<PAGE>
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VARIFLEX LS 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 LS Variable Annuity--an individual
flexible purchase payment deferred variable annuity contract (the "Contract")
offered by Security Benefit Life Insurance Company ("Security Benefit" or the
"Company"). The Contract is available for individuals as a non-tax qualified
retirement plan. The Contract is also available for individuals in connection
with a retirement plan qualified under Section 401, 403(b), 408, 408A or 457 of
the Internal Revenue Code. The Contract is designed to give you flexibility in
planning for retirement and other financial goals.
You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of Security Benefit called the SBL Variable
Annuity Account VIII, or to the Fixed Account. Each Subaccount invests in a
corresponding Series of SBL Fund (the "Fund"). The Subaccounts currently
available under the Contract are:
* Equity (formerly Growth) * Global Total Return
* Large Cap Value (formerly Growth-Income) * Managed Asset Allocation
* Money Market * Equity Income
* Global (formerly Worldwide Equity) * High Yield
* Diversified Income * Small Cap Value
(formerly High Grade Income) * Social Awareness
* Large Cap Growth * Technology
* Enhanced Index * Mid Cap Value (formerly Value)
* International * Main Street Growth and Income
* Mid Cap Growth (formerly Mid Cap) * Small Cap Growth
* Global Strategic Income (formerly Small Cap)
* Capital Growth * Select 25
Amounts allocated to the Fixed Account will accrue interest at rates that are
paid by Security Benefit as described in "The Fixed Account," page 22. Contract
Value in the Fixed Account is guaranteed by Security Benefit.
Amounts that you allocate to 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 Option," page 21.
You may return a Contract according to the terms of its Free-Look Right. (See
"Free-Look Right," page 18.)
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 ("SEC") 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 SW 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 35 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 OF SBL FUND. YOU SHOULD
READ THE PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE CONTRACT IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE VALUE
OF YOUR CONTRACT WILL GO UP AND DOWN AND YOU COULD LOSE MONEY.
DATE: MAY 1, 2000 AS SUPPLEMENTED JULY 1, 2000
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<PAGE>
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
CONTRACT BENEFITS..................................................... 5
FREE-LOOK RIGHT....................................................... 5
CHARGES AND DEDUCTIONS................................................ 5
Mortality and Expense Risk Charge................................... 5
Administrative Charge............................................... 5
Premium Tax Charge.................................................. 6
Other Expenses...................................................... 6
CONTACTING SECURITY BENEFIT........................................... 6
EXPENSE TABLE............................................................ 6
CONTRACTUAL EXPENSES.................................................. 7
ANNUAL SEPARATE ACCOUNT EXPENSES...................................... 7
ANNUAL SBL FUND EXPENSES.............................................. 7
EXAMPLE............................................................... 8
CONDENSED FINANCIAL INFORMATION.......................................... 9
INFORMATION ABOUT SECURITY BENEFIT, THE SEPARATE ACCOUNT, AND SBL FUND... 11
SECURITY BENEFIT LIFE INSURANCE COMPANY............................... 11
PUBLISHED RATINGS..................................................... 11
SEPARATE ACCOUNT...................................................... 11
SBL FUND.............................................................. 11
Series A (Equity Series)............................................ 12
Series B (Large Cap Value Series)................................... 12
Series C (Money Market Series)...................................... 12
Series D (Global Series)............................................ 12
Series E (Diversified Income Series)................................ 12
Series G (Large Cap Growth Series).................................. 12
Series H (Enhanced Index Series).................................... 12
Series I (International Series)..................................... 12
Series J (Mid Cap Growth Series).................................... 12
Series K (Global Strategic Income Series)........................... 13
Series L (Capital Growth Series).................................... 13
Series M (Global Total Return Series)............................... 13
Series N (Managed Asset Allocation Series).......................... 13
Series O (Equity Income Series)..................................... 13
Series P (High Yield Series)........................................ 13
Series Q (Small Cap Value Series)................................... 13
Series S (Social Awareness Series).................................. 13
Series T (Technology Series)........................................ 13
Series V (Mid Cap Value Series)..................................... 13
Series W (Main Street Growth and Income Series)..................... 13
Series X (Small Cap Growth Series).................................. 13
Series Y (Select 25 Series)......................................... 13
The Investment Adviser.............................................. 13
THE CONTRACT............................................................. 14
GENERAL............................................................... 14
APPLICATION FOR A CONTRACT............................................ 14
PURCHASE PAYMENTS..................................................... 14
ALLOCATION OF PURCHASE PAYMENTS....................................... 15
DOLLAR COST AVERAGING OPTION.......................................... 15
ASSET REALLOCATION OPTION............................................. 15
TRANSFERS OF CONTRACT VALUE........................................... 16
CONTRACT VALUE........................................................ 16
DETERMINATION OF CONTRACT VALUE....................................... 16
FULL AND PARTIAL WITHDRAWALS.......................................... 17
SYSTEMATIC WITHDRAWALS................................................ 18
FREE-LOOK RIGHT....................................................... 18
DEATH BENEFIT......................................................... 18
DISTRIBUTION REQUIREMENTS............................................. 19
DEATH OF THE ANNUITANT................................................ 19
CHARGES AND DEDUCTIONS................................................... 19
MORTALITY AND EXPENSE RISK CHARGE..................................... 19
ADMINISTRATIVE CHARGE................................................. 20
PREMIUM TAX CHARGE.................................................... 20
OTHER CHARGES......................................................... 20
VARIATIONS IN CHARGES................................................. 20
GUARANTEE OF CERTAIN CHARGES.......................................... 20
SBL FUND EXPENSES..................................................... 20
ANNUITY PERIOD........................................................... 20
GENERAL............................................................... 20
ANNUITY OPTIONS....................................................... 21
Option 1--Life Income............................................... 21
