<PAGE> 1
As filed with Securities and Exchange Commission on April 28, 1997
Registration Nos. 33-88524; 811-8938
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
to the
FORM S-6
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
(Exact Name of Trust)
SECURITY EQUITY LIFE INSURANCE COMPANY
(Name of Depositor)
84 Business Park Drive - Suite 303
Armonk, New York 10504
(Address of Depositor's Principal Executive Offices)
CHRISTOPHER A. MARTIN, ESQ.
Counsel, General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
(Name and Address of Agent for Service)
Copies to:
STEPHEN E. ROTH, ESQ.
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b), of Rule 485.
/X/ on May 1, 1997 pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
/ / On (date) pursuant to paragraph (a)(1) of Rule 485.
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite amount of securities under the Securities Act of
1933. The Notice required by Rule 24f-2 for 1996 was filed on February 28,
1997.
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<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
<C> <S>
1 Cover Page.
2 Cover Page.
3 Inapplicable.
4 Sale of the Contract.
5 Information about SELIC.
6 The Separate Account.
7 Not Required.
8 Not Required.
9 Inapplicable.
10(a) Additional Provisions of the Contract.
10(b) The Contract.
10(c),(d),(e) Death Benefits under the Contract; Contract
Values; Summary of the Contract; Additional
Provisions of the Contract; Surrender and
Partial Withdrawals; Contract Loan Privilege;
Transfers; Premiums; Appendix B.
10(f),(g),(h) Voting Rights; Additional Provisions of the
Contract.
10(i) Additional Provisions of the Contract; Death
Benefits under the Contract; The Separate Account;
Appendix B.
11 The Separate Account.
12 The Separate Account; Appendix A; Sale of the
Contract.
13 Charges and Deductions; Sale of the Contract;
Appendix A.
14 Premiums; Charges and Deductions; Sale of the
Contract.
15 Premiums.
16 The Separate Account; Appendix A.
17 Captions referenced under Items 10(c), (d), (e)
and (i) above.
18 The Separate Account; Contract Values.
19 Records and Reports; Sale of the Contracts.
20 Captions referenced under Items 6 and 10(g)
above.
21 Contract Loan Privilege.
22 Inapplicable.
23 Sale of the Contract.
24 Additional Provisions of the Contract.
25 Information about SELIC.
26 Sale of the Contract.
27 Information about SELIC.
28 Management of the Company.
29 Information about SELIC.
30 Inapplicable.
31 Inapplicable.
<PAGE> 3
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
<C> <S>
32 Inapplicable.
33 Inapplicable.
34 Sale of the Contract.
35 Information about SELIC.
36 Inapplicable.
37 Inapplicable.
38 Sale of the Contract.
39 Sale of the Contract.
40 Sale of the Contract.
41(a) Sale of the Contract.
42 Inapplicable.
43 Inapplicable.
44(a) The Separate Account; Appendix A; Premiums;
Charges and Deductions.
44(b) Charges and Deductions.
44(c) Premiums; Charges and Deductions.
45 Inapplicable.
46 Appendix A; Captions referenced under Items
10(c), (d) and (e) above.
47 Inapplicable.
48 Inapplicable.
49 Inapplicable.
50 Inapplicable.
51 Cover Page; Death Benefits under the Contract;
Termination; Charges and Deductions; The Contract;
Appendix B; Summary; Additional Provisions of the
Contract; Premiums; Sale of the Contract.
52 Additional Provisions of the Contract.
53 Federal Income Tax Considerations.
54 Inapplicable.
55 Inapplicable.
59 Financial Statements.
</TABLE>
This Post-Effective Amendment No. 2 to the Registration Statement on Form S-6
includes three prospectuses describing the Contracts. The first prospectus
("Prospectus Version A") describes the Contracts as they will be sold in the
general market. The second prospectus ("Prospectus Version B"), which is
being added by this filing, describes Contracts which are substantially
identical to the Contracts in Prospectus Version A, except that the Contracts
described in Prospectus Version B make available to policy owners different
investment divisions of the Registrant than does the Contracts in Prospectus
Version A. The third prospectus ("Prospectus Version C") describes the
Contracts as they will be sold primarily through a particular bank-affiliated
distribution network.
<PAGE> 4
PROSPECTUS
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY SECURITY EQUITY LIFE INSURANCE COMPANY
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
PROSPECTUS DATED MAY 1, 1997
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE
SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
<PAGE> 5
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE, SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
This Prospectus describes the Individual Flexible Premium Variable Life
Insurance Contract (the "Contract") offered by Security Equity Life Insurance
Company ("SELIC" or the "Company"). The Contract is designed to provide
lifetime insurance protection to age 100 and at the same time provide maximum
flexibility to vary premium payments and change the level of death benefits
payable under the Contract. This flexibility allows a Contract Holder to
provide for changing insurance needs under a single insurance Contract. A
Contract Holder also has the opportunity to allocate Net Premiums among
several investment portfolios with different investment objectives.
The Contract provides for: (1) a Net Cash Value that can be obtained by
surrendering the Contract; (2) Contract loans; and (3) a Death Benefit
payable at the Insured's death. Contract Holders may also attach a rider
that amends the Contract to instead provide insurance coverage on the lives
of two Insureds, with proceeds payable upon the death of the last surviving
Insured. As long as a Contract remains in force, the Death Benefit will not
be less than the current Face Amount of the Contract. A Contract will remain
in force so long as its Net Cash Value is sufficient to pay certain monthly
charges imposed in connection with the Contract.
During the "Free Look" period, Net Premiums are allocated to the Money Market
Division as specified in Appendix A. After the end of the "Free Look"
period, Net Premiums may be allocated to one or more of the Available
Divisions of the Separate Account or to the Fixed Fund. If Net Premiums are
allocated to the Separate Account, the duration of the Contract and the
amount of the Insurance Account Value will vary to reflect the investment
performance of the Available Divisions selected by the Contract Holder, and
depending on the Death Benefit option elected, the amount of the Death
Benefit above the minimum may also vary with that investment performance. The
Contract Holder bears the entire investment risk for all amounts allocated to
the Separate Account; there is no minimum guaranteed Insurance Account Value.
Each Available Division of the Separate Account 13 will invest in one of the
Underlying Portfolios shown in Appendix A. The accompanying Prospectuses for
these portfolios describe the investment objectives and policies, and the
risks of the
<PAGE> 6
portfolios. This Prospectus generally describes only the
portion of the Contracts involving the Available Divisions of the Separate
Account. For a brief summary of the Fixed Fund, see "The Fixed Fund".
It may not be advantageous to purchase a Contract as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another Flexible Premium Variable
Life Insurance Contract. Within certain limits, a Contract Holder may return
the Contract, or convert it to a Contract that provides benefits that do not
vary with the investment results of Available Divisions by exercising the
Conversion Right.
This Prospectus must be accompanied or preceded by the current prospectuses
for the Underlying Portfolios listed in Appendix A.
THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK OR DEPOSITORY INSTITUTION, AND THE CONTRACT IS NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY, AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Contracts are not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
Please read this Prospectus carefully and retain it for future reference.
The date of this Prospectus is May 1, 1997
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
Definitions 6
Summary of Contract 10
Explanation of a Case 10
Purpose of the Contract 11
The Contract Holder and Beneficiary 11
Availability of the Contract 12
Joint Insureds 12
Contract Values 12
The Separate Account 12
Death Benefit 13
Premiums 13
Charges and Deductions 14
Contract Loans 15
Surrender and Partial Withdrawals 16
Termination 16
Illustrations 16
Replacement of Existing Coverage 16
Tax Considerations 16
Free Look and Conversion Rights 17
Information About SELIC 17
The Separate Account 18
The Contract 19
Availability of Insurance Coverage 20
Evidence of Insurability 21
Premiums 21
Contract Values 23
Transfers 26
Contract Loan Privilege 27
Surrender and Partial Withdrawals 30
Death Benefits Under the Contract 31
Charges and Deductions 36
Premium Load 36
Daily Charges 38
Monthly Charges 39
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Underwriting Charges 41
Annual Charges 42
Other Charges 42
Termination 43
Maturity Date 43
Termination for Insufficient Net Cash Value 43
Reinstatement of a Contract Terminated for Insufficient Value 44
The Fixed Fund 44
General Description 44
Allocation of Amounts to the Fixed Fund 45
Fixed Fund Benefits 45
Fixed Fund Insurance Account Value 45
Fixed Fund Transfers, Surrenders, Partial Withdrawals and Contract Loans 47
Federal Income Tax Considerations 47
Additional Provisions of the Contract 53
Addition, Deletion, or Substitution of Investments 53
Incontestability 54
Conversion Rights 55
Misstatement of Age or Sex 55
Suicide 55
Availability of Funds 55
Entire Contract 56
Representations in Application 56
Contract Application and Contract Schedules 56
Right to Amend Contract 57
Computation of Contract Values 57
Claims of Creditors 57
Notice 57
Assignments 57
Construction 58
Severability 58
State Variations 58
Unisex Requirements Under Montana Law 58
Records and Reports 58
Sale of the Contract 59
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Voting Rights 59
State Regulation of the Company 60
Management of the Company 61-63
Legal Matters 64
Legal Proceedings 64
Experts 64
Additional Information 64
Financial Statements 64
Appendix A - Underlying Portfolios A1-A2
Appendix B - Contract Riders B1-B7
Appendix C - Illustrations of Death Benefits and Insurance Account Value C1-C11
</TABLE>
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<PAGE> 10
DEFINITIONS
See Appendix B for modifications to Definitions in the event that riders are
added to the Contract.
ATTAINED AGE: The Insured's Issue Age under the Contract plus the number of
completed Contract Years.
APPLICATION: The application form that must be completed by any purchaser of
the Contract, before the Contract can be issued.
AVAILABLE DIVISION: A Division of the Separate Account to which Net Premiums
may be allocated or Separate Account Value or Fixed Fund Insurance Account
Value may be transferred under the Contracts. Each Available Division
invests exclusively in the shares of a corresponding Underlying Portfolio
listed in Appendix A.
BENEFICIARY: The person(s), entity or entities named on SELIC's records to
receive the insurance proceeds payable under the Contract after the Insured
dies.
BORROWED FUND: An account established in SELIC's General Account for any
amounts transferred from the Available Divisions and the Fixed Fund and held
as collateral for Contract Loans. (See "Contract Loan Privilege").
CASE: A grouping of one or more Contracts connected by a non-arbitrary
factor, presented to SELIC as a group. (An example of such a factor is a
common employer for the Insureds under each Contract in the grouping). (See
"Explanation of a Case").
CONTRACT: The Flexible Premium Variable Life Insurance Contract offered by
SELIC that is described in this Prospectus.
CONTRACT ANNIVERSARY: An anniversary of the Contract Date. It marks the
start of a new Contract Year.
CONTRACT DATE: The date used to begin calculating Monthly Charges and Annual
Charges under the Contract. It will be shown in the Contract.
CONTRACT HOLDER: The owner of the Contract, as shown in the records of
SELIC. All of the rights and benefits of the Contract belong to the Contract
Holder, unless otherwise stated in the Contract.
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<PAGE> 11
CONTRACT LOAN: An amount borrowed by the Contract Holder from the Insurance
Account Value of the Contract.
CONTRACT MONTH: Each one month period commencing on the Contract Date and on
each Monthiversary thereafter.
CONTRACT YEAR: Each successive twelve month period starting on the Contract
Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit payable to the Beneficiary when the Insured dies.
DEATH BENEFIT OPTION ACCUMULATION RATE: The rate at which Premiums are
accumulated for purposes of calculating Death Benefit Option 3.
DIVISION: A sub-account of the Separate Account. Only Available Divisions
(described in this Prospectus) are available for investment under the
Contracts.
EMPLOYER: A corporation, partnership, sole proprietorship, association,
trust, and other similar or related entity. Affiliated Employers are
considered one Employer.
EXCESS PREMIUM: Any amount of Premium paid in a Contract Year over and above
the Target Premium.
FACE AMOUNT: The amount of insurance under the contract, excluding any
Supplemental Term Insurance Amount. The Initial Face Amount on the Issue
Date is shown in the Contract. Thereafter, it may change in accordance with
the terms of the Contract.
FIXED FUND: The portion of the Insurance Account Value allocated to the
Company's General Account (excluding the Borrowed Fund).
GOVERNING JURISDICTION: The state or jurisdiction in which the Contract is
delivered and whose laws govern its terms. The Governing Jurisdiction is set
forth in the Contract.
HOME OFFICE: The principal administrative office of SELIC, which is located
at 84 Business Park Drive, Suite 303, Armonk, NY 10504.
INITIAL NET PREMIUM: The Initial Premium paid under the Contract less the
applicable Premium Load.
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<PAGE> 12
INITIAL PREMIUM: The first Premium paid under the Contract.
INSURANCE ACCOUNT VALUE: The total amount that a Contract provides for
investment at any time. It is equal to the total of the amounts credited to
the Contract Holder in the Separate Account, the Fixed Fund, and the Borrowed
Fund.
INSURED: The person whose life is insured under the terms of the Contract.
The Insured is shown in the Contract.
ISSUE AGE: The Insured's age at his/her nearest birthday as of the Contract
Date.
ISSUE DATE: The day the Initial Premium is received and accepted by SELIC.
This is also the date that insurance coverage becomes effective. All
Contract values based on the Separate Account are determined beginning on the
Issue Date. The Issue Date is shown in the Contract.
MATURITY DATE: The date on which the Contract will mature. The Maturity
Date is shown in the Contract.
MAXIMUM LOAN AMOUNT: The maximum amount of Insurance Account Value that can
be borrowed by the Contract Holder under the Contract.
MINIMUM INSURANCE COVERAGE: The minimum amount of Total Insurance Coverage,
which includes any Supplemental Term Insurance Amount, under the Contract.
It is currently $25,000.
MINIMUM PREMIUM: The Minimum Premium is equal to the Minimum Net Premium
plus any applicable Premium Load.
MINIMUM NET PREMIUM: The Minimum Net Premium at any time is equal to (12)
times the Monthly Charges for the first month in the then current Contract
Year.
MONTHIVERSARY: The first day of each Contract Month. It is the day as of
which Monthly Charges are deducted from the Insurance Account Value. The
Monthiversary and the Contract Date coincide, except in months in which the
Monthiversary falls on a day which is not a Valuation Day. In such months,
the Valuation Day is deemed to fall on the next Valuation Day. If any
Monthiversary would fall on the 29th, 30th, or 31st of a month that does not
have that number of days, then the Monthiversary is deemed to be the last day
of that month.
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<PAGE> 13
MONTHLY CHARGES: The Contract charges that are deducted monthly from
Insurance Account Value. Monthly Charges include the Administration Charge,
the Cost of Insurance Charge, any Monthly Charges for benefits provided by
Contract rider, and any charges for special insurance class rating. (See
"Charges and Deductions").
NET AMOUNT AT RISK: The Net Amount at Risk is calculated on any
Monthiversary by subtracting the Insurance Account Value from the Death
Benefit, discounted one month at a 4.00% assumed annual effective interest
rate.
NET CASH VALUE: The Contract's Insurance Account Value minus any Contract
Loan balance and interest accrued thereon and unpaid.
NET PREMIUM: The amount of a Premium less applicable Premium Load.
PLANNED RENEWAL PREMIUM: An amount of Premium, specified in the
Application, which the Contract Holder anticipates will be paid in each
Contract Year after the first.
PREMIUM: Premiums are the payments made to SELIC under the Contract by the
Contract Holder to purchase insurance on the life of the Insured and to
contribute to the Insurance Account Value of the Contract. Each Premium
amount may consist of Target Premium, Excess Premium, or both.
PREMIUM LOAD: An amount deducted from each Premium prior to allocation of
the Premium to the Separate Account and/or the Fixed Fund. Premium Load
includes the Distribution Charge (comprised of a Premium Expense Load and a
Commission Charge), a Premium Tax Charge and a DAC Tax Charge.
SELIC: Security Equity Life Insurance Company, the issuer of the Contract.
SEPARATE ACCOUNT: A separate investment account established by the Board of
Directors of SELIC to support the benefits payable under the Contract. Each
Available Division of the Separate Account invests in a single corresponding
Underlying Portfolio.
SEPARATE ACCOUNT VALUE: The portion of the Contract's Insurance Account
Value invested in the Separate Account. It will be equal to the Contract's
Insurance Account Value, less the total of amounts in the Borrowed Fund and
in the Fixed Fund.
SUPPLEMENTAL TERM INSURANCE AMOUNT: The amount of insurance provided by the
Supplemental Term Insurance Rider, if any. This amount is shown in the
Contract. The Supplemental Term Insurance Rider is described in Appendix B.
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<PAGE> 14
TARGET PREMIUM: An amount of Premium used to determine Premium Loads under
the Contract. The annual Target Premium is based upon the Face Amount and is
shown in the Contract. For Contracts with a Face Amount equal to the Minimum
Face Amount, the Target Premium will be zero (0).
TOTAL INSURANCE COVERAGE: Total amount of insurance, including coverage
provided by any Supplemental Term Insurance Rider under the Contract.
UNDERLYING PORTFOLIO: An investment portfolio, managed by one or more
investment managers, the shares or units of which comprise the investment of
an Available Division of the Separate Account.
VALUATION DAY: A day that is a regular business day of SELIC and that the
New York Stock Exchange (or its successor) is open for trading. Each
Valuation Day ends at the Valuation Time.
VALUATION TIME: The close of trading on the New York Stock Exchange (or any
successor exchange), which is generally 4 p.m. Eastern Time.
VALUATION PERIOD: The period of time between Valuation Days. A Valuation
Period begins immediately after the Valuation Time on the previous Valuation
Day and ends as of the Valuation Time on the next succeeding Valuation Day.
SUMMARY OF THE CONTRACT
This summary provides a brief overview of the more significant aspects of the
Contract and should be read in conjunction with the detailed information
appearing elsewhere in this Prospectus. Further detail is provided in the
Contract, the Application, and the prospectuses for the Underlying
Portfolios. See Appendix B for modifications to this section in the event
that riders are added to the Contract.
EXPLANATION OF A CASE
Every Contract issued by SELIC will be part of a Case. A Case is a grouping
of one or more Contracts linked together by a non-arbitrary factor such as a
common Employer of each Insured under the Contracts. SELIC in its sole
discretion will determine what constitutes a Case. A Case may have one
Contract Holder (i.e., a single entity owns all the Contracts in the Case) or
as many Contract Holders as there are Contracts in the Case. The Premium
Load, Minimum Initial Premiums, and underwriting standards for an individual
Contract are determined based on the
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<PAGE> 15
characteristics of the Case to which the Contract belongs. (See "Charges and
Deductions").
A Contract is the agreement between SELIC and the Contract Holder to provide
benefits on the life of an Insured. Every Contract will belong to a Case.
Each Contract will be treated as an individual Contract, yet will also be
linked to the Case it belongs for purposes of determining certain Contract
features and charges.
PURPOSE OF THE CONTRACT
The Contract offers a means to obtain insurance protection relating to the
life of a person in whom the Contract Holder has an insurable interest. A
Death Benefit is payable to the applicable Beneficiary upon the death of the
Insured so long as the Contract remains in force. The accumulated values and
benefits under the Contract may be used by Contract Holders for any valid
purpose. Unlike traditional life insurance, which provides a guaranteed
Insurance Account Value, a Contract's Insurance Account Value will vary to
reflect investment results of the Available Divisions and interest credited
to the Fixed Fund.
Life insurance is not a short-term investment. Prospective Contract Holders
should evaluate the need for insurance and the Contract's long-term
investment potential and risks before purchasing a Contract.
The Contract is a long-term investment designed to provide a Death Benefit,
and should only be purchased for purposes consistent with these features.
The Death Benefit and Net Cash Value under Contracts in a Case may be used to
provide proceeds for various planning purposes. However, the Contracts are
not liquid investments: partial withdrawals may be currently taxable; and
Contract Loans and partial withdrawals may significantly affect current and
future Death Benefit proceeds and Net Cash Value, and cause Contracts to
lapse. (See "Termination -- Termination for Insufficient Net Cash Value").
In addition, if the performance of the Available Divisions to which Insurance
Account Value is allocated is not sufficient to provide proceeds for the
specific planning purpose contemplated, or if insufficient premiums are paid
or Contract values maintained, then Contracts may not achieve the purpose for
which they were purchased, or may lapse. (See "Termination -- Termination
for Insufficient Net Cash Value"). Because the Contracts are designed to
provide benefits on a long-term basis, before purchasing Contracts for a
specialized purpose, a purchaser should consider whether the long-term nature
of the Contract, and the potential impact of any contemplated Contract Loans
and partial withdrawals, are consistent with the purpose for which the
Contracts are being considered. Using the Contracts for a specialized
purpose may have tax consequences. (See generally "Federal Income Tax
Considerations," and in particular, "Other Tax Consequences."
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<PAGE> 16
THE CONTRACT HOLDER AND BENEFICIARY
The Contract Holder is the individual or entity set forth in the Application,
unless subsequently changed on the records of SELIC. The Contract Holder
retains all rights and responsibilities of ownership pertaining to its
interest in the Contract, including but not limited to, investment
allocation, payment of Premiums, borrowing, taking partial withdrawals, and
surrendering the Contract.
The Beneficiary is also named in the Application. The Contract Holder has
the right to change a revocable Beneficiary with prior written notice to
SELIC. The Beneficiary will receive all insurance benefits payable upon the
death of the Insured. UNLESS THE INSURED IS NAMED AS CONTRACT HOLDER, OR THE
------------------------------------------------------
CONTRACT HOLDER ASSIGNS THE RIGHT TO DESIGNATE THE BENEFICIARY TO THE
- ---------------------------------------------------------------------
INSURED, OR UNLESS OTHERWISE AGREED, THE INSURED HAS NO DIRECT OR INDIRECT
- --------------------------------------------------------------------------
INTEREST IN THE CONTRACT.
- ------------------------
AVAILABILITY OF THE CONTRACT
The Contract is offered only to individuals, corporations, partnerships, sole
proprietorships, associations, trusts, and other similar or related entities,
which satisfy certain suitability standards. The Contract may be purchased
to acquire insurance on the life of a person in whom the Contract Holder has
an appropriate insurable interest. Failure to establish an insurable interest
may result in adverse financial and tax consequences to the Contract Holder.
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<PAGE> 17
JOINT INSUREDS
A rider may be added to the Contract to provide coverage on the lives of two
Insureds, with the Death Benefit payable on the death of the last surviving
Insured. Most of the discussions in this Prospectus referencing a single
Insured may also be read as though the single Insured were the two Insureds
under a joint Contract. Certain discussions in the Prospectus are modified
if a Joint and Last Survivor Rider is added to the Contract. (See Appendix B
- -- "Joint and Last Survivor Rider").
CONTRACT VALUES
Net Premiums are allocated to one or more Available Divisions and/or the
Fixed Fund. To the extent Net Premiums are allocated to the Available
Divisions, the Insurance Account Value will, and the Death Benefit may, vary
with the investment performance of the chosen Available Divisions. To the
extent Net Premiums are allocated to the Fixed Fund, the Insurance Account
Value will accrue interest at a guaranteed minimum rate (see "The Fixed
Fund"). To the extent that Net Premiums are allocated to the Available
Divisions of the Separate Account, the Contract Holder bears the entire
investment risk associated with the investments of the selected Available
Divisions, and there is no guaranteed minimum Insurance Account Value.
THE SEPARATE ACCOUNT
Several Divisions of the Separate Account are available for allocation of Net
Premiums paid under the Contract, subject to certain limitations set forth in
the Contract. (See "The Contract -- Premiums") A list of the Available
Divisions -- a Division of the Separate Account currently available under the
Contract for allocation of Net Premiums and transfers -- is set forth in
Appendix A of this Prospectus.
Each Available Division of the Separate Account invests its assets in shares
or units of an Underlying Portfolio managed by one or more investment
managers. Each Underlying Portfolio has a different investment objective, and
is described more fully in the prospectus for the Underlying Portfolio which
accompanies this Prospectus.
In the future, Available Divisions may be added, and existing Available
Divisions may be deleted. The Contract Holder will be notified in writing of
any such change. (See "The Separate Account").
DEATH BENEFIT
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<PAGE> 18
Death Benefit proceeds are payable to the named Beneficiary when the Insured
under the Contract dies. The Death Benefit payable under the Contract will
depend upon the Death Benefit Option in effect for the Contract. So long as
the Contract remains in force, the minimum death benefit under each Death
Benefit Option will be at least equal to the current Face Amount of the
Contract. (See "The Contract -- Death Benefits Under the Contract").
PREMIUMS
A Contract Holder will have considerable flexibility under a Contract as to
both the timing and amount of Premiums. SELIC will not issue a Contract
unless it receives a Premium payment at least equal to the initial Minimum
Premium amount, which is equal to 12 times the Monthly Charges due under that
Contract in the first Contract Month, plus any applicable Premium Load. SELIC
may, in its sole discretion, require a reduced initial Minimum Premium in
connection with the purchase of certain Contracts. Each subsequent Premium
must be at least $50 per Contract. Subsequent Premiums may be paid at any
time and in any frequency, subject to certain restrictions. (See "The
Contract -- Premiums"). If the Initial Premium and subsequent Premiums prove
to be too low, insurance coverage under the Contract may cease.
The initial Net Premium will be allocated during the Free Look period to the
Money Market Division specified in Appendix A. After the Free Look period,
Separate Account Value will be allocated among the Available Divisions of the
Separate Account and the Fixed Fund according to the Contract Holder's
instructions as specified in the Application or as subsequently changed prior
to the end of the Free Look period.
Insurance Account Value may be transferred among the Available Divisions of
the Separate Account and the Fixed Fund by written request, subject to
certain restrictions. Amounts may be transferred by dollar amounts or by
percentages. (See "The Contract -- Transfers").
CHARGES AND DEDUCTIONS
Certain charges are deducted from Premiums and from Insurance Account Value
under the Contract. For a more detailed discussion of the charges deducted
under the Contract, see "Charges and Deductions." For additional information
regarding the investment advisory fees and operating expenses of the
Underlying Portfolios, see the accompanying prospectuses for these
portfolios.
A Premium Load is deducted from the Initial Premium and from each subsequent
Premium paid, prior to allocation to the Separate Account or the Fixed Fund.
The Premium Load includes a Distribution Charge (which consists of a
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<PAGE> 19
Premium Expense Load and a Commission Charge), a Premium Tax Charge (which
will be made for any applicable state premium taxes), and the DAC Tax Charge.
The Distribution Charge is equal to a maximum of 30% of Premiums paid during
the first Contract Year up to one Target Premium (and 2% of first year
Premiums thereafter), and declines as a percentage of Premiums paid in
Contract Years 2-10 (to a maximum of 10% of Premiums paid during each
Contract Year up to a Target Premium; and 2% of Premiums thereafter);
Contract Years 11-15 (to a maximum of 8% of Premiums paid during each
Contract Year up to a Target Premium and 2% of Premiums thereafter), and
Contract Years 16 and thereafter (a maximum of 4% of Premiums paid during
each Contract Year up to a Target Premium and 2% of Premiums thereafter).
The Premium Tax Charge reflects the state premium taxes imposed under the
Contract. The DAC Tax Charge is equal to 1% of all Premiums paid in all
Contract Years.
A Daily Charge for mortality and expense risks assumed by SELIC under the
Contract is calculated and deducted daily as a percentage of the Insurance
Account Value attributable to each Division of the Separate Account.
Currently, this Daily Charge is equal to 0.35% on an annual basis; it is
guaranteed not to exceed 0.50% on an annual basis.
Monthly Charges are deducted directly from the Insurance Account Value as of
the Contract Date and on each Monthiversary thereafter. Monthly Charges
include an Administration Charge of $4.50 per month (guaranteed not to exceed
$8.00 per month) and a charge for the cost of insurance provided under the
Contract. Monthly Charges also include any charges for additional benefits
provided by Contract rider and charges for a special class rating, if
applicable.
SELIC will deduct an Underwriting Charge, not to exceed $100, on the Issue
Date for Contracts issued on a medically underwritten basis, and on any
Monthiversary following any medical underwriting in connection with certain
Contract changes. This charge changes if a Joint and Last Survivor Rider is
added to the Contract. See Appendix B. SELIC may reduce or waive the
Underwriting Charge under certain circumstances.
On each Contract Anniversary the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest due
and unpaid for the previous Contract Year; and (ii) increased by the interest
credited to the Borrowed Fund during the previous Contract Year. The net
result is
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that if Contract Loan interest is not paid when due, then on the
Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
No charges are currently made to the Separate Account for federal, state or
local taxes that SELIC incurs which may be attributable to the Separate
Account. However, SELIC may impose such a charge in the future to provide
for any tax liability of the Separate Account.
Investment advisory fees and operating expenses of each Underlying Portfolio
are paid by such portfolio, and are reflected in the Separate Account Value
of a Contract.
At the Contract Holder's request, SELIC will provide an illustrative report
in addi-tion to the reports it customarily provides. Depending upon the type
and complexity of the requested report, SELIC may charge a reasonable fee not
to exceed $50.
CONTRACT LOANS
The Contract Holder may obtain a Contract Loan under the Contract on any
Monthiversary. There is a maximum amount that may be borrowed, and interest
will be charged for any amount borrowed in accordance with the Contract Loan
interest rate option selected by the Contract Holder in the Application or as
subsequently changed. (See "Contract Loan Privilege").
Contract Loans are deducted from the amount payable on surrender of the
Contract and are also deducted from any Death Benefit proceeds. Contract
Loan interest accrues daily, and if it is not repaid each year, it is
capitalized and added to the Contract Loan. Depending upon the investment
performance of the Available Divisions and the amounts borrowed, Contract
Loans may cause a Contract to lapse. If the Contract lapses with a Contract
Loan outstanding, adverse tax consequences may result. A Contract Loan may
also have other Federal income tax consequences. (See "Federal Income Tax
Considerations").
SURRENDER AND PARTIAL WITHDRAWALS
While the Insured is alive, the Contract may be surrendered at any time for
its Net Cash Value upon written request to SELIC's Home Office. To the
extent that the Insurance Account Value is allocated to the Available
Divisions of the Separate Account, SELIC does not guarantee any minimum Net
Cash Value. Partial
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withdrawals of Net Cash Value are permitted, subject to
certain restrictions. (See "The Contract - Surrender and Partial
Withdrawals").
A surrender or partial withdrawal may have Federal income tax consequences.
(See "Federal Income Tax Considerations").
TERMINATION
The Contract does not automatically terminate for failure to pay subsequent
Premiums. However, the Contract may terminate prior to its Maturity Date if
there is insufficient Net Cash Value to pay Monthly Charges. (See
"Termination").
ILLUSTRATIONS
Illustrations in this prospectus or used in connection with the purchase of a
Contract are based on hypothetical rates of return. These rates are not
guaranteed. They are illustrative only, and should not be deemed to be a
representation of past or potential investment performance. Actual rates of
return may be more or less than those in the illustrations and, therefore,
actual values will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, a prospective Contract Holder should consider
whether changing, or adding to, current insurance coverage would be
advantageous. Generally, it is not advisable to purchase another insurance
contract as a replacement for existing coverage. In particular, replacement
should be carefully considered if the decision to replace the coverage is
based solely on a comparison of contract illustrations.
TAX CONSIDERATIONS
SELIC intends for the Contract to satisfy the definition of life insurance
contract under section 7702 of the Internal Revenue Code. Under certain
circumstances, a Contract may be a "modified endowment contract" under
federal tax law, depending upon the amount of payments made in relation to
the death benefit provided under the Contract. SELIC will monitor Contracts
and will attempt to notify a Contract Holder on a timely basis if his or her
Contract is in jeopardy of becoming a modified endowment contract. The status
under the Internal Revenue Code of Contracts issued with a Supplemental Term
Insurance Rider, or a Joint and Last Survivor Rider, is less clear. For
further discussion of the tax status of a Contract and the tax consequences
of being treated as a life insurance contract or a modified endowment
contract, see "Federal Income Tax Considerations."
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FREE LOOK AND CONVERSION RIGHTS
In most states, the Contract may be canceled at any time within 10 days after
it is received by the Contract Holder, 10 days after SELIC mails or
personally delivers the Notice of Withdrawal Right to the Contract Holder, or
within 45 days after the date of the Application, whichever is later. The
Contract must be returned to SELIC at its Home Office along with written
notice of cancellation. If the Contract is canceled, it will be as though
the Contract had never been issued. A refund will be paid if the Contract is
canceled. The refund will equal any Premium(s) paid, minus any partial
withdrawals taken and any Contract Loans together with accrued but unpaid
Contract Loan interest.
