 1999 (except as noted)
(IN THOUSANDS)
<CAPTION>
HIGH GLOBAL GLOBAL MANAGED
GROWTH- MONEY WORLDWIDE GRADE STRATEGIC TOTAL ASSET
GROWTH INCOME MARKET EQUITY INCOME MID CAP INCOME RETURN ALLOCATION
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions. $ 962 $ 1,317 $ 2,657 $ --- $ 3,984 $ --- $ --- $ 481 $ 1,415
Expenses (NOTE 2):
Mortality and expense
risk fee........... (1,610) (821) (412) (560) (439) (408) (54) (175) (494)
Administrative fee... (193) (99) (49) (67) (53) (49) (6) (20) (59)
----------------------------------------------------------------------------------------------------------
Net investment
income (loss)........ (841) 397 2,196 (627) 3,492 (457) (60) 286 862
Capital gains
distributions........ 3,951 22,439 --- 6,029 --- 5,129 29 1,066 ---
Realized gain (loss)
on investments....... 9,542 (15,786) 133 1,955 (1,114) 1,439 (156) 120 2,380
Unrealized appreciation
(depreciation) on
investments.......... (4,690) (7,171) (1,294) 13,769 (4,171) 11,755 163 140 (104)
----------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investments 8,803 (518) (1,161) 21,753 (5,285) 18,323 36 1,326 2,276
----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations........... 7,962 (121) 1,035 21,126 (1,793) 17,866 (24) 1,612 3,138
Net assets at beginning
of year.............. 119,792 61,973 24,170 37,711 31,584 27,973 4,786 14,854 31,197
Variable annuity
deposits
(NOTES 2 AND 3)...... 96,312 24,141 131,833 30,389 21,282 35,584 1,038 2,288 19,578
Terminations and
withdrawals
(NOTES 2 AND 3)...... (84,430) (24,103) (126,576) (23,007) (17,926) (27,263) (1,654) (4,742) (10,217)
Annuity payments
(NOTES 2 AND 3)...... (21) (50) (2) (12) (40) (20) (1) (18) (43)
Mortality adjustment... --- --- --- --- 3 --- --- 3 3
----------------------------------------------------------------------------------------------------------
Net assets at
end of year.......... $139,615 $ 61,840 $ 30,460 $ 66,207 $ 33,110 $ 54,140 $ 4,145 $13,997 $ 43,656
==========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY HIGH SOCIAL SMALL ENHANCED
INCOME YIELD AWARENESS VALUE CAP INDEX INTERNATIONAL SELECT 25
SERIES SERIES SERIES SERIES SERIES SERIES* SERIES* SERIES* COMBINED
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions. $ 2,166 $ 1,145 $ 198 $ 90 $ 7 $ 20 $ --- $ --- $ 14,442
Expenses (NOTE 2):
Mortality and expense
risk fee........... (870) (172) (470) (276) (76) (18) (5) (37) (6,897)
Administrative fee... (104) (21) (56) (33) (9) (2) (1) (5) (826)
----------------------------------------------------------------------------------------------------------
Net investment
income (loss)........ 1,192 952 (328) (219) (78) --- (6) (42) 6,719
Capital gains
distributions........ 3,569 80 1,275 1,081 466 19 --- --- 45,133
Realized gain (loss)
on investments....... 2,885 (317) 4,221 1,038 917 39 26 234 7,556
Unrealized appreciation
(depreciation)
on investments....... (6,512) (759) 401 1,651 4,782 393 295 1,145 9,793
----------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investments (58) (996) 5,897 3,770 6,165 451 321 1,379 62,482
----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations........... 1,134 (44) 5,569 3,551 6,087 451 315 1,337 69,201
Net assets at
beginning of year.... 66,740 11,754 26,286 16,615 2,949 --- --- --- 478,384
Variable annuity
deposits
(NOTES 2 AND 3)...... 22,974 10,480 31,982 16,203 12,402 6,184 1,515 12,364 476,549
Terminations and
withdrawals
(NOTES 2 AND 3)...... (25,943) (8,563) (18,717) (6,983) (2,909) (792) (153) (1,241) (385,219)
Annuity payments
(NOTES 2 AND 3)...... (64) (11) (10) (16) --- --- --- --- (308)
Mortality adjustment... 3 --- --- --- --- --- --- --- 12
----------------------------------------------------------------------------------------------------------
Net assets at
end of year.......... $ 64,844 $13,616 $ 45,110 $29,370 $18,529 $5,843 $1,677 $12,460 $ 638,619
==========================================================================================================
</TABLE>
*For the period May 3, 1999 (inception date) through December 31, 1999
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
Variable Annuity Account VIII
Statements of Operations and Changes in Net Assets
Year ended December 31, 1998
(IN THOUSANDS)
<CAPTION>
HIGH GLOBAL GLOBAL
GROWTH- MONEY WORLDWIDE GRADE STRATEGIC TOTAL
GROWTH INCOME MARKET EQUITY INCOME MID CAP INCOME RETURN
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions. $ 440 $ 917 $ 984 $ 405 $ 1,364 $ 151 $ 454 $ 327
Expenses (NOTE 2):
Mortality and expense
risk fee.................. (1,133) (733) (327) (402) (319) (297) (64) (196)
Administrative fee.......... (141) (88) (39) (48) (38) (36) (8) (24)
---------------------------------------------------------------------------------------------------
Net investment income (loss).. (834) 96 618 (45) 1,007 (182) 382 107
Capital gains distributions... 5,587 5,825 --- 2,317 --- 2,528 83 817
Realized gain (loss)
on investments.............. 5,998 1,868 264 (468) 36 104 (247) 864
Unrealized appreciation
(depreciation) on
investments................. 9,164 (4,998) 58 3,458 493 1,426 19 (64)
---------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments.. 20,749 2,695 322 5,307 529 4,058 (145) 1,617
---------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations... 19,915 2,791 940 5,262 1,536 3,876 237 1,724
Net assets at
beginning of year........... 69,897 47,476 19,499 25,462 19,711 20,200 4,754 18,219
Variable annuity deposits
(NOTES 2 AND 3)............. 81,141 28,688 96,514 22,634 27,927 22,014 3,045 3,260
Terminations and withdrawals
(NOTES 2 AND 3)............. (51,154) (16,975) (92,783) (15,647) (17,584) (18,116) (3,247) (8,344)
Annuity payments
(NOTES 2 AND 3)............. (7) (7) --- --- (3) (1) (3) (1)
Mortality adjustment.......... --- --- --- --- (3) --- --- (4)
---------------------------------------------------------------------------------------------------
Net assets at end of year..... $119,792 $ 61,973 $ 24,170 $ 37,711 $ 31,584 $ 27,973 $ 4,786 $14,854
===================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MANAGED
ASSET EQUITY HIGH SOCIAL SMALL
ALLOCATION INCOME YIELD AWARENESS VALUE CAP
SERIES SERIES SERIES SERIES SERIES SERIES COMBINED
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions................ $ 331 $ 847 $ 872 $ 32 $ 71 $ 1 $ 7,196
Expenses (NOTE 2):
Mortality and expense risk fee...... (296) (790) (100) (190) (138) (17) (5,002)
Administrative fee.................. (35) (95) (12) (23) (17) (2) (606)
-------------------------------------------------------------------------------------------
Net investment income (loss).......... --- (38) 760 (181) (84) (18) 1,588
Capital gains distributions........... 207 2,049 76 348 316 - 20,153
Realized gain (loss) on investments... 1,621 6,030 (9) 1,082 201 (9) 17,335
Unrealized appreciation
(depreciation) on investments....... 1,886 (3,784) (533) 3,200 1,002 276 11,603
-------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments.......... 3,714 4,295 (466) 4,630 1,519 267 49,091
-------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations........... 3,714 4,257 294 4,449 1,435 249 50,679
Net assets at beginning of year....... 16,746 54,159 3,747 9,621 4,848 241 314,580
Variable annuity deposits
(NOTES 2 AND 3)..................... 16,210 29,699 12,360 17,562 12,363 2,785 376,202
Terminations and withdrawals
(NOTES 2 AND 3)..................... (5,468) (21,370) (4,645) (5,346) (2,029) (326) (263,034)
Annuity payments (NOTES 2 AND 3)...... (2) (2) (2) --- (2) --- (30)
Mortality adjustment.................. (3) (3) --- --- --- --- (13)
-------------------------------------------------------------------------------------------
Net assets at end of year............. $31,197 $ 66,740 $11,754 $26,286 $16,615 $2,949 $ 478,384
===========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Variable Annuity Account VIII
Notes to Financial Statements
December 31, 1999 and 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Variable Annuity Account VIII (the Account) is a separate
account of Security Benefit Life Insurance Company (SBL). The Account is
registered as a unit investment trust under the Investment Company Act of
1940, as amended. Deposits received by the Account are invested in the SBL
Fund, a mutual fund not otherwise available to the public. As directed by
the owners, amounts deposited may be invested in shares of Series A (Growth
Series - emphasis on capital appreciation), Series B (Growth-Income Series -
emphasis on capital appreciation with secondary emphasis on income), Series
C (Money Market Series - emphasis on capital preservation while generating
interest income), Series D (Worldwide Equity Series - emphasis on long-term
capital growth through investment in foreign and domestic common stocks and
equivalents), Series E (High Grade Income Series - emphasis on current
income with security of principal), Series J (Mid Cap Series - emphasis on
capital appreciation), Series K (Global Strategic Income Series - emphasis
on high current income with secondary emphasis on capital appreciation),
Series M (Global Total Return Series - emphasis on high total return
consisting of capital appreciation and current income), Series N (Managed
Asset Allocation Series - emphasis on high level of total return), Series O
(Equity Income Series - emphasis on substantial dividend income and capital
appreciation), Series P (High Yield Series - emphasis on high current income
with secondary emphasis on capital appreciation through investment in higher
yielding, higher risk debt securities), Series S (Social Awareness Series -
emphasis on capital appreciation), Series V (Value Series - emphasis on
long-term growth of capital), Series X (Small Cap Series - emphasis on
long-term growth of capital), Series H (Enhanced Index Series - emphasis on
capital appreciation consistent with performance of the Standard & Poor's
500 Composite Index), Series I (International Series - emphasis on long-term
capital appreciation from investment in foreign equity securities) and
Series Y (Select 25 Series - emphasis on long-term capital appreciation from
a concentration of 20 to 30 common stocks). During 1999, The former Emerging
Growth Series, Global Aggressive Bond Series and Specialized Asset
Allocation Series were renamed Mid Cap Series, Global Strategic Income
Series and Global Total Return Series, respectively.
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual fund are made by Security Management Company, LLC
(SMC), a limited liability company controlled by its members, SBL and
Security Benefit Group, Inc., a wholly-owned subsidiary of SBL.