Option 2--Life Income with Guaranteed
Payment of 5, 10, 15 or 20 Years.................................. 21
Option 3--Life with Installment Refund Option....................... 21
Option 4--Joint and Last Survivor................................... 21
Option 5--Payments for a Specified Period........................... 21
Option 6--Payments of a Specified Amount............................ 21
Value of Variable Annuity Payments: Assumed Interest Rate........... 21
SELECTION OF AN OPTION................................................ 22
THE FIXED ACCOUNT........................................................ 22
INTEREST.............................................................. 22
DEATH BENEFIT......................................................... 23
CONTRACT CHARGES...................................................... 23
TRANSFERS AND WITHDRAWALS FROM THE FIXED ACCOUNT...................... 23
PAYMENTS FROM THE FIXED ACCOUNT....................................... 24
MORE ABOUT THE CONTRACT.................................................. 24
OWNERSHIP............................................................. 24
Joint Owners........................................................ 24
DESIGNATION AND CHANGE OF BENEFICIARY................................. 24
DIVIDENDS............................................................. 24
PAYMENTS FROM THE SEPARATE ACCOUNT.................................... 24
PROOF OF AGE AND SURVIVAL............................................. 24
MISSTATEMENTS......................................................... 24
LOANS................................................................. 24
RESTRICTIONS ON WITHDRAWALS FROM QUALIFIED PLANS...................... 25
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM.............. 26
FEDERAL TAX MATTERS...................................................... 26
INTRODUCTION.......................................................... 26
TAX STATUS OF SECURITY BENEFIT AND THE SEPARATE ACCOUNT............... 26
General............................................................. 26
Charge for Security Benefit Taxes................................... 26
Diversification Standards........................................... 26
INCOME TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS.......... 27
Surrenders or Withdrawals Prior to the Annuity Start Date........... 27
Surrenders or Withdrawals on or after Annuity Start Date............ 27
Penalty Tax on Certain Surrenders and Withdrawals................... 28
ADDITIONAL CONSIDERATIONS............................................. 28
Distribution-at-Death Rules......................................... 28
Gift of Annuity Contracts........................................... 28
Contracts Owned by Non-Natural Persons.............................. 28
Multiple Contract Rule.............................................. 28
Possible Tax Changes................................................ 29
Transfers, Assignments or Exchanges of a Contract................... 29
QUALIFIED PLANS....................................................... 29
Section 401......................................................... 29
Section 403(b)...................................................... 30
Section 408......................................................... 30
Section 457......................................................... 31
Rollovers........................................................... 31
Tax Penalties....................................................... 32
Withholding......................................................... 32
OTHER INFORMATION........................................................ 32
VOTING OF SBL FUND SHARES............................................. 32
SUBSTITUTION OF INVESTMENTS........................................... 33
CHANGES TO COMPLY WITH LAW AND AMENDMENTS............................. 33
REPORTS TO OWNERS..................................................... 33
TELEPHONE TRANSFER PRIVILEGES......................................... 34
LEGAL PROCEEDINGS..................................................... 34
LEGAL MATTERS......................................................... 34
PERFORMANCE INFORMATION.................................................. 34
ADDITIONAL INFORMATION................................................... 35
REGISTRATION STATEMENT................................................ 35
FINANCIAL STATEMENTS.................................................. 35
STATEMENT OF ADDITIONAL INFORMATION...................................... 35
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 TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
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<PAGE>
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 is 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.
CONTRACT DATE -- The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually the
date that your initial purchase payment is credited to the Contract.
CONTRACT DEBT -- The unpaid loan balance including accrued 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 asany 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.
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%)
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.
PURCHASE PAYMENT-- An amount paid to Security Benefit as consideration for
the Contract.
SBL FUND-- An open-end management investment company commonly referred to as
a mutual fund.
SEPARATE ACCOUNT-- The SBL 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 SBL Fund.
SUBACCOUNT -- A division of the Separate Account of Security Benefit which
invests in a corresponding series of SBL Fund. Currently, twenty-two Subaccounts
are available under the Contract.
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 and any
uncollected premium taxes.
<PAGE>
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
relate to the portion of the Contract involving the Separate Account. The Fixed
Account is briefly described under "The Fixed Account," page 22 and in the
Contract.
PURPOSE OF THE CONTRACT -- The individual flexible purchase payment deferred
variable annuity contract ("Contract") described in this Prospectus is designed
to give you flexibility in planning for retirement and other financial goals.
You may purchase the Contract as a non-tax qualified retirement plan for an
individual ("Non-Qualified Plan"). You may also purchase the Contract on an
individual basis in connection with a retirement plan qualified under Section
401, 403(b), 408, 408A or 457 of the Internal Revenue Code of 1986, as amended.
These plans are sometimes referred to in this Prospectus as "Qualified Plans."
THE SEPARATE ACCOUNT AND SBL FUND -- The Separate Account is currently divided
into twenty-two accounts referred to as Subaccounts. See "Separate Account,"
page 11. Each Subaccount invests exclusively in shares of a corresponding Series
of 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(R) Series, Small Cap Growth
Series and Select 25 Series. See "SBL Fund," page 13. You may allocate all or a
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 a 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 guaranteed to be at least an effective annual
rate of 3.0 percent. See "The Fixed Account," page 22.
PURCHASE PAYMENTS -- The minimum initial purchase payment is $25,000 ($25 for
employees of The Texas A&M system). Thereafter, you may choose the amount and
frequency of purchase payments, except that the minimum subsequent purchase
payment is $1,000 ($25 for employees of The Texas A&M system). See "Purchase
Payments," page 14.