Once issued and as long as the Contract is in force, a Contract Holder may
during the first 24 months, transfer all of the Insurance Account Value out
of the Separate Account and into the Fixed Fund, and receive fixed and
guaranteed benefits under the Contract. Once this right is exercised no
transfers out of the Fixed Fund will be allowed and all Net Premiums paid
after the election will be allocated to the Fixed Fund. (See "Additional
Provisions of The Contract - Conversion Rights").
INFORMATION ABOUT SELIC
SELIC is a stock life insurance company domiciled in New York. It is a
wholly-owned subsidiary of General American Life Insurance Company ("General
American"), a life insurance company domiciled in Missouri.
SELIC was established in 1983 as a wholly-owned subsidiary of Security Mutual
Life Insurance Company of New York. It was purchased by General American on
December 31, 1993.
General American commenced operations in 1933 as a stock company and was
converted to a mutual company in a process that ended in 1946. General
American is principally engaged in issuing individual and group life and
health insurance contracts and annuity products. It is admitted to do
business in 49 states, the District of Columbia, and 10 Canadian provinces.
The principal offices of General American are located in St. Louis, Missouri.
SELIC is admitted to sell life insurance and annuities in 40 states and the
District of Columbia. SELIC concentrates on sales of corporate owned life
insurance products in all of these jurisdictions and sales of individual
products to residents of New York.
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<PAGE> 23
THE SEPARATE ACCOUNT
Security Equity Life Insurance Company Separate Account 13 (the "Separate
Account") was established by SELIC as a Separate Investment Account on
December 30,1994. The Separate Account will receive and invest the Net
Premiums paid under this Contract and allocated to it. In addition, the
Separate Account may receive and invest Net Premiums for other flexible
premium variable life insurance contracts that might be issued by SELIC.
The Separate Account is currently divided into a number of Divisions. Not all
Divisions are available for allocation of Net Premiums and transfers under
the Contract. Each Available Division invests exclusively in shares of an
Underlying Portfolio listed in Appendix A. Both realized and unrealized gains
or losses and income from the assets of each Division of the Separate Account
are credited to or charged against that Division without regard to income,
gains, or losses from any other Division of the Separate Account or from any
other business SELIC may conduct.
Obligations to Contract Holders and Beneficiaries that arise under the
Contract are obligations of SELIC. SELIC owns the assets of the Separate
Account. Those assets will only be used to support variable life insurance
contracts and for any other purposes permitted by applicable laws and
regulations. The portion of the assets of the Separate Account equal to the
reserves and other contract liabilities with respect to the Separate Account
will not be charged with liabilities that arise from any other business SELIC
may conduct. SELIC may, however, transfer from the Separate Account to its
General Account assets that exceed the reserves and other contract
liabilities in respect of the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Separate Account meets
the definition of a "separate account" under the federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices of the Separate Account, the Contracts, or SELIC by the
Commission.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES OF ANY UNDERLYING PORTFOLIO
WILL BE ACHIEVED.
Detailed information concerning the investment objectives, techniques and
restrictions pertaining to each Underlying Portfolio, and the expenses,
investment advisory services, and risks attendant to allocating Insurance
Account Value to each Underlying Portfolio, can be found in the current
prospectus with respect to each
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<PAGE> 24
Underlying Portfolio, which accompanies this Prospectus, and the current
Statement of Additional Information for each Underlying Portfolio. Such
information has been prepared by the Underlying Portfolio or the investment
company of which it is a part, and SELIC is not responsible for preparing this
information. The Underlying Portfolio prospectuses should be read carefully
before any decision is made concerning the allocation of Premium payments or
transfers among the Available Divisions.
Not all of the investment portfolios described in the accompanying
prospectuses are necessarily available under the Contract. Moreover, SELIC
cannot guarantee that each Underlying Portfolio will always be available for
the Contract. In the unlikely event that an Underlying Portfolio becomes
unavailable, SELIC will attempt to secure the availability of a comparable
Underlying Portfolio. Shares and units of each Underlying Portfolio are
purchased and redeemed at Net Asset Value, without a sales charge.
One or more of the Underlying Portfolios are available for investment by both
variable life insurance and variable annuity separate accounts. It is
conceivable that in the future it may be disadvantageous for both variable
life and variable annuity separate accounts to invest simultaneously in an
Underlying Portfolio that sells its shares to both types of separate
accounts. The Board of Directors or Trustees of such Underlying Portfolios,
the respective investment advisers of each Underlying Portfolio, and SELIC
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events of conflicts. Material conflicts
could arise from such things as changes in state insurance laws, changes in
federal income tax laws, changes in the investment management of an
Underlying Portfolio, or differences in the voting instructions given by
variable annuity contract owners and variable life insurance contract owners.
In the event of a material irreconcilable conflict, SELIC will take steps
necessary to protect our Contract Holders. This could include discontinuance
of investment in an Underlying Portfolio.
THE CONTRACT
The Contract is a flexible premium variable life insurance contract that
provides insurance on the life of an Insured. A Contract may be sold
together with other related Contracts forming a Case. See Appendix B for
modifications to this Section in the event that a Joint and Last Survivor
Rider and/or a Supplemental Term Insurance Rider is added to the Contract.
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AVAILABILITY OF INSURANCE COVERAGE
To be eligible for insurance under the Contract, a prospective Insured must
on the Contract Date:
(1) be at least 20 years of age and no more than 85 years of age;
(2) have elected or consented to be an Insured (if required by SELIC or the
Governing Jurisdiction); and
(3) have satisfied any necessary underwriting requirements of SELIC (see
"Charges and Deductions -- Monthly Charges -- Cost of Insurance
Charge").
A Contract can be issued if the Contract Holder:
(1) provides SELIC with the data it requires including, but not limited to
the prospective Insured's name, address, social security number,
sex, date of birth, smoker/nonsmoker status, and citizenship
(SELIC may also require submission of related documents that have
been completed by the prospective Insured);
(2) requests Total Insurance Coverage at least equal to the Minimum
Insurance Coverage for an Insured;
(3) designates the Beneficiary under the Contract; and
(4) pays the initial Minimum Premium for the first Contract Year.
Insurance coverage generally begins on the Issue Date for the Contract.
Temporary life insurance coverage may be provided under the terms of a
temporary insurance agreement. In accordance with SELIC's underwriting rules,
temporary life insurance coverage may not exceed the greater of $100,000 or
two times the Premium paid, and may not be in effect for more than 90 days.
This temporary insurance coverage will be issued on a conditional receipt
basis, which means that any Death Benefit under such temporary coverage will
only be paid if the Insured meets SELIC's usual and customary underwriting
standards for the applied-for coverage under the Contract (see "Charges and
Deductions -- Monthly Charges -- Cost of Insurance Charge").
As provided for under state insurance law, a Contract Holder, to preserve
insurance age of the Insured, may be permitted to backdate the Contract. In
no case may the Contract Date be more than six months prior to the date that
the Application was completed. If any Contract in a Case is backdated, then
all Contracts in the Case must
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be backdated to the same date. Monthly Charges for the backdated period will
be deducted as of the Contract Date, and each Monthiversary thereafter.
For modifications to this Section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider."
EVIDENCE OF INSURABILITY
SELIC may require medical evidence of insurability for any Contract that does
not meet SELIC's guaranteed issue or simplified issue standards when the
Contract is issued. (See "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge"). Medical evidence of insurability may also be required
for any transaction that increases the Net Amount at Risk for the Contract.
Transactions that increase the Net Amount at Risk may include but are not
limited to: payment of subsequent Premiums, change of Death Benefit Option,
change of Face Amount, partial withdrawals, and reinstatement of a Contract.
For modifications to this section for Joint Insureds, see Appendix B -- Last
Survivor Rider.
PREMIUMS
Premiums are the payments made to SELIC under the Contract to purchase
insurance on the life of the Insured and to contribute to the Insurance
Account Value of the Contract. All Premiums are payable to SELIC at its Home
Office. A Premium Load is deducted from any Premium received by SELIC prior
to its allocation to the Separate Account or to the Fixed Fund. The
resulting amount is the Net Premium. The applicable Premium Load percentage
depends upon the Case to which the Contract belongs, whether the Premium
consists of Target Premium or Excess Premium, and the Contract Year in which
the Premium is paid. (See "Charges and Deductions -- Premium Load).
Premiums may consist of Target Premium, Excess Premium or both. The Target
Premium depends upon the Insured's Issue Age, sex, underwriting class and
Face Amount. The Target Premium for the initial Face Amount is determined to
be the level annual premium payable to age 100 for a level death benefit that
under guaranteed cost of insurance rates and guaranteed policy expense
charges and a 4.00% net interest rate (after the M&E charge) the cash value
will accumulate to equal the initial Face Amount at age 100. The Target
Premium is determined on the Issue Date. It is not recalculated if there is
an increase in the Face
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Amount. It is recalculated if there is a decrease in
the Face Amount, but only if the new Face Amount is below the initial Face
Amount.
SELIC has the right to refund promptly any amount of Premium paid if
necessary to keep the Contract in compliance with state and federal laws,
including federal income tax laws. In particular, if a Contract Holder pays
Premium amounts during the first Contract Year significantly in excess of the
Planned Renewal Premium, SELIC reserves the right to refund promptly part or
all of such excess if applicable state insurance law restricts the amount of
commissions that would otherwise be payable to the writing agent in
connection with part or all of such Premium amounts.
SELIC will not issue the Contract unless it receives a Premium payment at
least equal to the initial Minimum Premium amount. The initial Minimum
Premium under the Contract is equal to twelve times the Monthly Charges due
under the Contract in the first Contract Month, plus any applicable Premium
Load. SELIC may, in its sole discretion, require a reduced initial Minimum
Premium in connection with the purchase of Contracts sold by licensed agents
of SELIC that are also registered representatives of Walnut Street
Securities, Inc. ("Walnut Street"), the distributor of the Contracts, or
selected broker-dealers or through banks that have entered into written sales
agreements with Walnut Street.
After the Initial Premium has been received and accepted by SELIC, the
Contract Holder may pay subsequent Premiums on any Valuation Day provided
that each subsequent Premium is at least $50 per Contract. All payments
received by SELIC from the Contract Holder will be credited to the Contract
as Premiums, unless the Contract Holder specifies that such payments are
Contract Loan repayments. Subsequent Premiums may cause a Contract that was
not classified as a "modified endowment contract" to become classified as
such a contract. SELIC will take steps to monitor subsequent Premiums, and
will notify a Contract Holder if a subsequent Premium, or a portion thereof,
would cause a Contract to become a modified endowment contract. (See
"Federal Income Tax Considerations -- Modified Endowment Contracts")
ALLOCATION OF NET PREMIUMS: Generally, the initial Net Premium will be
credited to the Money Market Division of the Separate Account and the
Insurance Account Value will begin to vary with investment experience on the
Valuation Day next following receipt of the initial payment at the Home
Office. However, in situations where SELIC receives the initial payment with
the application and underwriting is required, then the payment will be held
on deposit in SELIC's General Account until underwriting is completed and the
Contract is issued (the Issue Date). Any Net Premiums received
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during the Free Look period will be allocated to the Money Market Division.
At the end of such period, Separate Account Value will be allocated to or
among any of the Available Divisions and the Fixed Fund, in accordance with
the Contract Holder's allocation instructions set forth in the Application, or
as subsequently changed prior to the end of the Free Look period. No
allocation or transfer instructions received from the Contract Holder in the
Application or during the Free Look period will be acted upon until the Free
Look period has expired. The duration of the Free Look period depends upon
the law of a Contract's Governing Jurisdiction. The Free Look period under a
Contract will expire after the number of days provided for in the applicable
Governing Jurisdiction's Free Look period has elapsed following the date the
Contract is delivered to the Contract Holder, as evidenced by a signed
delivery receipt or certified mail return receipt, or if later, 10 days after
SELIC mails or personally delivers the Notice of Withdrawal Right to the
Contract Holder, or 45 days after the Application is signed. Transfer of
money to the Available Divisions and, or the Fixed Fund specified by the
Contract Holder will occur at the expiration of the Free Look period.
Net Premiums received after the Free Look period expires will be allocated
among the Available Divisions and the Fixed Fund in accordance with the
Contract Holder's instructions. Net Premiums that are received prior to the
Valuation Time on any Valuation Day will be allocated as of the date they are
received. Net Premiums received after such time will be allocated on the
next Valuation Day.
The maximum number of Available Divisions to which the Contract's Separate
Account Value may be allocated at any one time is five; amounts can also be
allocated to the Fixed Fund. If no instructions accompany a Premium, the
resulting Net Premium will be allocated to the Available Divisions and the
Fixed Fund in the same proportions as stated in the most recently recorded
Premium allocation instructions SELIC received from the Contract Holder.
The allocation of subsequent Premiums may be changed at any time upon SELIC's
receipt of written notice from the Contract Holder.
PREMIUMS TO PREVENT LAPSE: If the Contract is in danger of lapsing because
the Net Cash Value is insufficient to pay the Monthly Charges for the
Contract on a Monthiversary, the amount of Premium that must be paid to
prevent lapse will be equal to three times the Monthly Charges then due plus
any applicable Premium Load. (See "Termination -- Termination for
Insufficient Cash Value"). SELIC will send a notice to a Contract Holder
when such Premiums are required to keep the Contract in force.
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PREMIUMS TO REINSTATE A CONTRACT: When a Contract has lapsed due to
insufficient Net Cash Value, the amount of Premium that must be paid to
reinstate insurance coverage will be equal to the Monthly Charges due and
unpaid at the time of lapse, plus three times the Monthly Charges due at the
time of reinstatement, plus any applicable Premium Load. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient Value). When the
Contract has terminated, SELIC will send a notice specifying the Premiums
that are required to be paid to reinstate the Contract.
CONTRACT VALUES
The Insurance Account Value of the Contract is equal to the total amounts of
the Insurance Account Value in each Available Division of the Separate
Account, the Insurance Account Value in the Fixed Fund, and the Insurance
Account Value in the Borrowed Fund.
The Insurance Account Value allocated to each Available Division is measured
in "Accumulation Units." The value of an Accumulation Unit is determined as
of the Valuation Time on each Valuation Day. The value of any unit will vary
from Valuation Day to Valuation Day to reflect the investment performance of
the Available Division applicable to that Accumulation Unit.
The value of an Accumulation Unit in each Available Division is arbitrarily
set at $1.00 on the first Valuation Day for that Available Division. The
value of any Accumulation Unit on any subsequent Valuation Day is equal to
its value on the preceding Valuation Day multiplied by that Available
Division's Net Investment Factor for the Valuation Period. The Net
Investment Factor for an Available Division for a Valuation Period equals the
"gross investment rate" for such period plus one and minus the Mortality and
Expense Risk Charge for that Valuation Period.
The "gross investment rate" of an Available Division for any Valuation Period
is equal to the net earnings of that Available Division during the Valuation
Period, divided by the value of the total assets of that Available Division
at the beginning of the Valuation Period. The net earnings of each Available
Division during a Valuation Period are equal to the accrued investment income
and capital gains and losses (realized and unrealized) of that Available
Division, reduced by any amount charged against that Available Division for
premium taxes or other governmental charges paid or reserved by SELIC during
that Valuation Period.
The "gross investment rate" and net earnings of each Available Division will
be determined by SELIC in accordance with generally accepted accounting
principles and applicable laws, rules and regulations.
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Transactions which require the crediting and canceling of Accumulation Units
will be processed as of the Valuation Time on the Valuation Day in which the
transaction is effected. Premium payments, and requests for Contract Loans,
withdrawals, transfers, or any other transaction, received in proper form
before the Valuation Time on a Valuation Day will be effected as of the
Valuation Time on the day that the Premium payment, or transaction request,
is received. Premium payments, and transaction requests, received in proper
form after the Valuation Time on a Valuation Day, will be effected as of the
Valuation Time of the following Valuation Day.
The Insurance Account Value in the Money Market Division on the Issue Date is
equal to the Premium paid on that date, less any applicable Premium Load
less:
(1) Cost of Insurance Charges;
(2) Administration Charges;
(3) Any charges that are deducted from the Insurance Account Value for
benefits provided by Contract riders;
(4) Underwriting Charges, if any; and
(5) Charges for Special Insurance Class Rating, if any.
The Insurance Account Value in each Available Division as of the Valuation
Time on any subsequent Valuation Day is equal to the Insurance Account Value
in that Available Division on the prior Valuation Day plus:
(1) Any new Net Premium allocated to that Available Division;
(2) Any amounts transferred to that Available Division from another
Available Division, the Fixed Fund or the Borrowed Fund; and
(3) Any increase in value of the Available Division's investments due to
investment results net of Daily Charges;
and less:
(1) Any amounts transferred from that Available Division to another
Available Division, the Fixed Fund or the Borrowed Fund;
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(2) Any decrease in the value of the Available Division's investments due
to investment results net of Daily Charges;
(3) The Cost of Insurance Charges allocated to that Available Division
(deducted only on a Monthiversary);
(4) The Administration Charges allocated to that Available Division
(deducted only on a Monthiversary);
(5) Any partial withdrawals taken from such Contract and allocated to that
Available Division;
(6) Any charges allocated to that Available Division that are deducted from
the Insurance Account Value for benefits provided by Contract riders;
(7) Any Underwriting Charges allocated to that Available Division;
(8) Any charges for Special Insurance Class Rating allocated to that
Available Division (deducted only on a Monthiversary); and
(9) Any other charges allocated to that Available Division as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
For description of the Insurance Account Value in the Fixed Fund and the
Borrowed Fund, see "The Contract -- The Fixed Fund" and "Contract Loan
Privilege."
TRANSFERS
The Contract provides that all or part of the Insurance Account Value (except
amounts in the Borrowed Fund) may be transferred between or among Available
Divisions and the Fixed Fund on any Valuation Day subject to the following
limitations:
(a) The Insurance Account Value cannot be allocated to more than five
Available Divisions and the Fixed Fund at any one time;
(b) Transfer requests must be in writing and in a form acceptable to SELIC;
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(c) Except as described below, only one transfer is permitted in each
Contract Year;
(d) SELIC reserves the right to limit the amount of any transfer.
Transfers from or among the Available Divisions must be in amounts
of at least $500, or, if smaller, the Insurance Account Value in
an Available Division; and
(e) Transfers to the Fixed Fund may be limited. Insurance Account Value in
the Fixed Fund after any transfer to the Fixed Fund may be no
greater than the amount specified in the Contract. (See "The
Fixed Fund -- Allocation of Amounts to the Fixed Fund").
Transfers from the Fixed Fund are also subject to the following limitations:
(a) The transfer must be made in the 30 day period following a Contract
Anniversary; and
(b) The amount transferred may be no larger than 25% of the Insurance
Account Value in the Fixed Fund on the date of the transfer.
Transfers may be requested by dollar amount or whole percentage. SELIC will
execute a transfer only upon receipt of a properly executed transfer request.
Written confirmation of each transfer will be sent to the Contract Holder.
Notwithstanding the above limitations, which are set forth in the Contract,
SELIC will, as a matter of administrative practice, allow up to 12 transfers
per year between or among Available Divisions. Contract Holders will be
notified in advance if this administrative practice is changed or eliminated.
For purposes of calculating the number of transfers requested in any Contract
Year, all transfer requests received on the same Valuation Day will be
counted as one transfer request. Transfers effected in connection with
Contract Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers permitted in each Contract Year.
CONTRACT LOAN PRIVILEGE
The Contract Holder may request a loan against the Contract. The Contract
must be assigned to the Company as the sole security for the Contract Loan.
A Contract Loan may take place on any Valuation Day. An amount equal to the
amount borrowed will be transferred from the Separate Account and the Fixed
Fund to the Borrowed Fund.
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The Borrowed Fund is a portion of SELIC's General Account reserved for amounts
held as collateral for Contract Loans. A Contract Loan from, or secured by,
the Contract may have federal income tax consequences. In particular, if the
Contract is a "modified endowment contract" loans may be currently taxable and
subject to a 10% penalty tax. (See "Federal Income Tax Considerations").
SOURCE OF CONTRACT LOAN: Insurance Account Value equal to each Contract Loan
will be transferred to the Borrowed Fund, reducing the Insurance Account
Value in the Separate Account and the Fixed Fund. Unless other specific
instructions are received from the Contract Holder, the Contract Loan will be
taken from the Available Divisions of the Separate Account and the Fixed Fund
in proportion to the amount of the Contract Holder's then current Insurance
Account Value in each Available Division of the Separate Account and Fixed
Fund.
The maximum total of Contract Loans for each Contract is equal to the
Insurance Account Value less the sum of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with interest accrued but
unpaid; and
(3) Contract Loan interest charges until the next Contract Anniversary.
If a Contract Loan is requested that would cause this maximum to be exceeded,
SELIC will not process the request.
CONTRACT LOAN INTEREST: Contract Loan interest accrues daily and is due on
each Contract Anniversary. If it is not paid when due, the Contract Loan
interest will be added to the Contract Loan and, as part of the Contract
Loan, will bear the same interest rate. Any Contract Loan interest
capitalized on a Contract Anniversary will be treated as if it was a new
Contract Loan and will be transferred from the Available Division of the
Separate Account and Fixed Fund in proportion to the Insurance Account Value
therein.
A fixed Contract Loan interest rate option or a variable Contract Loan
interest rate option may be elected. This option may be changed by the
Contract Holder on any Contract Anniversary. Written notice of the change
must be received at SELIC's Home Office no more than 90 days nor less than 30
days prior to such Contract Anniversary. The Contract Loan interest rate
options are as follows:
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<PAGE> 34
Fixed Contract Loan Interest Rate. If a Fixed Contract Loan Interest Rate
- ---------------------------------
option is selected and a Contract Loan is outstanding, a fixed Contract Loan
interest rate of 6.00% will be assessed annually in arrears on the Contract
Anniversary.
Variable Contract Loan Interest Rate. On each Contract Anniversary, SELIC
- ------------------------------------
will declare the Variable Contract Loan Interest Rate that will apply to
outstanding Contract Loans for the next Contract Year. This rate will equal
the higher of a) or b), where a) is the Monthly Average of the Composite
Yield on Corporate Bonds as published by Moody's Investor Service, Inc. (or,
if it is no longer published, a substantially similar average) for the
calendar month ending two months before the Contract Year begins, and b) is
4.50%. If the rate calculated according to this formula is not at least .50%
higher than the rate in effect for the previous year, SELIC will not increase
the rate. If the rate calculated is at least .50% lower than the rate in
effect for the previous year, SELIC will decrease the rate.
If the Variable Contract Loan Interest Rate option is selected, SELIC will
inform the Contract Holder of the current Variable Contract Loan Interest
Rate at the time a Contract Loan is made. The current Variable Contract Loan
Interest Rate can be changed by SELIC on any Contract Anniversary, but the
rate will never exceed the maximum Contract Loan interest rate permitted by
the law of the Governing Jurisdiction.
INTEREST ON BORROWED FUND: Interest will be credited to amounts held in the
Borrowed Fund as collateral for Contract Loans. This rate of interest
credited on the Borrowed Fund will be at least equal to an annual effective
rate of 4.00%.
For the Fixed Contract Loan Interest Rate option, the rate of interest
credited on the Borrowed Fund is currently set equal to 5.65%. If a Variable
Contract Loan Interest Rate option is chosen, SELIC currently anticipates
that the rate of interest credited on the Borrowed Fund will equal the
Variable Contract Loan Interest Rate less a "loan interest spread" of .35%.
This "loan interest spread" is guaranteed never to exceed .50%. The Borrowed
Fund crediting rate may not be changed more frequently than annually. Any
change in the Borrowed Fund crediting rate for the Contract will be effective
on a Contract Anniversary. The Contract Holder will be notified in advance
of any such change.
Interest credited to the Borrowed Fund will be transferred to the Available
Divisions of the Separate Account and Fixed Fund on each Contract
Anniversary. The amount so transferred will be allocated among the Available
Divisions of the Separate Accounts
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<PAGE> 35
and Fixed Fund in proportion to the Insurance Account Value in each Available
Division of the Separate Account and Fixed Fund.
If Contract Loan interest due for the previous Contract Year has not been
paid when due, then on the Contract Anniversary, the Insurance Account Value
attributable to the Separate Account and Fixed Fund will be reduced by the
difference between the Contract Loan interest due and unpaid for the previous
Contract Year, and the interest credited to the Borrowed Fund during the
previous Contract Year.
On any given day the Insurance Account Value in the Borrowed Fund will be
equal to the Insurance Account Value in the Borrowed Fund on the previous day
plus:
(1) Any new amounts transferred to the Borrowed Fund from the Separate
Account and Fixed Fund due to new Contract Loans and/or
capitalized Contract Loan Interest; and
(2) Any interest credited to the Borrowed Fund.
and less:
(1) Any amounts transferred from the Borrowed Fund to the Separate Account
and/or Fixed Fund due to Contract Loan repayments or the transfer
of interest credited to the Borrowed Fund on a Contract
Anniversary.
REPAYMENT: All funds received by SELIC will be credited to the Contract as
Premiums unless clearly designated as a Contract Loan repayment by the
Contract Holder.
All or part of the Contract Loan plus accrued Contract Loan interest may be
repaid at any time while the Contract is in force.
Any repayment of a Contract Loan will result in the transfer of values equal
to the repayment out of the Borrowed Fund and the application of those values
to the Available Divisions of the Separate Account and Fixed Fund. Unless
other specific instructions are received from the Contract Holder, these
values will be applied to the Separate Account's Available Divisions and the
Fixed Fund in proportion to the amount of the Contract Holder's then current
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
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<PAGE> 36
SURRENDER AND PARTIAL WITHDRAWALS
At any time during the lifetime of the Insured and while the Contract is in
force, the Contract may be surrendered for its Net Cash Value on any
Valuation Date. The Contract Holder must request a surrender in writing and
in a form acceptable to SELIC. On surrender, SELIC will pay to the Contract
Holder in a single sum the Contract's Net Cash Value as of the Valuation Day
during which a proper surrender request is received. A Contract's Net Cash
Value is the Insurance Account Value less any outstanding Contract Loan and
accrued and unpaid Contract Loan interest. If a proper surrender request is
received on a Monthiversary, then Monthly Charges will not be deducted on
that Monthiversary. A surrender may have Federal income tax consequences.
(See "Federal Income Tax Considerations") Once the Contract is surrendered,
SELIC's obligations under the Contract will cease. (See "Termination").
The Contract Holder may also request partial withdrawals of Net Cash Value
from one or more Available Divisions and the Fixed Fund. The withdrawal must
be requested by the Contract Holder in writing on a form acceptable to SELIC.
Unless other specific instructions are received from the Contract Holder, the
withdrawal will be taken from each Available Division and the Fixed Fund in
proportion to the Contract Holder's then current Insurance Account Value in
each Available Division and the Fixed Fund. (See "The Fixed Fund").
Surrender and partial withdrawal proceeds will generally be paid to the
Contract Holder within seven days. (See "Additional Provisions of the
Contract -- Availability of Funds" and "The Fixed Fund").
The Contract Holder may withdraw any amount of at least $1,000 per withdrawal
and up to the Contract's maximum withdrawal amount. The maximum withdrawal
amount for the Contract is equal to the Insurance Account Value less the sum
of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with the unpaid accrued
Contract Loan interest on the Contract Loan amount; and
(3) Contract Loan interest on the Contract Loan amount until the next
Contract Anniversary.
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<PAGE> 37
Partial withdrawals may increase the Net Amount at Risk, resulting in higher
Cost of Insurance Charges under the Contract.
The Death Benefit and Face Amount may be adjusted at the time a partial
withdrawal is taken, based on the amount withdrawn, the Death Benefit Option
then in effect for the Contract, and the Insurance Account Value. If the
Face Amount is reduced, the reduction in Face Amount for Death Benefit Option
1 or Death Benefit Option 3 will be equal to the amount of the withdrawal.
The Total Insurance Coverage remaining after the partial withdrawal may not
be less than the Minimum Insurance Coverage. A partial withdrawal request
that would reduce the Total Insurance Coverage below this minimum will not be
effected. If the Face Amount reflects previous Face Amount increases at the
time of a partial withdrawal which causes a reduction in Face Amount, then
partial withdrawals will be applied first to reduce the Initial Face Amount,
and then to each Face Amount increase in order, starting with the first
increase.
A partial withdrawal that decreases the Face Amount of the Contract will
result in a recalculation of the Target Premium, and generally will decrease
the Target Premium for future Contract Years.
A partial withdrawal may have Federal income tax consequences. (See "Federal
Income Tax Considerations".)
Split Dollar Exception: Notwithstanding the above limitations, SELIC will,
as a matter of administrative practice, at the time of a split dollar
rollout, allow the owner of a Death Benefit Option 3 Contract, the option of
reducing the accumulated Premiums before reducing the Face Amount. If the
withdrawal is greater than the accumulated Premiums, a reduction in Face
Amount will occur for the amount in excess of the accumulated Premiums.
DEATH BENEFITS UNDER THE CONTRACT
If the Insured dies while the Contract is in force, a Death Benefit is
payable to the Beneficiary when SELIC receives due proof of death and any
other requirements are satisfied. The amount of the Death Benefit payable
depends on the Death Benefit Option selected for the Contract by the Contract
Holder and in effect on the date of death of the Insured, and is adjusted for
outstanding Contract Loans and unpaid charges. (See "Payment of Death
Benefits"). The amount of the Death Benefit will be determined at the end of
the Valuation Period during which the Insured's death occurred. The Death
Benefit will be paid to the surviving Beneficiary or Beneficiaries specified
in the Application or as subsequently changed. The Death Benefit under each
Death Benefit Option will never be less than the Contract's Face Amount as
long as the
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<PAGE> 38
Contract remains in force. For modifications to this Section for
Joint Insureds, see Appendix B -- "Joint and Last Survivor Rider."
DEATH BENEFIT OPTIONS: The Contract Holder may select one of the following
Death Benefit Options:
Option 1: The Face Amount in effect at the date of death
Option 2: The Face Amount plus the Insurance Account Value in effect at the
date of death; or
Option 3: The Face Amount in effect at the date of death, plus the
accumulated Premiums paid under the Contract up to the date of
death. In calculating the Death Benefit under this option,
the Premiums are accumulated from the date such Premiums were
credited to the Insurance Account Value to the date of death,
at a rate equal to the Death Benefit Option Accumulation Rate
shown in the Contract. This rate, which is selected by the
Contract Holder and subject to approval by SELIC, may be as
low as 0%, and does not have a maximum cap. A higher Death
Benefit Option Accumulation Rate will result in higher Cost of
Insurance Charges under a Contract.
To ensure that the Contract will qualify as life insurance under the Internal
Revenue Code, the Total Insurance Coverage will never be less than the
Minimum Death Benefit. The Minimum Death Benefit is equal to the Insurance
Account Value on the date of death multiplied by the appropriate Minimum
Death Benefit Factor as set forth in the Contract. Currently SELIC
calculates the Minimum Death Benefit Factor in accordance with Section
7702(a)(1) of the Internal Revenue Code ("The Cash Value Accumulation Test").
In the future SELIC may offer Contracts that will use Minimum Death Benefit
Factors and Premium limitations calculated in accordance with Section
7702(a)(2) of the Internal Revenue Code ("The Guideline Premium Test"). Once
a Contract is issued complying with either "The Cash Value Accumulation Test"
or "The Guideline Premium Test" that test and the Minimum Death Benefit
Factors will be employed throughout the life of the Contract.
A table of representative Minimum Death Benefit Factors follows:
<TABLE>
===============================================================
MINIMUM DEATH BENEFIT FACTORS
<CAPTION>
UNISEX
AGE UNISMOKE
===============================================================
<S> <C>
25 5.79
- ---------------------------------------------------------------
30 4.93
- ---------------------------------------------------------------
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<PAGE> 39
35 4.18
- ---------------------------------------------------------------
40 3.55
- ---------------------------------------------------------------
45 3.03
- ---------------------------------------------------------------
50 2.60
- ---------------------------------------------------------------
55 2.25
- ---------------------------------------------------------------
60 1.97
- ---------------------------------------------------------------
65 1.74
- ---------------------------------------------------------------
70 1.56
===============================================================
</TABLE>
Under Death Benefit Option 1 and Death Benefit Option 3, positive investment
performance (if any) will be reflected in Insurance Account Value, but not in
the Death Benefit, unless the Death Benefit equals the Minimum Death Benefit.
Under Death Benefit Option 2, the amount of Death Benefit will always vary as
the Insurance Account Value varies, but will never be less than the Face
Amount. In general, if Death Benefit Option 2 is selected, positive
investment performance (if any) will be reflected in the Death Benefit.