SMC has engaged T. Rowe Price Associates, Inc. to provide sub-advisory
services for the Managed Asset Allocation Series and the Equity Income
Series; Strong Capital Management, Inc. to provide sub-advisory services for
the Small Cap Series; Oppenheimer Funds, Inc. to provide sub-advisory
services for the Worldwide Equity Series; and Banker's Trust Company to
provide sub-advisory services for the Enhanced Index Series and the
International Series. Meridian Investment Management Corporation (Meridian)
served as sub-advisor for the Global Strategic Income Series and the Global
Total Return Series until May 15, 1999, when Meridian was replaced by
Wellington Management.
INVESTMENT VALUATION -- Investments in mutual fund shares are carried in the
balance sheet at market value (net asset value of the underlying mutual
fund). The first-in, first-out cost method is used to determine gains and
losses. Security transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold for the
year ended December 31 were as follows:
1999 1998
-----------------------------------------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
-----------------------------------------------
(IN THOUSANDS)
Growth Series............. $110,294 $95,323 $94,708 $59,975
Growth-Income Series...... 51,329 28,505 39,563 21,936
Money Market Series....... 46,835 39,384 6,261 1,912
Worldwide Equity Series... 38,609 25,837 28,719 19,460
High Grade Income Series.. 27,128 20,320 32,178 20,831
Mid Cap Series............ 43,340 30,367 26,358 20,115
Global Strategic
Income Series........... 1,176 1,824 4,204 3,944
Global Total Return Series 4,004 5,125 5,037 9,198
Managed Asset
Allocation Series....... 23,307 13,127 18,300 7,353
Equity Income Series...... 31,491 29,763 35,664 25,326
High Yield Series......... 12,251 9,312 14,705 6,157
Social Awareness Series... 36,615 22,413 19,191 6,808
Value Series.............. 18,676 8,611 13,581 3,016
Small Cap Series.......... 13,575 3,694 3,023 581
Enhanced Index Series..... 6,451 1,040 --- ---
International Series...... 1,558 202 --- ---
Select 25 Series.......... 12,962 1,881 --- ---
ANNUITY RESERVES -- Annuity reserves relate to contracts that have matured
and are in the payout stage. Such reserves are computed on the basis of
published mortality tables using assumed interest rates that will provide
reserves as prescribed by law. In cases where the payout option selected is
life contingent, SBL periodically recalculates the required annuity
reserves, and any resulting adjustment is either charged or credited to SBL
and not to the Account.
REINVESTMENT OF DIVIDENDS -- Dividend and capital gains distributions paid
by the mutual fund to the Account are reinvested in additional shares of
each respective series. Dividend income and capital gains distributions are
recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES -- The operations of the Account are a part of the
operations of SBL. Under current law, no federal income taxes are allocated
by SBL to the operations of the Account.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
SBL deducts an administrative fee equivalent to an annual rate of 0.15% of
the average daily net asset value of each account. Mortality and expense
risks assumed by SBL are compensated for by a fee equivalent to an annual
rate of 1.25% of the net asset value of each contract, of which 0.7% is for
assuming mortality risks and the remainder is for assuming expense risks.
When applicable, an amount for state premium taxes is deducted as provided
by pertinent state law either from the purchase payments or from the amount
applied to effect an annuity at the time annuity payments commence.
UNITS
----------------
YEAR ENDED
DECEMBER 31
1999 1998
----------------
(IN THOUSANDS)
Growth Series:
Variable annuity deposits............................ 3,779 3,638
Terminations, withdrawals and expense charges........ 3,333 2,308
Growth-Income Series:
Variable annuity deposits............................ 1,166 1,482
Terminations, withdrawals and expense charges........ 1,184 889
Money Market Series:
Variable annuity deposits............................ 11,277 8,530
Terminations, withdrawals and expense charges........ 10,815 8,185
Worldwide Equity Series:
Variable annuity deposits............................ 1,632 1,485
Terminations, withdrawals and expense charges........ 1,266 1,025
High Grade Income Series:
Variable annuity deposits............................ 1,677 2,189
Terminations, withdrawals and expense charges........ 1,424 1,379
Mid Cap Series:
Variable annuity deposits............................ 1,636 1,322
Terminations, withdrawals and expense charges........ 1,323 1,087
Global Strategic Income Series:
Variable annuity deposits............................ 81 241
Terminations, withdrawals and expense charges........ 129 258
Global Total Return Series:
Variable annuity deposits............................ 158 240
Terminations, withdrawals and expense charges........ 331 626
Managed Asset Allocation Series:
Variable annuity deposits............................ 1,181 1,084
Terminations, withdrawals and expense charges........ 615 364
Equity Income Series:
Variable annuity deposits............................ 1,177 1,641
Terminations, withdrawals and expense charges........ 1,336 1,187
High Yield Series:
Variable annuity deposits............................ 841 1,015
Terminations, withdrawals and expense charges........ 689 380
Social Awareness Series:
Variable annuity deposits............................ 1,316 875
Terminations, withdrawals and expense charges........ 764 276
Value Series:
Variable annuity deposits............................ 1,002 886
Terminations, withdrawals and expense charges........ 437 148
Small Cap Series:
Variable annuity deposits............................ 906 292
Terminations, withdrawals and expense charges........ 231 36
Enhanced Index Series:
Variable annuity deposits............................ 600 ---
Terminations, withdrawals and expense charges........ 75 ---
International Series:
Variable annuity deposits............................ 144 ---
Terminations, withdrawals and expense charges........ 14 ---
Select 25 Series:
Variable annuity deposits............................ 1,126 ---
Terminations, withdrawals and expense charges........ 109 ---
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
CONTENTS
PAGE
Report of Independent Auditors........................................... 18
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................ 19
Consolidated Statements of Income...................................... 20
Consolidated Statements of Changes in Stockholder's Equity............. 21
Consolidated Statements of Cash Flows.................................. 22
Notes to Consolidated Financial Statements............................. 24
<PAGE>
Report of Independent Auditors
The Board of Directors
Security Benefit Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security Benefit
Life Insurance Company and Subsidiaries (the Company), an indirect wholly-owned
subsidiary of Security Benefit Mutual Holding Company, as of December 31, 1999
and 1998, and the related consolidated statements of income, changes in
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Life Insurance Company and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
February 4, 2000
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(IN THOUSANDS)
DECEMBER 31
ASSETS 1999 1998
Investments: --------------------------
Securities available-for-sale:
Fixed maturities................................ $2,292,899 $2,142,032
Equity securities............................... 302,613 158,291
Fixed maturities held-to-maturity................. 157,772 264,283
Equity securities, trading........................ 14,925 10,917
Mortgage loans.................................... 23,468 57,400
Real estate....................................... 834 2,875
Policy loans...................................... 91,800 88,385
Cash.............................................. 17,785 28,419
Short-term investments............................ 18,002 ---
Other invested assets............................. 28,139 16,728
--------------------------
Total investments................................... 2,948,237 2,769,330
Accrued investment income........................... 35,288 31,740
Accounts receivable................................. 35,175 20,373
Reinsurance recoverable............................. 413,146 407,891
Property and equipment, net......................... 9,342 20,869
Deferred policy acquisition costs................... 227,415 168,483
Other assets........................................ 18,452 17,381
Separate account assets............................. 5,051,367 4,416,194
--------------------------
$8,738,422 $7,852,261
==========================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy reserves and annuity account values........ $2,958,813 $2,699,894
Policy and contract claims........................ 7,350 9,768
Other policyholder funds.......................... 19,878 20,496
Accounts payable and accrued expenses............. 57,668 47,168
Income taxes payable.............................. 27,812 24,622
Deferred income tax liability..................... 35,828 60,724
Long-term debt and other borrowings............... 55,000 60,000
Other liabilities................................. 17,457 14,276
Separate account liabilities...................... 5,051,367 4,416,194
--------------------------
Total liabilities................................... 8,231,173 7,353,142
Stockholder's equity:
Common stock, $10 par value; 1,000,000 shares
authorized; 700,010 issued and outstanding...... 7,000 7,000
Accumulated other comprehensive income (loss), net (31,221) 30,100
Retained earnings................................. 531,470 462,019
--------------------------
Total stockholder's equity.......................... 507,249 499,119
--------------------------
$8,738,422 $7,852,261
==========================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Income
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------
<S> <C> <C> <C>
Revenues:
Insurance premiums and other considerations......... $ 23,721 $ 24,187 $ 24,640
Net investment income............................... 197,460 174,787 185,629
Asset based fees.................................... 102,643 88,721 72,025
Other product charges............................... 9,156 7,749 9,163
Realized gains ..................................... 10,232 5,414 5,495
Other revenues...................................... 17,965 17,307 21,389
-------------------------------
Total revenues........................................ 361,177 318,165 318,341
Benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances............. 113,119 94,552 102,640
Benefit claims in excess of account balances...... 2,384 4,662 4,985
Traditional life insurance benefits................. 13,784 12,617 17,472
Supplementary contract payments..................... 7,971 9,694 9,660
Increase (decrease) in traditional life reserves.... (2,286) 1,699 7,050
Other benefits...................................... 15,138 13,227 7,801
-------------------------------
Total benefits........................................ 150,110 136,451 149,608
Commissions and other operating expenses.............. 80,661 65,890 60,796
Amortization of deferred policy acquisition costs..... 27,387 25,447 26,179
Interest expense...................................... 4,765 5,075 5,305
Other expenses........................................ 4,815 3,354 3,381
-------------------------------
Total benefits and expenses........................... 267,738 236,217 245,269
-------------------------------
Income before income taxes............................ 93,439 81,948 73,072
Income taxes.......................................... 23,988 22,361 21,567
-------------------------------
Net income............................................ $ 69,451 $ 59,587 $ 51,505
===============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMMON COMPREHENSIVE RETAINED
STOCK INCOME (LOSS) EARNINGS TOTAL
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.... $ --- $ (479) $357,927 $357,448
Comprehensive income:
Net income.................. --- --- 51,505 51,505
Unrealized gains, net....... --- 25,928 --- 25,928
--------
Comprehensive income.......... 77,433
--------------------------------------------------------
Balance at December 31, 1997.... --- 25,449 409,432 434,881
Common stock issued........... 7,000 --- (7,000) ---
Comprehensive income:
Net income.................. --- --- 59,587 59,587
Unrealized gains, net....... --- 4,651 --- 4,651
--------
Comprehensive income.......... 64,238
--------------------------------------------------------
Balance at December 31, 1998.... 7,000 30,100 462,019 499,119
Comprehensive income:
Net income.................. --- --- 69,451 69,451
Unrealized losses, net...... --- (61,321) --- (61,321)
--------
Comprehensive income.......... 8,130
--------------------------------------------------------
Balance at December 31, 1999.... $7,000 $(31,221) $531,470 $507,249
========================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................................................................... $ 69,451 $ 59,587 $ 51,505
Adjustments to reconcile net income to net cash provided by operating activities:
Annuity and interest sensitive life products:
Interest credited to account balances.......................................... 113,119 94,552 102,640
Charges for mortality and administration....................................... --- (297) (10,582)
Increase (decrease) in traditional life policy reserves.......................... (2,286) 1,699 (3,101)
(Increase) decrease in accrued investment income................................. (3,548) (1,706) 2,127
Policy acquisition costs deferred................................................ (41,592) (34,068) (37,999)
Policy acquisition costs amortized............................................... 27,387 25,447 26,179
Accrual of discounts on investments.............................................. (2,257) (2,708) (2,818)
Amortization of premiums on investments.......................................... 4,962 8,452 9,138