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 22.
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 22. See "Full and Partial Withdrawals," page 17 and
"Federal Tax Matters," page 26 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 18 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 20.
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 allocated to
the Fixed Account plus the Contract Value in the Subaccounts plus any charges
deducted from Contract Value in the Subaccounts. Security Benefit will refund
purchase payments allocated to the Subaccounts rather than the Contract Value in
those states and circumstances where it is required to do so.
CHARGES AND DEDUCTIONS -- Security Benefit does not deduct sales load from
purchase payments before allocating them to the Contract Value and no surrender
charge is assessed upon withdrawal or surrender of a Contract. Certain charges
will be deducted in connection with the Contract as described below.
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 19.
ADMINISTRATIVE CHARGE. Security Benefit deducts a daily administrative charge
equal to an annual rate of 0.15 percent of each Subaccount's average daily net
assets. Security Benefit does not assess the administration charge against
Contract Value which is applied under Annuity Options 1-4. See "Administrative
Charge," page 20.
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 annuitization 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," page 20.
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 20. The information contained in the table is not
applicable to amounts allocated to the Fixed Account.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 19. For a more complete description of 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 ....................................... None
Transfer Fee (per transfer) ............................................ None
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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 Administrative Charge ........................................... 0.15%
-----
Total Separate Account Annual Expenses ................................. 1.40%
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<TABLE>
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ANNUAL SBL FUND EXPENSES (as a percentage of each Series' average daily net assets)
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<CAPTION>
TOTAL MUTUAL
ESTIMATED BROKERAGE FUND EXPENSES(4)
MANAGEMENT PLAN DISTRIBUTION OTHER (AFTER EXPENSE
FEE(1) (12B-1) FEES(2) EXPENSES(3) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
Equity (Series A) ............................... 0.75% 0.01% 0.06% 0.81%
Large Cap Value (Series B) ...................... 0.75% 0.02% 0.07% 0.82%
Money Market (Series C) ......................... 0.50% 0.00% 0.07% 0.57%
Global (Series D) ............................... 1.00% 0.00% 0.21% 1.21%
Diversified Income (Series E) ................... 0.75% 0.00% 0.07% 0.82%
Large Cap Growth (Series G) ..................... 1.00% 0.00% 0.36% 1.36%
Enhanced Index Series (Series H) ................ 0.75% 0.00% 0.29% 1.04%
International Series (Series I) ................. 1.10% 0.00% 1.15% 2.25%
Mid Cap Growth (Series J) ....................... 0.75% 0.01% 0.07% 0.82%
Global Strategic Income (Series K) .............. 0.75% 0.00% 0.87% 1.62%
Capital Growth (Series L) ....................... 1.00% 0.00% 0.36% 1.36%
Global Total Return (Series M) .................. 1.00% 0.00% 0.36% 1.36%
Managed Asset Allocation (Series N) ............. 1.00% 0.00% 0.17% 1.17%
Equity Income (Series O) ........................ 1.00% 0.00% 0.09% 1.09%
High Yield (Series P) ........................... 0.75% 0.00% 0.11% 0.86%
Small Cap Value (Series Q) ...................... 1.00% 0.00% 0.36% 1.36%
Social Awareness (Series S) ..................... 0.75% 0.01% 0.07% 0.82%
Technology (Series T) ........................... 1.00% 0.00% 0.95% 1.95%
Mid Cap Value (Series V) ........................ 0.75% 0.02% 0.09% 0.84%
Main Street Growth and Income(R)(Series W) ...... 1.00% 0.00% 0.22% 1.22%
Small Cap Growth (Series X) ..................... 1.00% 0.00% 0.33% 1.33%
Select 25 (Series Y) ............................ 0.75% 0.01% 0.22% 0.97%
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<FN>
1. During the fiscal year ending December 31, 1999, the Investment Adviser waived the advisory fee of Series P and Series X. The
Investment Adviser ceased waiving the advisory fee of Series X effective December 1, 1999. There can be no assurance that the
Investment Adviser will continue to waive Series P's advisory fee. Expense information for Series P and Series X has been
restated to reflect the fees that would have been applicable had there been no fee waiver.
2. Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distribution under the Brokerage Plan in the current fiscal year in connection with the purchase and sale of securities held by
the fund.
3. 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.
4. Total expenses for Series I reflect fee waivers and/or reimbursement of expenses. In the absence of such waivers or
reimbursements, Series I's actual expenses would have been 4.2%.
</FN>
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</TABLE>
EXAMPLE -- The example presented below shows expenses that you would pay at the
end of one, three, five and ten years (except for the Large Cap Growth, Enhanced
Index, International, Capital Growth, Small Cap Value, Technology, Main Street
Growth and Income(R) 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, (2) annuitized, or (3) not
surrendered or annuitized. The example shows 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 EXAMPLE BELOW A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS 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 LESS
THAN THE ASSUMED AMOUNT.