Subject to certain limitations, the Contract Holder may change the Death
Benefit Option for the Contract while the Contract is in effect by notifying
SELIC in writing. If SELIC approves the change, it will take effect on the
next Contract Anniversary that is at least 30 days after all the required
information has been provided to SELIC. The Cost of Insurance Charges for
the Contract will be adjusted to provide for the change. No such change will
be effective if the Insured dies before the effective date of the change.
Changing the Contract's Death Benefit Option may result in either an increase
or decrease in the Face Amount. If the Face Amount increases, SELIC may
require satisfactory evidence of insurability. If the Face Amount decreases,
the order in which the Face Amount is reduced is assessed in the same manner
as a decrease in Face Amount (See "Face Amount"). Any change in the Death
Benefit Option will not be effected if it would result in Total Insurance
Coverage that is less than the Minimum Insurance Coverage of the Contract.
SELIC also reserves the right not to effect a requested change in Face Amount
if the change would result in the Contract not satisfying the requirements of
the Internal Revenue Code of 1986, as amended.
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<PAGE> 40
A change in the Death Benefit Option will not result in an immediate change
in the amount of a Contract's Death Benefit or Insurance Account Value. If a
Contract is changed from Death Benefit Option 1 to Death Benefit Option 2,
then the Face Amount will equal the Face Amount prior to the change less the
Insurance Account Value on the effective date of the change. If a Contract
is changed from Death Benefit Option 3 to Death Benefit Option 2, then the
Face Amount will equal the Face Amount prior to the change plus the
accumulated Premiums less the Insurance Account Value on the effective date
of the change. If a Contract is changed from Option 2 or Option 3 to Option
1, then the Face Amount will equal the Death Benefit on the effective date of
the change. SELIC may require satisfactory evidence of insurability if the
Contract is changed from Option 2 or Option 3 to Option 1. If a Contract is
changed from Option 1 to Option 3, then the Face Amount will equal the Face
Amount prior to the change less the accumulated Premiums on the effective
date of change. If a Contract is changed from Option 2 to Option 3, then the
Face Amount will equal the Death Benefit less the accumulated Premiums on the
effective date of the change.
A change in Death Benefit Option may affect monthly Cost of Insurance
Charges, because the amount of this charge varies with a Contract's Net
Amount at Risk. Assuming the Death Benefit is not equal to the Minimum Death
Benefit, changing from Option 2 or Option 3 to Option 1 will generally
decrease Net Amount at Risk, and therefore decrease Cost of Insurance
Charges, on Monthiversaries following the effective date of the change.
Changing from Option 1 or Option 3 to Option 2 will generally result in a Net
Amount at Risk that remains level; however, under Option 2, Cost of Insurance
Charges will increase over time, because cost of insurance rates generally
increase with the age of the Insured. Finally a change from Option 1 or
Option 2 to Option 3 will result in a Net Amount at Risk that will vary based
upon the frequency and amount of Premium payments, as well as the rate at
which the Premiums are accumulated. Under Option 3, more frequent and higher
premium payments as well as a higher Death Benefit Option Accumulation Rate
generally will result in a higher Net Amount at Risk, and therefore higher
Cost of Insurance Charges.
FACE AMOUNT: The Minimum Face Amount under a Contract is $10,000. The
minimum Total Insurance Coverage is $25,000. The Initial Face Amount and
Supplemental Term Insurance Amount will be set forth in the Application. The
Contract Holder may, subject to approval of SELIC, change the Face Amount.
The Contract Holder must request the change by notifying SELIC in writing,
and SELIC reserves the right to require satisfactory evidence of
insurability, which may include a medical examination. If SELIC approves the
change, it will take effect on the next Contract Anniversary which is at
least 30 days after all the required information has been provided to SELIC.
A partial withdrawal may also reduce the Face Amount under a Contract. (See
"The Contract -- Surrender and Partial Withdrawals").
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<PAGE> 41
Decreases in Face Amount cannot reduce the Total Insurance Coverage to less
than the Minimum Insurance Coverage. No such change will be effective if the
Insured dies before the date of such change. SELIC reserves the right not to
effect a requested change in Face Amount if the change would result in the
Contract not satisfying the requirements of the Internal Revenue Code of 1986,
as amended. The Net Cash Value immediately following the increase in Face
Amount must be sufficient to cover Monthly Charges to be deducted on the next
Monthiversary. If Net Cash Value will not be sufficient, an additional
Premium will be necessary before the increase in Face Amount will be
effected.
If the Face Amount is decreased, and the Contract's Face Amount before the
change in Death Benefit Option reflects previous Face Amount increases, then
the Face Amount reduction will result first in the reduction of the Face
Amount provided by the most recent increase, then the next most recent
increase successively, and finally the Initial Face Amount.
A decrease in the Face Amount of the Contract will also result in a
recalculation of the Target Premium, and generally will decrease the Target
Premium for future Contract Years.
Additional insurance coverage may be available under one or more riders to
the Contract, including a Supplemental Term Insurance Rider. (See Appendix B
- - "Supplemental Term Insurance Rider".) Under certain circumstances, SELIC
may offer Contracts through which insurance coverage is provided primarily
through the Supplemental Term Insurance Rider. Because insurance coverage
under such riders may be purchased through deductions from Available
Divisions and/or the Fixed Fund that are not taken into account in
determining Target Premium, there may not be additional Premium Load
associated with this coverage. There may be circumstances in which it will
be to the Contract Holder's economic advantage to include a significant
portion or percentage of coverage under the Supplemental Term Insurance
Rider. These circumstances depend on many factors, including the Premium
levels and amount and duration of coverage, as well as the age (and, where
applicable, sex, smoker status, and/or risk classification) of the Insured.
As discussed above, SELIC reserves the right to refund promptly certain
Premium amounts paid during the first Contract Year in excess of Planned
Renewal Premium amounts. (See "The Contract -- Premiums"). In such cases,
SELIC will generally agree to accept such Premium amounts provided that the
Contract Holder elects to convert a portion of the Face Amount, as determined
by SELIC, to coverage under a Supplemental Term Insurance Rider. Contract
Holders should contact their agent for additional information.
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<PAGE> 42
A change in Face Amount may have Federal income tax consequences. (See
"Federal Income Tax Considerations").
PAYMENT OF DEATH BENEFIT: The amount of any Death Benefit payable is
adjusted as follows:
(1) By deducting the amount of any unpaid Monthly Charges against the
Insurance Account Value to the date of death (See "Charges and
Deductions");
(2) By deducting the amount of any Contract Loans outstanding against the
Insurance Account Value on the date of death plus accrued but
unpaid interest on such Contract Loans on the date of death (See
"The Contract -- Contract Loan Privilege"); and
(3) By deducting the amount of any unpaid charges provided by rider.
The Death Benefit will usually be paid in a lump sum within seven days of the
date due proof of the Insured's death is received by SELIC at its Home Office
and any other requirements are satisfied. Payment of any amount of Death
Benefit based upon the Separate Account may be delayed, however, during any
period that:
(1) The New York Stock Exchange (or its successor) is closed, except for
normal weekend or holiday closings, or trading is restricted; or
(2) The SEC determines that a state of emergency exists.
Settlement of any amounts not based upon the Separate Account will be made
not more than six months after due proof of death is received. Interest on
Death Benefits will be credited as prescribed by law. Payment of a Death
Benefit may be deferred by a separate written agreement between SELIC and the
Contract Holder or Beneficiary, subject to SELIC's approval. In such cases,
the interest that will be credited will be at least 1.00% per annum.
BENEFICIARY: The Contract Holder may name or change the Beneficiary by
sending written notice to SELIC. A Beneficiary may be revocable or
irrevocable. An irrevocable Beneficiary may not be changed without his or
her consent, and consent is also required prior to the Contract Holder's
exercise of certain other rights. There may be different classes of
Beneficiaries, such as primary and secondary. These classes set the order of
payments. There may be more than one Beneficiary in a class. The
Beneficiary designation in effect on the Issue Date is stated in the Contract
Application and in any related documents which are attached to and made a
part of the Contract.
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<PAGE> 43
CHARGES AND DEDUCTIONS
Certain charges will be deducted by SELIC from Premiums and from Insurance
Account Value as compensation for providing the insurance benefits under the
Contract, for administering the Contract, for assuming certain risks, and for
incurring certain expenses in distributing the Contract. A prospective
purchaser may request personalized hypothetical illustrations of the
Contract's Insurance Account Value and Death Benefits. Such hypothetical
illustrations will reflect the effect of the charges and deductions under the
Contract and may assist a prospective purchaser in understanding the
operation of the Contract.
PREMIUM LOAD
Before crediting a Premium to the Available Divisions and/or the Fixed Fund,
a Premium Load, consisting of a Distribution Charge, a DAC Tax charge and a
Premium Tax Charge, is deducted from that Premium. Premium Load is expressed
as a percentage of Premium; the percentage depends upon whether the Premium
is Target Premium or Excess Premium, on the Contract Year during which the
Premium is paid, and on the Issue Age of the Insured.
DISTRIBUTION CHARGE: The Distribution Charge, which is a sales load, is
comprised of a Premium Expense Load and a Commission Charge.
The Premium Expense Load will be deducted from each Premium and will equal a
percentage of the Premium. The percentage will be determined based on the
sum of the Initial Premiums for all Contracts in a Case, in accordance with
the following table:
<TABLE>
<CAPTION>
SUM OF THE INITIAL PREMIUMS
OF ALL CONTRACTS IN THE CASE PREMIUM EXPENSE LOAD
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000 - $999,999 1.50%
$1,000,000 and more 1.25%
</TABLE>
A Commission Charge will be deducted from Premiums paid in each Contract Year
up to the Target Premium amount. There is no Commission Charge on any Excess
Premium amount paid during a Contract Year. The Commission Charge on
Premiums paid in a Contract Year up to the Target Premium amount is based
upon the Issue Age of the Insured and the Contract Year as follows:
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<PAGE> 44
<TABLE>
COMMISSION CHARGES DURING CONTRACT YEAR
---------------------------------------
<CAPTION>
Commission Charge
-------------------------------------------------------
For Contract Year Contract Years Contract Years
Issue Ages 1 2-10 11-15
---------- - ---- -----
<S> <C> <C> <C>
20 - 51 28.00% 8.00% 6.00%
52 - 59 28.00% 6.33% 4.00%
60 - 67 28.00% 4.66% 4.00%
68 - 80 19.00% 4.00% 4.00%
81 - 85 13.00% 4.00% 4.00%
</TABLE>
For all Issue Ages the Commission Charge will be 2.00% for Year 16 and
thereafter.
For Single Premium Payments, the maximum Commission Charge will be 6.00% of
Premium paid. Single Premium Payments are the excess of the Premium received
in the first Contract Year over Planned Renewal Premium. Failure to pay
Planned Renewal Premium will not automatically result in lapse of the
Contract.
The Distribution Charge is intended to compensate SELIC for its expenses in
the distribution of the Contracts, including sales commissions, printing
prospectuses, preparing sales literature and paying for other promotional
activities. To the extent that those expenses are not recovered from the
Distribution Charge, those expenses may be recovered from other sources,
including profit, if any, the mortality and expense risk charge and mortality
gains. In accordance with applicable SEC regulations, Distribution Charge
amounts will not exceed nine percent of the sum of the "guideline annual
premiums" that would be paid during the period equal to the lesser of 20
years or the anticipated life expectancy of the Insured based on the 1980
Commissioners Standard Ordinary Mortality Table, as defined in such
regulations.
For modifications to this section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider." For modifications to this section with the
addition of a Term Rider, see Appendix B -- "Supplemental Term Rider
Insurance."
PREMIUM TAX CHARGE: SELIC also deducts from each Premium a Premium Tax
Charge approximately equal to the taxes that are based on such Premium
received under the Contract and that are imposed on SELIC by the state in
which the Contract Holder resides or by the state in which the Insured
resides. In general, for Cases with one Contract Holder and with less than
500 Contracts, this charge will be determined as to any Contract in
accordance with the law of the state in which the Contract Holder resides.
For Cases with a greater number of Insureds and one Contract Holder, the
amount of the charge as to any Contract will be determined in accordance with
the law
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<PAGE> 45
of the state in which the Insured resides. State premium tax rates
currently range from .75% to 5.00%.
DAC TAX CHARGE: SELIC also deducts from each Premium a charge for federal
income taxes, equal to 1.00%, which compensates SELIC for an increased
federal tax burden resulting from the receipt of Premiums under Section 848
of the Internal Revenue Code. This charge for federal income taxes is
reasonable in relation to SELIC's federal tax burden under Section 848
resulting from the receipt of Premiums under the Contracts.
DAILY CHARGES
MORTALITY AND EXPENSE RISK CHARGE: Each Division of the Separate Account is
assessed a Mortality and Expense Risk Charge, which will never exceed an
annual effective rate of 0.50% of the Contract's Separate Account Value
attributable to that Division. Currently, the amount of this charge is an
annual effective rate of 0.35% of the Separate Account Value, which is
equivalent to 0.000957233% of the Separate Account Value attributable to the
Division on a daily basis.
The charge, which is designed to compensate SELIC for the mortality and
expense risks it assumes under the Contract, is deducted on a daily basis
from the Separate Account's assets.
The mortality risk assumed by SELIC under the Contract is that Insureds may,
on average, live for shorter periods of time than estimated and therefore
that the Cost of Insurance Charges specified in the Contract will be
insufficient to meet actual claims. The expense risk assumed by SELIC under
the Contract is the risk that other expenses of issuing and administering the
Contract and operating the Separate Account will be greater than the charges
imposed under the Contract to cover such expenses. If the money collected
from the Mortality and Expense Risk Charge is not needed to cover these
risks, it will be SELIC's gain and will be used for any proper purpose.
Conversely, if the money collected is insufficient to cover these risks,
SELIC will absorb any loss.
MONTHLY CHARGES
As of the Contract Date and on each Monthiversary thereafter, Monthly Charges
will be deducted from each Available Division and the Fixed Fund. Monthly
Charges consist of the Administration Charge, the Cost of Insurance Charge,
charges for additional benefits provided by Contract rider, and charges for
Special Insurance Class Rating, if any. These charges will be deducted from
each Available Division and the
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<PAGE> 46
Fixed Fund in proportion to the Insurance Account Value attributable to each
Available Division and the Fixed Fund.
ADMINISTRATION CHARGE: On each Monthiversary, a charge is deducted to
compensate SELIC for administrative expenses. The current amount of this
charge is $4.50 per month per Contract. This charge may change, but is
guaranteed not to exceed $8.00 per month per Contract. The Administration
Charge is assessed to reimburse SELIC for the expenses associated with the
administration and maintenance of the Contract and the Separate Account.
SELIC does not expect to profit from this charge.
COST OF INSURANCE CHARGE: A deduction for SELIC's cost of insurance
protection is made on each Monthiversary and, unless otherwise specified by
the Contract Holder, will be based on unisex and unismoke rates. The cost of
insurance rates generally increase as the Insured's Attained Age increases.
SELIC also offers rates, upon a Contract Holder's request, that vary based on
the sex (except Contracts sold in Montana; See "Unisex Requirements Under
Montana Law") and smoker class of the Insured. However, any variation by sex
and/or smoker class must be applied on a consistent basis for all Contracts
in the applicable Case.
The Cost of Insurance Charge is determined by multiplying the applicable cost
of insurance rate by the Net Amount at Risk each Contract Month. Any change
in the Net Amount at Risk will affect the total Cost of Insurance Charges
deducted from the applicable Insurance Account Value. Since the Net Amount at
Risk may not be constant, the charge could vary monthly.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract. Those
rates, as well as the rates used for Federal income tax purposes, are based
on the 1980 Commissioners Standard Ordinary (CSO) Mortality Tables, Age
Nearest Birthday that correspond to the applicable sex and smoker blend under
the Contract. Current Cost of Insurance Charges may be lower and may be
changed. The current Cost of Insurance Charges for the Contract Year are
shown in the Contract Holder's annual statement.
SELIC may offer insurance coverage up to $1 million on a guaranteed issue or
simplified issue basis under Contracts that meet all the following
requirements:
1) The Case to which the Contract belongs has at least 25 Insureds;
2) Each Insured under the Contracts in the applicable Case must at the
time of issue be actively at work for a common Employer for a
minimum of 1,000 hours annually;
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<PAGE> 47
3) 100% of "eligible persons," defined in a manner acceptable to SELIC,
must be named as an Insured under the applicable Case;
4) The Face Amount, and any Supplemental Term Insurance Amount, for each
Contract in the applicable Case must be determined in all years by
a formula acceptable to SELIC;
5) The Face Amount increases, including any increases in Supplemental Term
Insurance Amount, in any given year for any Contract in the
applicable Case cannot exceed 10% and the cumulative increase in
any Face Amount cannot exceed the smaller of the initial Total
Insurance Coverage or $1,000,000;
6) The Contract Holder, Insured and Beneficiary of each Contract in the
applicable Case must be either an entity domiciled in the United
States or a United States citizen; and
7) The Insured under each Contract in the applicable Case must be between
the ages of 20 and 65.
For Simplified Issue Contracts, SELIC requires that certain medical
information regarding the prospective Insured be provided in the Application.
SELIC will also offer Contracts on a medically underwritten basis. In these
situations, the rating of an Insured will affect the cost of insurance rates.
SELIC will offer medically underwritten Contracts on a standard and
substandard rating basis. Standard rates will, in general, be less than
substandard rates.
For Contracts with applications dated prior to April 29, 1996 and issued on a
guaranteed issue or simplified issue basis, the Cost of Insurance Charges
will vary only by the Attained Age of the Insured. For Contracts with
applications dated on or after April 29, 1996 and issued on a guaranteed
issue basis, the Cost of Insurance Charges will vary only by the Attained Age
of the Insured but for Contracts issued on a simplified issue basis the Cost
of Insurance Charges will vary by the Issue Age and the number of completed
Contract Years under the Contract. For all Contracts issued on a medically
underwritten basis the Cost of Insurance Charges will vary by the Issue Age
and the number of Completed Contract Years under the Contract. In general,
cost of insurance rates under Contracts that are issued on a guaranteed issue
basis will be greater than cost of insurance rates on Contracts issued on a
simplified issue basis, which will be greater than cost of insurance rates on
Contracts that are issued on a standard medically underwritten basis.
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SELIC may require medical underwriting for any transaction that increases its
Net Amount at Risk. If any medical underwriting has taken place, an
Insured's rate class may affect the guaranteed and current cost of insurance
rate applicable to that Insured, but not the cost of insurance rate
applicable for Federal income tax purposes which for all Contracts will be
equal to 100% of the applicable 1980 CSO table.
Each Insured is placed in a rate class when SELIC issues a Contract, based on
the Case to which the Contract belongs and underwriting information,
including medical underwriting, if any. When an increase in Face Amount is
requested, SELIC reserves the right: (i) to accept or reject the request,
with or without obtaining additional underwriting information; and (ii) to
obtain additional underwriting information, including medical underwriting,
before approving the increase to determine whether a different rate class
would apply to the increase. If the Insured's rate class at the time of the
increase has declined since the last change in coverage, and SELIC approves
the change in coverage, then the lower rate class will be applied to the Face
Amount increase only. If the Insured's rate class at the time of the
increase has improved since the last change in coverage, then the improved
rate class will be applied to the Total Insurance Coverage provided under the
Policy.
ADDITIONAL INSURANCE BENEFITS AND SPECIAL INSURANCE CLASS RATINGS: Subject
to certain requirements, one or more riders may be added to a Contract.
These riders and the charges associated therewith are described in Appendix B
to this Prospectus. (See "Additional Provisions of the Contract -- Entire
Contract"). Deductions will be made on each Monthiversary for applicable
charges for any additional benefits provided by Contract rider.
Deductions will also be made on each Monthiversary for any applicable Special
Insurance Class Rating Charges, which are imposed under the Contract if a
Contract is issued on a substandard basis. These charges are set forth in
the Contract.
UNDERWRITING CHARGES
An Underwriting Charge of up to $100 will be deducted from the Insurance
Account Value on the Issue Date if the Contract is issued on a medically
underwritten basis. Medically underwritten Contracts, for purposes of
deducting this charge, are all Contracts other than those issued on a
guaranteed issue or simplified issue basis (see "Charges and Deductions --
Monthly Charges -- Cost of Insurance Charges"). SELIC also reserves the
right to deduct an Underwriting Charge of up to $100 from the Contract's
Insurance Account Value on any Monthiversary following a Contract Month in
which medical underwriting has taken place due to an increase in SELIC's Net
Amount at Risk with respect to the Contract. The Underwriting Charge is
assessed to
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reimburse SELIC for the expenses associated with the underwriting of the
Contract. SELIC does not expect to profit from this charge.
SELIC may, in its sole discretion, reduce or waive the Underwriting Charge in
connection with the purchase of Contracts sold by licensed agents of SELIC
that are also registered representatives of selected broker-dealers or
through banks that have entered into written sales agreements with Walnut
Street. Any reduction in or waiver of the Underwriting Charge is reflected
in the Contract.
The Underwriting Charge will be deducted from the Available Divisions and the
Fixed Fund in proportion to Insurance Account Value attributable to each
Division and the Fixed Fund.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
ANNUAL CHARGES
On each Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest due
and unpaid for the previous Contract Year; and (ii) increased by the interest
credited to the Borrowed Fund during the previous Contract Year. The net
result is that if Contract Loan interest is not paid when due, then on the
Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
OTHER CHARGES
TAXES AND OTHER GOVERNMENTAL CHARGES: SELIC does not currently make any
charges against the Divisions of the Separate Account for Federal, state or
local taxes attributable to them. However, SELIC may in the future impose
such a charge to provide for any tax liability of the Separate Account.
FEES AND EXPENSES OF UNDERLYING PORTFOLIOS: The value of an Accumulation
Unit of each Separate Account Division that invests in shares or interests of
an Underlying Portfolio will reflect the expenses incurred by that Underlying
Portfolio. The Underlying Portfolio's expenses will include its investment
management fee and its operating expenses. The management fees and operating
expenses of each Underlying Portfolio are set forth in the accompanying
prospectus for such underlying Portfolio.
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ILLUSTRATIVE REPORT FEE: At the Contract Holder's request, SELIC will
provide an illustrative report in addition to the reports it customarily
provides. Depending upon the type and complexity of the requested report,
SELIC may charge a reasonable fee not to exceed $50.00 per report. (See
"Records and Reports"). This fee must be paid by the Contract Holder
separately, and will not be considered a Premium payment.
TERMINATION
The Contract terminates on the earliest to occur of the following:
(1) The end of the Grace Period following any Monthiversary in which the
Net Cash Value for the Contract is insufficient to pay the Monthly
Charges (See "Termination for Insufficient Net Cash Value,"
below);
(2) The surrender of the Contract by the Contract Holder;
(3) The Maturity Date of the Contract; or
(4) The fulfillment of all of SELIC's obligations under the Contract.
MATURITY DATE
No insurance coverage will be effective on or after the Maturity Date, which
is the Contract Anniversary on which the Insured reaches Attained Age 100.
If the Insured is living and the Contract is in force on the Maturity Date,
the Net Cash Value will be paid to the Contract Holder, the Contract will
terminate, and the liability of SELIC under the Contract will cease.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
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TERMINATION FOR INSUFFICIENT NET CASH VALUE
A Contract will not terminate automatically for failure to pay a subsequent
Premium. However, if the Net Cash Value is not sufficient to cover the
Monthly Charges due with respect to a Contract on any Monthiversary, then the
Grace Period begins. This Grace Period begins on the Monthiversary on which
the Monthly Charges are due. The Grace Period ends 61 days from that
Monthiversary or, if later, 61 days after the date SELIC mails a written
notice to the Contract Holder at the last known address shown on SELIC's
records. This notice will state the Premium amount needed to keep the
Contract in force. During the Grace Period, the insurance coverage under the
Contract will continue in effect.
To continue the Contract's insurance coverage in force, the Contract Holder
must make a Premium payment before the Grace Period ends at least equal to
three times the Monthly Charges due when the Grace Period began, plus Premium
Load.
The Contract will terminate without value (and therefore the insurance
coverage will cease) at the end of the Grace Period if such amounts are not
paid.
REINSTATEMENT OF A CONTRACT TERMINATED FOR INSUFFICIENT VALUE
A Contract that has terminated for insufficient Net Cash Value may be
reinstated within five years from the date of Contract termination. The
Contract Holder must request the reinstatement in a form acceptable to SELIC
and pay the reinstatement Premium, which must be at least equal to the
Monthly Charges due and unpaid at the time of lapse, plus three times the
Monthly Charges due at the time of reinstatement, plus any applicable Premium
Load. Medical evidence of insurability will be required for reinstatement,
and the Insured must be living on the date the reinstatement becomes
effective.
For Modification to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
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THE FIXED FUND
Amounts invested in the Fixed Fund become part of the general assets of SELIC
held in SELIC's General Account. SELIC invests the assets of the General
Account in accordance with applicable state insurance laws. Because of
exemptive and exclusionary provisions, interests in the General Account have
not been registered under the Securities Act of 1933, and the General Account
has not been registered as an investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the General Account. The disclosure regarding the
General Account may, however, be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
This Prospectus describes a flexible premium variable life insurance
contract. This Prospectus together with the accompanying prospectuses for the
Underlying Portfolios, is generally intended to serve as a disclosure
document only for the aspects of the Contract relating to the Separate
Account. For complete details regarding the Fixed Fund, see the Contract
itself.
GENERAL DESCRIPTION
The General Account consists of all assets owned by SELIC, other than those
in the Separate Account and other separate accounts. Subject to applicable
law, SELIC has sole discretion over the investment of the assets of the
General Account.
The allocation of amounts to the Fixed Fund does not entitle a Contract
Holder to share in the investment experience of the General Account. Instead,
SELIC guarantees that the Insurance Account Value in the Fixed Fund will
accrue interest at a rate of at least 4.00%, compounded annually, independent
of the actual investment experience of the General Account.
The Borrowed Fund is also part of the General Account. (See "The Contract --
Contract Loan Privilege").
ALLOCATION OF AMOUNTS TO THE FIXED FUND
At Contract issue, SELIC will determine the maximum percentage of the
non-borrowed Insurance Account Value that may be allocated, either initially
or by transfer, to the Fixed Fund. This maximum percentage is set forth in
the Contract (the "maximum allocation percentage"). The ability to allocate
Net Premiums or to transfer Insurance
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Account Value to the Fixed Fund may not be made available or may be limited in
accordance with the terms of the Contract. SELIC, from time to time, adjust
the maximum allocation percentage. Such adjustments may not be uniform to all
Contracts. Subject to this maximum, a Contract Holder may elect to allocate
Net Premiums to the Fixed Fund, the Separate Account, or both. Subject to this
maximum, the Contract Holder may also transfer the Insurance Account Value
from the Available Divisions of the Separate Account to the Fixed Fund.
FIXED FUND BENEFITS
If the Contract Holder allocates all Net Premiums only to the Fixed Fund and
makes no transfers, partial withdrawals, or Contract Loans, the entire
investment risk under the Contract will be borne by SELIC.
FIXED FUND INSURANCE ACCOUNT VALUE
Net Premiums allocated to the Fixed Fund are credited to the Insurance
Account Value. SELIC bears the full investment risk for these amounts and
guarantees that interest credited to each Contract Holder's Insurance Account
Value in the Fixed Fund will not be less than a rate of at least 4.00% per
year, compounded annually. SELIC may, in its sole discretion, credit a
higher rate of interest, although it is not obligated to credit interest in
excess of 4.00% per year, and might not do so. ANY INTEREST CREDITED ON THE
CONTRACT'S INSURANCE ACCOUNT VALUE IN THE FIXED FUND IN EXCESS OF THE
GUARANTEED MINIMUM RATE OF 4.00% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF SELIC. THE CONTRACT HOLDER ASSUMES THE RISK THAT INTEREST
CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR. If
excess interest is credited, a different rate of interest may be applied to
the value in the Borrowed Fund. The value in the Fixed Fund will be
calculated on each Monthiversary of the Contract.
SELIC guarantees that, on each Valuation Date, the Insurance Account Value in
the Fixed Fund will be the amount of the Net Premiums allocated or Insurance
Account Value transferred to the Fixed Fund, plus interest at the rate of
4.00% per year, plus any excess interest which SELIC credits and any amounts
transferred into the Fixed Fund, less the sum of all Contract charges
allocable to the Fixed Fund and any amounts deducted from the Fixed Fund in
connection with partial withdrawals, surrender charges or transfers to the
Separate Account.
On any given day the Insurance Account Value in the Fixed Fund will be equal
to the Insurance Account Value in the Fixed Fund on the prior Valuation Day
plus:
(1) Any new Net Premium allocated to the Fixed Fund;
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(2) Any amount transferred to the Fixed Fund from an Available Division or
the Borrowed Fund; and
(3) Any interest credited to the Fixed Fund;
and less:
(1) Any amount transferred from the Fixed Fund to an Available Division or
the Borrowed Fund;
(2) The Cost of Insurance Charges allocated to the Fixed Fund (deducted
only on a Monthiversary);
(3) The Administration Charges allocated to the Fixed Fund (deducted only
on a Monthiversary);
(4) Any partial withdrawals taken from such Contract and allocated to the
Fixed Fund;
(5) Any charges allocated to the Fixed Fund that are deducted from the
Insurance Account Value for benefits provided by Contract riders;
(6) Any Underwriting Charges allocated to the Fixed Fund;
(7) Any charges for Special Insurance Class Rating allocated to the Fixed
Fund (deducted only on a Monthiversary); and
(8) Any other charges allocated to the Fixed Fund as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction". For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
FIXED FUND TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS
Prior to the Maturity Date, amounts may be transferred from the Fixed Fund to
the Available Divisions or partially withdrawn from the Fixed Fund.
Transfers from the Fixed Fund are subject to the following restrictions:
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(a) The transfer must be made in the 30-day period following a Contract
Anniversary; and
(b) The amount transferred in any Contract Year may be no larger than 25%
of the Insurance Account Value in the Fixed Fund on the date of
the transfer or withdrawal.
Contract Loans and partial withdrawals may also be made from the Contract's
Insurance Account Value in the Fixed Fund, subject to the conditions and
restrictions on Contract Loans and partial withdrawals described above. (See
"The Contract -- Contract Loan Privilege" and "The Contract -- Surrender and
Partial Withdrawals").
Transfers, surrenders, and partial withdrawals payable from the Fixed Fund
and the payment of Contract Loans allocated to the Fixed Fund may be delayed
for up to six months. However, if payment is deferred for 30 days or more,
SELIC will pay interest at the rate of 2.50% per year for the period of the
deferment. Amounts from the Fixed Fund used to pay Premiums on Contracts with
SELIC will not be delayed.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Contracts and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon SELIC's understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Service.
1. TAX STATUS OF THE CONTRACT: Section 7702 of the Internal Revenue Code
of 1986, as amended (the "Code") sets forth a definition of a life
insurance contract for Federal tax purposes. The Section 7702
definition can be met if a life insurance contract satisfies
either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the
Contract is not directly addressed by Section 7702 or proposed
regulations issued under that section. The presence of these
Contract features, the absence of final regulations, and lack of
other pertinent interpretations of Section 7702, thus creates some
uncertainty about the application of Section 7702 to the Contract.
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Nevertheless, SELIC believes that the Contract generally qualifies as a
life insurance contract for federal tax purposes. Because of the
absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether a Contract with a
joint and last survivor or a term rider added will, in all cases,
meet the statutory life insurance contract definition. If a
Contract were determined not to be a life insurance contract for
purposes of Section 7702, such contract would not provide most of
the tax advantages normally provided by a life insurance contract.
If it is subsequently determined that a Contract does not satisfy
Section 7702, SELIC will take whatever steps it deems are
appropriate and reasonable to cause a Contract to comply with
Section 7702. For these reasons, SELIC reserves the right to
modify the Contract as necessary to attempt to qualify a Contract
as a life insurance contract under Section 7702.
Section 817(h) of the Code requires the investments of the Separate
Accounts to be "adequately diversified" in accordance with Treasury
Regulations for the Contract to qualify as a life insurance contract
under Section 7702 of the Code. Failure to comply with the
diversification requirements may result in not treating the Contract
as life insurance. If the Contract does not qualify as life
insurance you may be subject to immediate taxation on the
incremental increases in Insurance Account Value of the Contract.
Regulations specifying the diversification requirements have been
issued by the Department of Treasury, and SELIC believes it complies
fully with such requirements. In connection with the issuance of
the diversification regulations, the Treasury Department stated that
it anticipates the issuance of regulations or rulings prescribing
the circumstances in which an owner's control of the investments of
a separate account may cause the contract owner rather than the
insurance company, to be treated as the owner of the assets in the
separate account. If a Contract Holder is considered the owner of
the assets of the Separate Account, income and gains from the
Account would be included in the Holder's gross income.