Depreciation and amortization.................................................... 4,901 4,441 3,959
Realized gains................................................................... (10,232) (5,414) (5,495)
Other............................................................................ (8,775) 16,078 (1,451)
----------------------------------------
Net cash provided by operating activities.......................................... 151,130 166,063 134,102
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities available-for-sale.............................................. 349,219 436,773 368,901
Fixed maturities held-to-maturity................................................ 107,475 157,729 124,013
Equity securities available-for-sale............................................. 60,578 13,293 48,495
Mortgage loans................................................................... 35,239 8,924 3,739
Real estate...................................................................... --- --- 946
Separate account assets.......................................................... --- --- 9,180
Other invested assets............................................................ 2,882 2,929 7,865
----------------------------------------
555,393 619,648 563,139
Acquisition of investments:
Fixed maturities available-for-sale.............................................. (653,078) (878,753) (219,736)
Fixed maturities held-to-maturity................................................ (964) (1,287) (1,188)
Equity securities, available-for-sale............................................ (179,916) (42,641) (67,004)
Net purchases of equity securities, trading...................................... (1,879) (520) (1,498)
Mortgage loans................................................................... (1,132) (2,054) (1,447)
Real estate...................................................................... (166) (756) (712)
Increase in short-term investments, net.......................................... (17,994) --- ---
Other invested assets............................................................ (12,947) (7,441) (7,518)
----------------------------------------
(868,076) (933,452) (299,103)
Purchase of property and equipment................................................. (2,025) (4,617) (4,144)
Proceeds from sales of property and equipment...................................... 20,750 --- ---
Net increase in policy loans....................................................... (3,415) (2,627) (8,654)
Net cash transferred per coinsurance agreement..................................... --- --- (218,043)
----------------------------------------
Net cash provided by (used in) investing activities................................ (297,373) (321,048) 33,195
</TABLE>
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Repayment of long-term debt and other borrowings................................... $ (5,000) $ (5,000) $ ---
Annuity and interest sensitive life products:
Deposits credited to account balances............................................ 969,280 475,522 167,517
Withdrawals from account balances................................................ (828,671) (318,014) (312,228)
----------------------------------------
Net cash provided by (used in) financing activities................................ 135,609 152,508 (144,711)
----------------------------------------
Increase (decrease) in cash........................................................ (10,634) (2,477) 22,586
Cash at beginning of year.......................................................... 28,419 30,896 8,310
----------------------------------------
Cash at end of year................................................................ $ 17,785 $ 28,419 $ 30,896
========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................................................... $ 4,765 $ 5,443 $ 5,307
========================================
Income taxes..................................................................... $ 25,019 $ 8,269 $ 27,920
========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND ORGANIZATION -- The operations of Security Benefit
Life Insurance Company (SBL or the Company) consist primarily of marketing
and distributing annuities, mutual funds, life insurance and related
products throughout the United States. The Company and/or its subsidiaries
offer a diversified portfolio of investment products comprised primarily of
individual and group annuities and mutual fund products through multiple
distribution channels. In recent years, the Company's new business
activities increasingly have been concentrated in the individual flexible
premium variable annuity markets.
On July 31, 1998, the Company converted from a mutual life insurance
company to a stock life insurance company under a mutual holding company
structure pursuant to a Plan of Conversion (the Conversion). In connection
with the Conversion, Security Benefit Corp. (SBC), a Kansas domiciled
intermediate stock holding company, and Security Benefit Mutual Holding
Company (SBMHC), a Kansas domiciled mutual holding company, were formed. On
the same date, all of the initial shares of common stock of SBL, except for
shares issued to SBL Directors in accordance with Kansas law, were issued
to SBC. In addition, all of the initially issued shares of common stock of
SBC, consisting of 1,000 shares of Class B common stock, were issued to
SBMHC. As a result of the Conversion, SBMHC indirectly owned, through its
ownership of SBC, all of the issued and outstanding common stock of SBL
(except shares required by law to be held by SBL Directors). In accordance
with Kansas law, SBMHC must at all times hold at least 51% of the voting
stock of SBC.
BASIS OF PRESENTATION-- The consolidated financial statements include the
operations and accounts of the Company and its subsidiaries, including
Security Management Company, LLC and Security Benefit Group, Inc. (which
includes First Security Benefit Life Insurance and Annuity Company of New
York; Security Distributors, Inc.; Security Benefit Academy, Inc.; and
Security Financial Resources, Inc.). Significant intercompany transactions
have been eliminated in consolidation.
PENDING ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT -- The Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards
for derivative instruments, including certain derivatives embedded in other
contracts, and for hedging activities. SFAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative under SFAS No. 133 depends on the
intended use of the derivative and its hedging designation. The Company is
required to adopt SFAS No. 133 effective January 1, 2001. The Company does
not believe SFAS No. 133 will have a material impact on its results of
operations, liquidity or financial position.
USE OF ESTIMATES -- The preparation of consolidated financial statements
requires management to make estimates and assumptions that affect amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to
conform to the 1999 presentation.
INVESTMENTS -- Fixed maturities are classified as either held-to-maturity
or available-for-sale. Fixed maturities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities
to maturity. Held-to-maturity securities are stated at amortized cost,
adjusted for amortization of premiums and accrual of discounts. The Company
holds certain equity securities, classified as trading, which are related
to certain deferred compensation liabilities. These securities are stated
at fair value with the change in fair value reported as realized gains or
losses.
Fixed maturities not classified as held-to-maturity and equity securities
not classified as trading are classified as available-for-sale. Securities
available-for-sale are reported in the accompanying consolidated financial
statements at fair value. Any valuation changes resulting from changes in
the fair value of these securities are reflected as a component of
accumulated other comprehensive income or loss. These unrealized gains or
losses in accumulated other comprehensive income or loss are reported, net
of taxes and adjustments to deferred policy acquisition costs. Equity
securities are comprised of common stocks, preferred stocks and mutual
funds.
The amortized cost of fixed maturities is adjusted for amortization of
premiums and accrual of discounts. Premiums and discounts are recognized
over the estimated lives of the assets adjusted for prepayment activity.
Distributions from mutual funds are included in net investment income.
Realized gains and losses on sales of investments are recognized in
revenues on the specific-identification method.
Mortgage loans are reported at amortized cost. Real estate investments are
carried at the lower of depreciated cost or estimated realizable value.
Policy loans are reported at unpaid principal. Investments accounted for by
the equity method include investments in, and advances to, various joint
ventures and partnerships.
The operations of the Company are subject to risk resulting from interest
rate fluctuations to the extent that there is a difference between the
amount of the Company's interest-earning assets and the amount of
interest-bearing liabilities that are prepaid/withdrawn, mature or reprice
in specified periods. The principal objective of the Company's
asset/liability management activities is to provide maximum levels of net
investment income while maintaining acceptable levels of interest rate and
liquidity risk and while facilitating the funding needs of the Company. The
Company periodically may use derivative financial instruments to modify its
interest rate sensitivity to levels deemed to be appropriate based on the
Company's current economic outlook.
Such derivative financial instruments are for purposes other than trading
and are classified as available-for-sale. Accordingly, these instruments
are stated at fair value with the change in fair value reported as a
component of accumulated other comprehensive income.
Cash includes cash on hand, money market mutual funds and other investments
with initial maturities of less than 90 days.
Short-term investments are carried at market value and represent fixed
maturity securities with initial maturities of greater than 90 days but
less than one year.
DEFERRED POLICY ACQUISITION COSTS -- To the extent recoverable from future
policy revenues and gross profits, commissions and other policy-issue,
underwriting and marketing costs that are primarily related to the
acquisition or renewal of life insurance and deferred annuity business have
been deferred.
Traditional life insurance deferred policy acquisition costs are being
amortized in proportion to premium revenues over the premium-paying period
of the related policies using assumptions consistent with those used in
computing policy benefit reserves.
For interest sensitive life and deferred annuity business, deferred policy
acquisition costs are amortized in proportion to the present value
(discounted at the crediting rate) of expected gross profits from
investment, mortality and expense margins. That amortization is adjusted
retrospectively when estimates of current or future gross profits to be
realized from a group of products are revised. Deferred policy acquisition
costs are adjusted for the impact on estimated gross profits of net
unrealized gains and losses on securities.
PROPERTY AND EQUIPMENT -- Property and equipment, including home office
real estate, furniture and fixtures, and data-processing hardware and
related systems, are recorded at cost, less accumulated depreciation. The
provision for depreciation of property and equipment is computed using the
straight-line method over the estimated lives of the related assets. The
Company sold its home office building and furniture and equipment to the
state of Kansas on December 22, 1999 under a sale-leaseback agreement, see
NOTE 11.
SEPARATE ACCOUNTS -- The separate account assets and liabilities reported
in the accompanying balance sheets represent funds that are separately
administered for the benefit of contractholders who bear the investment
risk. The separate account assets and liabilities are carried at fair
value. Revenues and expenses related to separate account assets and
liabilities, to the extent of benefits paid or provided to the separate
account contractholders, are excluded from the amounts reported in the
consolidated statements of income. Investment income and gains or losses
arising from separate accounts accrue directly to the contractholders and,
therefore, are not included in investment earnings in the accompanying
statements of income. Revenues to the Company from the separate accounts
consist principally of contract maintenance charges, administrative fees,
and mortality and expense risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES -- Liabilities for future policy
benefits for traditional life products are computed using a net
level-premium method, including assumptions as to investment yields,
mortality and withdrawals, and other assumptions that approximate expected
experience.
Liabilities for future policy benefits for interest sensitive life and
deferred annuity products represent accumulated contract values without
reduction for potential surrender charges and deferred front-end contract
charges that are amortized over the life of the policy. Interest on
accumulated contract values is credited to contracts as earned. Crediting
rates ranged from 3.4% to 12.0% during 1999, from 3.4% to 8.0% during 1998
and from 3.8% to 7.25% during 1997.
INCOME TAXES -- Deferred income tax assets and liabilities are determined
based on differences between the financial reporting and income tax bases
of assets and liabilities and are measured using the enacted tax rates and
laws. Deferred income tax expenses or credits reflected in the Company's
statements of income are based on the changes in deferred tax assets or
liabilities from period to period (excluding unrealized gains and losses on
securities available-for-sale).
RECOGNITION OF REVENUES -- Traditional life insurance products include
whole life insurance, term life insurance and certain annuities. Premiums
for these traditional products are recognized as revenues when due.