Example -- You would pay the expenses shown below on a $1,000 investment,
assuming 5 percent annual return on assets:
--------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Equity Subaccount......................... $23 $ 69 $119 $255
Large Cap Value Subaccount................ 23 70 120 257
Money Market Subaccount................... 20 62 106 230
Global Subaccount......................... 26 81 139 294
Diversified Income Subaccount............. 23 69 119 255
Large Cap Growth Subaccount............... 28 86 --- ---
Enhanced Index Subaccount................. 25 76 --- ---
International Subaccount.................. 37 112 --- ---
Mid Cap Growth Subaccount................. 23 70 119 256
Global Strategic Income Subaccount........ 31 93 159 334
Capital Growth Subaccount................. 28 86 --- ---
Global Total Return Subaccount............ 28 86 146 309
Managed Asset Allocation Subaccount....... 26 80 137 290
Equity Income Subaccount.................. 25 78 133 283
High Yield Subaccount..................... 23 71 121 260
Small Cap Value Subaccount................ 28 86 --- ---
Social Awareness Subaccount............... 23 70 119 256
Technology Subaccount..................... 34 103 --- ---
Mid Cap Value Subaccount.................. 23 71 121 260
Main Street Growth and Income(R)Subaccount 27 81 --- ---
Small Cap Growth Subaccount............... 28 85 144 306
Select 25 Subaccount...................... 24 74 --- ---
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<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information presents accumulation unit
values for the years ended December 31, 1999, 1998, 1997, 1996 and the period
April 4, 1995 (date of inception) through December 31, 1995, as well as ending
accumulation units outstanding under each Subaccount.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
1999(2) 1998 1997(1) 1996 1995
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<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
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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 1,631,708 240,306
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ENHANCED 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 --- --- --- ---
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INTERNATIONAL SUBACCOUNT
Accumulation unit value:
Beginning of period.................................... $10.00 --- --- --- ---
End of period.......................................... $12.88 --- --- --- ---
Accumulation units outstanding at the end of period....... 130,329 --- --- --- ---
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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 $10.00 --- ---
End of period.......................................... $12.35 $12.36 $11.84 --- ---
Accumulation units outstanding at the end of period....... 1,097,087 945,133 316,416 --- ---
---------------------------------------------------------------------------------------------------------------------------------
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 and Mid Cap Value Subaccount for the period July 3, 1997 (inception) through December 31, 1997. Small
Cap Growth Subaccount for the period October 15, 1997 (inception) through December 31, 1997.
2. Accumulation Unit Values for Enhanced Index Subaccount, International Subaccount and Select 25 Subaccount are for the period
May 3, 1999 (the date the Subaccounts were first publicly offered) through December 31, 1999.
</FN>
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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, the Company had total assets of approximately $8.7
billion. Together with its subsidiaries, the Company has total funds under
management of over $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 the Company as measured by Standard & Poor's Insurance Ratings
Services may be referred to in advertisements or sales literature or in reports
to Owners. These ratings are opinions of an operating insurance company's
financial capacity to meet the obligations of its insurance and annuity policies
in accordance with their terms. Such ratings do not reflect the investment
performance of the Separate Account or the degree of risk associated with an
investment in the Separate Account.
SEPARATE ACCOUNT -- Security Benefit established the Separate Account under
Kansas law on September 12, 1994. The Contract provides that the income, gains,
or losses of the Separate Account, whether or not realized, are credited to or
charged against the assets of the Separate Account without regard to other
income, gains, or losses of Security Benefit. Kansas law provides that assets in
a separate account attributable to the reserves and other liabilities under the
contracts may not be charged with liabilities arising from any other business
that the insurance company conducts if, and to the extent, the contracts so
provide. The Contract contains such a provision. Security Benefit owns the
assets in the Separate Account and is required to maintain sufficient assets in
the Separate Account to meet all Separate Account obligations under the
Contracts. Security Benefit may transfer to its General Account assets that
exceed anticipated obligations of the Separate Account. All obligations arising
under the Contracts are general corporate obligations of Security Benefit.
Security Benefit may invest its own assets in the Separate Account for other
purposes, but not to support contracts other than variable annuity contracts,
and may accumulate in the Separate Account proceeds from Contract charges and
investment results applicable to those assets.
The Separate Account is currently divided into twenty-two Subaccounts. The
Contract provides that 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 SBL Fund. Security Benefit may in
the future establish additional Subaccounts of the Separate Account, which may
invest in other Series of 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 for 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 may also 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 the 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 primarily in a
diversified portfolio of investment-grade debt securities. The debt securities
in which Series E invests will primarily be domestic securities, but may also
include dollar denominated foreign securities.
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 stock 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 and as a secondary objective, capital appreciation by
investing in a combination of domestic and foreign high-yield, lower rated debt
securities (commonly known 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(TM) 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 may also 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 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 primarily in a diversified
portfolio of common stocks, securities convertible into common stocks, preferred
stocks, and warrants which the Investment Adviser believes are undervalued.
SERIES W (MAIN STREET GROWTH AND INCOME(R) SERIES) -- Amounts that you allocate
to the Main Street Growth and Income(R) 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 2000(TM) Growth 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 located at 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 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(R) Series;
Bankers Trust Company, 130 Liberty Street, New York, New York 10006 to provide
investment advisory services to Enhanced Index Series and International Series;
Wellington Management Company, LLP, 75 State Street, Boston, Massachusetts 02109
to provide investment advisory services to Global Strategic Income Series,
Global Total Return Series and Technology 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;
Strong Capital Management Corporation, 900 Heritage Reserve, Menomonee,
Wisconsin 53051 to provide investment advisory services to Small Cap Growth
Series and Small Cap Value 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 an individual 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
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 90. 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 $25,000 ($25 for employees of The Texas A&M system). Thereafter, you
may choose the amount and frequency of purchase payments, except that the
minimum subsequent purchase payment is $1,000 ($25 for employees of The Texas
A&M system). The minimum subsequent purchase payment if you elect an Automatic
Investment Program is also $1,000. 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.
ALLOCATION OF PURCHASE PAYMENTS -- In an application for a Contract, you select
the Subaccounts or the Fixed Account to which purchase payments will be
allocated. Purchase payments 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 one percent of any payment being allocated to any one Subaccount or
the Fixed Account. The allocations must be whole percentages and must total 100
percent. 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 16.