Though no Regulations on the subject of an owner's control of the
investments of a separate account have been issued since the
Regulations specifying the diversification requirements were
issued, informal guidance is available from certain private letter
rulings issued by the Internal Revenue Service to individual
taxpayers. The ownership rights under the Contract are different
in certain respects from, those described by the Internal Revenue
Service in rulings in which it determined the owners were not
owners of separate account assets. For example, a Contract Holder
has additional flexibility in allocating premium payments and cash
values. These differences could result in the Contract Holder
being treated as the owner of a pro rata share of the assets of the
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Separate Accounts. In addition, SELIC does not know what standards
will be set forth in any regulations or additional rulings which
the Treasury might issue. SELIC therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Contract
Holder from being considered the owner of a pro rata portion of the
assets of the Separate Accounts or to otherwise qualify the Contract
for favorable tax treatment.
The following discussion assumes that each Contract will qualify as a
life insurance contract for Federal income tax purposes.
2. TAX TREATMENT OF CONTRACT BENEFITS: SELIC believes the death benefit
under the Contract should generally be excludable from the gross
income of the Beneficiaries under Section 101(a)(1) of the Code.
Many changes or transactions involving a Contract may have tax
consequences, depending on the circumstances. Such changes include
but are not limited to the exchange of the Contract, a change in a
Contract's Face Amount, a change of ownership, the payment of a
subsequent premium, a partial withdrawal from a Contract, a complete
surrender of a Contract, an assignment, a Contract Loan, or a
Contract lapse with an outstanding Contract Loan. In addition,
Federal estate and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Contract proceeds depend
on the circumstance of each Contract Holder or Beneficiary. A
competent tax adviser should be consulted for further information.
Generally, the Contract Holder will not be deemed to be in constructive
receipt of the Insurance Account Value including increments
thereof, under the Contract until there is a distribution. The
tax consequences of distributions from, and loans taken from or
secured by, the Contract(s) should generally be determined on a
Contract by Contract basis. (See "Multiple Contracts," below.)
Such tax consequences further depend on whether the Contract from which
the distribution is made or Contract Loan is taken is classified
as a "modified endowment contract" under Section 7702A. However,
upon a complete surrender or lapse of any Contract, if the amount
received plus the amount of Indebtedness exceeds the total
investment in the Contract, the excess will generally be treated
as ordinary income subject to tax.
3. MODIFIED ENDOWMENT CONTRACTS: A Contract may be treated as a modified
endowment contract depending upon the amount of premiums paid in
relation to the death benefit provided in respect of such
Contract. The premium limitation rules for determining whether a
Contract is a modified endowment contract are
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complex. In general, a Contract will be a modified endowment contract
if the accumulated premiums paid at any time during the first seven
years after the Contract is established exceeds the sum of the net level
premiums which would have been paid on or before such time if the future
benefits provided in respect of the Contract were deemed to be paid-up
after the payment of seven level annual premiums.
In addition, if the benefits or rights associated with a Contract are
"materially changed," it may cause such Contract to be treated as a
modified endowment contract. The material change rules for
determining whether a Contract is a modified endowment contract are
also complex. In general, however, the determination of whether a
Contract will be a modified endowment contract after a material
change generally depends upon the relationship among the death
benefit associated with the Contract at the time of such change,
the Insurance Account Value at the time of the change and the
additional premiums paid in respect of the Contract during the
seven years starting with the date on which the material change
occurs. Moreover, a life insurance contract received in exchange
for a life insurance contract classified as a modified endowment
contract will also be treated as a modified endowment contract.
(a) Distributions from Contracts Classified as Modified
Endowment Contracts: Contracts classified as modified
endowment contracts will be subject to the following tax
rules: First, all distributions, including distributions
upon lapse or surrender, from such a Contract are treated
as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Insurance Account Value of
the Contract immediately before the distribution over the
investment in the Contract (described below) at such time.
Second, loans taken from or secured by, the Insurance
Account Value of such a Contract, as well as due but
unpaid interest thereon, are treated as distributions from
such Contract and taxed accordingly. Third, a 10 percent
additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, such
a Contract that is included in income except where the
distribution or loan is made on or after the taxpayer
attains age 59-1/2, is attributable to the taxpayer's
becoming disabled, or is part of a series of substantially
equal periodic payments for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and the taxpayer's
Beneficiary. Contract Holders that are not natural
persons are unlikely to meet these exceptions.
If a Contract becomes a modified endowment Contract after
it is issued, distributions made during the Contract year
in which it becomes a
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modified endowment Contract, distributions in any subsequent
Contract year and distributions within two years before the
Contract becomes a modified endowment Contract will be subject to
the tax treatment described above. This means that a distribution
from a Contract that is not a modified endowment Contract could
later become taxable as a distribution from a modified endowment
Contract.
(b) Distributions From Contracts Not Classified as Modified
Endowment Contracts: Distributions from a Contract that
is not a modified endowment contract are generally
treated as first recovering the investment in the
Contract (described below) and then, only after the
return of all such investment in the Contract, as
distributing taxable income. An exception to this general
rule may occur in the case of a decrease in the death
benefit provided in respect of a Contract (possibly
resulting from a partial withdrawal) or any other change
that reduces benefits associated with the Contract in the
first 15 years after the Contract is established and that
results in a cash distribution to the Contract Holder in
order for the Contract to continue complying with the
Section 7702 definitional limits. Such a cash
distribution will be taxed in whole or in part as
ordinary income (to the extent of any gain in the
Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a
modified endowment contract are generally not treated as
distributions. Instead, such loans are generally treated
as indebtedness of the Contract Holder. However, if the
Service or a court were to deem the loan not 'bona fide',
it is possible that the loans from the Contract may be
treated as taxable distributions.
Neither distributions (including distributions upon
surrender or lapse) nor loans from, or secured by, a
Contract that is not a modified endowment contract are
subject to the 10% additional income tax. If a Contract
which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any
distribution made from the Contract within two years
prior to the date of such change in status may become
taxable and subject to the 10% additional income tax.
(c) Classification of Contract: Due to the Contract's
flexibility, classification of a Contract as a modified
endowment contract will depend upon the circumstances of
each Contract. SELIC has adopted administrative steps
designed to protect a Contract Holder against the
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possibility that a Contract might become a modified
endowment contract. SELIC believes the safeguards are
adequate for most situations, but it cannot provide
complete assurance that a Contract will not be classified
as a modified endowment contract. At the time a Net
Premium is credited which (according to SELIC's
calculations) would cause a Contract to become a modified
endowment contract, SELIC will notify the Contract Holder
that unless a refund of the excess Premium is requested
by the Contract Holder, the Contract will be a modified
endowment contract. The Contract Holder will have 30
days after receiving such notification to request the
refund. The excess Premium paid with 4.00% required
annual interest or gain, whichever is greater, will be
returned to the Contract Holder upon receipt by SELIC of
the refund request. The amount to be refunded will be
deducted from the Insurance Account Value in the
Available Divisions and in the Fixed Fund in the same
proportion as the payment was allocated.
A Contract Holder should contact a competent tax adviser before
purchasing a Contract to determine the circumstances under which a
Contract would be a modified endowment contract. In addition, a
Contract Holder should contact a competent tax adviser before
paying any additional premiums; making any other change to,
including an exchange of, a Contract; or making a change to the
benefits provided under a Contract to determine whether such
premium or change would cause the Contract (or the new contract in
the case of an exchange) to be treated as a modified endowment
contract.
4. LOAN INTEREST: Generally, interest paid on any loan under a life
insurance contract owned by an individual is not deductible. In
addition, interest on any loan under a life insurance contract
owned by a business taxpayer on the life of any individual who is
an officer of or is financially interested in the business carried
on by that taxpayer is deductible only under certain very limited
circumstances. A CONTRACT HOLDER SHOULD CONSULT A COMPETENT TAX
ADVISER BEFORE DEDUCTING ANY LOAN INTEREST.
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5. INVESTMENT IN A CONTRACT: Investment in a Contract means (i) the
aggregate amount of any premiums or other consideration paid in
respect of a Contract, minus (ii) the aggregate amount received
under the Contract which is excluded from gross income of the
Contract Holder (except that the amount of any loan from, or
secured by, a Contract that is a modified endowment contract, to
the extent such amount is excluded from gross income, will be
disregarded), plus (iii) the amount of any loan from or secured by
a Contract that is a modified endowment contract to the extent that
such amount is included in the gross income of the Contract Holder.
6. MULTIPLE CONTRACTS: All modified endowment contracts that are issued
by SELIC (or its affiliates) to the same Contract Holder during
any calendar year are treated as one modified endowment contract
for purposes of determining the amount includible in gross income
under section 72(e) of the Code. In view of this rule, in the
event that a number of Contracts are established at the same time
or during the same calendar year, it is important to determine how
many, if any, of the Contracts will be treated as modified
endowment contracts. A competent tax adviser should be consulted
for further information.
7. ALTERNATIVE MINIMUM TAX: There may also be an indirect tax upon the
inside build-up of the Contract under the corporate alternative
minimum tax.
8. OTHER TAX CONSEQUENCES. The Contract may be used in various
arrangements, including nonqualified deferred compensation or
salary continuance plans, split dollar insurance plans, executive
bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of
such plans may vary depending on the facts and circumstances of
each individual arrangement. Therefore, if you are contemplating
the use of the Contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to
consult a qualified tax advisor regarding the tax attributes of
the particular arrangement and the suitability of this product for
the arrangement.
9. POSSIBLE CHARGE FOR TAXES: SELIC is presently taxed as a life
insurance company and does not incur federal income tax liability,
or state or local tax liability, attributable to investment income
or capital gains of the Separate Account. Based on these
assumptions, no charge is currently being made to the Separate
Account for federal income taxes, or state or local taxes. However,
SELIC may in the future impose such a charge if (i) the tax
treatment of SELIC is ultimately determined to be other than what
SELIC believes it to be, (ii) there are changes made in the income
tax treatment, or state or local tax treatment, of
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variable life insurance at the company level, or of the separate
accounts, or (iii) there is a change in SELIC's status. Any such charge
would be designed to cover the taxes attributable to the investment
results of the Separate Accounts.
ADDITIONAL PROVISIONS OF THE CONTRACT
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
SELIC reserves the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held
by the Separate Account or that the Separate Account may purchase. SELIC
reserves the right to eliminate the shares of any of the Underlying
Portfolios and to substitute the shares of another registered open-end
investment company if the shares of an Underlying Portfolio are no longer
available for investment or if, in SELIC's judgment, further investment in
any Underlying Portfolio becomes inappropriate in view of the purposes of the
Separate Account. SELIC will not substitute any shares attributable to a
Contract Holder's interest in a Division of a Separate Account without notice
to the Contract Holder and prior approval of the SEC, to the extent required
by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of contracts, or from permitting a
conversion between series or classes of contracts on the basis of requests
made by Contract Holders.
The participation agreements pursuant to which Underlying Portfolios sell
shares to the Separate Account can be terminated by the Underlying Portfolio
or by SELIC under a variety of circumstances, with or without cause.
SELIC also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new investment company,
with a specified investment objective. New Divisions may be established
when, in the sole discretion of SELIC, marketing needs or investment
conditions warrant, and any new Division will be made available to existing
Contract Holders on a basis to be determined by SELIC. SELIC may also
eliminate or combine one or more Divisions, substitute one Division for
another Division, or transfer assets between Divisions, if, in its sole
discretion, marketing, tax, or investment conditions warrant; such changes
will not occur without notice to the Contract Holder and prior approval of
the SEC, to the extent required by the 1940 Act or other applicable law.
In the event of a substitution or change, SELIC may, if it considers it
necessary, make changes in the Contract by appropriate endorsement. SELIC
will notify Contract Holders of any such changes.
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If deemed by SELIC to be in the best interests of persons having voting
rights under the Contracts, and to the extent any necessary SEC approvals or
Contract Holder votes are obtained, the Separate Account may be: (a) operated
as a management company under the 1940 Act; (b) de-registered under that Act
in the event such registration is no longer required; or (c) combined with
other separate accounts of SELIC. To the extent permitted by applicable law,
SELIC may also transfer the assets of the Separate Account associated with
the Contract to another separate account.
Also, subject to the approval of the New York Superintendent of Insurance,
SELIC has the right to change the investment policy of any Separate Account
Division. If required, the process for obtaining approval of a material
change from the New York Superintendent of Insurance will be filed with the
insurance supervisory official of the Governing Jurisdiction. SELIC will
notify the Contract Holder if any material change of investment policy is
approved.
INCONTESTABILITY
SELIC must bring any legal action to contest the validity of any insurance
coverage under the Contract within two years from the applicable Issue Date
of the Contract, or from the effective date of any change in coverage
requiring medical evidence of insurability, as applicable.
CONVERSION RIGHTS
Once the Contract is issued and as long as the Contract is in force, a
Contract Holder may during the first 24 months, transfer all of the Insurance
Account Value into the Fixed Fund and receive fixed and guaranteed benefits
under the Contract. Once this right is exercised, no transfers out of the
Fixed Fund will be allowed and all Net Premiums paid after the election will be
allocated to the Fixed Fund. This request must be in writing and must
specifically indicate that the transfer is being made pursuant to the
Conversion Right. This transfer will not be subject to any transfer
limitations or charges. At the time of such transfer, there will not be any
effect on the Contract's Death Benefit, Contract Loans, Face Amount, Net
Amount at Risk, Issue Age or insurance class. All benefits after a
conversion will be based upon the Fixed Fund.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated in the Application and
the misstatement is discovered after the Insured's death, the amount of death
benefit payable by SELIC will be that which the most recent mortality charges
would have
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purchased for the correct age and sex. If the Insured is still living at the
time of discovery, future amounts payable will be adjusted based upon the
correct facts.
SUICIDE
Subject to the insurance laws of the Governing Jurisdiction, if the Insured
commits suicide, while sane or insane, within two years from the date
coverage becomes effective with respect to such person under the Contract,
only a limited Death Benefit will be payable. In such case, the amount of
the Death Benefit will be equal to the amount of the Net Premiums paid, less
any partial withdrawals, and less any Contract Loans and any Contract Loan
interest accrued but unpaid.
If, after the expiration of the two year period described above, the Insured
commits suicide within two years from the date of receipt of any subsequent
Premium that increases the amount of the Death Benefit, the amount of the
Death benefit attributable to such increase will be limited to a refund of
the Cost of Insurance Charges made for such increase.
AVAILABILITY OF FUNDS
Cash payments from the Contract for partial withdrawals, Contract Loans, and
surrenders will usually be made within seven days after a written request is
received at the Home Office of SELIC. Transfers between or among Separate
Account Divisions will usually be effected on the date the transfer request
is received in good order. Payment or transfers may be delayed, however,
during any period that:
(1) The New York Stock Exchange (or its successor) is closed for trading; or
(2) The SEC determines that a state of emergency exists.
Payment of the portion of any amount payable from the Fixed Fund for Contract
Loans, partial withdrawals or surrender, and transfers to the Separate
Account Divisions may be delayed for not more than six months. If payment is
deferred for 30 days or more, SELIC will pay interest on such amounts at the
rate of 2.50% per year for the period of deferment.
ENTIRE CONTRACT
The Contract is issued in consideration of the Application and the Initial
Premium. The Contract and Application, a copy of which is attached to the
Contract, together with any Contract Schedules, any riders, and any other
related documents constitute the entire Contract. Any waiver or change of
any provision in the Contract must be in
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writing and signed by an officer of SELIC. Additional insurance benefits may
be made available under the Contract by rider. Any such riders selected by
the Contract Holder and agreed to by SELIC will be attached to and made a part
of the Contract.
The failure of SELIC to enforce any provision of the Contract does not
constitute and cannot be construed as a waiver of such provision or of the
right to enforce it at a later time, nor does the waiver of any provision by
SELIC on one or more occasions constitute nor can it be construed as a waiver
for all occasions, and SELIC cannot be stopped from enforcing any provision
of the Contract except as may be otherwise agreed to in writing by an officer
of SELIC.
REPRESENTATIONS IN APPLICATION
SELIC deems all statements in the Application to be representations and not
warranties. SELIC will not use any statement, in the absence of fraud, to
void the Contract or to defend a claim for the insurance benefits under the
Contract unless it is contained in the Application and a copy of the
Application is attached to the Contract on the Issue Date, or unless it is
contained in a related document and signed either by the Contract Holder or
by the proposed Insured, and a copy of such completed document is provided to
the Contract Holder on the Issue Date or on the effective date of any change
requiring evidence of insurability.
CONTRACT APPLICATION AND CONTRACT SCHEDULES
If any information contained in the Contract, Application, Contract
Schedules, or any other related documents for the Contract is inaccurate or
untrue on the date the Contract is issued, the Contract Holder is required
under the Contract to promptly notify SELIC and provide corrected
information.
RIGHT TO AMEND CONTRACT
If any provision in the Contract is in conflict with the laws of the
Governing Jurisdiction, the provision will be deemed to be amended to conform
with such laws. SELIC may amend the Contract from time to time as may be
required to meet the definition of "life insurance" under the Internal
Revenue Code of 1986, as amended, or its regulations or published rulings.
COMPUTATION OF CONTRACT VALUES
A detailed statement of the method used to compute the Contract's benefits
and values is filed with the insurance regulatory authority of the Governing
Jurisdiction. These
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benefits and values are not less than those required by the laws of the
Governing Jurisdiction.
CLAIMS OF CREDITORS
The proceeds of the Contract will be free from creditors' claims to the
extent allowed by law.
NOTICE
Any written notice required by the Contract to be given by SELIC to the
Contract Holder will be effective five days after it is mailed by first class
mail or 15 days after it is mailed by third class mail (or when received, if
sent by any other means) to the Contract Holder at the Contract Holder's
current address as noted on the records of SELIC.
Any written notice required by the Contract to be given by the Contract
Holder to SELIC will be effective when received in a form acceptable to SELIC
at its Home Office. To be acceptable, a notice must be in written form, in
the English language (except where applicable law requires otherwise), must
include all pertinent information, and must be signed by the Contract Holder
or an individual authorized to act for the Contract Holder and so designated
on the records of SELIC.
ASSIGNMENTS
Neither the Contract nor any of the rights of the Contract Holder or
Beneficiary under it may be assigned or transferred without the written
permission of SELIC.
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CONSTRUCTION
In the event of a conflict between the Contract provisions and the
information contained in any Contract Schedule, the provisions of the
Contract will be controlling.
SEVERABILITY
In the event any provision of the Contract is declared illegal or otherwise
unenforceable, it will be severed from the Contract and the remainder of the
Contract will be valid and enforceable.
STATE VARIATIONS
Certain Contract features, including the "Free Look" provision, are subject
to state variations. The Contract Holder should read his or her Contract
carefully to determine whether any variations apply in the state in which the
Contract is issued.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The state of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the lives of its residents. Therefore, all Contracts
offered by this Prospectus and issued for delivery in Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account Divisions will be
maintained by SELIC. Each year within 30 days after the Contract
Anniversary, SELIC will mail a report to the Contract Holder. The report
will show the Insurance Account Value at the beginning of the previous
Contract Year and all Premiums paid since that time. It will also show the
additions to, and deductions from, the Insurance Account Value during the
Contract Year, and the Insurance Account Value, Death Benefit, Net Cash
Value, any outstanding Contract Loan amount and accrued Contract Loan
interest as of the current Contract Anniversary. The report will also
include any additional information required by applicable law or regulation.
SELIC also will mail the Contract Holder any other reports or documents
required by applicable law or regulation.
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In addition to the periodic reports, the Contract Holder may request an
illustrative report showing projected Contract values. There may be a charge
for providing an illustrative report. (See "Charges and Deductions -- Other
Charges").
SALE OF THE CONTRACT
The Contract will be sold by individuals who, in addition to being licensed
as life insurance agents for SELIC, are also registered representatives of
Walnut Street Securities, Inc. ("Walnut Street"), the distributors of the
Contract, or of broker-dealers or through banks who have entered into written
sales agreements with Walnut Street. Walnut Street was incorporated under
the laws of Missouri in 1984 and is an indirect subsidiary of General
American Life Insurance Company. Walnut Street is registered with the SEC as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. No director or officer
of Walnut Street owns any interest in the Separate Account, however, the
policies issued through the Separate Account may be used to fund nonqualified
deferred obligations of the depositor or its affiliates subject to any
regulatory requirements.
SELIC will pay writing agent compensation equal to the Commission Charge in
connection with the Contract Holder's purchase of the Contract plus a maximum
of 22% of Target Premium and a maximum of 5.00% of any Excess Premium.
VOTING RIGHTS
To the extent required by law, SELIC will vote shares of the Underlying
Portfolios held in the Separate Account at regular or special shareholder
meetings of the Underlying Portfolios in accordance with instructions
received from persons having voting interests in the corresponding Divisions
of the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the Underlying Portfolios in its own right, it may elect to do so.
The number of votes that a Contract Holder has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Contract Holder at the record date rather than the number of
units alone. Fractional shares will be counted. The number of votes of an
Underlying Portfolio that the Contract Holder has the right
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to instruct will be determined as of the date established by that Underlying
Portfolio for determining eligibility to vote at the meetings of the
Underlying Portfolio. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures established
by the Underlying Portfolio.
SELIC will vote shares as to which no timely instructions are received in
proportion to the voting instructions which are received with respect to the
contracts participating in that Underlying Portfolio. SELIC will also vote
shares it owns that are not attributable to contracts in the same proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Underlying
Portfolio.
DISREGARD OF VOTING INSTRUCTIONS: SELIC may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification, or investment objective of an Underlying Portfolio, or
one or more of its Series, or to approve or disapprove an investment advisory
contract for an Underlying Portfolio. In addition, SELIC itself may
disregard voting instructions in favor of changes proposed by a Contract
Holder in the investment advisory agreement or the investment adviser of an
Underlying Portfolio if SELIC reasonably disapproves of such changes. A
proposed change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities, or SELIC
determines that the change would have an adverse effect on its General
Account in that the proposed investment advisory contract for an Underlying
Portfolio may result in overly speculative or unsound investments. In the
event SELIC does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next annual report to
Contract Holders.
STATE REGULATION OF THE COMPANY
SELIC, a stock life insurance company organized under the laws of New York,
is subject to regulation by the New York Department of Insurance. An annual
statement is filed with the Superintendent of Insurance on or before March
1st of each year covering the operations and reporting on the financial
condition of SELIC as of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of the
Company and the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.
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In addition, SELIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
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<TABLE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS AND PRINCIPAL OFFICERS
<CAPTION>
NAME PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS
<S> <C>
Willard N. Archie SELIC Director; Vice Chairman, Mitchell,
Vice Chairman Titus & Company (CPA management consulting
Mitchell, Titus & Company firm). Prior to January 1996, Managing
One Battery Park Plaza Partner, Mitchell, Titus & Company.
New York, NY 10004-1461
Carson E. Beadle, SELIC Director; Managing Director, William
Managing Director M. Mercer Inc. (actuarial, employee
William M. Mercer, Inc. benefits, compensation and human resources
1166 Avenue of the Americas management consulting firm)
New York, NY 10036
James R. Elsesser SELIC Director; Vice President and Chief
Vice President & CFO Financial Officer, Ralston Purina Company
Ralston Purina Company (pet food, batteries, and bread business).
Checkerboard Square
St. Louis, MO 63164
Stanley Goldstein SELIC Director; Partner, Goldstein, Golub,
Goldstein, Golub, Kessler & Co. Kessler & Company (accounting services).
1185 Sixth Avenue
New York, NY 10036
David D. Holbrook SELIC Director; Chairman, Marsh &
Chairman McLennan, Inc. (insurance and reinsurance
Marsh & McLennan, Inc. brokers, consulting and investment
1166 Avenue of the Americas management).
New York, NY 10036
Richard A. Liddy SELIC Director; Chairman of the Board;
Chairman, President and CEO President and Chief Executive Officer,
General American Life Insurance Co. General American Life Insurance Co. (life
700 Market Street insurance). Prior to May 1992, President
St. Louis, MO 63101 and Chief Operations Officer.
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Fabio Pieroni SELIC Vice President, Treasurer &
Vice President, Treasurer & Controller Controller; Prior to June 1993, 2nd Vice
Security Equity Life Insurance Co. President of Finance and Administration,
First UNUM Life Insurance Company.
Leonard M. Rubenstein, SELIC Director; Executive Vice President -
Executive Vice President - Investments Investments, General American Life
General American Life Insurance Co. Insurance Co. (life insurance).
700 Market Street
St. Louis, MO 63101
William C. Thater SELIC Director and President; Prior to
President June 1993, Vice President - Individual
Security Equity Life Insurance Co. Life, General American Life Insurance Co.
84 Business Park Drive, Suite #303 (life insurance). Prior to September
Armonk, NY 10504 1991, Adv. Sales Vice President, General
American Life Ins. Co. Prior to January
1990, Vice President, Marsh & McLennan
(insurance and reinsurance brokers,
consulting and investment management).
H. Edwin Trusheim SELIC Director; Retired Chairman, General
General American Life Insurance Co. American Life Insurance Co. (life
700 Market Street insurance). Prior to May 1993, Chairman &
St. Louis, MO 63101 CEO, General American Life Ins. Co.
Virginia V. Weldon, M.D. SELIC Director; Senior Vice President,
Senior Vice President Monsanto Company (chemicals diversified
Monsanto Company industry, pharmaceuticals, life science
800 North Lindbergh Blvd. products, and food ingredients business).
St. Louis, MO 63167
Ted C. Wetterau SELIC Director; Chairman and Chief
Chairman and CEO Executive Officer, Wetterau & Associates,
Wetterau Associates Inc. (retail and wholesale grocery,
1401 S. Brentwood, Suite 760 manufacturing business).
St. Louis, MO 63144
Ben H. Wolzenski, SELIC Director; Executive Vice President, General
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Executive Vice President - Individual American Life Insurance Co. (life
General American Life Insurance Co. insurance). Prior to October 1991, Vice
13045 Tesson Ferry Road President - Individual Life Products,
St. Louis, MO 63128 General American Life Ins. Co.
A. Greig Woodring SELIC Director; CEO & President,
CEO & President Reinsurance Group of American, Inc.
Reinsurance Group of America, Inc. (reinsurance). Prior Executive Vice
660 Mason Ridge Center Dr., Suite 300 President - Reinsurance, General American
St. Louis, MO 63141 Life Ins. Co.
</TABLE>
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<PAGE> 74
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
has been provided by Matthew P. McCauley, General Counsel, SELIC.
LEGAL PROCEEDINGS
Neither SELIC nor the Separate Account is involved in any material legal
proceedings.
EXPERTS
The audited financial statements of Security Equity Life Insurance Company
and the Separate Account have been included in this Prospectus in reliance on
the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and on the authority of said firm as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined by Ralph A.
Gorter of Security Equity Life Insurance Company, whose opinion is filed as
an exhibit to the registration statement for the Contracts.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Contracts. This Prospectus does not contain all the information set forth in
the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, SELIC and the Contracts.
Statements contained in this Prospectus as to the contents of the Contract
and other legal instruments are summaries. For a complete statement of the
terms thereof, reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of SELIC which are included in this Prospectus
should be distinguished from the financial statements of the Separate
Account, and should be considered only as bearing on the ability of SELIC to
meet its obligations under the Contract. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
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APPENDIX A -- UNDERLYING PORTFOLIOS
The Available Division of the Separate Account invests in shares or units of
an Underlying Portfolio from the following open-end, management investment
companies:
EVERGREEN VARIABLE TRUST
Evergreen VA Portfolio
Evergreen VA Foundation Portfolio
Evergreen VA Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
Money Market Portfolio
LIFE & ANNUITY TRUST
Asset Allocation Portfolio
U.S. Government Allocation Portfolio
TOMORROW FUNDS RETIREMENT TRUST
Core Large-Cap Stock Portfolio
Core Small-Cap Stock Portfolio
VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
VARIABLE INSURANCE PRODUCT FUNDS II
Asset Manager Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
Each Underlying Portfolio operates as a separate investment vehicle, and the
income or losses of one Underlying Portfolio has no effect on the investment
performance of any other Underlying Portfolio.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH
UNDERLYING PORTFOLIO LISTED.
The prospectus for each Underlying Portfolio includes information regarding
the investment advisory fee and operating expenses of the Underlying
Portfolio, which are
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reflected in the value of the Accumulation Units of the Division of the
Separate Account that invests in such Underlying Portfolio. The prospectus for
each Underlying Portfolio also includes investment strategies, objectives and
investment advisor.
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APPENDIX B -- CONTRACT RIDERS
JOINT AND LAST SURVIVOR RIDER
-----------------------------
The Joint and Last Survivor Rider modifies the Contract to provide insurance
coverage on the lives of two Insureds. The rider will be subject to all
terms in the Contract, and the addition of the rider will not change any
mechanics of the Contract, except as modified in the Contract and highlighted
below. Some of the discussions in the Prospectus applicable to the Contract
apply differently to a Contract to which a Joint and Last Survivor Rider has
been added. Set out below are the modifications to designated sections of
the Prospectus in the event that a Joint and Last Survivor Rider is added to
the Contract. Except as noted below, the discussions in the Prospectus
referencing a single Insured can be read as though the single Insured was two
Insureds under a Contract with a Joint and Last Survivor Rider.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Joint and Last Survivor
Rider:
FIRST INSURED: The first person of the two Insureds to die.
INSURED: A person whose life is insured under the terms of the Contract.
There are two Insureds under the Contract. Both Insureds are shown in the
Contract.
JOINT AND LAST SURVIVOR RIDER: A rider added attached to the Contract
described in this Prospectus, which will amend the Contract to pay a Death
Benefit after the death of Last Insured.
LAST INSURED: The last person of the two Insureds to die.
The following are the major differences between a Contract with a Joint and
Last Survivor Rider added, and a Contract without this rider.
1. All conditions of eligibility of a prospective Insured will be
applied to both Insureds in order for a Contract with a Joint
and Last Survivor Rider to be issued. (See "The Contract --
Availability of Insurance Coverage")
2. Death Benefits will be paid on a Temporary Insurance Coverage
basis only if both Insureds meet SELIC's usual and customary
underwriting standards for the
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applied for coverage (See "The Contract -- Availability of
Insurance Coverage").
3. All Contracts that are issued with a Joint and Last Survivor
Rider attached will require medical evidence of insurability.
(See "The Contract -- Evidence of Insurability").
4. All Contracts that are issued with a Joint and Last Survivor
Rider attached will pay a Death Benefit only on the death of
the Last Insured. No Death Benefit will be paid on the
death of the First Insured. (See "The Contract -- Death
Benefits Under the Contract").
5. No change in Death Benefit Option or Face Amount will be
effective if the Last Insured dies before the change is
effective. (See "The Contract -- Death Benefit Options" and
"The Contract -- Death Benefits Under the Contract").
6. In general, a Contract with a Joint and Last Survivor Rider will
have a lower Target Premium than a Contract issued on a
single Insured with the same Total Insurance Coverage. This
will result in lower Commission Charges for a Contract with
the same Total Insurance Coverage. (See "Charges and
Deductions -- Premium Load").
7. A deduction for SELIC's cost of insurance protection is made on
each Monthiversary and in general will be based upon the sex
and smoker status of the two Insureds. The Joint and Last
Survivor cost of insurance rates will be blended rates based
upon the Issue Ages of the Insureds, the number of completed
Contract Years, as well as the sex and smoker status of the
Insureds. The cost of insurance rates may also vary by any
special insurance class charges.
The guaranteed cost of insurance rates will not be greater than
the guaranteed maximum cost of insurance rates set forth in
the Contract. These rates, as well as the rates used to
calculate the Minimum Death Benefit and limitations on
Premiums payable under the Contract, are based on the 1980
Commissioners Standard Ordinary Tables, Age Nearest
Birthday, that correspond to the applicable ages, sex and
smoker status of the Insureds. Current cost of insurance
rates may be lower.
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<PAGE> 79
Since a benefit is paid only in the event that both Insureds have
died, Cost of Insurance Charges for Contracts with a Joint
and Last Survivor Rider attached will generally be lower
than the charges for a comparable single life Contract.
(See "Charges and Deductions -- Cost of Insurance Charge").
8. The calculation of the Minimum Death Benefit and any limitations
on Premiums will reflect the fact that no Death Benefit will
be paid until the death of the Last Insured. Assuming the
same amount of requested Insurance Coverage, any limitations
on Premiums payable under the Contract will be lower than
those based upon a single life, while the Minimum Death
Benefits will be higher than those based upon a single life.
(See "The Contract -- Death Benefits Under the Contract").