Revenues from interest sensitive life insurance products and deferred
annuities consist of policy charges for the cost of insurance, policy
administration charges and surrender charges assessed against
contractholder account balances during the period.
FAIR VALUES OF FINANCIAL INSTRUMENTS -- The following methods and
assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturities are based on
quoted market prices if available. For fixed maturities not actively
traded, fair values are estimated using values obtained from independent
pricing services or estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality and
maturity of the investments. The fair values for equity securities are
based on quoted market prices.
Mortgage loans and policy loans: Fair values for mortgage loans and
policy loans are estimated using discounted cash flow analyses based on
market interest rates for similar loans to borrowers with similar credit
ratings. Loans with similar characteristics are aggregated for purposes
of the calculations. The carrying amounts reported in the consolidated
balance sheets approximate their fair values.
Investment-type contracts: Fair values for the Company's liabilities
under investment-type insurance contracts are estimated using the
assumption reinsurance method, whereby the amount of statutory profit
the assuming company would realize from the business is calculated.
Those amounts are then discounted at a rate of return commensurate with
the rate presently offered by the Company on similar contracts.
Long-term debt: Fair values for long-term debt are estimated using
discounted cash flow analyses based on current borrowing rates for
similar types of borrowing arrangements.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses,
and fair values, determined as set forth in NOTE 1, of the Company's
portfolio of fixed maturities and equity securities available-for-sale and
fixed maturities held-to-maturity at December 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE (IN THOUSANDS)
U.S. Treasury securities and obligations of
U.S. government corporations and agencies.......... $ 217,050 $ 95 $ 7,403 $ 209,742
Obligations of states and political subdivisions..... 24,094 203 567 23,730
Corporate securities................................. 1,152,870 2,503 66,602 1,088,771
Mortgage-backed securities........................... 806,045 659 32,402 774,302
Asset-backed securities.............................. 200,258 22 3,926 196,354
-------------------------------------------------------
Totals............................................... $2,400,317 $ 3,482 $110,900 $2,292,899
=======================================================
Equity securities.................................... $ 265,270 $42,998 $ 5,655 $ 302,613
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions..... $ 43,747 $ --- $ 1,202 $ 42,545
Corporate securities................................. 79,541 1,053 2,225 78,369
Mortgage-backed securities........................... 28,815 507 13 29,309
Asset-backed securities.............................. 5,669 --- 30 5,639
-------------------------------------------------------
Totals............................................... $ 157,772 $ 1,560 $ 3,470 $ 155,862
=======================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE (IN THOUSANDS)
U.S. Treasury securities and obligations of
U.S. government corporations and agencies.......... $ 204,414 $ 5,254 $ 8 $ 209,660
Obligations of states and political subdivisions..... 27,583 2,310 --- 29,893
Corporate securities................................. 1,073,925 34,920 10,716 1,098,129
Mortgage-backed securities........................... 628,020 12,530 2,550 638,000
Asset-backed securities.............................. 166,144 2,113 1,907 166,350
-------------------------------------------------------
Totals............................................... $2,100,086 $57,127 $15,181 $2,142,032
=======================================================
Equity securities.................................... $ 140,999 $18,271 $ 979 $ 158,291
=======================================================
HELD-TO-MATURITY
Obligations of states and political subdivisions..... $ 61,473 $ 3,196 $ --- $ 64,669
Corporate securities................................. 93,413 7,718 360 100,771
Mortgage-backed securities........................... 96,987 1,640 --- 98,627
Asset-backed securities.............................. 12,410 289 --- 12,699
-------------------------------------------------------
Totals............................................... $ 264,283 $12,843 $ 360 $ 276,766
=======================================================
</TABLE>
The following amounts were included in accumulated other comprehensive
income (loss) for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the year.... $(119,081) $12,700 $ 62,404
Less realized gains included in net income................... 10,232 5,414 5,495
-------------------------------------
Other comprehensive income (loss), before deferred taxes
and the unlocking of deferred policy acquisition costs..... (129,313) 7,286 56,909
Deferred income taxes, net of valuation allowance............ 23,069 (3,553) (15,113)
Unlocking of deferred policy acquisition costs............... 44,923 918 (15,868)
-------------------------------------
Other comprehensive income (loss), net....................... $ (61,321) $ 4,651 $ 25,928
=====================================
</TABLE>
The change in net unrealized holding gains on trading securities, which are
included in realized gains, was $2,172,000, $1,153,000 and $566,000 for
1999, 1998 and 1997, respectively.
The Company holds $74,356,000 of common stock of the Federal Home Loan Bank
of Topeka (FHLB), which is in excess of 10% of stockholder's equity of
December 31, 1999.
The amortized cost and fair value of fixed maturities at December 31, 1999,
by contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without penalties.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less................... $ 11,111 $ 11,128 $ 136 $ 139
Due after one year through five years..... 246,132 239,030 18,430 18,544
Due after five years through 10 years..... 619,779 587,670 43,946 42,617
Due after 10 years........................ 516,992 484,415 60,776 59,614
Mortgage-backed securities................ 806,045 774,302 28,815 29,309
Asset-backed securities................... 200,258 196,354 5,669 5,639
----------------------------------------------------
$2,400,317 $2,292,899 $157,772 $155,862
====================================================
</TABLE>
The composition of the Company's portfolio of fixed maturities by quality
rating at December 31, 1999 is as follows:
QUALITY RATING CARRYING AMOUNT %
------------------------------------------------------------
(IN THOUSANDS)
AAA............................ $1,069,041 43.6%
AA............................. 369,204 15.1
A.............................. 411,220 16.8
BBB............................ 397,162 16.2
Noninvestment grade............ 204,044 8.3
--------- -----
$2,450,671 100.0%
========= =====
Major categories of net investment income for the years ended December 31,
1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest on fixed maturities......................... $175,938 $154,529 $167,646
Dividends and distributions on equity securities..... 12,434 11,684 8,012
Interest on mortgage loans........................... 4,502 5,388 6,017
Interest on policy loans............................. 5,510 5,381 6,282
Interest on short-term investments................... 2,686 2,377 2,221
Other................................................ 597 865 (166)
-----------------------------------
Total investment income.............................. 201,667 180,224 190,012
Less investment expenses............................. 4,207 5,437 4,383
-----------------------------------
Net investment income................................ $197,460 $174,787 $185,629
===================================
</TABLE>
Proceeds from sales of fixed maturities and equity securities
available-for-sale and related realized gains and losses, including
valuation adjustments, for the years ended December 31, 1999, 1998 and 1997
are as follows:
1999 1998 1997
----------------------------------
(IN THOUSANDS)
Proceeds from sales................... $180,289 $196,849 $333,498
Gross realized gains.................. 9,857 9,801 11,889
Gross realized losses................. 5,674 4,939 6,640
Net realized gains, net of associated amortization of deferred policy
acquisition costs, for the years ended December 31, 1999, 1998 and 1997
consist of the following:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities............................................................ $ (751) $2,976 $ 861
Equity securities........................................................... 7,062 3,039 4,954
Gain on sale of home office building and furniture and equipment............ 4,173 --- ---
Other....................................................................... (56) (105) (320)
--------------------------------
10,428 5,910 5,495
Amortization of deferred policy acquisition costs........................... (196) (496) ---
--------------------------------
Net realized gains.......................................................... $10,232 $5,414 $5,495
================================
</TABLE>
There were no outstanding agreements to sell securities at December 31,
1999, 1998 or 1997. The notional amount of certain interest rate exchange
agreements outstanding at December 31, 1999 was $109,000,000. These
agreements have maturities ranging from June 2002 to December 2005. Under
these agreements, the Company receives variable interest rates based on the
three-month LIBOR rate and pays fixed interest rates ranging from 5.54% to
7.5%. Additionally, the Company has an interest rate exchange agreement
with a notional amount of $6,450,000 in which it pays variable interest
rates based on the three-month LIBOR rate paid in British pounds and
receives variable interest rates based on the three-month LIBOR rate in
U.S. dollars.
The Company has a portfolio of commercial and residential mortgage loans
outstanding in 14 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the
largest outstanding balances at December 31, 1999 being in the states of
Kansas (19%), Oklahoma (18%) and Texas (14%).
At December 31, 1999, the Company had approximately $420.9 million in
securities held as collateral in relation to its structured institutional
products.
3. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified,
noncontributory defined benefit pension plan sponsored by the Company and
certain of its affiliates. Benefits are based on years of service and an
employee's highest average compensation over a period of five consecutive
years during the last 10 years of service. The Company's policy has been to
contribute funds to the plan in amounts required to maintain sufficient
plan assets to provide for accrued benefits. In applying this general
policy, the Company considers, among other factors, the recommendations of
its independent consulting actuaries, the requirements of federal pension
law and the limitations on deductibility imposed by federal income tax law.
Plan assets are invested in public mutual funds with varying investment
objectives which are managed by an affiliated entity.
In addition to the Company's defined benefit pension plan, the Company
provides certain medical and life insurance benefits to full-time employees
who have retired after the age of 55 with five years of service. The plan
is contributory, with retiree contributions adjusted annually, and contains
other cost-sharing features such as deductibles and coinsurance.
Contributions vary based on the employee's years of service earned after
age 40. The Company's portion of the costs is frozen after 2002 with all
future cost increases passed on to the retirees. Retirees in the plan prior
to July 1, 1993 are covered 100% by the Company.
The following table sets forth the plans' funded status and amounts
recognized in the financial statements at December 31 and for the years
then ended:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Benefit obligation at year end......................................... $(12,836) $(13,306) $(4,930) $(4,733)
Fair value of plan assets at year end.................................. 13,990 11,363 --- ---
-------------------------------------------------
Funded status of the plan.............................................. $ 1,154 $ (1,943) $(4,930) $(4,733)
=================================================
Accrued benefit cost recognized in the consolidated balance sheets..... $ (286) $ (253) $(5,634) $(5,527)
Net periodic benefit cost.............................................. 999 719 538 474
Benefits paid.......................................................... 389 2,475 284 235
Contributions.......................................................... 966 870 43 34
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate.......................................................... 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets......................................... 9.00% 9.00% --- ---
Rate of compensation increase.......................................... 4.50% 4.50% --- ---
</TABLE>
The annual assumed rate of increase in the per capita cost of covered
benefits is 7% for 1999 and 8% for 1998 and is assumed to decrease
gradually to 5% for 2001 and remain at that level thereafter.
The health care cost trend rate has a significant effect on the amount
reported. For example, increasing the assumed health care cost trend rates
by one percentage point each year would increase the accumulated
postretirement benefit obligation as of December 31, 1999 by $229,000 and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1999 by $67,000.
The Company has a profit-sharing and savings plan for which substantially
all employees are eligible after one year of employment with the Company.
Company contributions to the profit-sharing and savings plan charged to
operations were $2,565,000, $2,171,000 and $2,065,000 for 1999, 1998 and
1997, respectively.