DOLLAR COST AVERAGING OPTION -- Prior to the Annuity Start Date, you may dollar
cost average your Contract Value by authorizing Security Benefit to make
periodic transfers of Contract Value from any one Subaccount to one or more of
the other Subaccounts. Dollar cost averaging is a systematic method of investing
in which securities are purchased at regular intervals in fixed dollar amounts
so that the cost of the securities gets averaged over time and possibly over
various market cycles. The option will result in the transfer of Contract Value
from one Subaccount to one or more of the other Subaccounts. Amounts transferred
under this option will be credited at the price of the Subaccount as of the end
of the Valuation Dates on which the transfers are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts transferred to a
Subaccount will result in the crediting of a greater number of units when the
price is low and a lesser number of units when the price is high. Similarly, the
amounts transferred from a Subaccount will result in a debiting of a greater
number of units when the price is low and a lesser number of units when the
price is high. Dollar cost averaging does not guarantee profits, nor does it
assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
you must designate whether Contract Value is to be transferred on the basis of a
specific dollar amount, fixed period or earnings only, the Subaccount or
Subaccounts to and from which the transfers will be made, the desired frequency
of the transfers, which may be on a monthly or quarterly basis, and the length
of time during which the transfers shall continue or the total amount to be
transferred over time.
After Security Benefit has received a Dollar Cost Averaging Request in proper
form at its Home Office, Security Benefit will transfer Contract Value in the
amounts you designate from the Subaccount from which transfers are to be made to
the Subaccount or Subaccounts you have chosen. Security Benefit will effect each
transfer on the date you specify, or if no date is specified, on the monthly or
quarterly anniversary, whichever corresponds to the period selected, of the date
of receipt at the Home Office of a Dollar Cost Averaging Request in proper form.
Transfers will be made until the total amount elected has been transferred or
until Contract Value in the Subaccount from which transfers are made has been
depleted. Amounts periodically transferred under this option are not included in
the 14 transfers per Contract Year that are allowed as discussed under
"Transfers of Contract Value ," page 16.
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, the Subaccount has been depleted, or 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 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 22.
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 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 Dates on which the transfer is
effected.
You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. The Asset Reallocation Option
will terminate automatically if a transfer is made to, or from, any Subaccount
included in the allocation selected by the Contractowner. 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 Program, subject to certain restrictions described in "Transfers
and Withdrawals from the Fixed Account," page 23.
TRANSFERS OF CONTRACT VALUE -- Prior to the Annuity Start Date, you may transfer
Contract Value among the Subaccounts upon proper written request to Security
Benefit's Home Office. You may make transfers (other than transfers pursuant to
the Dollar Cost Averaging and Asset Reallocation Options) by telephone if the
Telephone Transfer section of the application or an Authorization for Telephone
Requests form has been properly completed, signed and filed at Security
Benefit's Home Office. The minimum transfer amount is $1,000 or the amount
remaining in a given Subaccount. The minimum transfer amount does not apply to
transfers under the Dollar Cost Averaging or Asset Reallocation Options.
You may also transfer Contract Value from the Subaccounts to the Fixed
Account; however, transfers from the Fixed Account to the Subaccounts are
restricted as described in "The Fixed Account," page 22.
Security Benefit 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, 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 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 administrative 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 restrictions on partial withdrawals of Contract Value
from the Fixed Account, 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 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 a 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 a 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 for at least $1,000,
except systematic withdrawals discussed below. A request for a partial
withdrawal will result in a payment by Security Benefit in accordance with the
amount specified in the partial withdrawal request. Upon payment, the Contract
Value will be reduced by an amount equal to the payment and any applicable
premium tax. If a partial withdrawal is requested that would leave the
Withdrawal Value in the Contract less than $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(R) 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 Subaccount 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 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 "Premium Tax Charge," page 20.
A full or partial withdrawal, including a systematic withdrawal, may result
in the 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 25. The tax consequences of a withdrawal
under the Contract should be carefully considered. See "Federal Tax Matters,"
page 26.
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 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 a specified dollar amount, as all earnings in the Contract, or as
based upon the life expectancy of the Owner or the Owner and a beneficiary. A
Contractowner may also 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 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 will be allocated from the Contractowner's Contract
Value in the Subaccounts and the Fixed Account, as directed by the
Contractowner. If a Contractowner does not specify the allocation, the
systematic withdrawal will be deducted from the Contract Value in the
Subaccounts and the Fixed Account in the following order: Money Market
Subaccount, 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(R) 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 Subaccount 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. Systematic withdrawals from Contract Value
allocated to the Fixed Account must provide for payments over a period of not
fewer than 36 months as described under "The Fixed Account," page 22. 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 26.
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 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," page 19. 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. Additionally, if the Owner is not a natural
person, the amount of the death benefit will be based on the age of the oldest
Annuitant on the date the Contract was issued. 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 21.
The death benefit proceeds will be the death benefit reduced by any
outstanding Contract Debt and any uncollected premium taxes. If an Owner dies
during the Accumulation Period and the age of each Owner was 75 or less on the
date the Contract was issued, the amount of the death benefit will be the
greatest of:
* The sum of all Purchase Payments, less any reductions caused by previous
withdrawals,
* The Contract Value on the date due proof of death and instructions regarding
payment are received by Security Benefit, or
* The stepped-up death benefit.
The stepped-up death benefit is: (1) the largest death benefit on any
Contract anniversary that is both an exact multiple of five and occurs prior to
the oldest Owner attaining age 76, plus (2) any Purchase Payments made since the
applicable fifth year anniversary, less (3) any reductions caused by previous
withdrawals since the applicable fifth year anniversary.