9. The Underwriting Charge for Contracts issued with a Joint and
Last Survivor Rider attached will be equal to the sum of a
flat fee and a charge per $1,000 of Total Insurance Coverage,
subject to a maximum charge. This charge is determined
separately for each Insured. The charges for each Insured
are added together to obtain the total charge for the
Contact. This charge is deducted on each Monthiversary for
the first 12 Contract Months. The flat fee, charge per
$1,000, and maximum charge are shown in the table below.
<TABLE>
<CAPTION>
Per $1,000 of Maximum Total
Flat Fee Total Insurance Underwriting Charge
Issue Age Per Month Coverage Per Month Per Insured Per
Month
<S> <C> <C> <C>
20 - 45 $4.17 $.00833 $37.50
46 - 60 $4.17 $.01250 $54.17
61 - 85 $4.17 $.01667 $54.17
</TABLE>
If there is a Contract change after issue which requires medical
underwriting, SELIC will deduct on the Monthiversary
following the underwriting an amount per Insured equal to
$100, plus the per thousand charge above multiplied by 12,
multiplied by the increase in the Net Amount at Risk to
which the underwriting relates, subject to the maximum
charge shown above. (See "Charges and Deductions --
Underwriting Charges").
SELIC may, in its sole discretion, reduce or waive the
Underwriting Charge in connection with the purchase of
Contracts sold by licensed agents of SELIC that
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<PAGE> 80
are also registered representatives of selected broker-dealers or
through banks that have entered into written sales agreements with
Walnut Street. Any reduction in or waiver of the Underwriting
Charge will be reflected in the Contract.
10. The Maturity Date of Contracts issued with a Joint and Last
Survivor Rider attached will be when the younger of the two
Insureds reaches the attained age of 100. (See "Termination
-- Maturity Date").
11. For a Contract issued with a Joint and Last Survivor Rider
attached to be reinstated, both Insureds must be alive on
the date of reinstatement. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient
Value").
12. A limited Death Benefit will be paid on a Contract issued with a
Joint and Last Survivor Rider if either Insured commits
suicide within two years from the date coverage becomes
effective or within two years from the date of receipt of a
Subsequent Premium payment which increases the Death
Benefit. (See " Additional Provisions of the Contract --
Suicide").
SUPPLEMENTAL TERM INSURANCE RIDER
---------------------------------
A Contract Holder may elect to add a Supplemental Term Insurance Rider to the
Contract at the time of the Application. The Supplemental Term Insurance
Rider increases the Total Insurance Amount under the Contract. The addition
of this Rider will allow SELIC to deduct additional monthly charges from the
Insurance Account Value of the Contract.
This rider may be added to a single life Contract, or a Contract to which a
Joint and Last Survivor Rider has been attached.
Set out below are additional definitions and other modifications applicable
when a Supplemental Term Rider is added to a Contract.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Supplemental Term
Insurance Rider:
B-4
<PAGE> 81
DATE OF DEATH UPON WHICH DEATH BENEFIT BECOMES PAYABLE: The date of death of
the Insured, for a single life Contract, or the Last Insured for a Contract
to which a Joint and Last Survivor Rider has been added.
RIDER DEATH BENEFIT: Is the amount of Supplemental Term Insurance Coverage
under the Rider.
SUPPLEMENTAL TERM INSURANCE RIDER: A rider added to the Contract described
in this Prospectus, which will increase the Total Insurance Amount under the
Contract.
SUPPLEMENTAL TERM INSURANCE BENEFIT
The Supplemental Term Insurance Rider provides term insurance coverage (the
Rider Death Benefit) that is in addition to insurance coverage provided under
the Contract. SELIC will pay the Rider Death Benefit to the beneficiary if
the Date of Death Upon Which Death Benefit becomes Payable occurs while the
rider is in force. SELIC must receive proof that such death occurred before
the Rider Expiry Date in the Contract, or the termination of the coverage
provided by the Supplemental Term Insurance Rider, if earlier, as specified
in the rider and the Contract.
The Contract Holder may, subject to the approval of the Company, change the
Supplemental Term Insurance Amount. The Contract Holder must request any
change not specified in the Contract by notifying SELIC in writing. Evidence
of Insurability will be required for any change that increases the
Supplemental Term Insurance Amount. If SELIC approves the change, it will
take effect on the next Monthiversary which is at least 30 days after all the
required information has been provided to SELIC. The Contract will be
amended to reflect any such change in the Supplemental Term Insurance Amount.
No change will be effective if the Date Upon Which Death Benefit becomes
Payable is before the date of the change.
MONTHLY CHARGES FOR SUPPLEMENTAL TERM INSURANCE AMOUNTS - COST OF INSURANCE
CHARGES
Charges for the Supplemental Term Insurance Rider, which consist of monthly
Cost of Insurance Charges for the Rider Death Benefit, are deducted from the
Insurance Account Value on each Monthiversary. The charges are determined by
multiplying the rider Net Amount At Risk by the current monthly Cost of
Insurance Rate for the rider.
The rider Net Amount at Risk on any Monthiversary is equal to:
B-5
<PAGE> 82
(a) The Supplemental Term Insurance Amount discounted to such
Monthiversary at the rate specified in the Basis of
Computation Specified in the Contract; less
(b) The excess, if any, of the Insurance Account Value on such
Monthiversary over the Death Benefit for the Contract
discounted to such Monthiversary at the rate specified in the
Basis of Computations Specified in the Contract.
The cost of insurance rates for the Supplemental Term Insurance Rider will be
equal to the current cost of insurance rates for the Face Amount under
Contract. On each Monthiversary on which the Supplemental Term Insurance
Rider is in force, the Cost of Insurance for the Supplemental Term Insurance
Rider will be added to the Monthly Charges deducted from the Insurance
Account Value.
TERMINATION OF THE SUPPLEMENTAL TERM INSURANCE RIDER
The Supplemental Term Insurance Rider may be terminated as of any
Monthiversary following a written request to the Company. The Supplemental
Term Insurance Rider will terminate automatically when any of the following
events occur:
(a) The lapse of the Contract;
(b) The surrender of the Contract;
(c) The Maturity Date of the Contract;
(d) The Date of Death Upon Which Death Benefits become Payable; or
(e) The Rider Expiry Date.
REINSTATEMENT OF SUPPLEMENTAL TERM INSURANCE RIDER
If the Supplemental Term Insurance Rider terminates, it may be reinstated
within five years of the earlier of the Contact termination or rider
termination provided that:
B-6
<PAGE> 83
(a) If the Contract has terminated, it is also being reinstated;
(b) Satisfactory evidence of insurability is provided to SELIC; and
(c) Any charges due under the rider are paid as of the date of the
Reinstatement.
The charges due will be equal to the amount of the charges for the rider due
and unpaid at the time that the rider terminated, plus three times the
charges for the rider due at the time of Reinstatement.
In order for the rider to be reinstated, the same number of Insureds under
the Contract must be alive as were alive when the rider terminated.
ADDITIONAL PROVISIONS OF THE RIDER - INCONTESTABILITY
In order for SELIC to contest the validity of any coverage provided by the
Supplemental Term Insurance Rider, legal action must be commenced within two
years from the rider effective date or from the effective date of any change
in rider coverage requiring evidence of insurability, including Reinstatement
of Coverage.
ADDITIONAL PROVISIONS OF THE RIDER - SUICIDE
If the Supplemental Term Insurance Rider is attached to a single life
Contract and the Insured dies by suicide, while sane or insane, within two
years from the rider Effective Date, the death benefit payable will be
limited to the sum of the Cost of Insurance Charges for the rider.
If this rider is attached to a Contract, to which a Joint and Last Survivor
Rider has been added, and either Insured dies by suicide, while sane or
insane, within two years from the rider Effective Date, the Death Benefit
payable will be limited to the sum of the Cost of Insurance Charges for the
rider.
The following are major modifications to a Contract when a Supplemental Term
Insurance Rider is added:
(1) Coverage provided by the Supplemental Term Insurance Rider is not
taken into account in determining the amount of Target
Premium: accordingly there may be no additional Premium Load
associated with this coverage. (See "The Contracts --
Premiums").
B-7
<PAGE> 84
(2) In the event that a partial withdrawal results in a decrease in
the Face Amount, which would cause the Face Amount to be
less than the Minimum Face Amount of a Contract, the
Supplemental Term Insurance Amount will be decreased by the
amount of the excess of the withdrawal over the decreased
Face Amount. (See "The Contract -- Surrender and Partial
Withdrawals").
(3) The Supplemental Term Insurance Amount will be included in Total
Insurance Coverage in determining whether the Minimum Death
Benefit applies, and is not included in Death Benefit
proceeds when the Death Benefit payable under the Contract
is equal to the Minimum Death Benefit.
B-8
<PAGE> 85
APPENDIX C -- ILLUSTRATIONS OF DEATH BENEFITS
AND NET INSURANCE ACCOUNT VALUE
The following illustrations show hypothetically how the Insurance Account
Value and Death Benefit of a Contract change with the investment experience
of the Available Divisions of the Separate Account. The illustrations show
how the Insurance Account Value and Death Benefit of a Contract issued to an
Insured of a given Issue Age and at a given Premium would vary over time if
the investment return on the assets held in each Available Division of the
Separate Account were an assumed uniform, gross, after-tax annual rate of 0%,
6% or 12%. THE HYPOTHETICAL RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. The
illustrations illustrate a Contract issued to a Male, Issue Age 45 in a
nonsmoker rate class assuming Medical Underwriting. The values would be
different from those shown if the gross annual investment rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above and below
those averages for individual Contract Years. The actual values will depend
upon various factors, including age, sex, smoking status, and underwriting
status of the Insured.
The Insurance Account Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the assumed rate of return,
reflecting deduction of the maximum mortality and expense risk charge, the
maximum monthly administrative charges, and monthly charges for the cost of
insurance based on the maximum values allowed under the 1980 Commissioners
Standard Ordinary Mortality Table. The Insurance Account Value column under
the "Current" heading shows the accumulated value of the Net Premiums at the
assumed rate of return, reflecting deduction of the current mortality and
expense risk charge, the current monthly administrative charges, and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between illustrations depending
upon whether Death Benefit Option 1, Option 2, or Option 3 is illustrated.
The amounts shown for the Insurance Account Value and Death Benefit reflect
the fact that the investment rate of return is lower than the gross after-tax
return on the assets held in a Division due to the advisory fee (.56% of
aggregate average daily net assets is assumed) and operating expenses of the
Underlying Portfolio (which are assumed to be .26%). After deduction for
these amounts and the mortality and expense basis the illustrated gross
annual investment rates of return of 0%, 6% and 12% correspond to approximate
net annual rates of -1.17%, 4.83%, and 10.83%, respectively, on a current
basis, and -1.32%, 4.68%, and 10.68%, respectively, on a guaranteed basis.
The average advisory fee and fund expense reflects any voluntary expense
reimbursement arrangements between the various underlying funds and their
investment advisors. The investment advisors could terminate these
C-1
<PAGE> 86
arrangements at any time. If any of these arrangements are terminated, the
above net annual rates of return would be reduced. The actual investment
advisory fee applicable to each Division is shown in the respective
prospectuses for each Underlying Portfolio. These Prospectuses for the Funds
should also be consulted for details about the nature and extent of expenses
for each Underlying Portfolio.
The hypothetical values shown in the illustrations do not reflect any charges
for federal income taxes against the Separate Account, since Security Equity
Life Insurance Company is not currently making any such charges. However,
such charges may be made in the future and, in that event, the gross annual
investment rate of return of the Available Divisions would have to exceed 0%,
6% and 12% by an amount sufficient to cover the charges in order to produce
the Death Benefit and Insurance Account Value illustration. (See "Federal
Tax Matters").
The illustrations illustrate the Contract values that would result based upon
the investment rates of return if Premiums are paid as indicated, if all Net
Premiums are allocated evenly among Available Divisions, and if no Contract
Loans have been made. The illustrations are also based on the assumptions
that the Contract Holder has not requested an increase or decrease in the
Face Amount, that no partial withdrawals have been made, that no transfer
charges were incurred, and that no optional riders have been requested.
Upon request, Security Equity Life Insurance Company will provide a
comparable illustration based upon the proposed Insured's Issue Age, sex and
underwriting class, the Face Amount and Premium pattern requested, and any
available riders requested.
C-2
<PAGE> 87
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,071 1,071 100,000 768 768 100,000
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,583 2,583 100,000 1,988 1,988 100,000
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,046 4,046 100,000 3,168 3,168 100,000
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,470 5,470 100,000 4,308 4,308 100,000
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,860 6,860 100,000 5,405 5,405 100,000
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,218 8,218 100,000 6,458 6,458 100,000
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,544 9,544 100,000 7,463 7,463 100,000
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,841 10,841 100,000 8,413 8,413 100,000
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 12,113 12,113 100,000 9,305 9,305 100,000
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,343 13,343 100,000 10,132 10,132 100,000
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,593 14,593 100,000 10,929 10,929 100,000
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,804 15,804 100,000 11,650 11,650 100,000
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,977 16,977 100,000 12,293 12,293 100,000
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 18,098 18,098 100,000 12,853 12,853 100,000
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 19,164 19,164 100,000 13,320 13,320 100,000
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 20,240 20,240 100,000 13,765 13,765 100,000
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 21,249 21,249 100,000 14,097 14,097 100,000
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 22,194 22,194 100,000 14,304 14,304 100,000
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 23,075 23,075 100,000 14,366 14,366 100,000
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 23,895 23,895 100,000 14,264 14,264 100,000
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 26,802 26,802 100,000 10,616 10,616 100,000
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 26,950 26,950 100,000 <F***> <F***> <F***>
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 88
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,139 1,139 100,000 827 827 100,000
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,816 2,816 100,000 2,183 2,183 100,000
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,541 4,541 100,000 3,579 3,579 100,000
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,328 6,328 100,000 5,017 5,017 100,000
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,185 8,185 100,000 6,494 6,494 100,000
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,115 10,115 100,000 8,014 8,014 100,000
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,126 12,126 100,000 9,571 9,571 100,000
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,220 14,220 100,000 11,164 11,164 100,000
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,409 16,409 100,000 12,791 12,791 100,000
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,681 18,681 100,000 14,446 14,446 100,000
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 21,102 21,102 100,000 16,170 16,170 100,000
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,623 23,623 100,000 17,920 17,920 100,000
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 26,248 26,248 100,000 19,698 19,698 100,000
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,972 28,972 100,000 21,500 21,500 100,000
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 31,799 31,799 100,000 23,324 23,324 100,000
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 34,808 34,808 100,000 25,248 25,248 100,000
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 37,931 37,931 100,000 27,189 27,189 100,000
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 41,179 41,179 100,000 29,141 29,141 100,000
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 44,564 44,564 100,000 31,095 31,095 100,000
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 48,100 48,100 100,000 33,042 33,042 100,000
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 68,298 68,298 107,911 42,508 42,508 100,000
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 92,466 92,466 132,226 50,586 50,586 100,000
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 89
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,208 1,208 100,000 886 886 100,000
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,057 3,057 100,000 2,386 2,386 100,000
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,074 5,074 100,000 4,023 4,023 100,000
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,288 7,288 100,000 5,811 5,811 100,000
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,725 9,725 100,000 7,765 7,765 100,000
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,412 12,412 100,000 9,902 9,902 100,000
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,379 15,379 100,000 12,239 12,239 100,000
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,657 18,657 100,000 14,793 14,793 100,000
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,288 22,288 100,000 17,586 17,586 100,000
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 26,295 26,295 100,000 20,642 20,642 100,000
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,785 30,785 100,000 24,034 24,034 100,000
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,755 35,755 100,000 27,754 27,754 100,000
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 41,260 41,260 100,000 31,845 31,845 100,000
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 47,355 47,355 100,000 36,352 36,352 100,000
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 54,086 54,086 110,335 41,326 41,326 100,000
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 61,564 61,564 122,513 46,914 46,914 100,000
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 69,782 69,782 134,679 53,107 53,107 102,497
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 78,809 78,809 148,161 59,875 59,875 112,564
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 88,728 88,728 162,372 67,222 67,222 123,016
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 99,263 99,263 178,324 75,178 75,178 134,568
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 172,247 172,247 272,150 125,897 125,897 198,918
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 286,898 286,898 410,265 199,437 199,437 285,195
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $5,612
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,893 5,612 3,497 3,497 103,497 3,188 3,188 103,188
- --------------------------------------------------------------------------------------------------------------------------
2 47 12,080 5,612 8,129 8,129 108,129 7,514 7,514 107,514
- --------------------------------------------------------------------------------------------------------------------------
3 48 18,576 5,612 12,674 12,674 112,674 11,756 11,756 111,756
- --------------------------------------------------------------------------------------------------------------------------
4 49 25,398 5,612 17,141 17,141 117,141 15,911 15,911 115,911
- --------------------------------------------------------------------------------------------------------------------------
5 50 32,560 5,612 21,535 21,535 121,535 19,978 19,978 119,978
- --------------------------------------------------------------------------------------------------------------------------
6 51 40,081 5,612 25,858 25,858 125,858 23,956 23,956 123,956
- --------------------------------------------------------------------------------------------------------------------------
7 52 47,978 5,612 30,111 30,111 130,111 27,837 27,837 127,837
- --------------------------------------------------------------------------------------------------------------------------
8 53 56,269 5,612 34,296 34,296 134,296 31,618 31,618 131,618
- --------------------------------------------------------------------------------------------------------------------------
9 54 64,975 5,612 38,418 38,418 138,418 35,293 35,293 135,293
- --------------------------------------------------------------------------------------------------------------------------
10 55 74,116 5,612 42,457 42,457 142,457 38,855 38,855 138,855
- --------------------------------------------------------------------------------------------------------------------------
11 56 83,715 5,612 46,551 46,551 146,551 42,409 42,409 142,409
- --------------------------------------------------------------------------------------------------------------------------
12 57 93,793 5,612 50,565 50,565 150,565 45,836 45,836 145,836
- --------------------------------------------------------------------------------------------------------------------------
13 58 104,376 5,612 54,498 54,498 154,498 49,133 49,133 149,133
- --------------------------------------------------------------------------------------------------------------------------
14 59 115,487 5,612 58,334 58,334 158,334 52,294 52,294 152,294
- --------------------------------------------------------------------------------------------------------------------------
15 60 127,154 5,612 62,068 62,068 162,068 55,309 55,309 155,309
- --------------------------------------------------------------------------------------------------------------------------
16 61 139,404 5,612 65,905 65,905 165,905 58,390 58,390 158,390
- --------------------------------------------------------------------------------------------------------------------------
17 62 152,267 5,612 69,621 69,621 169,621 61,302 61,302 161,302
- --------------------------------------------------------------------------------------------------------------------------
18 63 165,773 5,612 73,218 73,218 173,218 64,027 64,027 164,027
- --------------------------------------------------------------------------------------------------------------------------
19 64 179,954 5,612 76,697 76,697 176,697 66,548 66,548 166,548
- --------------------------------------------------------------------------------------------------------------------------
20 65 194,844 5,612 80,059 80,059 180,059 68,844 68,844 168,844
- --------------------------------------------------------------------------------------------------------------------------
25 70 281,237 5,612 94,743 94,743 194,743 76,396 76,396 176,396
- --------------------------------------------------------------------------------------------------------------------------
30 75 391,498 5,612 104,876 104,876 204,876 74,876 74,876 174,876
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 90
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $5,612
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,893 5,612 3,713 3,713 103,713 3,394 3,394 103,394
- --------------------------------------------------------------------------------------------------------------------------
2 47 12,080 5,612 8,853 8,853 108,853 8,199 8,199 108,199
- --------------------------------------------------------------------------------------------------------------------------
3 48 18,576 5,612 14,207 14,207 114,207 13,201 13,201 113,201
- --------------------------------------------------------------------------------------------------------------------------
4 49 25,398 5,612 19,795 19,795 119,795 18,407 18,407 118,407
- --------------------------------------------------------------------------------------------------------------------------
5 50 32,560 5,612 25,632 25,632 125,632 23,821 23,821 123,821
- --------------------------------------------------------------------------------------------------------------------------
6 51 40,081 5,612 31,731 31,731 131,731 29,451 29,451 129,451
- --------------------------------------------------------------------------------------------------------------------------
7 52 47,978 5,612 38,104 38,104 138,104 35,301 35,301 135,301
- --------------------------------------------------------------------------------------------------------------------------
8 53 56,269 5,612 44,767 44,767 144,767 41,374 41,374 141,374
- --------------------------------------------------------------------------------------------------------------------------
9 54 64,975 5,612 51,737 51,737 151,737 47,674 47,674 147,674
- --------------------------------------------------------------------------------------------------------------------------
10 55 74,116 5,612 59,009 59,009 159,009 54,203 54,203 154,203
- --------------------------------------------------------------------------------------------------------------------------
11 56 83,715 5,612 66,741 66,741 166,741 61,081 61,081 161,081
- --------------------------------------------------------------------------------------------------------------------------
12 57 93,793 5,612 74,815 74,815 174,815 68,199 68,199 168,199
- --------------------------------------------------------------------------------------------------------------------------
13 58 104,376 5,612 83,244 83,244 183,244 75,564 75,564 175,564
- --------------------------------------------------------------------------------------------------------------------------
14 59 115,487 5,612 92,028 92,028 193,259 83,179 83,179 183,179
- --------------------------------------------------------------------------------------------------------------------------
15 60 127,154 5,612 101,165 101,165 206,377 91,045 91,045 191,045
- --------------------------------------------------------------------------------------------------------------------------
16 61 139,404 5,612 110,875 110,875 220,640 99,395 99,395 199,395
- --------------------------------------------------------------------------------------------------------------------------
17 62 152,267 5,612 120,953 120,953 233,439 108,004 108,004 208,447
- --------------------------------------------------------------------------------------------------------------------------
18 63 165,773 5,612 131,410 131,410 247,051 116,847 116,847 219,673
- --------------------------------------------------------------------------------------------------------------------------
19 64 179,954 5,612 142,266 142,266 260,347 125,901 125,901 230,399
- --------------------------------------------------------------------------------------------------------------------------
20 65 194,844 5,612 153,530 153,530 274,818 135,134 135,134 241,890
- --------------------------------------------------------------------------------------------------------------------------
25 70 281,237 5,612 216,318 216,318 341,782 184,037 184,037 290,779
- --------------------------------------------------------------------------------------------------------------------------
30 75 391,498 5,612 290,597 290,597 415,554 236,033 236,033 337,527
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 91
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $5,612
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,893 5,612 3,928 3,928 103,928 3,600 3,600 103,600
- --------------------------------------------------------------------------------------------------------------------------
2 47 12,080 5,612 9,603 9,603 109,603 8,910 8,910 108,910
- --------------------------------------------------------------------------------------------------------------------------
3 48 18,576 5,612 15,857 15,857 115,857 14,757 14,757 114,757
- --------------------------------------------------------------------------------------------------------------------------
4 49 25,398 5,612 22,762 22,762 122,762 21,197 21,197 121,197
- --------------------------------------------------------------------------------------------------------------------------
5 50 32,560 5,612 30,394 30,394 130,394 28,290 28,290 128,290
- --------------------------------------------------------------------------------------------------------------------------
6 51 40,081 5,612 38,832 38,832 138,832 36,103 36,103 136,103
- --------------------------------------------------------------------------------------------------------------------------
7 52 47,978 5,612 48,164 48,164 148,164 44,705 44,705 144,705
- --------------------------------------------------------------------------------------------------------------------------
8 53 56,269 5,612 58,488 58,488 158,488 54,173 54,173 154,173
- --------------------------------------------------------------------------------------------------------------------------
9 54 64,975 5,612 69,916 69,916 170,595 64,595 64,595 164,595
- --------------------------------------------------------------------------------------------------------------------------
10 55 74,116 5,612 82,528 82,528 194,765 76,059 76,059 179,499
- --------------------------------------------------------------------------------------------------------------------------
11 56 83,715 5,612 96,582 96,582 221,173 88,727 88,727 203,184
- --------------------------------------------------------------------------------------------------------------------------
12 57 93,793 5,612 112,077 112,077 249,932 102,555 102,555 228,697
- --------------------------------------------------------------------------------------------------------------------------
13 58 104,376 5,612 129,159 129,159 278,984 117,655 117,655 254,134
- --------------------------------------------------------------------------------------------------------------------------
14 59 115,487 5,612 147,962 147,962 310,720 134,126 134,126 281,665
- --------------------------------------------------------------------------------------------------------------------------
15 60 127,154 5,612 168,649 168,649 344,044 152,081 152,081 310,245
- --------------------------------------------------------------------------------------------------------------------------
16 61 139,404 5,612 191,614 191,614 381,312 171,865 171,865 342,012
- --------------------------------------------------------------------------------------------------------------------------
17 62 152,267 5,612 216,849 216,849 418,518 193,406 193,406 373,274
- --------------------------------------------------------------------------------------------------------------------------
18 63 165,773 5,612 244,569 244,569 459,789 216,812 216,812 407,607
- --------------------------------------------------------------------------------------------------------------------------
19 64 179,954 5,612 275,027 275,027 503,299 242,218 242,218 443,258
- --------------------------------------------------------------------------------------------------------------------------
20 65 194,844 5,612 308,480 308,480 552,179 269,719 269,719 482,797
- --------------------------------------------------------------------------------------------------------------------------
25 70 281,237 5,612 531,465 531,465 839,714 444,937 444,937 703,001
- --------------------------------------------------------------------------------------------------------------------------
30 75 391,498 5,612 883,468 883,468 1,263,359 698,764 698,764 999,233
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made
by SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any
period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,070 1,070 101,948 762 762 101,948
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,578 2,578 103,896 1,968 1,968 103,896
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,033 4,033 105,844 3,125 3,125 105,844
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,445 5,445 107,792 4,233 4,233 107,792
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,817 6,817 109,740 5,287 5,287 109,740
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,152 8,152 111,688 6,284 6,284 111,688
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,449 9,449 113,636 7,217 7,217 113,636
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,708 10,708 115,584 8,078 8,078 115,584
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 11,936 11,936 117,532 8,860 8,860 117,532
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,111 13,111 119,480 9,553 9,553 119,480
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,298 14,298 121,428 10,185 10,185 121,428
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,434 15,434 123,376 10,708 10,708 123,376
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,515 16,515 125,324 11,115 11,115 125,324
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,524 17,524 127,272 11,394 11,394 127,272
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 18,454 18,454 129,220 11,529 11,529 129,220
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 19,360 19,360 131,168 11,579 11,579 131,168
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 20,164 20,164 133,116 11,447 11,447 133,116
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 20,863 20,863 135,064 11,104 11,104 135,064
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 21,458 21,458 137,012 10,516 10,516 137,012
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 21,945 21,945 138,960 9,645 9,645 138,960
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 22,158 22,158 148,700 <F***> <F***> <F***>
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 16,631 16,631 158,440 <F***> <F***> <F***>
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 92
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,138 1,138 101,948 820 820 101,948
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,810 2,810 103,896 2,162 2,162 103,896
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,527 4,527 105,844 3,534 3,534 105,844
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,301 6,301 107,792 4,935 4,935 107,792
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,138 8,138 109,740 6,363 6,363 109,740
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,041 10,041 111,688 7,817 7,817 111,688
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,017 12,017 113,636 9,289 9,289 113,636
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,067 14,067 115,584 10,773 10,773 115,584
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,202 16,202 117,532 12,263 12,263 117,532
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,404 18,404 119,480 13,748 13,748 119,480
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,744 20,744 121,428 15,260 15,260 121,428
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,165 23,165 123,376 16,752 16,752 123,376
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 25,669 25,669 125,324 18,215 18,215 125,324
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,243 28,243 127,272 19,638 19,638 127,272
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 30,886 30,886 129,220 21,006 21,006 129,220
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 33,666 33,666 131,168 22,382 22,382 131,168
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 36,509 36,509 133,116 23,668 23,668 133,116
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 39,419 39,419 135,064 24,837 24,837 135,064
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 42,403 42,403 137,012 25,852 25,852 137,012
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 45,465 45,465 138,960 26,676 26,676 138,960
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 61,776 61,776 148,700 26,318 26,318 148,700
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 79,362 79,362 158,440 10,145 10,145 158,440
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made
by SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any
period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 93
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
==========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- --------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- --------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,207 1,207 101,948 879 879 101,948
- --------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,051 3,051 103,896 2,364 2,364 103,896
- --------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,059 5,059 105,844 3,974 3,974 105,844
- --------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,258 7,258 107,792 5,723 5,723 107,792
- --------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,673 9,673 109,740 7,619 7,619 109,740
- --------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,329 12,329 111,688 9,680 9,680 111,688
- --------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,255 15,255 113,636 11,914 11,914 113,636
- --------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,479 18,479 115,584 14,334 14,334 115,584
- --------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,042 22,042 117,532 16,956 16,956 117,532
- --------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 25,961 25,961 119,480 19,793 19,793 119,480
- --------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,345 30,345 121,428 22,908 22,908 121,428
- --------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,182 35,182 123,376 26,283 26,283 123,376
- --------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,522 40,522 125,324 29,945 29,945 125,324
- --------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 46,411 46,411 127,272 33,924 33,924 127,272
- --------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 52,909 52,909 129,220 38,251 38,251 129,220
- --------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 60,163 60,163 131,168 43,046 43,046 131,168
- --------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 68,183 68,183 133,116 48,276 48,276 133,116
- --------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 77,042 77,042 144,840 53,986 53,986 135,064
- --------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 86,783 86,783 158,812 60,230 60,230 137,012
- --------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 97,481 97,481 174,491 67,072 67,072 138,960
- --------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 168,797 168,797 266,700 112,714 112,714 178,088
- --------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 281,389 281,389 402,386 179,705 179,705 256,979
==========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
<PAGE> 94
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.17% Net)<F*> (-1.32% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,071 1,071 100,000 768 768 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,582 2,582 100,000 1,987 1,987 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,044 4,044 100,000 3,167 3,167 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,467 5,467 100,000 4,306 4,306 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,856 6,856 100,000 5,402 5,402 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,212 8,212 100,000 6,454 6,454 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,537 9,537 100,000 7,456 7,456 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,831 10,831 100,000 8,405 8,405 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 12,101 12,101 100,000 9,295 9,295 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,329 13,329 100,000 10,120 10,120 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,575 14,575 100,000 10,914 10,914 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,784 15,784 100,000 11,633 11,633 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,953 16,953 100,000 12,274 12,274 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 18,070 18,070 100,000 12,831 12,831 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 19,133 19,133 100,000 13,296 13,296 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 20,205 20,205 100,000 13,737 13,737 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 21,210 21,210 100,000 14,067 14,067 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 22,150 22,150 100,000 14,270 14,270 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 23,027 23,027 100,000 14,329 14,329 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 23,842 23,842 100,000 14,224 14,224 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 26,722 26,722 100,000 10,559 10,559 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 26,838 26,838 100,000 - - -
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F**> These values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F****>The Contract would lapse under these assumptions. Additional
premium would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-3
<PAGE> 95
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-4.83% Net)<F*> (-4.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,139 1,139 100,000 827 827 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,815 2,815 100,000 2,182 2,182 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,539 4,539 100,000 3,578 3,578 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,325 6,325 100,000 5,014 5,014 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,180 8,180 100,000 6,491 6,491 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,108 10,108 100,000 8,008 8,008 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,116 12,116 100,000 9,563 9,563 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,208 14,208 100,000 11,154 11,154 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,393 16,393 100,000 12,777 12,777 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,660 18,660 100,000 14,429 14,429 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 21,076 21,076 100,000 16,149 16,149 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,591 23,591 100,000 17,894 17,894 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 26,209 26,209 100,000 19,666 19,666 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,925 28,925 100,000 21,463 21,463 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 31,744 31,744 100,000 23,280 23,280 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 34,743 34,743 100,000 25,196 25,196 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 37,855 37,855 100,000 27,129 27,129 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 41,091 41,091 100,000 29,071 29,071 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 44,463 44,463 100,000 31,015 31,015 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 47,983 47,983 100,000 32,950 32,950 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 68,085 68,085 107,575 42,331 42,331 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 92,124 92,124 131,737 50,252 50,252 100,000
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F**> These values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost
of insurance rates for the exact combination of premiums and
benefits shown.