4. REINSURANCE
Principal reinsurance transactions for the years ended December 31, 1999,
1998 and 1997 are summarized as follows:
1999 1998 1997
-------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid..................... $47,074 $46,391 $33,872
===============================
Commissions received.............. $ 4,570 $ 5,647 $ 5,173
===============================
Claim recoveries.................. $25,008 $20,166 $12,136
===============================
In the accompanying consolidated financial statements, premiums, benefits,
settlement expenses and deferred policy acquisition costs are reported net
of reinsurance ceded; policy liabilities and accruals are reported gross of
reinsurance ceded. The Company remains liable to policyholders if the
reinsurers are unable to meet their contractual obligations under the
applicable reinsurance agreements. To minimize its exposure to significant
losses from reinsurance insolvencies, the Company evaluates the financial
condition of its reinsurers and monitors concentrations of credit risk
arising from similar geographic regions, activities or economic
characteristics of reinsurers. At December 31, 1999 and 1998, the Company
had established receivables totaling $413,146,000 and $407,891,000,
respectively, for reserve credits, reinsurance claims and other receivables
from its reinsurers. Substantially all of these receivables are
collateralized by assets of the reinsurers held in trust. Life insurance in
force ceded at December 31, 1999 and 1998 was $6.8 billion and $7.0
billion, respectively. The amount of reinsurance assumed is not
significant.
In 1997, the Company transferred, through a 100% coinsurance agreement,
$318 million in policy reserves and claim liabilities reduced by a ceding
commission of $63 million and other related items. The agreement related to
a block of universal life and traditional life insurance business. The
Company recorded a pretax gain of $14,625,000 which is deferred in other
liabilities and amortized to income over the estimated life of the business
transferred, estimated to be 15 years. Amortization of this deferred gain
amounted to $1,830,000, $1,414,000 and $427,000 during 1999, 1998 and 1997,
respectively.
5. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return
with SBMHC. The provision for income taxes includes current federal income
tax expense or benefit and deferred income tax expense or benefit due to
temporary differences between the financial reporting and income tax bases
of assets and liabilities. Such differences relate principally to
liabilities for future policy benefits and accumulated contract values,
deferred compensation, deferred policy acquisition costs, postretirement
benefits, deferred selling commissions, depreciation expense and unrealized
gains (losses) on securities available-for-sale.
Income tax expense (benefit) consists of the following for the years ended
December 31, 1999, 1998 and 1997:
1999 1998 1997
----------------------------------
(IN THOUSANDS)
Current.................... $28,209 $21,931 $ 32,194
Deferred................... (4,221) 430 (10,627)
----------------------------------
$23,988 $22,361 $ 21,567
==================================
The provision for income taxes differs from the amount computed at the
statutory federal income tax rate due primarily to dividends-received
deductions and tax credits.
Net deferred income tax assets or liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Net unrealized loss on securities available-for-sale..... $22,510 $ ---
Future policy benefits................................... 6,217 5,432
Employee benefits........................................ 12,916 8,110
Deferred gain on coinsurance agreement................... 3,887 4,475
Other.................................................... 10,879 11,147
--------------------
Total deferred income tax assets........................... 56,409 29,164
Valuation allowance for deferred income tax asset.......... (7,500) ---
--------------------
Net deferred income tax assets............................. 48,909 29,164
Deferred income tax liabilities:
Deferred policy acquisition costs........................ 73,678 55,540
Net unrealized gain on securities available-for-sale..... --- 20,034
Deferred gain on investments............................. 7,366 7,772
Other.................................................... 3,693 6,542
--------------------
Total deferred income tax liabilities...................... 84,737 89,888
--------------------
Net deferred income tax liability.......................... $35,828 $60,724
====================
</TABLE>
SFAS No. 109, "Accounting for Income Taxes," requires companies to
determine whether a deferred income tax asset will be realized in future
years. The Company has evaluated the recoverability of its deferred tax
assets and established a $7,500,000 valuation allowance related to the net
unrealized loss on securities available-for-sale.
6. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether recognized or not recognized in a company's balance sheet, for
which it is practicable to estimate that value. The methods and assumptions
used by the Company to estimate the following fair value disclosures for
financial instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities
under all insurance contracts are taken into consideration in the Company's
overall management of interest rate risk that minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts. The fair value amounts presented
herein do not include an amount for the value associated with customer or
agent relationships, the expected interest margin (interest earnings in
excess of interest credited) to be earned in the future on investment-type
products or other intangible items. Accordingly, the aggregate fair value
amounts presented herein do not necessarily represent the underlying value
of the Company; likewise, care should be exercised in deriving conclusions
about the Company's business or financial condition based on the fair value
information presented herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Supplementary contracts without life contingencies..... $ 25,694 $ 26,008 $ 27,105 $ 27,353
Individual and group annuities......................... 2,509,309 2,305,743 2,147,665 1,940,943
Long-term debt......................................... 55,000 53,600 60,000 69,909
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment under several operating lease
agreements. Total expense for all operating leases amounted to $1,396,000,
$1,155,000 and $1,018,000 during 1999, 1998 and 1997, respectively. The
Company has aggregate future lease commitments at December 31, 1999 of
$9,196,000 for noncancelable operating leases consisting of $2,595,000 in
2000, $2,565,000 in 2001, $1,523,000 in 2002, $833,000 in 2003 and
$1,680,000 between 2004 and 2006. There are no noncancelable lease
commitments beyond 2006.
In addition, in 2001, under the terms of one of the operating leases, the
Company has the option to renew the lease for another five years, purchase
the asset for approximately $4.7 million or return the asset to the lessor
and pay a termination charge of approximately $3.7 million.
In connection with its investments in certain limited partnerships, the
Company is committed to invest additional capital of $6,900,000 over the
next few years as required by the general partner.
Guaranty fund assessments are levied on the Company by life and health
guaranty associations in most states in which it is licensed to cover
losses of policyholders of insolvent or rehabilitated insurers. At December
31, 1999 and 1998, the Company has reserved $2,182,000 and $2,142,000,
respectively, to cover current and estimated future assessments, net of
related premium tax credits.
8. LONG-TERM DEBT AND OTHER BORROWINGS
The Company has a $213.6 million line-of-credit facility from the FHLB. Any
borrowings in connection with this facility bear interest at 0.1% over the
Federal Funds rate (5.1% at December 31, 1999). No amounts were outstanding
at December 31, 1999 and 1998.
The Company has a $5 million advance from the FHLB due February 28, 2001 at
an interest rate of 6.04%.
The Company has $50 million of 8.75% surplus notes maturing on May 15,
2016. The surplus notes were issued pursuant to Rule 144A under the
Securities Act of 1933. The surplus notes have repayment conditions and
restrictions whereby each payment of interest on or principal of the
surplus notes may be made only with the prior approval of the Kansas
Insurance Commissioner and only out of surplus funds that the Kansas
Insurance Commissioner determines to be available for such payment under
the Kansas Insurance Code.
9. RELATED-PARTY TRANSACTIONS
The Company owns shares of mutual funds managed by Security Management
Company, LLC with net asset values totaling $197,098,000 and $108,285,000
at December 31, 1999 and 1998, respectively. These amounts are included in
equity securities on the consolidated balance sheets.
10. STATUTORY INFORMATION
The Company and its insurance subsidiary prepare statutory-basis financial
statements in accordance with accounting practices prescribed or permitted
by the Kansas and New York Insurance regulatory authorities, respectively.
Accounting practices used to prepare statutory-basis financial statements
for regulatory filings of life insurance companies differ in certain
instances from accounting principles generally accepted in the United
States. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners (NAIC),
as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices
not so prescribed; such practices may differ from state to state, may
differ from company to company within a state and may change in the future.
In addition, the NAIC and the state of Kansas have adopted the codification
of Statutory Accounting Principles (the Codification) effective January 1,
2001. When implemented, the definitions of what comprises prescribed versus
permitted statutory accounting practices may result in changes to
accounting policies that insurance enterprises use to prepare their
statutory financial statements. The Company does not expect a material
impact on its statutory financial statements resulting from the
implementation of Codification. Statutory capital and surplus of the
insurance operations are $470,187,000 and $427,350,000 at December 31, 1999
and 1998, respectively. Statutory net income of the insurance operations
are $55,139,000, $50,371,000 and $42,950,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
11. SALE-LEASEBACK OF HOME OFFICE BUILDING AND FURNITURE AND EQUIPMENT
On December 22, 1999, the Company sold its home office building and
furniture and equipment to the state of Kansas for $20,750,000. Concurrent
with the sale, the Company leased the building and the furniture and
equipment back for a period of not less than 24 months and not more than 30
months. The transaction resulted in a gain of $7,322,000 on the building.
In accordance with SFAS No. 13, "Accounting for Leases," and SFAS No. 28,
"Accounting for Sales with Leasebacks," the Company has recognized a gain
of $4,173,000 in 1999. The remaining gain will be deferred and recorded in
earnings over the lease term. The future minimum lease payments under the
terms of the related operating lease agreement are $1,349,000 for both 2000
and 2001.
12. IMPACT OF YEAR 2000 (UNAUDITED)
Over the past several years, the Company had been assessing the potential
impact of the year 2000 on its systems, procedures, customers and business
processes. This assessment provided information on system components that
needed to be replaced or modified. All identified modifications to the
Company's operating systems were completed during 1998 and 1999. Subsequent
to December 31, 1999, the Company has experienced no significant impact on
its business operations resulting from the year 2000. The Company continues
to assess and test its systems to ensure continued compliance and expects
no significant future impact.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Certified Resolution of the Board of Directors of Security
Benefit Life Insurance Company ("SBL") authorizing
establishment of the Separate Account(a)
(2) Not Applicable
(3) (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) Application (Form V9492 R1-00)
(b) Application - Unisex (Form V9492 R1-00)
(6) (a) Articles of Incorporation of SBL(d)
(b) Bylaws of SBL(d)
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel(g)
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedules of Computation of Performance
(14) Powers of Attorney of Howard R. Fricke, 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 (filed March 16,
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 (filed 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 (filed 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 (filed August 17, 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 (filed 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 (filed April 30, 1999).
(g) Incorporated herein by reference to the Exhibits filed with the
Registrant's Initial Registration Statement No. 333-93947 (filed December
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
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
John D. Cleland* Senior Vice President
Gregory J. 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. As of December 31, 1999 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
JURISDICTION OF OWNED OR 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. As
of December 31, 1999 the approximate percentage of ownership by the
separate accounts for each company is as follows:
Security Growth and Income Fund 40.0%
Security Ultra Fund 42.0%
SBL Fund 100.0%
Advisor's Fund 100.0%
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 1, 2000, 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 POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
------------------ --------------------
Gregory J. Garvin President
John D. Cleland Vice President and Director
Richard K Ryan Director
James R. Schmank Director
Mark E. Young 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)P. 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 29th day of March, 2000.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman (The Depositor)
of the Board and
Chief Executive Officer
By: ROGER K. VIOLA
--------------------------------------------
Kris A. Robbins Roger K. Viola, Senior Vice President,
Director, President and General Counsel and Secretary as
Chief Operating Officer Attorney-In-Fact for the Officers and
Directors Whose Names Appear Opposite
Sister Loretto Marie Colwell
Director SBL VARIABLE ANNUITY ACCOUNT VIII
(The Registrant)
John C. Dicus By: SECURITY BENEFIT LIFE INSURANCE COMPANY
Director (The Depositor)
William W. Hanna By: HOWARD R. FRICKE
Director --------------------------------------------
Howard R. Fricke, Chief Executive Officer
John E. Hayes, Jr.