If an Owner dies during the Accumulation Period and the age of any Owner was
76 or greater on the date the Contract was issued, or if due proof of death
(regardless of the age of any Owner on the date the Contract was issued) 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 the Contract Value on the date due proof of death and instructions
regarding payment are received by Security Benefit at its Home Office.
The death benefit for Contracts issued in Florida is different than the death
benefit described above. For Contracts issued in Florida, the death benefit,
regardless of the age at issue, is the greater of (1) the Contract Value as of
the end of the Valuation Period in which due proof of death and instructions
regarding payment are received by Security Benefit at its Home Office, or (2)
the total purchase payments received less any reductions caused by previous
withdrawals. However, if 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 the Contract Value on the
date due proof of death and instructions regarding payment are received by
Security Benefit at its Home Office.
The death benefit proceeds will be paid to the Designated Beneficiary in a
single sum or under one of the Annuity Options, as directed by the Owner or 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 26 for
a discussion of the tax consequences in the event of death.
DISTRIBUTION REQUIREMENTS -- For Contracts issued in connection with
Non-Qualified Plans, if the surviving spouse of the deceased Owner is the sole
Designated Beneficiary, such spouse may elect to continue this Contract in force
until the earliest of the spouse's death or the Annuity Start Date or receive
the death benefit proceeds.
For any Designated Beneficiary other than a surviving spouse, only those
options may be chosen that provide for complete distribution of such Owner's
interest in the Contract within five years of the death of the Owner. If the
Designated Beneficiary is a natural person, that person alternatively can elect
to begin receiving annuity payments within one year of the Owner's death over a
period not extending beyond his or her life or life expectancy. If the Owner of
the Contract is not a natural person, these distribution rules are applicable
upon the death of or a change in the primary Annuitant.
For Contracts issued in connection with Qualified Plans, the terms of the
particular Qualified Plan and the Internal Revenue Code should be reviewed with
respect to limitations or restrictions on distributions following the death of
the Owner or Annuitant. Because the rules applicable to Qualified Plans are
extremely complex, a competent tax adviser should be consulted.
DEATH OF THE ANNUITANT -- If the Annuitant dies prior to the Annuity Start Date,
and the Owner is a natural person and is not the Annuitant, no death benefit
proceeds will be payable under the Contract. The Owner may name a new Annuitant
within 30 days of the Annuitant's death. If a new Annuitant is not named,
Security Benefit will designate the Owner as Annuitant. On the death of the
Annuitant after the Annuity Start Date, any guaranteed payments remaining unpaid
will continue to be paid to the Designated Beneficiary pursuant to the Annuity
Option in force at the date of death.
CHARGES AND DEDUCTIONS
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.
ADMINISTRATIVE CHARGE -- Security Benefit deducts a daily administrative charge
equal to an annual rate of .15 percent of each Subaccount's average daily net
assets. The administrative charge is not assessed against Contract Value which
has been applied under Annuity Options 1 through 4. The purpose of this charge
is to reimburse Security Benefit for the expenses associated with administration
of the Contracts and operation of the Subaccounts. Security Benefit does not
expect to profit from this charge.
PREMIUM TAX CHARGE -- Various states and municipalities impose a tax on premiums
received by insurance companies on annuity contracts. 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, the operations
of Security Benefit with respect to the Contracts, or 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," page 26.
VARIATIONS IN CHARGES -- Security Benefit may reduce or waive the amount of the
administrative charge for a Contract where the expenses associated with the sale
of the Contract or the administrative and maintenance costs associated with the
Contract are reduced for reasons such as the amount of the initial purchase
payment or the amounts of projected purchase payments.
GUARANTEE OF CERTAIN CHARGES -- Security Benefit guarantees that 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 and the administrative charge shall
not exceed an annual rate of .15 percent of each Subaccount's average daily net
assets.
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 first annual Contract anniversary and
may not be deferred beyond the Annuitant's 95th 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
annual Contract Anniversary. See "Selection of an Option," page 22. 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 any outstanding Contract Debt.
The Contracts provide for six Annuity Options. Security Benefit may make
other Annuity Options available upon request. Annuity payments under Annuity
Options 1 through 4 are based upon annuity rates that vary with the Annuity
Option selected. In the case of Options 1 through 4, the annuity rates will vary
based on the age and sex of the Annuitant, except that unisex rates are
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 10 years under Option 2.
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, 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 and 6, full and partial withdrawals may be made. The Contract
specifies annuity tables for Annuity Options 1 through 4 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 occurs prior to the
due date of the second annuity payment, two if death occurs 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.
OPTION 3 -- LIFE WITH INSTALLMENT REFUND OPTION. Periodic annuity payments
will be made during the lifetime of the Annuitant with the promise that if, at
the death of the Annuitant, the number of payments that has been made is less
than the number determined by dividing the amount applied under this Option by
the amount of the first payment, annuity payments will be continued to the
Designated Beneficiary until that number of payments has been made.
OPTION 4 -- JOINT AND LAST SURVIVOR. Periodic annuity payments will be made
during the lifetime of either Annuitant. It is possible under this Option for
only one annuity payment to be made if both Annuitants die prior to the second
annuity payment due date, two if both die 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 five to twenty years, as elected, by
the Owner, with the guarantee that if, at the death of all Annuitants, payments
have been made for less than the selected fixed period, the remaining unpaid
payments will be paid to the Designated Beneficiary.