<F***>The Contract would lapse under these assumptions. Additional
premium would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-4
<PAGE> 96
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-10.83% Net)<F*> (-10.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,208 1,208 100,000 886 886 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,056 3,056 100,000 2,385 2,385 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,072 5,072 100,000 4,022 4,022 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,285 7,285 100,000 5,809 5,809 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,720 9,720 100,000 7,760 7,760 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,404 12,404 100,000 9,895 9,895 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,367 15,367 100,000 12,229 12,229 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,640 18,640 100,000 14,779 14,779 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,265 22,265 100,000 17,568 17,568 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 26,265 26,265 100,000 20,618 20,618 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,746 30,746 100,000 24,002 24,002 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,705 35,705 100,000 27,713 27,713 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 41,197 41,197 100,000 31,794 31,794 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 47,276 47,276 100,000 36,288 36,288 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 53,989 53,989 110,138 41,247 41,247 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 61,447 61,447 122,279 46,817 46,817 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 69,640 69,640 134,404 52,989 52,989 102,269
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 78,638 78,638 147,840 59,735 59,735 112,301
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 88,524 88,524 161,999 67,057 67,057 122,715
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 99,380 99,380 177,890 74,984 74,984 134,222
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 171,705 171,705 271,294 125,492 125,492 198,278
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 285,779 285,779 408,664 198,655 198,655 284,077
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F**> These values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F***>The Contract would lapse under these assumptions. Additional
premium would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-5
<PAGE> 97
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.17% Net)<F*> (-1.32% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,070 1,070 101,070 765 765 100,765
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,579 2,579 102,579 1,976 1,976 101,976
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,035 4,035 104,035 3,142 3,142 103,142
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,450 5,450 105,450 4,263 4,263 104,263
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,826 6,826 106,826 5,333 5,333 105,333
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,165 8,165 108,165 6,353 6,353 106,353
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,469 9,469 109,469 7,316 7,316 107,316
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,737 10,737 110,737 8,215 8,215 108,215
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 11,976 11,976 111,976 9,046 9,046 109,046
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,166 13,166 113,166 9,800 9,800 109,800
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,369 14,369 114,369 10,509 10,509 110,509
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,527 15,527 115,527 11,129 11,129 111,129
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,635 16,635 116,635 11,655 11,655 111,655
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,679 17,679 117,679 12,081 12,081 112,081
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 18,652 18,652 118,652 12,396 12,396 112,396
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 19,615 19,615 119,615 12,668 12,668 112,668
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 20,490 20,490 120,490 12,805 12,805 112,805
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 21,278 21,278 121,278 12,792 12,792 112,792
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 21,980 21,980 121,980 12,610 12,610 112,610
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 22,598 22,598 122,598 12,238 12,238 112,238
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 24,015 24,015 124,015 6,953 6,953 106,953
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 21,616 21,616 121,616 - - -
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F**> These values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and
cost of insurance rates for the exact combination of premiums and
benefits shown.
<F***>The Contract would lapse under these assumptions. Additional
premium would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
$"C-6"
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.83% Net)<F*> (4.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,138 1,138 101,138 823 823 100,823
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,811 2,811 102,811 2,107 2,107 102,170
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,529 4,529 104,529 3,550 3,550 103,550
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,304 6,304 106,304 4,963 4,963 104,963
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,143 8,143 108,143 6,406 6,406 106,406
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,049 10,049 110,049 7,879 7,879 107,879
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,026 12,026 112,026 9,376 9,376 109,376
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,078 14,078 114,078 10,890 10,890 110,890
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,214 16,214 116,214 12,416 12,416 112,416
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,418 18,418 118,418 13,947 13,947 113,947
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,757 20,757 120,757 15,514 15,514 115,514
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,177 23,177 123,177 17,072 17,072 117,072
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 25,677 25,677 125,677 18,614 18,614 118,614
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,244 28,244 128,244 20,132 20,132 120,132
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 30,876 30,876 130,876 21,614 21,614 121,614
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 33,637 33,637 133,637 23,125 23,125 123,125
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 36,453 36,453 136,453 24,573 24,573 124,573
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 39,326 39,326 139,326 25,935 25,935 125,935
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 42,258 42,258 142,258 27,187 27,187 127,187
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 45,253 45,253 145,253 28,298 28,298 128,298
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 60,807 60,807 160,807 30,792 30,792 130,792
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 76,205 76,205 176,205 24,045 24,045 124,045
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***>The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-7
<PAGE> 98
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.83% Net)<F*> (10.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,207 1,207 101,207 882 882 100,882
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,052 3,052 103,052 2,372 2,372 102,372
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,060 5,060 105,060 3,990 3,990 103,990
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,260 7,260 107,260 5,748 5,748 105,748
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,674 9,674 109,674 7,657 7,657 107,657
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,328 12,328 112,328 9,731 9,731 109,731
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,248 15,248 115,248 11,980 11,980 111,980
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,463 18,463 118,463 14,415 14,415 114,415
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,011 22,011 122,011 17,050 17,050 117,050
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 25,905 25,905 125,905 19,896 19,896 119,896
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,254 30,254 130,254 23,012 23,012 123,012
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,039 35,039 135,039 26,375 26,375 126,375
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,305 40,305 140,305 30,006 30,006 130,006
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 46,086 46,086 146,086 33,926 33,926 133,926
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 52,431 52,431 152,431 38,154 38,154 138,154
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 59,470 59,470 159,470 42,795 42,795 142,795
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 67,189 67,189 167,189 47,793 47,793 147,793
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 75,662 75,662 175,662 53,168 53,168 153,168
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 84,973 84,973 184,973 58,936 58,936 158,936
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 95,210 95,210 195,210 65,117 65,117 165,117
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 163,711 163,711 263,711 103,128 103,128 203,128
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 272,853 272,853 390,180 154,988 154,988 254,988
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***>The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-8
<PAGE> 99
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @ 0.00% Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.17% Net)<F*> (-1.32% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,069 1,069 101,948 762 762 101,948
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,577 2,577 103,896 1,967 1,967 103,896
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,031 4,031 105,844 3,124 3,124 105,844
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,442 5,442 107,792 4,231 4,231 107,792
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,813 6,813 109,740 5,284 5,284 109,740
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,146 8,146 111,688 6,280 6,280 111,688
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,441 9,441 113,636 7,211 7,211 113,636
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,699 10,699 115,584 8,071 8,071 115,584
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 11,924 11,924 117,532 8,851 8,851 117,532
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,097 13,097 119,480 9,541 9,541 119,480
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,280 14,280 121,428 10,172 10,172 121,428
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,413 15,413 123,376 10,693 10,693 123,376
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,491 16,491 125,324 11,097 11,097 125,324
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,497 17,497 127,272 11,373 11,373 127,272
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 18,423 18,423 129,220 11,506 11,506 129,220
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 19,326 19,326 131,168 11,554 11,554 131,168
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 20,125 20,125 133,116 11,419 11,419 133,116
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 20,821 20,821 135,064 11,074 11,074 135,064
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 21,411 21,411 137,012 10,483 10,483 137,012
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 21,893 21,893 138,960 9,609 9,609 138,960
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 22,083 22,083 148,700 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 16,531 16,531 158,440 - - -
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***>The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-9
<PAGE> 100
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @ 0.00% Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.83% Net)<F*> (4.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,138 1,138 101,948 820 820 101,948
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,810 2,810 103,896 2,161 2,161 103,896
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,526 4,526 105,844 3,532 3,532 105,844
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,298 6,298 107,792 4,933 4,933 107,792
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,133 8,133 109,740 6,360 6,360 109,740
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,035 10,035 111,688 7,811 7,811 111,688
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,007 12,007 113,636 9,281 9,281 113,636
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,054 14,054 115,584 10,763 10,763 115,584
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,185 16,185 117,532 12,249 12,249 117,532
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,383 18,383 119,480 13,731 13,731 119,480
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,718 20,718 121,428 15,240 15,240 121,428
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,133 23,133 123,376 16,727 16,727 123,376
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 25,630 25,630 125,324 18,184 18,184 125,324
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,197 28,197 127,272 19,602 19,602 127,272
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 30,832 30,832 129,220 20,964 20,964 129,220
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 33,602 33,602 131,168 22,333 22,333 131,168
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 36,435 36,435 133,116 23,612 23,612 133,116
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 39,333 39,333 135,064 24,771 24,771 135,064
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 42,304 42,304 137,012 25,778 25,778 137,012
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 45,352 45,352 138,960 26,591 26,591 138,960
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 61,564 61,564 148,700 26,164 26,164 148,700
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 78,985 78,985 158,440 9,878 9,878 158,440
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***>The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-10
<PAGE> 101
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @ 0.00% Annual Premium: $1,948
<CAPTION>
=================================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- ---------------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.83% Net)<F*> (10.68% Net)<F**>
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,206 1,206 101,948 879 879 101,948
- ---------------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,051 3,051 103,896 2,363 2,363 103,896
- ---------------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,057 5,057 105,844 3,973 3,973 105,844
- ---------------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,255 7,255 107,792 5,720 5,720 107,792
- ---------------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,668 9,668 109,740 7,615 7,615 109,740
- ---------------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,321 12,321 111,688 9,673 9,673 111,688
- ---------------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,243 15,243 113,636 11,904 11,904 113,636
- ---------------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,462 18,462 115,584 14,320 14,320 115,584
- ---------------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,019 22,019 117,532 16,937 16,937 117,532
- ---------------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 25,931 25,931 119,480 19,769 19,769 119,480
- ---------------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,306 30,306 121,428 22,877 22,877 121,428
- ---------------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,132 35,132 123,376 26,243 26,243 123,376
- ---------------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,460 40,460 125,324 29,896 29,896 125,324
- ---------------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 46,333 46,333 127,272 33,863 33,863 127,272
- ---------------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 52,812 52,812 129,220 38,175 38,175 129,220
- ---------------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 60,045 60,045 131,168 42,953 42,953 131,168
- ---------------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 68,038 68,038 133,116 48,163 48,163 133,116
- ---------------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 76,869 76,869 144,513 53,848 53,848 135,064
- ---------------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 86,576 86,576 158,434 60,063 60,063 137,012
- ---------------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 97,236 97,236 174,052 66,872 66,872 138,960
- ---------------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 168,254 168,254 265,842 112,279 112,279 177,400
- ---------------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 280,272 280,272 400,789 178,895 178,895 255,820
=================================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of insurance
rates for the exact combination of premiums and benefits shown.
<F***>The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-11
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company
and Policyholders of Security Equity
Life Insurance Company Separate Account 13:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the General American Money Market Fund, Wells
Fargo Bank Asset Allocation Fund, Fidelity Growth Fund, Fidelity Investment
Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA Fund, Evergreen
Foundation Fund, and Evergreen Growth and Income Fund Divisions of Security
Equity Life Insurance Company Separate Account 13 (Separate Account) as of
December 31, 1996, and related statements of operations and changes in net
assets for the periods presented. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned at December 31,
1996 by correspondence with General American Capital Company, Wells Fargo
Bank Investment Adviser, Fidelity Investments, and Evergreen Asset
Management. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the General American Money
Market Fund, Wells Fargo Bank Asset Allocation Fund, Fidelity Growth Fund,
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA
Fund, Evergreen Foundation Fund, and Evergreen Growth and Income Fund
Divisions of Security Equity Life Insurance Company Separate Account 13 as of
December 31, 1996, and the results of their operations and changes in their
net assets for the periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 11, 1997
<PAGE> 103
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Net Assets
December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments, at market value $14,988,772 12,498 3,582,291 3,722,557 2,648,716 3,576,902 1,814,032 3,617,537
Payable to general account 3,003 12 6,033 7,928 7,982 171 87 173
---------- ------ --------- --------- --------- --------- --------- ---------
Total net assets $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
Total units 13,318,334 8,931 2,212,740 3,124,238 1,561,960 3,227,545 1,585,211 3,224,042
========== ====== ========= ========= ========= ========= ========= =========
Unit value $ 1.13 1.40 1.62 1.19 1.69 1.11 1.14 1.12
==== ==== ==== ==== ==== ==== ==== ====
Cost of investments $15,605,386 13,225 3,429,757 3,650,045 2,458,355 3,402,045 1,723,718 3,399,530
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 104
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on investments:
Proceeds from sales 9,427,292 545 2,657,607 964,149 996,124 34,167 17,279 36,201
Cost of investments
sold 9,821,858 577 2,601,002 967,181 961,682 32,848 16,419 34,638
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on sales (394,566) (32) 56,605 (3,032) 34,442 1,319 860 1,563
Realized gain from
distributions 662,558 - - - - - - -
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on
investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain (loss)
on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain
(loss) on
investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net gain (loss) on
investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
--------- ---- --------- ------- ------- ------- ------- -------
Mortality and expense
charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
--------- ---- --------- ------- ------- ------- ------- -------
Increase in assets
from operations $ 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
========= ==== ========= ======= ======= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE> 105
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Period September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
-------- ---- ----
Net realized gain on investments:
Proceeds from sales 8,244 -
Cost of investments sold 8,217 - -
-------- ---- ----
Net realized gain on sales 27 - -
Realized gain from distributions 494,746 - -
-------- ---- ----
Net realized gain on investments 494,773 - -
-------- ---- ----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
-------- ---- ----
Net unrealized gain (loss) on investments (477,414) (264) (141)
-------- ---- ----
Net gain (loss) on investments 17,359 (264) (141)
-------- ---- ----
Mortality and expense charges 910 1 1
-------- ---- ----
Increase (decrease) in assets
from operations $ 16,449 5 (142)
======== ==== ====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 106
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
---------- ------ --------- --------- --------- --------- --------- ---------
Net realized gain (loss)
on investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net gain (loss)
on investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
---------- ------ --------- --------- --------- --------- --------- ---------
Mortality and expense charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in assets
from operations 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
---------- ------ --------- --------- --------- --------- --------- ---------
Capital transactions:
Deposit into Separate
Account 16,201,970 6,223 1,854,129 1,992,244 1,139,931 1,799,979 899,908 1,799,969
Transfers to/from
Divisions (9,318,249) 3,087 1,757,397 1,878,412 1,439,294 1,696,024 848,012 1,696,024
Policy charges (864,845) (1,318) (241,335) (224,743) (164,854) (116,201) (58,256) (116,251)
---------- ------ --------- --------- --------- --------- --------- ---------
Net deposits into
Separate Account 6,018,876 7,992 3,370,191 3,645,913 2,414,371 3,379,802 1,689,664 3,379,742
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in net assets 6,139,213 8,391 3,572,336 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
Net assets, beginning of year 8,846,556 4,095 3,922 - - - - -
---------- ------ --------- --------- --------- --------- --------- ---------
Net assets, end of year $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 107
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Period from September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
--------- ----- -----
Net realized gain on investments 494,773 - -
--------- ----- -----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
--------- ----- -----
Net unrealized gain (loss) on investments (477,414) (264) (141)
--------- ----- -----
Net gain (loss) on investments 17,359 (264) (141)
--------- ----- -----
Mortality and expense charges 910 1 1
--------- ----- -----
Increase (decrease) in assets from operations 16,449 5 (142)
--------- ----- -----
Capital transactions:
Deposit into Separate Account 9,362,425 - -
Transfers to/from Divisions
and General Account (8,244) 4,131 4,104
Policy charges (524,074) (41) (40)
--------- ----- -----
Net deposits into Separate Account 8,830,107 4,090 4,064
--------- ----- -----
Increase in net assets 8,846,556 4,095 3,922
Net assets, beginning of period - - -
--------- ----- -----
Net assets, end of period $8,846,556 4,095 3,922
========= ===== =====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 108
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
December 31, 1996
(1) Organization
------------
Security Equity Life Insurance Company Separate Account 13 (the
Separate Account) commenced operations on November 15, 1994.
The Separate Account is registered under the Investment Company
Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account receives purchase payments from individual flexible
variable life contracts issued by Security Equity Life Insurance
Company (Security Equity).
The Separate Account is divided into a number of Divisions. Each
Division invests in shares of an underlying portfolio available
to policyholders as directed by the policyholders. The
portfolios available for investment through the Separate
Account are the General American Money Market Fund, Fidelity
Growth Fund, Fidelity Investment Grade Bond Fund, Fidelity
Asset Manager Fund, Fidelity Index 500 Fund, Bankers Trust
Emerging Market Fund, Bankers Trust Liquid Asset Fund, Bankers
Trust Limited Maturity Bond Fund, Evergreen VA Fund, Evergreen
Foundation Fund, Evergreen Growth and Income Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, Wells Fargo Bank Asset Allocation
Fund, and Wells Fargo Bank U.S. Government Allocation Fund.
Investments through the separate account Divisions in the General
American Money Market Fund, Wells Fargo Bank Asset Allocation
Fund, and Fidelity Growth Fund Divisions were initiated in the
Separate Account for policyholders on September 1, 1995.
Investments through the separate account Divisions in the
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund,
Evergreen VA Fund, Evergreen Foundation Fund, and Evergreen
Growth and Income Fund Divisions were initiated in the Separate
Account for policyholders during 1996. The remaining available
divisions had not commenced operations at December 31, 1996.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following is a summary of significant accounting policies followed
by the Separate Account in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
(a) Investments
-----------
The Separate Account's investments are valued daily, based on
the net asset value of the shares held. The first-in,
first-out method is used in determining the cost of
shares sold on withdrawals by the Separate Account.
Share transactions are recorded on the trade date, which
is the same as the settlement date.
(b) Federal Income Taxes
--------------------
Security Equity is taxed under federal law as a life
insurance company. The Separate Account is part of
Security Equity's total operations and is not taxed
separately. Under current federal income tax law, no
taxes are payable on investment income or realized
capital gains from sales of investments of the Separate
Account. Therefore, no federal income tax expense has
been provided.
(c) Dividend Reinvestment
---------------------
Dividends are recorded on the ex-dividend date and
immediately reinvested on the pay date.
(Continued)
<PAGE> 109
2
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(d) Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
increase and decrease in net assets from operations
during the period. Actual results could differ from
those estimates.
(3) Policy Charges
--------------
Charges are deducted from premiums and paid to Security Equity for
providing the insurance benefits set forth in the contracts and
any additional benefits by rider, administering the policies,
reimbursement of expenses incurred in distributing the
policies, and assuming certain risks in connection with the
policy.
The premium payment, less the premium load charge, equals the net
premium. The premium load is deducted from the initial premium and
from each subsequent premium paid by a policyholder, prior to
allocation to the Separate Account. The premium load includes a
distribution charge, a premium tax charge, and the DAC tax charge.
Distribution Charge: The distribution charge is composed of a premium
-------------------
expense load and a commission charge. The amount of the
distribution charge will depend on the amount of initial premium and
the sales commissions paid.
Premium Expense Load: The premium expense load will be deducted
--------------------
from each premium and will equal a percentage of the premium.
The percentage will be determined based on the sum of the initial
premiums for all policies in a case, in accordance with the
following table:
<TABLE>
<CAPTION>
Sum of the initial premiums
of all contracts in the case Premium expense load
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000-$999,999 1.50
$1,000,000 and more 1.25
====
</TABLE>
Commission Charge: A commission charge may be deducted from a
-----------------
premium. The commission charge deducted from a premium will be
equal to the full amount of commissions payable by Security
Equity on the target premium.
Premium Tax Charge: Various states and subdivisions impose a tax on
------------------
premiums received by insurance companies. Premium taxes vary from
state to state. The percentage deducted from each premium varies
based on the governing jurisdiction of the contract.
DAC Tax Charge: The DAC tax charge is equal to 1% of all premiums paid
--------------
in all contract years.
Charges are deducted monthly from the cash value of each policy to
compensate Security Equity for certain administrative costs, the
cost of insurance, and optional rider benefit charges.
(Continued)
<PAGE> 110
3
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
Administrative Costs: Security Equity has responsibility for the
--------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the
maintenance of each policy and the Separate Account, Security
Equity assesses a monthly administrative charge against each
policy. This monthly charge is $4.50 per policy. This cost may
change, but is guaranteed not to exceed $8.00 per month per
policy.
Cost of Insurance: The cost of insurance is deducted on each
-----------------
monthly anniversary for the following policy month. Because the
cost of insurance depends upon a number of variables, the cost
varies for each policy month. The cost of insurance is
determined by multiplying the applicable cost of insurance rate
by the net amount at risk each policy month.
Optional Rider Benefit Charges: This monthly deduction includes
------------------------------
charges for any additional benefits provided by rider.
In addition to the above policy charges, a daily charge against the
operations of each Division is made for the mortality and expense
risks assumed by Security Equity. The mortality and expense risk
charge assessed against each Division will never exceed an annual
effective rate of .50% of the policy's Separate Account value
attributable to that Division. Currently, the amount of this
charge is an annual effective rate of .35% of the Separate Account
value, which is equivalent to .000957233% of the Separate Account
value attributable to the Division on a daily basis. The
mortality risk assumed by Security Equity under the contract is
that insureds may, on average, live for shorter periods of time
than estimated. The expense risk assumed by Security Equity under
the contract is the risk that the cost of issuing and
administering the contract may be more than estimated.
(4) Purchases and Sales of Shares
-----------------------------
During the period ended December 31, 1996, purchases and proceeds from
the sales pertaining to the Separate Account were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
General American Money Market Fund $ 16,055,033 9,427,292
Wells Fargo Bank Asset Allocation Fund 9,287 545
Fidelity Growth Fund 6,026,650 2,657,607
Fidelity Investment Grade Fund 4,617,226 964,149
Fidelity Index 500 Fund 3,420,037 996,124
Evergreen VA Fund 3,434,893 34,167
Evergreen Foundation Fund 1,740,138 17,279
Evergreen Growth and Income Fund 3,434,170 36,201
========== =========
</TABLE>
There were no purchases or sales for the Fidelity Asset Manager Fund,
Bankers Trust Emerging Market Fund, Bankers Trust Liquid Asset
Fund, Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
(Continued)
<PAGE> 111
4
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(5) Unit Activity
-------------
For the year ended December 31, 1996, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund 8,266,085 13,774,894 (8,722,645) 13,318,334
Wells Fargo Bank
Asset Allocation
Fund 3,253 5,521 157 8,931
Fidelity Growth Fund 2,774 1,081,685 1,128,281 2,212,740
Fidelity Investment Grade Fund - 1,607,694 1,516,544 3,124,238
Fidelity Index 500 Fund - 653,667 908,293 1,561,960
Evergreen VA Fund - 1,569,119 1,658,426 3,227,545
Evergreen Foundation Fund - 755,933 829,278 1,585,211
Evergreen Growth and Income
Fund - 1,565,607 1,658,435 3,224,042
========= ========== ========== ==========
</TABLE>
For the period September 1, 1995 (inception) to December 31, 1995,
transactions in accumulation units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund - 8,273,816 (7,731) 8,266,085
Wells Fargo Bank
Asset Allocation
Fund - - 3,253 3,253
Fidelity Growth Fund - - 2,774 2,774
========== ========= ====== =========
</TABLE>
There have been no accumulation of units for the Fidelity Asset Manager
Fund, Bankers Trust Emerging Market Fund, Bankers Trust Liquid
Asset Fund, Bankers Trust Limited Maturity Bond Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
<PAGE> 112
Schedule
--------
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Schedule of Investments
December 31, 1996
<CAPTION>
Number of Market
shares value
------ -----
<S> <C> <C>
General American Money Market Fund 869,269 $ 14,988,772
Wells Fargo Bank Asset Allocation Fund 1,094 12,498
Fidelity Growth Fund 115,038 3,582,291
Fidelity Investment Grade Fund 304,130 3,722,557
Fidelity Index 500 Fund 29,717 2,648,716
Evergreen VA Fund 313,488 3,576,902
Evergreen Foundation Fund 160,392 1,814,032
Evergreen Growth and Income Fund 305,794 3,617,537
======= ==========
</TABLE>
There were no investments in the Fidelity Asset Manager Fund, Bankers
Trust Emerging Market Fund, Bankers Trust Liquid Asset Fund,
Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund.
<PAGE> 113
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company:
We have audited the accompanying balance sheets of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the related statements
of operations, stockholder's equity, and cash flows for each of the years in
the three-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 4, 1997
<PAGE> 114
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1996 and 1995
<CAPTION>
================================================================================================
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Bonds, at fair value $ 58,058,439 63,256,127
Policy loans 5,081,949 4,524,903
Cash and cash equivalents 5,534,380 1,977,082
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 68,674,768 69,758,112
Reinsurance benefits recoverable:
Future policy benefits 6,436,700 7,221,329
Policy and contract claims 2,048,247 1,704,918
Accrued investment income 1,230,483 1,279,216
Goodwill 1,349,013 1,428,369
Deferred policy acquisition costs 3,658,233 1,471,754
Value of business acquired 2,461,000 2,441,000
Deferred tax asset 3,403,349 2,251,570
Other assets 877,289 1,250,035
Separate account assets 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total assets $206,764,516 150,079,515
================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------------------------------------
Reserve for future policy benefits 54,516,590 55,520,856
Policy and contract claims 1,494,338 2,176,837
Other policyholders' funds 21,723 25,064
Advance premiums 1,861,279 1,057,064
Other liabilities and accrued expenses 6,622,653 2,290,147
Payable to affiliates 75,510 51,785
Separate account liabilities 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total liabilities 181,217,527 122,394,965
- ------------------------------------------------------------------------------------------------
Commitments and contingencies (note 10)
Stockholder's equity:
Common stock, par value $25; 100,000 shares authorized,
issued, and outstanding 2,500,000 2,500,000
Additional paid-in capital 27,447,892 27,447,892
Net unrealized gain on investments, net of taxes 59,112 1,990,132
Retained deficit (4,460,015) (4,253,474)
- ------------------------------------------------------------------------------------------------
Total stockholder's equity 25,546,989 27,684,550
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $206,764,516 150,079,515
================================================================================================
See accompanying notes to financial statements.
</TABLE>
1
<PAGE> 115
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Operations
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
===============================================================================================
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Premiums and contract charges $ 7,434,043 6,379,803 9,025,429
Net investment income 4,546,544 4,699,713 4,095,545
Other income 19,053 272 843,891
Realized investment gains (losses) 313,185 (179,830) (515,975)
- -----------------------------------------------------------------------------------------------
Total revenues 12,312,825 10,899,958 13,448,890
- -----------------------------------------------------------------------------------------------
Benefits and expenses:
Policy benefits 3,309,410 3,234,062 2,539,611
Policy surrenders, net 1,635,498 1,016,535 1,786,502
Change in reserve for future policy benefits (1,893,195) (2,791,166) 1,296,603
Interest credited 2,437,432 2,391,220 2,349,814
Commissions, net of capitalized costs 1,403,608 1,283,902 3,930,807
General and administrative expenses 4,795,193 4,966,525 5,531,872
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired, net (20,000) (28,000) (50,000)
Other expenses 849,064 619,517 1,131,898
- -----------------------------------------------------------------------------------------------
Total benefits and expenses 12,596,366 10,771,951 18,596,461
- -----------------------------------------------------------------------------------------------
Income (loss) from operations before
federal income tax expense (benefit) (283,541) 128,007 (5,147,571)
- -----------------------------------------------------------------------------------------------
Federal income tax expense (benefit):
Current 15,000 -- --
Deferred (92,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Total Federal income tax expense
(benefit) (77,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (206,541) 63,721 (4,317,195)
===============================================================================================
See accompanying notes to financial statements.
</TABLE>
2
<PAGE> 116
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
Net
unrealized
Additional gain (loss) on Total
Common paid-in investments, Retained stockholder's
stock capital net of taxes deficit equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $2,500,000 17,447,892 -- -- 19,947,892
Net loss -- -- -- (4,317,195) (4,317,195)
Contribution of capital from Parent -- 10,000,000 -- -- 10,000,000
Change in net unrealized gain
(loss) on investments -- -- (4,061,215) -- (4,061,215)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 2,500,000 27,447,892 (4,061,215) (4,317,195) 21,569,482
Net income -- -- -- 63,721 63,721
Change in net unrealized gain
(loss) on investments -- -- 6,051,347 -- 6,051,347
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 2,500,000 27,447,892 1,990,132 (4,253,474) 27,684,550
Net loss -- -- -- (206,541) (206,541)
Change in net unrealized gain
(loss) on investments -- -- (1,931,020) -- (1,931,020)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $2,500,000 27,447,892 59,112 (4,460,015) 25,546,989
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 117
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (206,541) 63,721 (4,317,195)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Change in:
Reinsurance benefits ceded 441,300 3,844,903 (1,354,981)
Accrued investment income 48,733 (36,253) (279,331)
Other assets 372,746 (824,660) (164,367)
Deferred policy acquisition costs, net (2,186,479) (1,471,754) --
Policy liabilities (1,004,266) (1,345,723) 2,392,502
Policy and contract claims (682,499) (2,880,980) 2,268,697
Other policyholders' funds (3,341) 2,425 534
Federal income tax payable 15,000 -- --
Advance premiums 804,215 393,064 664,000
Other liabilities and accrued expenses 4,317,506 190,733 1,295,393
Payable to affiliates 23,725 (17,141) (224,158)
Accretion of bond premiums, net 189,350 221,543 536,812
Deferred tax expense (benefit) (92,000) 64,286 (830,376)
Net (gain) loss on sale of investments (313,185) 179,830 515,975
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired (20,000) (28,000) (50,000)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,783,660 (1,564,650) 532,859
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investments (12,790,361) (17,056,300) (26,813,376)
Sale or maturity of investments 15,141,063 19,355,372 16,780,012
Increase in policy loans, net (557,046) (893,507) (747,167)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 1,793,656 1,405,565 (10,780,531)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Contribution of capital from Parent -- -- 10,000,000
Policyholder account balances:
Deposits on interest-sensitive life contracts 48,448,968 18,382,186 35,046,849
Transfers to separate account for
interest-sensitive life contracts, net (48,468,986) (27,178,119) (26,250,945)
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (20,018) (8,795,933) 18,795,904
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 3,557,298 (8,955,018) 8,548,232
Cash and cash equivalents at beginning of year 1,977,082 10,932,100 2,383,868
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,534,380 1,977,082 10,932,100
=========================================================================================================================
Supplemental disclosure of cash flow information -
taxes paid $ -- 20,000 --
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
4
<PAGE> 118
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1996 and 1995
=============================================================================
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Equity Life Insurance Company (SELIC or the Company) is a
wholly owned subsidiary of General American Life Insurance Company
(General American or the Parent). On December 31, 1993, Security
Mutual Life Insurance Company of New York (Security Mutual) sold
100% of the Company's stock to General American, as approved by
the State of New York Department of Insurance.
In 1986, the Company commenced direct writing of universal life
and term business, and in 1987 began marketing a single premium
whole life policy. In 1984, the Company began assuming single
premium deferred annuity (SPDA) and other insurance business
through reinsurance agreements with Security Mutual. The SPDA and
ordinary life insurance blocks of business were recaptured by
Security Mutual in 1992.
SELIC is licensed in 40 states and the District of Columbia.
Insurance operations have generally been limited to the sale of
individual life insurance products (term and universal life) made
through the general agency system, including career agents and
brokers.
With the sale of SELIC by Security Mutual to General American,
SELIC's activities have been redirected to serving the insurance
needs of publicly held corporations and New York state residents.
Additionally, SELIC focuses on accessing numerous and alternative
distribution channels in addition to a general agency system.
SELIC markets Corporate Owned Life Insurance (COLI) primarily
through specially designed variable products.
The acquisition of Security Equity by General American was
accounted for as a purchase transaction and, accordingly, the
purchase price was allocated to the assets and liabilities
acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. These allocations have
been reflected, or "pushed down," in the financial statements of
the Company. The total purchase price of $19,947,892 was
allocated among the fair value of tangible net assets of
$15,997,813, value of business acquired of $2,363,000, and
goodwill of $1,587,079 at the date of acquisition.
The accompanying financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of
financial statements requires the use of estimates by management
which affect the amounts reflected in the financial statements.
Actual results could differ from those estimates.
The significant accounting policies of the Company are as follows:
(a) RECOGNITION OF POLICY REVENUE AND RELATED EXPENSES
Policy revenue recognition varies depending upon the type of
insurance product. For traditional life products with fixed and
guaranteed premiums and benefits, such as whole life and term
insurance policies, premiums are recognized when due. Benefits
and other expenses
5 (Continued)
<PAGE> 119
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
of these products are associated with earned premiums and other
sources of earnings so as to result in recognition of profits
over the life of the contracts. This association is
accomplished by means of the provision for liabilities for
future benefits and the deferral and amortization of policy
acquisition costs. Premiums collected on universal life-type
policies are reported as deposits to the policyholder account
balance and not as income to SELIC. Income to SELIC on these
policies consists of the assessments for mortality costs,
surrenders, and expenses.
(b) Investment Securities
At December 31, 1996 and 1995, all long-term securities are
carried at market value with the unrealized gain (loss), net of
tax impact, being reflected as a separate component of
stockholder's equity as the Company considers all long-term
securities as available-for-sale. Short-term investments are
carried at cost which approximates market value. Policy loans
are valued at aggregate unpaid balances. The fair value of
policy loans is assumed to equal the carrying value because the
loans have no fixed maturity date and, therefore, it is not
practicable to determine a fair value.