Director By: DONALD J. SCHEPKER
--------------------------------------------
Donald J. Schepker, Senior Vice President,
Frank C. Sabatini Chief Financial Officer and Treasurer
Director
(ATTEST): ROGER K. VIOLA
Robert C. Wheeler --------------------------------------
Director Roger K. Viola, Senior Vice President,
General Counsel and Secretary
Date: March 29, 2000
<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) Application (Form V9492 R1-00)
(b) Application - Unisex (Form V9492 R1-00)
(6) (a) None
(b) None
(7) None
(8) None
(9) None
(10) Consent of Independent Auditors
(11) None
(12) None
(13) Schedules of Computation of Performance
(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
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% 4% 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 9. Main Street 16. Mid Cap Value
2. Diversified Income Growth and Income 17. Mid Cap Growth
3. High Yield 10. Equity 18. Global
4. Global Strategic Income 11. Large Cap Growth 19. International
5. Managed Asset Allocation 12. Enhanced Index 20. Technology
6. Equity Income 13. Capital Growth 21. Small Cap Value
7. Global Total Return 14. Select 25 22. Small Cap Growth
8. Large Cap Value 15. Social Awareness
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>
- --------------------------------------------------------------------------------
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 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
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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.
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DEATH BENEFIT PROVISIONS
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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>
- --------------------------------------------------------------------------------
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
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% 4% 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 9. Main Street 16. Mid Cap Value
2. Diversified Income Growth and Income 17. Mid Cap Growth
3. High Yield 10. Equity 18. Global
4. Global Strategic Income 11. Large Cap Growth 19. International
5. Managed Asset Allocation 12. Enhanced Index 20. Technology
6. Equity Income 13. Capital Growth 21. Small Cap Value
7. Global Total Return 14. Select 25 22. Small Cap Growth
8. Large Cap Value 15. Social Awareness
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>
- --------------------------------------------------------------------------------
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.
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DEATH BENEFIT PROVISIONS
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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.
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ANNUITY BENEFIT PROVISIONS
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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 Growth Subaccount _____%
Small Cap Value Subaccount _____%
Technology Subaccount _____%
International Subaccount _____%
Global Subaccount _____%
Mid Cap Growth Subaccount _____%
Mid Cap Value Subaccount _____%
Social Awareness Subaccount _____%
Select 25 Subaccount _____%
Capital Growth Subaccount _____%
Enhanced Index Subaccount _____%
Large Cap Growth Subaccount _____%
Equity Subaccount _____%
Main Street Growth and Income Subaccount _____%
Large Cap Value Subaccount _____%
Global Total Return Subaccount _____%
Equity Income Subaccount _____%
Managed Asset Allocation Subaccount _____%
Global Strategic Income Subaccount _____%
High Yield Subaccount _____%
Diversified 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) TSA
[_] 408(b) IRA [_] 408A 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 authorize Electronic Transfers, you
must check this box. [_]
================================================================================
9. BILLING INFORMATION
Payment Amount $_____________________
[_] Salary Savings, SBL Bill Number, if known ________
Billing Statement Required: No [_] Yes [_], if 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 [_]
Draft Day___________________________________________________________________
Bank Address________________________________________________________________
Bank Phone Number___________________________________________________________
Account Number______________________________________________________________
Routing Transit Number______________________________________________________
I authorize SBL to make withdrawals from my 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 actually 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 option as follows:
Small Cap Growth _____% Equity _____%
Small Cap Value _____% Main Street Growth and Income _____%
Technology _____% Large Cap Value _____%
International _____% Global Total Return _____%
Global _____% Equity Income _____%
Mid Cap Growth _____% Managed Asset Allocation _____%
Mid Cap Value _____% Global Strategic Income _____%
Social Awareness _____% High Yield _____%
Select 25 _____% Diversified Income _____%
Capital Growth _____% Money Market _____%
Enhanced Index _____% Fixed Account _____%
Large Cap Growth _____%
Effective date of my first transfer: ____________________________
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 payment 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 THE
SUBACCOUNTS 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. [_] Check this bos to receive a Statement of Additional
Information.
================================================================================
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 (c) 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 CERTIFICATION 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 applicable 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
================================================================================
For Company Representative's Use Only: Option [_] A [_] B [_] C [_] D
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE
INSURANCE COMPANY ("SBL")
- --------------------------------------------------------------------------------
VARIABLE ANNUITY APPLICATION
- --------------------------------------------------------------------------------
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 (R1-00)
<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 Growth Subaccount _____%
Small Cap Value Subaccount _____%
Technology Subaccount _____%
International Subaccount _____%
Global Subaccount _____%
Mid Cap Growth Subaccount _____%
Mid Cap Value Subaccount _____%
Social Awareness Subaccount _____%
Select 25 Subaccount _____%
Capital Growth Subaccount _____%
Enhanced Index Subaccount _____%
Large Cap Growth Subaccount _____%
Equity Subaccount _____%
Main Street Growth and Income Subaccount _____%
Large Cap Value Subaccount _____%
Global Total Return Subaccount _____%
Equity Income Subaccount _____%
Managed Asset Allocation Subaccount _____%
Global Strategic Income Subaccount _____%
High Yield Subaccount _____%
Diversified 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) TSA
[_] 408(b) IRA [_] 408A 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 authorize Electronic Transfers, you
must check this box. [_]
================================================================================
9. BILLING INFORMATION
Payment Amount $_____________________
[_] Salary Savings, SBL Bill Number, if known ________
Billing Statement Required: No [_] Yes [_], if 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 [_]
Draft Day___________________________________________________________________
Bank Address________________________________________________________________
Bank Phone Number___________________________________________________________
Account Number______________________________________________________________
Routing Transit Number______________________________________________________
I authorize SBL to make withdrawals from my 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 actually 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 option as follows:
Small Cap Growth _____% Equity _____%
Small Cap Value _____% Main Street Growth and Income _____%
Technology _____% Large Cap Value _____%
International _____% Global Total Return _____%
Global _____% Equity Income _____%
Mid Cap Growth _____% Managed Asset Allocation _____%
Mid Cap Value _____% Global Strategic Income _____%
Social Awareness _____% High Yield _____%
Select 25 _____% Diversified Income _____%
Capital Growth _____% Money Market _____%
Enhanced Index _____% Fixed Account _____%
Large Cap Growth _____%
Effective date of my first transfer: ____________________________
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 payment 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 THE
SUBACCOUNTS 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. [_] Check this bos to receive a Statement of Additional
Information.
================================================================================
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 (c) 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 CERTIFICATION 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 applicable 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
================================================================================
For Company Representative's Use Only: Option [_] A [_] B [_] C [_] D
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE
INSURANCE COMPANY ("SBL")
- --------------------------------------------------------------------------------
VARIABLE ANNUITY APPLICATION
- --------------------------------------------------------------------------------
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 (R1-00)U
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 4, 2000, with respect to the consolidated
financial statements of Security Benefit Life Insurance Company and Subsidiaries
and the financial statements of Variable Annuity Account VIII included in the
Registration Statement under the Securities Act of 1933 (Registration No.
333-93947) and the Registration Statement under the Investment Company Act of
1940 (Registration No. 811-8836) on Form N-4 and the related Statement of
Additional Information accompanying the Prospectus of Variflex Extra Credit
Variable Annuity.