OPTION 6 -- PAYMENTS OF A SPECIFIED AMOUNT. Periodic annuity payments of the
amount elected by the Owner will be made until the amount applied and interest
thereon are exhausted, with the guarantee that if, at the death of all
Annuitants, all guaranteed payments have not yet been made, the remaining unpaid
payments will be paid to the Designated Beneficiary.
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 are based on an "assumed interest rate" of 3 1/2
percent, compounded annually. Variable annuity payments generally increase or
decrease from one annuity payment date to the next based upon the performance of
the applicable Subaccounts during the interim period adjusted for the assumed
interest rate. If the performance of the Subaccount selected is equal to the
assumed interest rate, the annuity payments will remain constant. If the
performance of the Subaccounts is greater than the assumed interest rate, the
annuity payments will increase, and if it is less than the assumed interest
rate, the annuity payments will decline. A higher assumed interest rate would
mean a higher initial annuity payment, but the amount of the annuity payment
would increase more slowly in a rising market (or the amount of the annuity
payment would decline more rapidly in a declining market). A lower assumption
would have the opposite effect.
SELECTION OF AN OPTION -- You should carefully review the Annuity Options with
your financial or tax advisers. For Contracts used in connection with a
Qualified Plan, reference should be made to the terms of the particular plan and
the requirements of the Internal Revenue Code for pertinent limitations
respecting annuity payments and other matters. For instance, Qualified Plans
generally require that annuity payments begin no later than April 1 of the
calendar year following the year in which the Annuitant reaches age 70 1/2. In
addition, under Qualified Plans, the period elected for receipt of annuity
payments under Annuity Options (other than Life Income) generally may be no
longer than the joint life expectancy of the Annuitant and beneficiary in the
year that the Annuitant reaches age 70 1/2, and must be shorter than such joint
life expectancy if the beneficiary is not the Annuitant's spouse and is more
than ten years younger than the Annuitant. For Non-Qualified Plans, Security
Benefit does not allow annuity payments to be deferred beyond the Annuitant's
95th birthday.
THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments and transfer
Contract Value to the Fixed Account. 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 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 14.
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
the 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 3.0 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, in effect on the day of the new
Guarantee Period.
Contract Value allocated or transferred to the Fixed Account at one point in
time may be credited with a different Current Rate than amounts allocated or
transferred to the Fixed Account at another point in time. For example, amounts
allocated to the Fixed Account in June may be credited with a different current
rate than amounts allocated to the Fixed Account in July. In addition, if
Guarantee Periods of different durations are offered, Contract Value allocated
or transferred to the Fixed Account for a Guarantee Period of one duration may
be credited with a different Current Rate than amounts allocated or transferred
to the Fixed Account for a Guarantee Period of a different duration. Therefore,
at any time, various portions of your Contract Value in the Fixed Account may be
earning interest at different Current Rates depending upon the point in time
such portions were allocated or transferred to the Fixed Account and the
duration of the Guarantee Period. Security Benefit bears the investment risk for
the Contract Value allocated to the Fixed Account and for paying interest at the
Guaranteed Rate on amounts allocated to the Fixed Account.
For purposes of determining the interest rates to be credited on Contract
Value in the Fixed Account, withdrawals, loans, or transfers from the Fixed
Account will be deemed to be taken in the following order: (1) from any portion
of Contract Value allocated to the Fixed Account for which the Guarantee Period
expires during the calendar month in which the withdrawal, loan, or transfer is
effected; (2) then in the order beginning with that portion of such Contract
Value which has the longest amount of time remaining before the end of its
Guarantee Period; and (3) ending with that portion which has the least amount of
time remaining before the end of its Guarantee Period. For more information
about transfers and withdrawals from the Fixed Account, see "Transfers and
Withdrawals From the Fixed Account" below.
DEATH BENEFIT -- The death benefit under the Contract will be determined in the
same fashion for a Contract that has Contract Value in the Fixed Account as for
a Contract that has Contract Value allocated to the Subaccounts. See "Death
Benefit," page 18.
CONTRACT CHARGES -- Premium taxes 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 administrative
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 SBL Fund to
the extent the 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) from Contract Value, the Guarantee Period of which
expires during the calendar month in which the transfer is effected, (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) $1,000 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 waive or 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 and the amount remaining in an account
after a transfer.
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 and any systematic withdrawals from the
Fixed Account will automatically terminate as of the date of such purchase
payment or transfer. You may reestablish Dollar Cost Averaging, Asset
Reallocation or systematic withdrawals from the Fixed Account by submitting a
written request to Security Benefit. However, if for any reason a Dollar Cost
Averaging or systematic withdrawal option is cancelled, you may only reestablish
the option after the expiration of the next monthly or quarterly anniversary (or
semiannual or annual anniversary in the case of systematic withdrawals) that
corresponds to the period selected in establishing the option.
You may also make full withdrawals to the same extent as if you had allocated
Contract Value to the Subaccounts. A Contractowner may make a partial withdrawal
from the Fixed Account only (1) from Contract Value, the Guarantee Period of
which expires during the calendar month in which the partial withdrawal is
effected, (2) pursuant to systematic withdrawals and (3) once per Contract Year
in an amount equal to the greater of $5,000 or 10 percent of the Contract Value
in the Fixed Account at the time of the partial withdrawal. However, no partial
withdrawal request will be processed which would result in the withdrawal of
Contract Value from the Loan Account. Systematic withdrawals from Contract Value
allocated to the Fixed Account must provide for payments over a period of not
fewer than 36 months. Any change in the type, frequency or amount of Systematic
Withdrawals from the Fixed Account requires that a new 36 month period be
started. See "Full and Partial Withdrawals," page 17 and "Systematic
Withdrawals," page 18. 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 permitted under the terms of the
Qualified Plan. See "Loans," page 24.