Realized gains or losses on the sale of securities are
determined on the basis of specific identification and include
the impact of any related amortization of premium or accretion
of discount which is generally computed consistent with the
interest method.
(c) Value of Business Acquired
Value of business acquired (VOBA) represents the present value
of future profits resulting from the acquisition of insurance
policies in a purchase transaction. VOBA is amortized in
proportion to the estimated premiums or gross profits,
depending on the type of contract, with accretion of interest
on the unamortized discounted balance. In 1996, 1995 and 1994,
amortization of VOBA was $121,000, $112,000 and $89,000, and
the accretion of interest on the unamortized balance was
$140,000 and $139,000, respectively. The carrying value of
VOBA is periodically evaluated to ascertain recoverability from
future operations. Impairment would be recognized in current
operations when determined.
(d) Goodwill
Goodwill, representing the excess of purchase price over the
fair value of assets acquired, is amortized on a straight-line
basis over 20 years. The carrying value of goodwill is
periodically evaluated to ascertain recoverability from future
operations. Impairment would be recognized in current
operations when determined.
(e) Reserve for Future Policy Benefits
Liabilities for future benefits on life policies are
established in amounts adequate to meet the estimated future
obligations on policies in force. Liabilities for future
policy benefits on certain life insurance policies are computed
using the net level premium method and are based upon
assumptions as to future investment yield, mortality, and
withdrawals. Mortality and
6 (Continued)
<PAGE> 120
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
withdrawal assumptions for all policies have been based on
various actuarial tables which are consistent with the
Company's own experience. Liabilities for future benefits on
certain long-duration life insurance contracts are carried at
accumulated policyholder values.
(f) Federal Income Taxes
The Company is taxed as a life insurance company under the
Deficit Reduction Act of 1984. The Company establishes
deferred taxes under the asset and liability method of SFAS
No.109, Accounting for Income Taxes, and deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
those temporary differences are expected to be recovered or
settled. Under SFAS No.109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company filed its federal income tax return on a
consolidated basis with Security Mutual prior to 1994. The
Company will file its federal income tax return as a separate
entity for 1996, consistent with 1995 and 1994.
(g) Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on a
basis consistent with terms of the risk transfer reinsurance
contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable
reinsurance ceded for future policy benefits and claim
liabilities have been reported as assets for these items, and
commissions and expense allowances received in connection with
reinsurance ceded have been accounted for in income as earned
over the anticipated reinsurance contract life. Reinsurance
does not relieve the Company from its primary responsibility to
meet claim obligations.
(h) Deferred Policy Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable
from future premiums. Such costs may include commissions, as
well as certain costs of policy issuance and underwriting. In
1996 and 1995, the Company deferred $2.4 million and $1.5
million, respectively, in acquisition costs related to interest
sensitive products and recognized amortization of $168,000 and
$12,000, respectively, based on the estimated gross profits of
the underlying business. The Company did not defer any policy
acquisition costs in 1994 as a result of the nature of the
business written.
(i) Separate Account Business
The assets and liabilities of the separate account represent
segregated funds administered and invested by the Company for
purposes of funding variable life insurance contracts for the
7 (Continued)
<PAGE> 121
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
exclusive benefit of variable life insurance contract holders.
The Company receives administrative fees from the separate
account and retains varying amounts of withdrawal charges to
cover expenses in the event of early withdrawals by contract
holders. The assets and liabilities of the separate account
are carried at market value.
(j) FAIR MARKET DISCLOSURES
Fair value disclosures are required under SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. Such
fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instrument. These estimates do not reflect any
result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Although fair
value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates
should be used with care. The following assumptions were used
to estimate the fair market value of each class of financial
instrument for which it was practicable to estimate fair value:
Invested assets - Fixed maturities are valued using quoted
---------------
market prices, if available. If quoted market prices are not
available, fair value is estimated using quoted market prices
of similar securities. The carrying value of policy loans
approximates fair value.
Policyholder account balances - The fair value of policyholder
-----------------------------
account balances is equal to the discounted estimated future
cash flows using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts
with maturities consistent with those remaining for the
contracts being valued. The carrying value approximates fair
value at December 31, 1996 and 1995.
Cash and short-term investments - The carrying amount is a
-------------------------------
reasonable estimate of fair value.
(k) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial
paper, and repurchase agreements with original or remaining
maturities of 90 days or less when purchased.
(l) Reclassification
Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1995 presentation.
8 (Continued)
<PAGE> 122
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(2) INVESTMENTS
The sources of net investment income (principally interest) follow:
<TABLE>
<CAPTION>
================================================================================================
1996 1995 1994
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $4,291,428 4,458,159 3,840,763
Short-term investments 75,110 43,781 133,755
Policy loans and other 260,276 294,298 216,942
------------------------------------------------------------------------------------------------
4,626,814 4,796,238 4,191,460
Investment expenses 80,270 96,525 95,915
------------------------------------------------------------------------------------------------
Net investment income $4,546,544 4,699,713 4,095,545
================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 and 1995 are shown below. Market value is based upon market
prices obtained from independent pricing services which approximate
fair value.
<TABLE>
<CAPTION>
=========================================================================================================
1996
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 3,962,315 127,349 6,292 4,083,372
Corporate securities 40,917,820 1,299,830 902,482 41,315,168
Mortgage-backed securities 13,087,363 29,539 457,003 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 1,456,970 1,366,029 58,058,439
=========================================================================================================
</TABLE>
9 (Continued)
<PAGE> 123
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 9,299,846 287,844 273,583 9,314,107
Corporate securities 40,799,139 3,013,425 388,584 43,423,980
Mortgage-backed securities 10,095,402 432,140 9,502 10,518,040
---------------------------------------------------------------------------------------------------------
$60,194,387 3,733,409 671,669 63,256,127
=========================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
=========================================================================================================
Estimated
Amortized market
cost value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,257,740 1,255,992
Due after one year through five years 2,404,896 2,384,096
Due after five years through ten years 6,160,517 5,951,583
Due after ten years 35,056,982 35,806,869
Mortgage-backed securities 13,087,363 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 58,058,439
=========================================================================================================
</TABLE>
Proceeds from the sale, call, and maturity of investments in bonds
1996, 1995, and 1994 were $15,141,063, $19,355,372, and $16,780,012,
respectively. Gross gains of $381,856, $428,522, and $119,699 and gross
losses of $68,671, $608,352, and $635,674 were realized on those sales
in 1996, 1995, and 1994, respectively.
The Company has bonds on deposit with various state insurance
departments with an amortized cost of approximately $2,411,000 and
$2,421,000 at December 31, 1996 and 1995, respectively.
(3) REINSURANCE
The Company reinsures certain risks with other insurance companies as
the Company sets a maximum retention amount (currently $125,000)
to help reduce the loss on any single policy.
10 (Continued)
<PAGE> 124
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with affiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Reinsurance premiums ceded $1,632,262 1,956,568 2,391,067
Policy benefits ceded 1,397,188 305,947 2,340,522
Commissions and expenses ceded -- -- 169,453
- ----------------------------------------------------------------------------------------------------
</TABLE>
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with nonaffiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with nonaffiliates:
Reinsurance premiums ceded $5,744,060 5,489,407 6,299,344
Policy benefits ceded 3,824,327 2,682,132 3,050,824
Commissions and expenses ceded -- -- 674,438
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Company remains contingently liable with respect to any
reinsurance ceded and would become actually liable if the assuming
company was unable to meet its obligations under the reinsurance
treaty.
(4) FEDERAL INCOME TAXES
A reconciliation of the Company's "expected" federal income tax
expense (benefit), computed by applying the federal U.S. corporate
tax rate of 35% to income (loss) from operations before federal
income tax expense (benefit), is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $(99) 45 (1,802)
Amortization of intangibles, net 21 18 10
Other, net 1 1 962
- ----------------------------------------------------------------------------------------------------
Federal income tax expense (benefit) $(77) 64 (830)
====================================================================================================
</TABLE>
11 (Continued)
<PAGE> 125
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
================================================================================
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
December 31, 1996 and 1995 are presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
===========================================================================================
1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy acquisition costs $1,746 1,157
Reserves 1,694 2,072
Capital loss carryforward 148 243
Net operating loss carryforward -- 323
Other, net 685 410
-------------------------------------------------------------------------------------------
Total gross deferred tax assets 4,273 4,205
Less valuation allowance -- --
-------------------------------------------------------------------------------------------
Net deferred tax assets 4,273 4,205
-------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 80 1,097
Other, net 790 856
-------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 870 1,953
-------------------------------------------------------------------------------------------
Net deferred tax asset $3,403 2,252
===========================================================================================
</TABLE>
On December 31, 1993, General American purchased 100% of the Company.
Pursuant to the acquisition, the election was made under Internal
Revenue Code Section 338(h)(10) to treat the purchase of stock as a
purchase of assets for tax purposes. As a result, a revaluation of
the tax bases of the Company's assets and liabilities was made in
connection with the acquisition.
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. In
assessing the realization of deferred tax assets, the Company considers
whether it is more likely than not that the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Although the
Company has a limited history of earnings, its Parent does have a long
history of earnings. Pursuant to Internal Revenue Service regulations,
the Company cannot file a consolidated tax return with its Parent until
five years following the acquisition. However, after five years, the
Company will be able to file a consolidated tax return with its Parent,
and realization of the gross tax asset will not be dependent solely on
the Company's ability to generate its own taxable income. General
American has a proven history of earnings and it appears more likely
than not that the Company's gross deferred tax asset will
ultimately be fully realized.
The Company filed its federal income tax return on a consolidated basis
with Security Mutual prior to 1994. In connection with the Company's
transfer of stock ownership, Security Mutual agreed to assume all
unpaid tax liability incurred prior to the date of sale.
12 (Continued)
<PAGE> 126
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(5) RELATED-PARTY TRANSACTIONS
The Company purchases certain administrative services from
General American. Charges for services performed are based upon
personnel and other costs involved in providing such services.
The expenses incurred for these services were $529,000, $463,200,
and $407,000 for 1996, 1995, and 1994, respectively.
Effective January 1, 1994, the Company entered into an
administrative service agreement with Security Mutual. Under the
agreement, Security Mutual provides for the administration of
policies issued through December 31, 1993. The expenses incurred
for these services were $1,621,268, $1,842,320, and $1,980,812 for
1996, 1995, and 1994, respectively.
(6) PENSION, INCENTIVE, AND HEALTH AND LIFE INSURANCE BENEFIT PLANS
Associates of SELIC participate in a noncontributory multi-employer
defined benefit pension plan jointly sponsored by SELIC and
General American. The benefit is accrued are based on the number
of years of service and compensation level of each participant.
No pension expense was recognized in 1996, 1995, or 1994 due to
overfunding of the plan.
In addition, in 1995 SELIC adopted an associate bonus plan applicable
to full-time exempt associates. Bonuses are based on an economic
value-added model prepared annually by the Company. Total bonuses
accrued to Company employees were $144,000 and $59,500 in 1996 and
1995, respectively. In 1994, the Company accrued bonuses of
$150,000 under a nonrelated associate bonus plan.
SELIC provides for certain health care and life insurance benefits
for retired employees in accordance with SFAS No. 106, Employer's
Accounting for Postretirement Benefits Other Than Pensions. SFAS
No. 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services.
SFAS No. 106 allows recognition of the cumulative effect of the
liability in the year of the adoption or the amortization of the
transition obligation over a period of up to 20 years. The
Company has elected to recognize the initial postretirement
benfit obligation of approximately $16,427 over a period of 20
years. The unrecognized initial postretirement benefit obligation
was approximately $13,962 and $14,784 at December 31, 1996 and
1995, respectively. The net periodic post-retirement benefit cost
for the years ended December 31, 1996, 1995, and 1994 was $8,490,
$6,711, and $6,232, respectively. This includes expected costs of
benefits for newly eligible or vested employees, interest costs,
gains and losses from differences between actuarial and actual
experience, and amortization of the initial postretirement benefit
obligation. The accumulated post-retirement benefit obligation
was approximately $28,981 and $17,089 at December 31, 1996 and
1995, respectively. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% for all
years. The health care cost trend rates were 9% for the Indemnity
Plan, 8% for the HMO Plan, and 9% for the Dental Plan. These
rates were graded to 5.25% over the next 14 years. A one
percentage point increase in the assumed health care cost trend
rates would increase the December 31, 1996 accumulated
postretirement obligation by 12.9%, and the estimated service cost
and interest cost components of the net periodic postretirement
benefit cost for 1996 by 16.0%.
13 (Continued)
<PAGE> 127
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(7) STATUTORY FINANCIAL INFORMATION
The Company is subject to financial statement filing requirements of
the State of New York Department of Insurance, its state of
domicile, as well as the states in which it transacts business.
Such financial statements, generally referred to as statutory
financial statements, are prepared on a basis of accounting which
varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include:
(1)charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed
using required valuation standards which may vary in methodology
utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting
and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield
stabilization on fixed maturity dispositions prior to maturity
with asset valuation reserves based on statutorily determined
formulae and interest stabilization reserves designed to level
yields over their original purchase maturities; (5) deferred
premiums provided for statutory mean reserves; (6) annuity
contract deposits represent funds deposited by policyholders and
are included in premiums or contract charges; (7) non-recognition
of certain assets as nonadmitted through a direct charge to
surplus; and (8) valuation of investments in bonds at amortized
cost..
The stockholder's equity (surplus) and net loss of the Company at
December 31, 1996, 1995, and 1994, as determined using statutory
accounting practices, is summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================================
1996 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surplus as reported to regulatory authorities $12,441,081 15,125,968 17,264,148
Net loss as reported to regulatory authorities (2,778,942) (1,465,539) (3,779,205)
=========================================================================================================
</TABLE>
(8) DIVIDEND RESTRICTIONS
Dividend payments by the Company are restricted by state insurance
laws as to the amount that may be paid as well as the prior notice
and approval of the State of New York Department of Insurance.
The Company did not pay a dividend in 1996, 1995, or 1994.
(9) RISK-BASED CAPITAL
The insurance departments of various states, including the Company's
domiciliary state of New York, impose risk-based capital (RBC)
requirements on insurance enterprises. The RBC calculation serves
as a benchmark for the regulation of life insurance companies by
state insurance regulators. The requirements apply various
weighted factors to financial balances or activity levels based on
their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory authorities is required based on the ratio
of a company's actual total adjusted capital (sum of capital and
surplus and asset valuation reserve) to control levels determined
by the RBC formula. At December 31, 1996, the Company's actual
total adjusted capital was in excess of minimum levels which would
require action by the Company or regulatory authorities under the
RBC formula.
14 (Continued)
<PAGE> 128
SECURITY EQUITY INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(10) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under noncancellable
leases which expire in August 1998. The future minimum lease
obligations under the terms of the leases are summarized as
follows:
<TABLE>
<CAPTION>
========================================================================================
<S> <C>
Year ended December 31:
1997 $ 84,600
1998 58,600
----------------------------------------------------------------------------------------
$143,200
========================================================================================
</TABLE>
Rent expense totaled approximately $82,700, $83,900, and $50,700
in 1996, 1995, and 1994, respectively.
(11) SUBSEQUENT EVENT
Subsequent to December 31, 1996, a policyholder of the Company
utilized the "free-look" option of their variable life contract
which resulted in the return of approximately $13 million in
contract deposits to the policyholder and the nonrealization of
approximately $1.6 million in commissions and related expenses by
the Company. The impact to the Company's net income and financial
position is not significant. Management is maintaining continuing
discussions with this policyholder to provide an opportunity to
retain this business in 1997.
15
<PAGE> 129
PROSPECTUS
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY SECURITY EQUITY LIFE INSURANCE COMPANY
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
PROSPECTUS DATED MAY 1, 1997
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE
SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
<PAGE> 130
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE, SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
This Prospectus describes the Individual Flexible Premium Variable Life
Insurance Contract (the "Contract") offered by Security Equity Life Insurance
Company ("SELIC" or the "Company"). The Contract is designed to provide
lifetime insurance protection to age 100 and at the same time provide maximum
flexibility to vary premium payments and change the level of death benefits
payable under the Contract. This flexibility allows a Contract Holder to
provide for changing insurance needs under a single insurance Contract. A
Contract Holder also has the opportunity to allocate Net Premiums among
several investment portfolios with different investment objectives.
The Contract provides for: (1) a Net Cash Value that can be obtained by
surrendering the Contract; (2) Contract loans; and (3) a Death Benefit
payable at the Insured's death. Contract Holders may also attach a rider
that amends the Contract to instead provide insurance coverage on the lives
of two Insureds, with proceeds payable upon the death of the last surviving
Insured. As long as a Contract remains in force, the Death Benefit will not
be less than the current Face Amount of the Contract. A Contract will remain
in force so long as its Net Cash Value is sufficient to pay certain monthly
charges imposed in connection with the Contract.
During the "Free Look" period, Net Premiums are allocated to the Money Market
Division as specified in Appendix A. After the end of the "Free Look"
period, Net Premiums may be allocated to one or more of the Available
Divisions of the Separate Account or to the Fixed Fund. If Net Premiums are
allocated to the Separate Account, the duration of the Contract and the
amount of the Insurance Account Value will vary to reflect the investment
performance of the Available Divisions selected by the Contract Holder, and
depending on the Death Benefit option elected, the amount of the Death
Benefit above the minimum may also vary with that investment performance. The
Contract Holder bears the entire investment risk for all amounts allocated to
the Separate Account; there is no minimum guaranteed Insurance Account Value.
Each Available Division of the Separate Account 13 will invest in one of the
Underlying Portfolios shown in Appendix A. The accompanying Prospectuses for
these portfolios describe the investment objectives and policies, and the
risks of the portfolios. This
<PAGE> 131
Prospectus generally describes only the portion of the Contracts involving the
Available Divisions of the Separate Account. For a brief summary of the Fixed
Fund, see "The Fixed Fund".
It may not be advantageous to purchase a Contract as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another Flexible Premium Variable
Life Insurance Contract. Within certain limits, a Contract Holder may return
the Contract, or convert it to a Contract that provides benefits that do not
vary with the investment results of Available Divisions by exercising the
Conversion Right.
This Prospectus must be accompanied or preceded by the current prospectuses
for the Underlying Portfolios listed in Appendix A.
THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK OR DEPOSITORY INSTITUTION, AND THE CONTRACT IS NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY, AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Contracts are not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
Please read this Prospectus carefully and retain it for future reference.
The date of this Prospectus is May 1, 1997
- 2 -
<PAGE> 132
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
Definitions 6
Summary of Contract 10
Explanation of a Case 10
Purpose of the Contract 11
The Contract Holder and Beneficiary 11
Availability of the Contract 12
Joint Insureds 12
Contract Values 12
The Separate Account 13
Death Benefit 13
Premiums 13
Charges and Deductions 14
Contract Loans 15
Surrender and Partial Withdrawals 16
Termination 16
Illustrations 16
Replacement of Existing Coverage 16
Tax Considerations 16
Free Look and Conversion Rights 17
Information About SELIC 17
The Separate Account 18
The Contract 19
Availability of Insurance Coverage 20
Evidence of Insurability 21
Premiums 21
Contract Values 23
Transfers 26
Contract Loan Privilege 27
Surrender and Partial Withdrawals 30
Death Benefits Under the Contract 31
Charges and Deductions 36
Premium Load 37
Daily Charges 39
Monthly Charges 39
- 3 -
<PAGE> 133
<S> <C>
Underwriting Charges 42
Annual Charges 43
Other Charges 43
Termination 44
Maturity Date 44
Termination for Insufficient Net Cash Value 44
Reinstatement of a Contract Terminated for Insufficient Value 45
The Fixed Fund 45
General Description 45
Allocation of Amounts to the Fixed Fund 46
Fixed Fund Benefits 46
Fixed Fund Insurance Account Value 46
Fixed Fund Transfers, Surrenders, Partial Withdrawals and Contract Loans 48
Federal Income Tax Considerations 48
Additional Provisions of the Contract 55
Addition, Deletion, or Substitution of Investments 55
Incontestability 56
Conversion Rights 56
Misstatement of Age or Sex 57
Suicide 57
Availability of Funds 57
Entire Contract 58
Representations in Application 58
Contract Application and Contract Schedules 58
Right to Amend Contract 58
Computation of Contract Values 59
Claims of Creditors 59
Notice 59
Assignments 59
Construction 59
Severability 60
State Variations 60
Unisex Requirements Under Montana Law 60
Records and Reports 60
Sale of the Contract 61
- 4 -
<PAGE> 134
<S> <C>
Voting Rights 61
State Regulation of the Company 62
Management of the Company 63-65
Legal Matters 66
Legal Proceedings 66
Experts 66
Additional Information 66
Financial Statements 66
Appendix A - Underlying Portfolios A1
Appendix B - Contract Riders B1-B7
Appendix C - Illustrations of Death Benefits and Insurance Account Value C1-C11
</TABLE>
- 5 -
<PAGE> 135
DEFINITIONS
See Appendix B for modifications to Definitions in the event that riders are
added to the Contract.
ATTAINED AGE: The Insured's Issue Age under the Contract plus the number of
completed Contract Years.
APPLICATION: The application form that must be completed by any purchaser of
the Contract, before the Contract can be issued.
AVAILABLE DIVISION: A Division of the Separate Account to which Net Premiums
may be allocated or Separate Account Value or Fixed Fund Insurance Account
Value may be transferred under the Contracts. Each Available Division
invests exclusively in the shares of a corresponding Underlying Portfolio
listed in Appendix A.
BENEFICIARY: The person(s), entity or entities named on SELIC's records to
receive the insurance proceeds payable under the Contract after the Insured
dies.
BORROWED FUND: An account established in SELIC's General Account for any
amounts transferred from the Available Divisions and the Fixed Fund and held
as collateral for Contract Loans. (See "Contract Loan Privilege").
CASE: A grouping of one or more Contracts connected by a non-arbitrary
factor, presented to SELIC as a group. (An example of such a factor is a
common employer for the Insureds under each Contract in the grouping). (See
"Explanation of a Case").
CONTRACT: The Flexible Premium Variable Life Insurance Contract offered by
SELIC that is described in this Prospectus.
CONTRACT ANNIVERSARY: An anniversary of the Contract Date. It marks the
start of a new Contract Year.
CONTRACT DATE: The date used to begin calculating Monthly Charges and Annual
Charges under the Contract. It will be shown in the Contract.
CONTRACT HOLDER: The owner of the Contract, as shown in the records of
SELIC. All of the rights and benefits of the Contract belong to the Contract
Holder, unless otherwise stated in the Contract.
- 6 -
<PAGE> 136
CONTRACT LOAN: An amount borrowed by the Contract Holder from the Insurance
Account Value of the Contract.
CONTRACT MONTH: Each one month period commencing on the Contract Date and on
each Monthiversary thereafter.
CONTRACT YEAR: Each successive twelve month period starting on the Contract
Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit payable to the Beneficiary when the Insured dies.
DEATH BENEFIT OPTION ACCUMULATION RATE: The rate at which Premiums are
accumulated for purposes of calculating Death Benefit Option 3.
DIVISION: A sub-account of the Separate Account. Only Available Divisions
(described in this Prospectus) are available for investment under the
Contracts.
EMPLOYER: A corporation, partnership, sole proprietorship, association,
trust, and other similar or related entity. Affiliated Employers are
considered one Employer.
EXCESS PREMIUM: Any amount of Premium paid in a Contract Year over and above
the Target Premium.
FACE AMOUNT: The amount of insurance under the contract, excluding any
Supplemental Term Insurance Amount. The Initial Face Amount on the Issue
Date is shown in the Contract. Thereafter, it may change in accordance with
the terms of the Contract.
FIXED FUND: The portion of the Insurance Account Value allocated to the
Company's General Account (excluding the Borrowed Fund).
GOVERNING JURISDICTION: The state or jurisdiction in which the Contract is
delivered and whose laws govern its terms. The Governing Jurisdiction is set
forth in the Contract.
HOME OFFICE: The principal administrative office of SELIC, which is located
at 84 Business Park Drive, Suite 303, Armonk, NY 10504.
INITIAL NET PREMIUM: The Initial Premium paid under the Contract less the
applicable Premium Load.
- 7 -
<PAGE> 137
INITIAL PREMIUM: The first Premium paid under the Contract.
INSURANCE ACCOUNT VALUE: The total amount that a Contract provides for
investment at any time. It is equal to the total of the amounts credited to
the Contract Holder in the Separate Account, the Fixed Fund, and the Borrowed
Fund.
INSURED: The person whose life is insured under the terms of the Contract.
The Insured is shown in the Contract.
ISSUE AGE: The Insured's age at his/her nearest birthday as of the Contract
Date.
ISSUE DATE: The day the Initial Premium is received and accepted by SELIC.
This is also the date that insurance coverage becomes effective. All
Contract values based on the Separate Account are determined beginning on the
Issue Date. The Issue Date is shown in the Contract.
MATURITY DATE: The date on which the Contract will mature. The Maturity
Date is shown in the Contract.
MAXIMUM LOAN AMOUNT: The maximum amount of Insurance Account Value that can
be borrowed by the Contract Holder under the Contract.
MINIMUM INSURANCE COVERAGE: The minimum amount of Total Insurance Coverage,
which includes any Supplemental Term Insurance Amount, under the Contract.
It is currently $25,000.
MINIMUM PREMIUM: The Minimum Premium is equal to the Minimum Net Premium
plus any applicable Premium Load.
MINIMUM NET PREMIUM: The Minimum Net Premium at any time is equal to 12
times the Monthly Charges for the first month in the then current Contract
Year.
MONTHIVERSARY: The first day of each Contract Month. It is the day as of
which Monthly Charges are deducted from the Insurance Account Value. The
Monthiversary and the Contract Date coincide, except in months in which the
Monthiversary falls on a day which is not a Valuation Day. In such months,
the Valuation Day is deemed to fall on the next Valuation Day. If any
Monthiversary would fall on the 29th, 30th, or 31st of a month that does not
have that number of days, then the Monthiversary is deemed to be the last day
of that month.
- 8 -
<PAGE> 138
MONTHLY CHARGES: The Contract charges that are deducted monthly from
Insurance Account Value. Monthly Charges include the Administration Charge,
the Cost of Insurance Charge, any Monthly Charges for benefits provided by
Contract rider, and any charges for special insurance class rating. (See
"Charges and Deductions").
NET AMOUNT AT RISK: The Net Amount at Risk is calculated on any
Monthiversary by subtracting the Insurance Account Value from the Death
Benefit, discounted one month at a 4.00% assumed annual effective interest
rate.
NET CASH VALUE: The Contract's Insurance Account Value minus any Contract
Loan balance and interest accrued thereon and unpaid.
NET PREMIUM: The amount of a Premium less applicable Premium Load.
PLANNED RENEWAL PREMIUM: An amount of Premium, specified in the
Application, which the Contract Holder anticipates will be paid in each
Contract Year after the first.
PREMIUM: Premiums are the payments made to SELIC under the Contract by the
Contract Holder to purchase insurance on the life of the Insured and to
contribute to the Insurance Account Value of the Contract. Each Premium
amount may consist of Target Premium, Excess Premium, or both.
PREMIUM LOAD: An amount deducted from each Premium prior to allocation of
the Premium to the Separate Account and/or the Fixed Fund. Premium Load
includes the Distribution Charge (comprised of a Premium Expense Load and a
Commission Charge), a Premium Tax Charge and a DAC Tax Charge.
SELIC: Security Equity Life Insurance Company, the issuer of the Contract.
SEPARATE ACCOUNT: A separate investment account established by the Board of
Directors of SELIC to support the benefits payable under the Contract. Each
Available Division of the Separate Account invests in a single corresponding
Underlying Portfolio.
SEPARATE ACCOUNT VALUE: The portion of the Contract's Insurance Account
Value invested in the Separate Account. It will be equal to the Contract's
Insurance Account Value, less the total of amounts in the Borrowed Fund and
in the Fixed Fund.
SUPPLEMENTAL TERM INSURANCE AMOUNT: The amount of insurance provided by the
Supplemental Term Insurance Rider, if any. This amount is shown in the
Contract. The Supplemental Term Insurance Rider is described in Appendix B.
- 9 -
<PAGE> 139
TARGET PREMIUM: An amount of Premium used to determine Premium Loads under
the Contract. The annual Target Premium is based upon the Face Amount and is
shown in the Contract. For Contracts with a Face Amount equal to the Minimum
Face Amount, the Target Premium will be zero (0).
TOTAL INSURANCE COVERAGE: Total amount of insurance, including coverage
provided by any Supplemental Term Insurance Rider under the Contract.
UNDERLYING PORTFOLIO: An investment portfolio, managed by one or more
investment managers, the shares or units of which comprise the investment of
an Available Division of the Separate Account.
VALUATION DAY: A day that is a regular business day of SELIC and that the
New York Stock Exchange (or its successor) is open for trading. Each
Valuation Day ends at the Valuation Time.
VALUATION TIME: The close of trading on the New York Stock Exchange (or any
successor exchange), which is generally 4 p.m. Eastern Time.
VALUATION PERIOD: The period of time between Valuation Days. A Valuation
Period begins immediately after the Valuation Time on the previous Valuation
Day and ends as of the Valuation Time on the next succeeding Valuation Day.
SUMMARY OF THE CONTRACT
This summary provides a brief overview of the more significant aspects of the
Contract and should be read in conjunction with the detailed information
appearing elsewhere in this Prospectus. Further detail is provided in the
Contract, the Application, and the prospectuses for the Underlying
Portfolios. See Appendix B for modifications to this section in the event
that riders are added to the Contract.
EXPLANATION OF A CASE
Every Contract issued by SELIC will be part of a Case. A Case is a grouping
of one or more Contracts linked together by a non-arbitrary factor such as a
common Employer of each Insured under the Contracts. SELIC in its sole
discretion will determine what constitutes a Case. A Case may have one
Contract Holder (i.e., a single entity owns all the Contracts in the Case) or
----
as many Contract Holders as there are Contracts in the Case. The Premium
Load, Minimum Initial Premiums, and underwriting standards for an
- 10 -
<PAGE> 140
individual Contract are determined based on the characteristics of the Case to
which the Contract belongs. (See "Charges and Deductions").
A Contract is the agreement between SELIC and the Contract Holder to provide
benefits on the life of an Insured. Every Contract will belong to a Case.
Each Contract will be treated as an individual Contract, yet will also be
linked to the Case it belongs for purposes of determining certain Contract
features and charges.
PURPOSE OF THE CONTRACT
The Contract offers a means to obtain insurance protection relating to the
life of a person in whom the Contract Holder has an insurable interest. A
Death Benefit is payable to the applicable Beneficiary upon the death of the
Insured so long as the Contract remains in force. The accumulated values and
benefits under the Contract may be used by Contract Holders for any valid
purpose. Unlike traditional life insurance, which provides a guaranteed
Insurance Account Value, a Contract's Insurance Account Value will vary to
reflect investment results of the Available Divisions and interest credited
to the Fixed Fund.
Life insurance is not a short-term investment. Prospective Contract Holders
should evaluate the need for insurance and the Contract's long-term investment
potential and risks before purchasing a Contract.
The Contract is a long-term investment designed to provide a Death Benefit,
and should only be purchased for purposes consistent with these features.
The Death Benefit and Net Cash Value under Contracts in a Case may be used to
provide proceeds for various planning purposes. However, the Contracts are
not liquid investments: partial withdrawals may be currently taxable; and
Contract Loans and partial withdrawals may significantly affect current and
future Death Benefit proceeds and Net Cash Value, and cause Contracts to
lapse. (See "Termination -- Termination for Insufficient Net Cash Value"). In
addition, if the performance of the Available Divisions to which Insurance
Account Value is allocated is not sufficient to provide proceeds for the
specific planning purpose contemplated, or if insufficient premiums are paid
or Contract values maintained, then Contracts may not achieve the purpose for
which they were purchased, or may lapse. (See "Termination -- Termination for
Insufficient Net Cash Value"). Because the Contracts are designed to provide
benefits on a long-term basis, before purchasing Contracts for a specialized
purpose, a purchaser should consider whether the long-term nature of the
Contract, and the potential impact of any contemplated Contract Loans and
partial withdrawals, are consistent with the purpose for which the Contracts
are being considered. Using the Contracts for a specialized purpose may have
tax consequences. (See generally "Federal Income Tax Considerations," and in
particular, "Other Tax Consequences").
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THE CONTRACT HOLDER AND BENEFICIARY
The Contract Holder is the individual or entity set forth in the Application,
unless subsequently changed on the records of SELIC. The Contract Holder
retains all rights and responsibilities of ownership pertaining to its
interest in the Contract, including but not limited to, investment
allocation, payment of Premiums, borrowing, taking partial withdrawals, and
surrendering the Contract.