Ernst & Young LLP
Kansas City, Missouri
March 29, 2000
<PAGE>
VARIFLEX EXTRA CREDIT Item 24.b Exhibit (13)
EQUITY SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,043.70
(1+T)^1 = (1.04370)^1
1+T = 1.04370
T = .04370
3 Years
1000 (1+T)^3 = 2,285.72
((1+T)^3)^1/3 = (2.28572)^1/3
1+T = 1.17979
T = .1798
4.74 Years
1000 (1+T)^4.74 = 2,455.09
((1+T)^4.74)^1/4.74 = (2.45509)^1/4.74
1+T = 1.20863
T = .2086
<PAGE>
LARGE CAP VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 975.73
(1+T)^1 = (.97573)^1
1+T = .97537
T = -0.0243
3 Years
1000 (1+T)^3 = 1,298.34
((1+T)^3)^1/3 = (1.29834)^1/3
1+T = 1.09093
T = .0909
4.74 Years
1000 (1+T)^4.74 = 1,825.35
((1+T)^4.74)^1/4.74 = (1.82535)^1/4.74
1+T = 1.13537
T = .1354
<PAGE>
MONEY MARKET YIELD
Money Market Series (Series C) as of December 30, 1999
CALCULATION OF CHANGE IN UNIT VALUE:
- -----------------------------------
(Underlying Underlying)
(Fund Price Fund Price)
(12-31-99 - 12-24-99 )
--------------------------- = Weekly Earnings
( Underlying Fund Price )
( 12-24-99 )
12.61213665 - 12.59871062
- ------------------------- = .001065667
12.59871062
Base
[(1+Weekly Earnings)^1/7 - (Daily M&E Charge + Daily Admin. Fee)]^7 - 1 = Period
Return
[(1 + .001065667)^1/7 - (.00003424658 + .00000784558)]^7 - 1 = .00077079
CURRENT 7-DAY YIELD:
- -------------------
(Base Period Return)365/7 = Current 7-Day Yield
(.00077079)365/7 = 4.02%
EFFECTIVE YIELD:
- ---------------
[(Base Period Return + 1)^365/7] - 1 = Effective Yield
(.00077079 + 1)^365/7] - 1 = 4.10%
<PAGE>
GLOBAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 970.22
(1+T)^1 = (.97022)^1
1+T = .97022
T = -0.0298
3 Years
1000 (1+T)^3 = 1,874.92
((1+T)^3)^1/3 = (1.87492)^1/3
1+T = 1.23309
T = .2331
4.74 Years (From date of inception April 4, 1995)
1000 (1+T)^4.74 = 2,402.01
((1+T)^4.74)^1/4.74 = (2.40201)^1/4.74
1+T = 1.20307
T = .2031
<PAGE>
DIVERSIFIED INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 921.72
(1+T)^1 = (.92172)^1
1+T = .92172
T = -0.0783
3 Years
1000 (1+T)^3 = 1,066.79
((1+T)^3)^1/3 = (1.06679)^1/3
1+T = 1.02179
T = .0218
4.74 Years
1000 (1+T)^4.74 = 1,158.86
((1+T)^4.74)^1/4.74 = (1.15886)^1/4.74
1+T = 1.030159
T = .0316
<PAGE>
SOCIAL AWARENESS SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,132.94
(1+T)^1 = (1.13294)^1
1+T = 1.13294
T = .1329
3 Years
1000 (1+T)^3 = 1,784.83
((1+T)^3)^1/3 = (1.78483)^1/3
1+T = 1.21301
T = .2130
4.74 Years (From date of inception April 4, 1995)
1000 (1+T)^4.74 = 2,501.32
((1+T)^4.74)^1/4.74 = (2.50132)^1/4.74
1+T = 1.21339
T = .2134
<PAGE>
MID CAP GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,591.44
(1+T)^1 = (1.59144)^1
1+T = 1.59144
T = .5914
3 Years
1000 (1+T)^3 = 2,193.37
((1+T)^3)^1/3 = (2.19337)^1/3
1+T = 1.29928
T = .2993
4.74 Years (From date of inception April 4, 1995)
1000 (1+T)^4.74 = 2,932.81
((1+T)^4.74)^1/4.74 = (2.93281)^1/4.74
1+T = 1.25482
T = .2548
<PAGE>
GLOBAL STRATEGIC INCOME BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 964.38
(1+T)^1 = (.96438)^1
1+T = .96438
T = -0.0356
3 Years
1000 (1+T)^3 = 1,066.19
((1+T)^3)^1/3 = (1.06619)^1/3
1+T = 1.02159
T = .0216
4.59 Years (From date of inception June 1, 1995)
1000 (1+T)^4.59 = 1,272.39
((1+T)^4.59)^1/4.59 = (1.27239)^1/4.59
1+T = 1.05388
T = .0539
<PAGE>
GLOBAL TOTAL RETURN SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,100.08
(1+T)^1 = (1.10008)^1
1+T = 1.10008
T = .1001
3 Years
1000 (1+T)^3 = 1,284.04
((1+T)^3)^1/3 = (1.28404)^1/3
1+T = 1.08691
T = .0869
4.59 Years (from date of inception June 1, 1995)
1000 (1+T)^4.59 = 1,531.94
((1+T)^4.59)^1/4.59 = (1.53194)^1/4.59
1+T = 1.09738
T = .0974
<PAGE>
MANAGED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,056.54
(1+T)^1 = (1.05654)^1
1+T = 1.05654
T = .0565
3 Years
1000 (1+T)^3 = 1,477.41
((1+T)^3)^1/3 = (1.47741)^1/3
1+T = 1.13118
T = .1312
4.59 Years (from date of inception June 1, 1995)
1000 (1+T)^4.59 = 1,585.39
((1+T)^4.59)^1/4.59 = (1.58539)^1/4.59
1+T = 1.10561
T = .1056
<PAGE>
EQUITY INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 989.29
(1+T)^1 = (.98929)^1
1+T = 0.98929
T = -0.0107
3 Years
1000 (1+T)^3 = 1,353.51
((1+T)^3)^1/3 = (1.35351)^1/3
1+T = 1.10617
T = .1062
4.59 Years (from date of inception June 1, 1995)
1000 (1+T)^4.59 = 1,857.36
((1+T)^4.59)^1/4.59 = (1.85736)^1/4.59
1+T = 1.14441
T = .1444
<PAGE>
HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 970.09
(1+T)^1 = (.97009)^1
1+T = .97009
T = -0.0299
3 Years
1000 (1+T)^3 = 1,136.44
((1+T)^3)^1/3 = (1.13644)^1/3
1+T = 1.04356
T = .0436
3.41 Years (from date of inception August 5, 1996)
1000 (1+T)^3.41 = 1,204.16
((1+T)^3.41)^1/3.41 = (1.20416)^1/3.41
1+T = 1.05599
T = .0560
<PAGE>
MID CAP VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,150.96
(1+T)^1 = (1.15096)^1
1+T = 1.15096
T = .15096
2.67 Year (from date of inception May 1, 1997)
1000 (1+T)^2.67 = 1,719.46
((1+T)^2.67)^1/2.67 = (1.71946)^1/2.67
1+T = 1.22507
T = .2251
<PAGE>
SMALL CAP GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1 Year
1000 (1+T)^1 = 1,852.01
(1+T)^1 = (1.85201)^1
1+T = 1.85201
T = .8520
2.21 Year (from date of inception October 15, 1997)
1000 (1+T)^2.21 = 1,943.04
((1+T)^2.21)^1/2.21 = (1.94304)^1/2.21
1+T = 1.35062
T = .3506
<PAGE>
ENHANCED INDEX SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^1/.66 = 1,093.98
((1+T)^.66)^1/.66 = (1.09398)^1/.66
1+T = 1.14579
T = .1458
<PAGE>
INTERNATIONAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^1/.66 = 1,275.98
((1+T)^.66)^1/.66 = (1.27598)^1/.66
1+T = 1.44667
T = .4467
<PAGE>
SELECT 25 SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^1/.66 = 1,210.46
((1+T)^.66)^1/.66 = (1.21046)^1/.66
1+T = 1.33562
T = .3356
<PAGE>
EQUITY SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,066.23
(1+T)^1 = (1.06623)^1
1+T = 1.06623
T = .0662
5 Years
1000 (1+T)^5 = 2,729.29
((1+T)^5)^1/5 = (2.72929)^1/5
1+T = 1.22239
T = .2224
10 Years
1000 (1+T)^10 = 3,883.77
((1+T)^10)^1/10 = (3.88377)^1/10
1+T = 1.14532
T = .1453
<PAGE>
LARGE CAP VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,004.10
(1+T)^1 = (1.00410)^1
1+T = 1.00410
T = .0041
5 Years
1000 (1+T)^5 = 1,985.86
((1+T)^5)^1/5 = (1.98586)^1/5
1+T = 1.14707
T = .1471
10 Years
1000 (1+T)^10 = 2,753.39
((1+T)^10)^1/10 = (2.75339)^1/10
1+T = 1.10659
T = .1066
<PAGE>
GLOBAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,515.20
(1+T)^1 = (1.51520)^1
1+T = 1.51520
T = .5152
5 Year
1000 (1+T)^5 = 2,383.75
((1+T)^5)^1/5 = (2.38375)^1/5
1+T = 1.18974
T = .1897
8.67 Years (From date of inception May 1, 1991)
1000 (1+T)^8.67 = 3,102.04
((1+T)^8.67)^1/8.67 = (3.10204)^1/8.67
1+T = 1.13948
T = .1395
<PAGE>
DIVERSIFIED INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 948.74
(1+T)^1 = (.094874)^1
1+T = .094874
T = -0.0513
5 Years
1000 (1+T)^5 = 1,255.09
((1+T)^5)^1/5 = (1.25509)^1/5
1+T = 1.04649
T = .0465
10 Years
1000 (1+T)^10 = 1,644.63
((1+T)^10)^1/10 = (1.64463)^1/10
1+T = 1.05101
T = .0510
<PAGE>
SOCIAL AWARENESS SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,154.26
(1+T)^1 = (1.15426)^1
1+T = 1.15426
T = .1543
5 Years
1000 (1+T)^5 = 2,672.06
((1+T)^5)^1/5 = (2.67206)^1/5
1+T = 1.21722
T = .2172
8.67 Years (From date of inception May 1, 1991)
1000 (1+T)^8.67 = 3,355.26
((1+T)^8.67)^1/8.67 = (3.35526)^1/8.67
1+T = 1.14984
T = .1498
<PAGE>
MID CAP GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,596.11
(1+T)^1 = (1.59611)^1
1+T = 1.59611
T = .5961
5 Years
1000 (1+T)^5 = 3,011.93
((1+T)^5)^1/5 = (3.01193)^1/5
1+T = 1.24672
T = .2467
7.25 Years (From date of inception October 1, 1992)
1000 (1+T)^7.25 = 3,926.40
((1+T)^7.25)^1/7.25 = (3.92640)^1/7.25
1+T = 1.20762
T = .2076
<PAGE>
GLOBAL STRATEGIC INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 997.71
(1+T)^1 = (.99771)^1
1+T = .99771
T = -0.0023
4.58 Years (From date of inception June 1, 1995)
1000 (1+T)^4.58 = 1,307.00
((1+T)^4.58)^1/4.58 = (1.30700)^1/4.58
1+T = 1.06020
T = .0602
<PAGE>
GLOBAL TOTAL RETURN SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,123.66
(1+T)^1 = (1.12366)^1
1+T = 1.12366
T = .1237
4.58 Years (from date of inception June 1, 1995)
1000 (1+T)^4.58 = 1,563.03
((1+T)^4.58)^1/4.58 = (1.56303)^1/4.58
1+T = 1.10243
T = .1024
<PAGE>
MANAGED ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,081.79
(1+T)^1 = (1.08179)^1
1+T = 1.08179
T = .0818
4.58 Years (from date of inception June 1, 1995)
1000 (1+T)^4.58 = 1,745.99
((1+T)^4.58)^1/4.58 = (1.74599)^1/4.58
1+T = 1.12940
T = .1294
<PAGE>
EQUITY INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,017.13
(1+T)^1 = (1.01713)^1
1+T = 1.01713
T = .0171
4.58 Years (from date of inception June 1, 1995)
1000 (1+T)^4.58 = 1,901.00
((1+T)^4.58)^1/4.58 = (1.90100)^1/4.58
1+T = 1.15057
T = .1506
<PAGE>
HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 998.38
(1+T)^1 = (.99838)^1
1+T = 0.99838
T = -0.0016
3.41 Years (from date of inception August 5, 1996)
1000 (1+T)^3.41 = 1,234.00
((1+T)^3.41)^1/3.41 = (1.23400)^1/3.41
1+T = 1.06360
T = .0636
<PAGE>
MID CAP VALUE SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,172.58
(1+T)^1 = (1.17258)^1
1+T = 1.17258