PAYMENTS FROM THE FIXED ACCOUNT -- Full and partial withdrawals, loans, and
transfers from the Fixed Account may be delayed for up to six months after a
written request in proper form is received by Security Benefit at its Home
Office. During the period of deferral, interest at the applicable interest rate
or rates will continue to be credited to the amounts allocated to the Fixed
Account. However, payment of any amounts will not be deferred if they are to be
used to pay premiums on any policies or contracts issued by Security Benefit.
MORE ABOUT THE CONTRACT
OWNERSHIP -- The Contractowner is the person named as such in the application or
in any later change shown in Security Benefit's records. While living, the
Contractowner alone has the right to receive all benefits and exercise all
rights that the Contract grants or Security Benefit allows. The Owner may be an
entity that is not a living person, such as a trust or corporation referred to
herein as "Non-Natural Persons." See "Federal Tax Matters," page 26.
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 the 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 may share in the surplus earnings of Security Benefit.
However, the current dividend scale is zero and Security Benefit does not
anticipate that dividends will be paid. Certain states will not permit the
Contract to be issued as a dividend-paying policy.
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 while the Owner is living and 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. In addition, 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.
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 31st 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. 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 forgo
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.
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 32.
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 your contributions made after December 31, 1988 under a
salary reduction agreement begin only after you (i) reach age 59 1/2, (ii)
separate from service, (iii) die, (iv) become disabled, or (v) incur a hardship.
Furthermore, we may not distribute to you on account of hardship gains accrued
after December 31, 1988 attributable to your contributions. 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 Section 403(b) tax-sheltered annuity
contract, you will not be entitled to make a full or partial withdrawal, as
described in this Prospectus, in order to receive proceeds from the Contract
attributable to your contributions under a salary reduction agreement or any
gains credited to your Contract after December 31, 1988 unless one of the
conditions above 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 your 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. You may be able to transfer your Contract's Full
Withdrawal Value to certain other investment alternatives meeting the
requirements of Section 403(b) that are available under your 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.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM -- If you are a
participant in the Texas Optional Retirement Program, your Contract is subject
to restrictions required under the Texas Education Code. In accordance with
those restrictions, you will not be permitted to make withdrawals prior to your
retirement, death or termination of employment in a Texas public institution of
higher education.
FEDERAL TAX MATTERS
INTRODUCTION -- The Contract described in this Prospectus is designed for use by
individuals in retirement plans which may or may not be Qualified Plans under
the provisions of the Internal Revenue Code ("Code"). The ultimate effect of
federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefits to the Owner, the Annuitant, and the Beneficiary or
other payee will depend upon the type of retirement plan, 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 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 A 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 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 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 policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." Guidance issued to date has no application to the Contract.
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 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," page 28 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 expectany) 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 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. 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 or her entire investment, the unrecovered
investment will be allowed as a deduction on the employee's final return. If the
employee made no contributions that were taxable when made, the full amount of
each annuity payment is taxable 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," page 31.
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," page 29.
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 31.
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 IRA" 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," page 29. 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," page 31.
The Internal Revenue Service has not reviewed the Contract for qualification
as an IRA, and has not addressed in a ruling of general applicability whether a
death benefit provision such as the provision in the Contract comports with IRA
qualification requirements.
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 IRS. Purchasers of the Contract for such purposes
will be provided with such supplementary information as may be required by the
IRS or other appropriate agency, and will have the right to revoke the Contract
under certain circumstances. In general, Roth IRAs are subject to certain
required distribution requirements. Unlike a traditional IRA, Roth IRAs are not
subject to minimum required distribution rules during the Contractowner's life
time. 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 IRS 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 a 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 29. 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 are rolled over or transferred in accordance with Code
requirements; or (viii) that are 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 IRA's 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 fewer than ten years) from a Qualified Plan (other than IRAs 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 -- You indirectly (through the Separate Account)
purchase shares of the Series of SBL Fund when you allocate purchase payments to
the Subaccounts. The Company owns shares of the Fund in the Separate Account for
your benefit. Under current law, the Company will vote shares of the Fund held
in the Subaccounts in accordance with voting instructions received from Owners
having the right to give such instructions. You will have the right to give
voting instructions to the extent that you have Account Value allocated to the
particular Subaccount. The Company will vote all shares it owns through the
Subaccount in the same proportion as the shares for which it receives voting
instructions from Owners. The Company votes shares in accordance with its
current understanding of the federal securities laws. If the Company later
determines that it may vote shares of the Fund in its own right, it may elect to
do so.
Unless otherwise required by applicable law, the number of shares of a
particular Series as to which you may give voting instructions to the Company is
determined by dividing your Account Value in the corresponding Subaccount on a
particular date by the net asset value per share of that 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 date established by the
Fund for determining shareholders eligible to vote at the meeting of the Fund.
If required by the SEC, the Company reserves the right to determine in a
different fashion the voting rights attributable to the shares of the Fund.
Voting instructions may be cast in person or by proxy.
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. Security Benefit also reserves the right to
limit the amount and frequency of subsequent purchase payments.
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 the 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 out 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, nor 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 requests in accordance with its procedures. As a result of this
policy on telephone requests, you may bear the risk of loss arising from the
telephone transfer privileges. 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, except the Money Market
Subaccount, 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 a
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), will reflect the
deduction of the administrative charge and the mortality and expense risk charge
and may simultaneously be shown for other periods.
Although the Contracts were not available for purchase until April 4, 1995,
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 rating 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. The Table of Contents of
the Statement of Additional Information is as follows:
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....................................................... 6