T = .1726
2.67 Year (from date of inception May 1, 1997)
1000 (1+T)^2.67 = 1,753.01
((1+T)^2.67)^1/2.67 = (1.75301)^1/2.67
1+T = 1.23397
T = .2340
<PAGE>
SMALL CAP GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
1 Year
1000 (1+T)^1 = 1,846.66
(1+T)^1 = (1.84666)^1
1+T = 1.84666
T = .8467
2.21 Year (from date of inception October 15, 1997)
1000 (1+T)^2.21 = 1,938.99
((1+T)^2.21)^1/2.21 = (1.93899)^1/2.21
1+T = 1.34935
T = 0.3494
<PAGE>
ENHANCED INDEX SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^.66 = 1,113.00
((1+T)^.66)^1/.66 = (1.113)^1/.66
1+T = 1.17611
T = 0.1761
<PAGE>
INTERNATIONAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^.66 = 1,288.00
((1+T)^.66)^1/.66 = (1.28800)^1/.66
1+T = 1.46737
T = 0.4674
<PAGE>
SELECT 25 SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
(without deduction of contingent deferred sales charge)
.66 Year (from date of inception May 3, 1999)
1000 (1+T)^.66 = 1,225.00
((1+T)^.66)^1/.66 = (1.225)^1/.66
1+T = 1.36000
T = 0.3600
<PAGE>
DIVERSIFIED INCOME SERIES
Yield Calculation As Of December 31, 1999 = 7.68%
----
[ (212,220.86-0.00) ]^6
2[----------------------- + 1 ] - 1
[(2,719,263.4504)(12.40) ]
[(( 212,220.86 ) )^6]
2[((-------------) + 1) ] - 1
[((33,718,866.78) ) ]
2[((.006293831 + 1)^6) - 1]
2[(1.006263831)^6 - 1]
2[(1.0384 - 1)]
2(.0384)
= .0768
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES A (EQUITY)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,066.23 - $1,000 $ 66.23 / $1,000 = 6.62%
1998 1,236.31 - 1,000 236.31 / 1,000 = 23.63%
1997 1,269.25 - 1,000 269.25 / 1,000 = 26.93%
1996 1,229.86 - 1,000 209.86 / 1,000 = 20.99%
1995 1,348.31 - 1,000 348.31 / 1,000 = 34.83%
1994 970.27 - 1,000 (29.73) / 1,000 = (2.97%)
1993 1,121.11 - 1,000 121.11 / 1,000 = 12.11%
1992 1,096.23 - 1,000 96.23 / 1,000 = 9.62%
1991 1,341.51 - 1,000 341.51 / 1,000 = 34.15%
1990 889.54 - 1,000 (110.46) / 1,000 = (11.05%)
1989 1,330.76 - 1,000 330.76 / 1,000 = 33.08%
1988 1,086.13 - 1,000 86.13 / 1,000 = 8.61%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES B (LARGE CAP VALUE)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,004.10 - $1,000 $ 4.10 / $1,000 = .41%
1998 1,060.10 - 1,000 60.10 / 1,000 = 6.01%
1997 1,247.98 - 1,000 247.98 / 1,000 = 24.80%
1996 1,165.35 - 1,000 165.35 / 1,000 = 16.54%
1995 1,282.83 - 1,000 282.83 / 1,000 = 28.28%
1994 956.52 - 1,000 (43.48) / 1,000 = (4.35)%
1993 1,080.37 - 1,000 80.37 / 1,000 = 8.04%
1992 1,048.14 - 1,000 48.14 / 1,000 = 4.81%
1991 1,358.09 - 1,000 358.09 / 1,000 = 35.81%
1990 942.58 - 1,000 (57.42) / 1,000 = (5.74)%
1989 1,265.96 - 1,000 265.96 / 1,000 = 26.60%
1988 1,177.45 - 1,000 177.45 / 1,000 = 17.75%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES C (MONEY MARKET)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,031.22 - $1,000 $31.22 / $1,000 = 3.12%
1998 1,036.87 - 1,000 36.87 / 1,000 = 3.69%
1997 1,037.32 - 1,000 37.32 / 1,000 = 3.73%
1996 1,035.74 - 1,000 35.74 / 1,000 = 3.57%
1995 1,039.16 - 1,000 39.16 / 1,000 = 3.92%
1994 1,022.58 - 1,000 22.58 / 1,000 = 2.26%
1993 1,011.42 - 1,000 11.42 / 1,000 = 1.14%
1992 1,017.97 - 1,000 17.97 / 1,000 = 1.80%
1991 1,041.85 - 1,000 41.85 / 1,000 = 4.19%
1990 1,063.23 - 1,000 63.23 / 1,000 = 6.32%
1989 1,075.57 - 1,000 75.57 / 1,000 = 7.56%
1988 1,057.26 - 1,000 57.26 / 1,000 = 5.73%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES D (GLOBAL)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,515.20 - $1,000 $515.20 / $1,000 = 51.52%
1998 1,184.44 - 1,000 184.44 / 1,000 = 18.44%
1997 1,049.13 - 1,000 49.13 / 1,000 = 4.91%
1996 1,158.50 - 1,000 158.50 / 1,000 = 15.85%
1995 1,092.83 - 1,000 93.83 / 1,000 = 9.28%
1994 1,013.58 - 1,000 13.58 / 1,000 = 1.36%
1993 1,298.49 - 1,000 298.49 / 1,000 = 29.85%
1992 960.10 - 1,000 (39.90) / 1,000 = (3.99)%
1991* 1,029.89 - 1,000 29.89 / 1,000 = 2.99%
*From May 1, 1991 to December 31, 1991.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES E (DIVERSIFIED INCOME)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $ 948.74 - $1,000 $(51.26) / $1,000 = (5.13%)
1998 1,065.21 - 1,000 65.21 / 1,000 = 6.52%
1997 1,084.88 - 1,000 84.88 / 1,000 = 8.49%
1996 978.37 - 1,000 (21.63) / 1,000 = (2.16%)
1995 1,170.05 - 1,000 170.05 / 1,000 = 17.01%
1994 917.37 - 1,000 (82.63) / 1,000 = (8.26)%
1993 1,110.31 - 1,000 110.31 / 1,000 = 11.03%
1992 1,060.11 - 1,000 60.11 / 1,000 = 6.01%
1991 1,152.40 - 1,000 152.40 / 1,000 = 15.24%
1990 1,053.05 - 1,000 53.05 / 1,000 = 5.31%
1989 1,102.34 - 1,000 102.34 / 1,000 = 10.23%
1988 1,057.19 - 1,000 57.19 / 1,000 = 5.72%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES S (SOCIAL AWARENESS)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,155.24 - $1,000 $155.24 / $1,000 = 15.52%
1998 1,296.23 - 1,000 296.23 / 1,000 = 29.62%
1997 1,209.38 - 1,000 209.38 / 1,000 = 20.94%
1996 1,171.18 - 1,000 171.18 / 1,000 = 17.12%
1995 1,259.78 - 1,000 259.78 / 1,000 = 25.95%
1994 948.62 - 1,000 (51.38) / 1,000 = (5.14)%
1993 1,103.99 - 1,000 103.99 / 1,000 = 10.40%
1992 1,146.99 - 1,000 146.99 / 1,000 = 14.70%
1991* 1,045.34 - 1,000 45.34 / 1,000 = 4.53%
*From May 1, 1991 to December 31, 1991.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES J (MID CAP GROWTH)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,596.11 - $1,000 $596.11 / $1,000 = 59.61%
1998 1,163.10 - 1,000 163.10 / 1,000 = 16.31%
1997 1,182.80 - 1,000 182.80 / 1,000 = 18.28%
1996 1,164.00 - 1,000 164.00 / 1,000 = 16.40%
1995 1,178.39 - 1,000 178.39 / 1,000 = 17.84%
1994 935.14 - 1,000 (64.86) / 1,000 = (6.49)%
1993 1,120.46 - 1,000 120.46 / 1,000 = 12.05%
1992* 1,244.19 - 1,000 244.19 / 1,000 = 24.42%
*From October 1, 1992 to December 31, 1992.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES K (GLOBAL STRATEGIC INCOME)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $ 997.71 - $1,000 $ (2.29) / $1,000 = .23%
1998 1,053.91 - 1,000 53.91 / 1,000 = 5.39%
1997 1,039.30 - 1,000 39.30 / 1,000 = 3.93%
1996 1,120.90 - 1,000 120.90 / 1,000 = 12.09%
1995* 1,067.00 - 1,000 67.00 / 1,000 = 6.70%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES M (GLOBAL TOTAL RETURN)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,123.66 - $1,000 $123.66 / $1,000 = 12.37%
1998 1,111.02 - 1,000 111.02 / 1,000 = 11.10%
1997 1,046.82 - 1,000 46.82 / 1,000 = 4.68%
1996 1,126.18 - 1,000 126.18 / 1,000 = 12.62%
1995* 1,062.00 - 1,000 62.00 / 1,000 = 6.20%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES N (MANAGED ASSET ALLOCATION)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,081.79 - $1,000 $ 81.79 / $1,000 = 8.18%
1998 1,167.87 - 1,000 167.87 / 1,000 = 16.79%
1997 1,167.22 - 1,000 167.22 / 1,000 = 16.72%
1996 1,112.78 - 1,000 112.78 / 1,000 = 11.28%
1995* 1,064.00 - 1,000 64.00 / 1,000 = 6.40%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES O (EQUITY INCOME)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,017.13 - $1,000 $ 17.13 / $1,000 = 1.71%
1998 1,074.75 - 1,000 74.75 / 1,000 = 7.48%
1997 1,265.64 - 1,000 265.64 / 1,000 = 26.56%
1996 1,183.47 - 1,000 183.47 / 1,000 = 18.35%
1995* 1,164.00 - 1,000 161.00 / 1,000 = 16.10%
*From June 1, 1995 to December 31, 1995.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES P (HIGH YIELD)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $ 998.38 - $1,000 $ (1.62) / $1,000 = (.16)%
1998 1,043.91 - 1,000 43.91 / 1,000 = 4.39%
1997 1,116.99 - 1,000 116.99 / 1,000 = 11.70%
1996* 1,060.00 - 1,000 60.00 / 1,000 = 6.00%
*From August 5, 1996 to December 31, 1996.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES V (MID CAP VALUE)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,172.58 - $1,000 $172.58 / $1,000 = 17.26%
1998 1,149.12 - 1,000 149.12 / 1,000 = 14.91%
1997* 1,301.00 - 1,000 301.00 / 1,000 = 30.10%
*From May 1, 1997 to December 31, 1997.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES X (SMALL CAP GROWTH)
Quotation of Total Return for the period of January 1, 1988 to December 31,
1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,842.86 - $1,000 $842.86 / $1,000 = 84.29%
1998 1,099.48 - 1,000 99.48 / 1,000 = 9.95%
1997* 955.00 - 1,000 (45.00) / 1,000 = (4.50)%
*From October 15, 1997 to December 31, 1997.
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES H (ENHANCED INDEX)
Quotation of Total Return for the period of May 3, 1999 to December 31, 1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,113.00 - $1,000 $113.00 / $1,000 = 11.30%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES I (INTERNATIONAL)
Quotation of Total Return for the period of May 3, 1999 to December 31, 1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,288.00 - $1,000 $288.00 / $1,000 = 28.80%
<PAGE>
VARIFLEX EXTRA CREDIT
NON-STANDARDIZED TOTAL RETURN
SERIES Y (SELECT 25)
Quotation of Total Return for the period of May 3, 1999 to December 31, 1999.
Initial Investment = $1,000
INCREASE %
ENDING INITIAL (DECREASE) INITIAL INCREASE
VALUE VALUE IN VALUE VALUE (DECREASE)
1999 $1,225.00 - $1,000 $225.00 / $1,000 = 22.50%
<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
- ------------------------------