The Beneficiary is also named in the Application. The Contract Holder has
the right to change a revocable Beneficiary with prior written notice to
SELIC. The Beneficiary will receive all insurance benefits payable upon the
death of the Insured. UNLESS THE INSURED IS NAMED AS CONTRACT HOLDER, OR THE
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CONTRACT HOLDER ASSIGNS THE RIGHT TO DESIGNATE THE BENEFICIARY TO THE
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INSURED, OR UNLESS OTHERWISE AGREED, THE INSURED HAS NO DIRECT OR INDIRECT
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INTEREST IN THE CONTRACT.
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AVAILABILITY OF THE CONTRACT
The Contract is offered only to individuals, corporations, partnerships, sole
proprietorships, associations, trusts, and other similar or related entities,
which satisfy certain suitability standards. The Contract may be purchased
to acquire insurance on the life of a person in whom the Contract Holder has
an appropriate insurable interest. Failure to establish an insurable interest
may result in adverse financial and tax consequences to the Contract Holder.
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JOINT INSUREDS
A rider may be added to the Contract to provide coverage on the lives of two
Insureds, with the Death Benefit payable on the death of the last surviving
Insured. Most of the discussions in this Prospectus referencing a single
Insured may also be read as though the single Insured were the two Insureds
under a joint Contract. Certain discussions in the Prospectus are modified
if a Joint and Last Survivor Rider is added to the Contract. (See Appendix B
- -- "Joint and Last Survivor Rider").
CONTRACT VALUES
Net Premiums are allocated to one or more Available Divisions and/or the
Fixed Fund. To the extent Net Premiums are allocated to the Available
Divisions, the Insurance Account Value will, and the Death Benefit may, vary
with the investment performance of the chosen Available Divisions. To the
extent Net Premiums are allocated to the Fixed Fund, the Insurance Account
Value will accrue interest at a guaranteed minimum rate (see "The Fixed
Fund"). To the extent that Net Premiums are allocated to the Available
Divisions of the Separate Account, the Contract Holder bears the entire
investment risk associated with the investments of the selected Available
Divisions, and there is no guaranteed minimum Insurance Account Value.
THE SEPARATE ACCOUNT
Several Divisions of the Separate Account are available for allocation of Net
Premiums paid under the Contract, subject to certain limitations set forth in
the Contract. (See "The Contract -- Premiums"). A list of the Available
Divisions -- a Division of the Separate Account currently available under the
Contract for allocation of Net Premiums and transfers -- is set forth in
Appendix A of this Prospectus. Each Available Division of the Separate
Account invests its assets in shares or units of an Underlying Portfolio
managed by one or more investment managers. Each Underlying Portfolio has a
different investment objective, and is described more fully in the prospectus
for the Underlying Portfolio which accompanies this Prospectus.
In the future, Available Divisions may be added, and existing Available
Divisions may be deleted. The Contract Holder will be notified in writing of
any such change. (See "The Separate Account").
DEATH BENEFIT
Death Benefit proceeds are payable to the named Beneficiary when the Insured
under the Contract dies. The Death Benefit payable under the Contract will
depend upon the Death Benefit Option in effect for the Contract. So long as
the Contract remains in force, the
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minimum death benefit under each Death Benefit Option will be at least equal to
the current Face Amount of the Contract. (See "The Contract -- Death Benefits
Under the Contract").
PREMIUMS
A Contract Holder will have considerable flexibility under a Contract as to
both the timing and amount of Premiums. SELIC will not issue a Contract
unless it receives a Premium payment at least equal to the initial Minimum
Premium amount, which is equal to 12 times the Monthly Charges due under that
Contract in the first Contract Month, plus any applicable Premium Load. SELIC
may, in its sole discretion, require a reduced initial Minimum Premium in
connection with the purchase of certain Contracts. Each subsequent Premium
must be at least $50 per Contract. Subsequent Premiums may be paid at any
time and in any frequency, subject to certain restrictions. (See "The
Contract -- Premiums"). If the Initial Premium and subsequent Premiums prove
to be too low, insurance coverage under the Contract may cease.
The initial Net Premium will be allocated during the Free Look period to the
Money Market Division specified in Appendix A. After the Free Look period,
Separate Account Value will be allocated among the Available Divisions of the
Separate Account and the Fixed Fund according to the Contract Holder's
instructions as specified in the Application or as subsequently changed prior
to the end of the Free Look period.
Insurance Account Value may be transferred among the Available Divisions of
the Separate Account and the Fixed Fund by written request, subject to
certain restrictions. Amounts may be transferred by dollar amounts or by
percentages. (See "The Contract -- Transfers").
CHARGES AND DEDUCTIONS
Certain charges are deducted from Premiums and from Insurance Account Value
under the Contract. For a more detailed discussion of the charges deducted
under the Contract, see "Charges and Deductions." For additional information
regarding the investment advisory fees and operating expenses of the Underlying
Portfolios, see the accompanying prospectuses for these portfolios.
A Premium Load is deducted from the Initial Premium and from each subsequent
Premium paid, prior to allocation to the Separate Account or the Fixed Fund.
The Premium Load includes a Distribution Charge (which consists of a Premium
Expense Load and a Commission Charge), a Premium Tax Charge (which will be
made for any applicable state premium taxes), and the DAC Tax Charge.
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The Distribution Charge is equal to a maximum of 30% of Premiums paid during
the first Contract Year up to one Target Premium (and 2% of first year
Premiums thereafter), and declines as a percentage of Premiums paid in
Contract Years 2-10 (to a maximum of 10% of Premiums paid during each
Contract Year up to a Target Premium; and 2% of Premiums thereafter);
Contract Years 11-15 (to a maximum of 8% of Premiums paid during each
Contract Year up to a Target Premium and 2% of Premiums thereafter), and
Contract Years 16 and thereafter (a maximum of 4% of Premiums paid during
each Contract Year up to a Target Premium and 2% of Premiums thereafter).
The Premium Tax Charge reflects the state premium taxes imposed under the
Contract. The DAC Tax Charge is equal to 1% of all Premiums paid in all
Contract Years.
A Daily Charge for mortality and expense risks assumed by SELIC under the
Contract is calculated and deducted daily as a percentage of the Insurance
Account Value attributable to each Division of the Separate Account.
Currently, this Daily Charge is equal to 0.35% on an annual basis; it is
guaranteed not to exceed 0.50% on an annual basis.
Monthly Charges are deducted directly from the Insurance Account Value as of
the Contract Date and on each Monthiversary thereafter. Monthly Charges
include an Administration Charge of $4.50 per month (guaranteed not to exceed
$8.00 per month) and a charge for the cost of insurance provided under the
Contract. Monthly Charges also include any charges for additional benefits
provided by Contract rider and charges for a special class rating, if
applicable.
SELIC will deduct an Underwriting Charge, not to exceed $100, on the Issue
Date for Contracts issued on a medically underwritten basis, and on any
Monthiversary following any medical underwriting in connection with certain
Contract changes. This charge changes if a Joint and Last Survivor Rider is
added to the Contract. See Appendix B. SELIC may reduce or waive the
Underwriting Charge under certain circumstances.
On each Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest due
and unpaid for the previous Contract Year; and (ii) increased by the interest
credited to the Borrowed Fund during the previous Contract Year. The net
result is that if Contract Loan interest is not paid when due, then on the
Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year, and the
interest credited to the Borrowed Fund during the previous Contract Year.
No charges are currently made to the Separate Account for federal, state or
local taxes that SELIC incurs which may be attributable to the Separate
Account. However, SELIC
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may impose such a charge in the future to provide for any tax liability of the
Separate Account.
Investment advisory fees and operating expenses of each Underlying Portfolio
are paid by such portfolio, and are reflected in the Separate Account Value
of a Contract.
At the Contract Holder's request, SELIC will provide an illustrative report
in addition to the reports it customarily provides. Depending upon the type
and complexity of the requested report, SELIC may charge a reasonable fee not
to exceed $50.
CONTRACT LOANS
The Contract Holder may obtain a Contract Loan under the Contract on any
Monthiversary. There is a maximum amount that may be borrowed, and interest
will be charged for any amount borrowed in accordance with the Contract Loan
interest rate option selected by the Contract Holder in the Application or as
subsequently changed. (See "Contract Loan Privilege").
Contract Loans are deducted from the amount payable on surrender of the
Contract and are also deducted from any Death Benefit proceeds. Contract
Loan interest accrues daily, and if it is not repaid each year, it is
capitalized and added to the Contract Loan. Depending upon the investment
performance of the Available Divisions and the amounts borrowed, Contract
Loans may cause a Contract to lapse. If the Contract lapses with a Contract
Loan outstanding, adverse tax consequences may result. A Contract Loan may
also have other Federal income tax consequences. (See "Federal Income Tax
Considerations").
SURRENDER AND PARTIAL WITHDRAWALS
While the Insured is alive, the Contract may be surrendered at any time for
its Net Cash Value upon written request to SELIC's Home Office. To the extent
that the Insurance Account Value is allocated to the Available Divisions of
the Separate Account, SELIC does not guarantee any minimum Net Cash Value.
Partial withdrawals of Net Cash Value are permitted, subject to certain
restrictions. (See "The Contract -- Surrender and Partial Withdrawals").
A surrender or partial withdrawal may have Federal income tax consequences.
(See "Federal Income Tax Considerations").
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TERMINATION
The Contract does not automatically terminate for failure to pay subsequent
Premiums. However, the Contract may terminate prior to its Maturity Date if
there is insufficient Net Cash Value to pay Monthly Charges. (See
"Termination").
ILLUSTRATIONS
Illustrations in this prospectus or used in connection with the purchase of a
Contract are based on hypothetical rates of return. These rates are not
guaranteed. They are illustrative only, and should not be deemed to be a
representation of past or potential investment performance. Actual rates of
return may be more or less than those in the illustrations and, therefore,
actual values will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, a prospective Contract Holder should consider
whether changing, or adding to, current insurance coverage would be
advantageous. Generally, it is not advisable to purchase another insurance
contract as a replacement for existing coverage. In particular, replacement
should be carefully considered if the decision to replace the coverage is
based solely on a comparison of contract illustrations.
TAX CONSIDERATIONS
SELIC intends for the Contract to satisfy the definition of life insurance
contract under section 7702 of the Internal Revenue Code. Under certain
circumstances, a Contract may be a "modified endowment contract" under
federal tax law, depending upon the amount of payments made in relation to
the death benefit provided under the Contract. SELIC will monitor Contracts
and will attempt to notify a Contract Holder on a timely basis if his or her
Contract is in jeopardy of becoming a modified endowment contract. The
status under the Internal Revenue Code of Contracts issued with a
Supplemental Term Insurance Rider, or a Joint and Last Survivor Rider, is
less clear. For further discussion of the tax status of a Contract and the
tax consequences of being treated as a life insurance contract or a modified
endowment contract, see "Federal Income Tax Considerations."
FREE LOOK AND CONVERSION RIGHTS
In most states, the Contract may be canceled at any time within 10 days after
it is received by the Contract Holder, 10 days after SELIC mails or personally
delivers the Notice of Withdrawal Right to the Contract Holder, or within 45
days after the date of the Application, whichever is later. The Contract must
be returned to SELIC at its Home
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Office along with written notice of cancellation. If the Contract is canceled,
it will be as though the Contract had never been issued. A refund will be paid
if the Contract is canceled. The refund will equal any Premium(s) paid, minus
any partial withdrawals taken and any Contract Loans together with accrued but
unpaid Contract Loan interest.
Once issued and as long as the Contract is in force, a Contract Holder may
during the first 24 months, transfer all of the Insurance Account Value out
of the Separate Account and into the Fixed Fund, and receive fixed and
guaranteed benefits under the Contract. Once this right is exercised no
transfers out of the Fixed Fund will be allowed and all Net Premiums paid
after the election will be allocated to the Fixed Fund. (See "Additional
Provisions of The Contract -- Conversion Rights").
INFORMATION ABOUT SELIC
SELIC is a stock life insurance company domiciled in New York. It is a
wholly-owned subsidiary of General American Life Insurance Company ("General
American"), a life insurance company domiciled in Missouri.
SELIC was established in 1983 as a wholly-owned subsidiary of Security Mutual
Life Insurance Company of New York. It was purchased by General American on
December 31, 1993.
General American commenced operations in 1933 as a stock company and was
converted to a mutual company in a process that ended in 1946. General
American is principally engaged in issuing individual and group life and
health insurance contracts and annuity products. It is admitted to do
business in 49 states, the District of Columbia, and 10 Canadian provinces.
The principal offices of General American are located in St. Louis, Missouri.
SELIC is admitted to sell life insurance and annuities in 40 states and the
District of Columbia. SELIC concentrates on sales of corporate owned life
insurance products in all of these jurisdictions and sales of individual
products to residents of New York.
THE SEPARATE ACCOUNT
Security Equity Life Insurance Company Separate Account 13 (the "Separate
Account") was established by SELIC as a Separate Investment Account on
December 30,1994. The Separate Account will receive and invest the Net
Premiums paid under this Contract and allocated to it. In addition, the
Separate Account may receive and invest Net Premiums
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for other flexible premium variable life insurance contracts that might be
issued by SELIC.
The Separate Account is currently divided into a number of Divisions. Not all
Divisions are available for allocation of Net Premiums and transfers under
the Contract. Each Available Division invests exclusively in shares of an
Underlying Portfolio listed in Appendix A. Both realized and unrealized gains
or losses and income from the assets of each Division of the Separate Account
are credited to or charged against that Division without regard to income,
gains, or losses from any other Division of the Separate Account or from any
other business SELIC may conduct.
Obligations to Contract Holders and Beneficiaries that arise under the
Contract are obligations of SELIC. SELIC owns the assets of the Separate
Account. Those assets will only be used to support variable life insurance
contracts and for any other purposes permitted by applicable laws and
regulations. The portion of the assets of the Separate Account equal to the
reserves and other contract liabilities with respect to the Separate Account
will not be charged with liabilities that arise from any other business SELIC
may conduct. SELIC may, however, transfer from the Separate Account to its
General Account assets that exceed the reserves and other contract
liabilities in respect of the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Separate Account meets
the definition of a "separate account" under the federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices of the Separate Account, the Contracts, or SELIC by the
Commission.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES OF ANY UNDERLYING PORTFOLIO
WILL BE ACHIEVED.
Detailed information concerning the investment objectives, techniques and
restrictions pertaining to each Underlying Portfolio, and the expenses,
investment advisory services, and risks attendant to allocating Insurance
Account Value to each Underlying Portfolio, can be found in the current
prospectus with respect to each Underlying Portfolio, which accompanies this
Prospectus, and the current Statement of Additional Information for each
Underlying Portfolio. Such information has been prepared by the Underlying
Portfolio or the investment company of which it is a part, and SELIC is not
responsible for preparing this information. The Underlying Portfolio
prospectuses should be read carefully before any decision is made concerning
the allocation of Premium payments or transfers among the Available Divisions.
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Not all of the investment portfolios described in the accompanying
prospectuses are necessarily available under the Contract. Moreover, SELIC
cannot guarantee that each Underlying Portfolio will always be available for
the Contract. In the unlikely event that an Underlying Portfolio becomes
unavailable, SELIC will attempt to secure the availability of a comparable
Underlying Portfolio. Shares and units of each Underlying Portfolio are
purchased and redeemed at Net Asset Value, without a sales charge.
One or more of the Underlying Portfolios are available for investment by both
variable life insurance and variable annuity separate accounts. It is
conceivable that in the future it may be disadvantageous for both variable
life and variable annuity separate accounts to invest simultaneously in an
Underlying Portfolio that sells its shares to both types of separate
accounts. The Board of Directors or Trustees of such Underlying Portfolios,
the respective investment advisers of each Underlying Portfolio, and SELIC
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events of conflicts. Material conflicts
could arise from such things as changes in state insurance laws, changes in
federal income tax laws, changes in the investment management of an
Underlying Portfolio, or differences in the voting instructions given by
variable annuity contract owners and variable life insurance contract owners.
In the event of a material irreconcilable conflict, SELIC will take steps
necessary to protect our Contract Holders. This could include discontinuance
of investment in an Underlying Portfolio.
THE CONTRACT
The Contract is a flexible premium variable life insurance contract that
provides insurance on the life of an Insured. A Contract may be sold
together with other related Contracts forming a Case. See Appendix B for
modifications to this Section in the event that a Joint and Last Survivor
Rider and/or a Supplemental Term Insurance Rider is added to the Contract.
AVAILABILITY OF INSURANCE COVERAGE
To be eligible for insurance under the Contract, a prospective Insured must
on the Contract Date:
(1) be at least 20 years of age and no more than 85 years of age;
(2) have elected or consented to be an Insured (if required by SELIC or the
Governing Jurisdiction); and
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(3) have satisfied any necessary underwriting requirements of SELIC (see
"Charges and Deductions -- Monthly Charges -- Cost of Insurance
Charge").
A Contract can be issued if the Contract Holder:
(1) provides SELIC with the data it requires including, but not limited to,
the prospective Insured's name, address, social security number,
sex, date of birth, smoker/nonsmoker status, and citizenship
(SELIC may also require submission of related documents that have
been completed by the prospective Insured);
(2) requests Total Insurance Coverage at least equal to the Minimum
Insurance Coverage for an Insured;
(3) designates the Beneficiary under the Contract; and
(4) pays the initial Minimum Premium for the first Contract Year.
Insurance coverage generally begins on the Issue Date for the Contract.
Temporary life insurance coverage may be provided under the terms of a
temporary insurance agreement. In accordance with SELIC's underwriting rules,
temporary life insurance coverage may not exceed the greater of $100,000 or
two times the Premium paid, and may not be in effect for more than 90 days.
This temporary insurance coverage will be issued on a conditional receipt
basis, which means that any Death Benefit under such temporary coverage will
only be paid if the Insured meets SELIC's usual and customary underwriting
standards for the applied-for coverage under the Contract (see "Charges and
Deductions -- Monthly Charges -- Cost of Insurance Charge").
As provided for under state insurance law, a Contract Holder, to preserve
insurance age of the Insured, may be permitted to backdate the Contract. In
no case may the Contract Date be more than six months prior to the date that
the Application was completed. If any Contract in a Case is backdated, then
all Contracts in the Case must be backdated to the same date. Monthly
Charges for the backdated period will be deducted as of the Contract Date,
and each Monthiversary thereafter.
For modifications to this Section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider."
EVIDENCE OF INSURABILITY
SELIC may require medical evidence of insurability for any Contract that does
not meet SELIC's guaranteed issue or simplified issue standards when the
Contract is issued. (See "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge"). Medical
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evidence of insurability may also be required for any transaction that increases
the Net Amount at Risk for the Contract. Transactions that increase the Net
Amount at Risk may include but are not limited to: payment of subsequent
Premiums, change of Death Benefit Option, change of Face Amount, partial
withdrawals, and reinstatement of a Contract.
For modifications to this section for Joint Insureds, see Appendix B -- Last
Survivor Rider.
PREMIUMS
Premiums are the payments made to SELIC under the Contract to purchase
insurance on the life of the Insured and to contribute to the Insurance
Account Value of the Contract. All Premiums are payable to SELIC at its Home
Office. A Premium Load is deducted from any Premium received by SELIC prior
to its allocation to the Separate Account or to the Fixed Fund. The
resulting amount is the Net Premium. The applicable Premium Load percentage
depends upon the Case to which the Contract belongs, whether the Premium
consists of Target Premium or Excess Premium, and the Contract Year in which
the Premium is paid. (See "Charges and Deductions -- Premium Load).
Premiums may consist of Target Premium, Excess Premium or both. The Target
Premium depends upon the Insured's Issue Age, sex, underwriting class and
Face Amount. The Target Premium for the initial Face Amount is determined to
be the level annual premium payable to age 100 for a level death benefit that
under guaranteed cost of insurance rates and guaranteed policy expense
charges and a 4.00% net interest rate (after the M&E charge) the cash value
will accumulate to equal the initial Face Amount at age 100. The Target
Premium is determined on the Issue Date. It is not recalculated if there is
an increase in the Face Amount. It is recalculated if there is a decrease in
the Face Amount, but only if the new Face Amount is below the initial Face
Amount.
SELIC has the right to refund promptly any amount of Premium paid if
necessary to keep the Contract in compliance with state and federal laws,
including federal income tax laws. In particular, if a Contract Holder pays
Premium amounts during the first Contract Year significantly in excess of the
Planned Renewal Premium, SELIC reserves the right to refund promptly part or
all of such excess if applicable state insurance law restricts the amount of
commissions that would otherwise be payable to the writing agent in
connection with part or all of such Premium amounts.
SELIC will not issue the Contract unless it receives a Premium payment at
least equal to the initial Minimum Premium amount. The initial Minimum
Premium under the Contract is equal to twelve times the Monthly Charges due
under the Contract in the first Contract Month, plus any applicable Premium
Load. SELIC may, in its sole discretion, require a reduced initial Minimum
Premium in connection with the purchase of Contracts sold by
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licensed agents of SELIC that are also registered representatives of Walnut
Street Securities, Inc. ("Walnut Street"), the distributor of the Contracts, or
selected broker-dealers or through banks that have entered into written sales
agreements with Walnut Street.
After the Initial Premium has been received and accepted by SELIC, the
Contract Holder may pay subsequent Premiums on any Valuation Day provided
that each subsequent Premium is at least $50 per Contract. All payments
received by SELIC from the Contract Holder will be credited to the Contract
as Premiums, unless the Contract Holder specifies that such payments are
Contract Loan repayments. Subsequent Premiums may cause a Contract that was
not classified as a "modified endowment contract" to become classified as
such a contract. SELIC will take steps to monitor subsequent Premiums, and
will notify a Contract Holder if a subsequent Premium, or a portion thereof,
would cause a Contract to become a modified endowment contract. (See
"Federal Income Tax Considerations -- Modified Endowment Contracts").
ALLOCATION OF NET PREMIUMS: Generally, the initial Net Premium will be
credited to the Money Market Division of the Separate Account and the
Insurance Account Value will begin to vary with investment experience on the
Valuation Day next following receipt of the initial payment at the Home
Office. However, in situations where SELIC receives the initial payment with
the application and underwriting is required, then the payment will be held
on deposit in SELIC's General Account until underwriting is completed and the
Contract is issued (the Issue Date). Any Net Premiums received during the
Free Look period will be allocated to the Money Market Division. At the end
of such period, Separate Account Value will be allocated to or among any of
the Available Divisions and the Fixed Fund, in accordance with the Contract
Holder's allocation instructions set forth in the Application, or as
subsequently changed prior to the end of the Free Look period. No allocation
or transfer instructions received from the Contract Holder in the Application
or during the Free Look period will be acted upon until the Free Look period
has expired. The duration of the Free Look period depends upon the law of a
Contract's Governing Jurisdiction. The Free Look period under a Contract
will expire after the number of days provided for in the applicable Governing
Jurisdiction's Free Look period has elapsed following the date the Contract
is delivered to the Contract Holder, as evidenced by a signed delivery
receipt or certified mail return receipt, or if later, 10 days after SELIC
mails or personally delivers the Notice of Withdrawal Right to the Contract
Holder, or 45 days after the Application is signed. Transfer of money to the
Available Divisions and, or the Fixed Fund specified by the Contract Holder
will occur at the expiration of the Free Look period.
Net Premiums received after the Free Look period expires will be allocated
among the Available Divisions and the Fixed Fund in accordance with the
Contract Holder's instructions. Net Premiums that are received prior to the
Valuation Time on any
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Valuation Day will be allocated as of the date they are received. Net Premiums
received after such time will be allocated on the next Valuation Day.
The maximum number of Available Divisions to which the Contract's Separate
Account Value may be allocated at any one time is five; amounts can also be
allocated to the Fixed Fund. If no instructions accompany a Premium, the
resulting Net Premium will be allocated to the Available Divisions and the
Fixed Fund in the same proportions as stated in the most recently recorded
Premium allocation instructions SELIC received from the Contract Holder.
The allocation of subsequent Premiums may be changed at any time upon SELIC's
receipt of written notice from the Contract Holder.
PREMIUMS TO PREVENT LAPSE: If the Contract is in danger of lapsing because
the Net Cash Value is insufficient to pay the Monthly Charges for the
Contract on a Monthiversary, the amount of Premium that must be paid to
prevent lapse will be equal to three times the Monthly Charges then due plus
any applicable Premium Load. (See "Termination -- Termination for
Insufficient Cash Value"). SELIC will send a notice to a Contract Holder
when such Premiums are required to keep the Contract in force.
PREMIUMS TO REINSTATE A CONTRACT: When a Contract has lapsed due to
insufficient Net Cash Value, the amount of Premium that must be paid to
reinstate insurance coverage will be equal to the Monthly Charges due and
unpaid at the time of lapse, plus three times the Monthly Charges due at the
time of reinstatement, plus any applicable Premium Load. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient Value). When the
Contract has terminated, SELIC will send a notice specifying the Premiums
that are required to be paid to reinstate the Contract.
CONTRACT VALUES
The Insurance Account Value of the Contract is equal to the total amounts of
the Insurance Account Value in each Available Division of the Separate
Account, the Insurance Account Value in the Fixed Fund, and the Insurance
Account Value in the Borrowed Fund.
The Insurance Account Value allocated to each Available Division is measured
in "Accumulation Units." The value of an Accumulation Unit is determined as
of the Valuation Time on each Valuation Day. The value of any unit will vary
from Valuation Day to Valuation Day to reflect the investment performance of
the Available Division applicable to that Accumulation Unit.
- 24 -
<PAGE> 154
The value of an Accumulation Unit in each Available Division is arbitrarily
set at $1.00 on the first Valuation Day for that Available Division. The
value of any Accumulation Unit on any subsequent Valuation Day is equal to
its value on the preceding Valuation Day multiplied by that Available
Division's Net Investment Factor for the Valuation Period. The Net Investment
Factor for an Available Division for a Valuation Period equals the "gross
investment rate" for such period plus one and minus the Mortality and Expense
Risk Charge for that Valuation Period.
The "gross investment rate" of an Available Division for any Valuation Period
is equal to the net earnings of that Available Division during the Valuation
Period, divided by the value of the total assets of that Available Division
at the beginning of the Valuation Period. The net earnings of each Available
Division during a Valuation Period are equal to the accrued investment income
and capital gains and losses (realized and unrealized) of that Available
Division, reduced by any amount charged against that Available Division for
premium taxes or other governmental charges paid or reserved by SELIC during
that Valuation Period.
The "gross investment rate" and net earnings of each Available Division will
be determined by SELIC in accordance with generally accepted accounting
principles and applicable laws, rules and regulations.
Transactions which require the crediting and canceling of Accumulation Units
will be processed as of the Valuation Time on the Valuation Day in which the
transaction is effected. Premium payments, and requests for Contract Loans,
withdrawals, transfers, or any other transaction, received in proper form
before the Valuation Time on a Valuation Day will be effected as of the
Valuation Time on the day that the Premium payment, or transaction request,
is received. Premium payments, and transaction requests, received in proper
form after the Valuation Time on a Valuation Day, will be effected as of the
Valuation Time of the following Valuation Day.
The Insurance Account Value in the Money Market Division on the Issue Date is
equal to the Premium paid on that date, less any applicable Premium Load
less:
(1) Cost of Insurance Charges;
(2) Administration Charges;
(3) Any charges that are deducted from the Insurance Account Value for
benefits provided by Contract riders;
(4) Underwriting Charges, if any; and
- 25 -
<PAGE> 155
(5) Charges for Special Insurance Class Rating, if any.
The Insurance Account Value in each Available Division as of the Valuation
Time on any subsequent Valuation Day is equal to the Insurance Account Value
in that Available Division on the prior Valuation Day plus:
(1) Any new Net Premium allocated to that Available Division;
(2) Any amounts transferred to that Available Division from another
Available Division, the Fixed Fund or the Borrowed Fund; and
(3) Any increase in value of the Available Division's investments due to
investment results net of Daily Charges;
and less:
(1) Any amounts transferred from that Available Division to another
Available Division, the Fixed Fund or the Borrowed Fund;
(2) Any decrease in the value of the Available Division's investments due
to investment results net of Daily Charges;
(3) The Cost of Insurance Charges allocated to that Available Division
(deducted only on a Monthiversary);
(4) The Administration Charges allocated to that Available Division
(deducted only on a Monthiversary);
(5) Any partial withdrawals taken from such Contract and allocated to that
Available Division;
(6) Any charges allocated to that Available Division that are deducted from
the Insurance Account Value for benefits provided by Contract riders;
(7) Any Underwriting Charges allocated to that Available Division;
(8) Any charges for Special Insurance Class Rating allocated to that
Available Division (deducted only on a Monthiversary); and
(9) Any other charges allocated to that Available Division as stated in the
Contract.
- 26 -
<PAGE> 156
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
For description of the Insurance Account Value in the Fixed Fund and the
Borrowed Fund, see "The Contract -- The Fixed Fund" and "Contract Loan
Privilege."
TRANSFERS
The Contract provides that all or part of the Insurance Account Value (except
amounts in the Borrowed Fund) may be transferred between or among Available
Divisions and the Fixed Fund on any Valuation Day subject to the following
limitations:
(a) The Insurance Account Value cannot be allocated to more than five
Available Divisions and the Fixed Fund at any one time;
(b) Transfer requests must be in writing and in a form acceptable to SELIC;
(c) Except as described below, only one transfer is permitted in each
Contract Year;
(d) SELIC reserves the right to limit the amount of any transfer.
Transfers from or among the Available Divisions must be in amounts
of at least $500, or, if smaller, the Insurance Account Value in
an Available Division; and
(e) Transfers to the Fixed Fund may be limited. Insurance Account Value in
the Fixed Fund after any transfer to the Fixed Fund may be no
greater than the amount specified in the Contract. (See "The
Fixed Fund -- Allocation of Amounts to the Fixed Fund").
Transfers from the Fixed Fund are also subject to the following limitations:
(a) The transfer must be made in the 30 day period following a Contract
Anniversary; and
(b) The amount transferred may be no larger than 25% of the Insurance
Account Value in the Fixed Fund on the date of the transfer.
Transfers may be requested by dollar amount or whole percentage. SELIC will
execute a transfer only upon receipt of a properly executed transfer request.
Written confirmation of each transfer will be sent to the Contract Holder.
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<PAGE> 157
Notwithstanding the above limitations, which are set forth in the Contract,
SELIC will, as a matter of administrative practice, allow up to 12 transfers
per year between or among Available Divisions. Contract Holders will be
notified in advance if this administrative practice is changed or eliminated.
For purposes of calculating the number of transfers requested in any Contract
Year, all transfer requests received on the same Valuation Day will be
counted as one transfer request. Transfers effected in connection with
Contract Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers permitted in each Contract Year.
CONTRACT LOAN PRIVILEGE
The Contract Holder may request a loan against the Contract. The Contract
must be assigned to the Company as the sole security for the Contract Loan.
A Contract Loan may take place on any Valuation Day. An amount equal to the
amount borrowed will be transferred from the Separate Account and the Fixed
Fund to the Borrowed Fund. The Borrowed Fund is a portion of SELIC's General
Account reserved for amounts held as collateral for Contract Loans. A
Contract Loan from, or secured by, the Contract may have federal income tax
consequences. In particular, if the Contract is a "modified endowment
contract" loans may be currently taxable and subject to a 10% penalty tax.
(See "Federal Income Tax Considerations").
SOURCE OF CONTRACT LOAN: Insurance Account Value equal to each Contract Loan
will be transferred to the Borrowed Fund, reducing the Insurance Account
Value in the Separate Account and the Fixed Fund. Unless other specific
instructions are received from the Contract Holder, the Contract Loan will be
taken from the Available Divisions of the Separate Account and the Fixed Fund
in proportion to the amount of the Contract Holder's then current Insurance
Account Value in each Available Division of the Separate Account and Fixed
Fund.
The maximum total of Contract Loans for each Contract is equal to the
Insurance Account Value less the sum of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with interest accrued but
unpaid; and
(3) Contract Loan interest charges until the next Contract Anniversary.
If a Contract Loan is requested that would cause this maximum to be exceeded,
SELIC will not process the request.
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<PAGE> 158
CONTRACT LOAN INTEREST: Contract Loan interest accrues daily and is due on
each Contract Anniversary. If it is not paid when due, the Contract Loan
interest will be added to the Contract Loan and, as part of the Contract
Loan, will bear the same interest rate. Any Contract Loan interest
capitalized on a Contract Anniversary will be treated as if it was a new
Contract Loan and will be transferred from the Available Division of the
Separate Account and Fixed Fund in proportion to the Insurance Account Value
therein.
A fixed Contract Loan interest rate option or a variable Contract Loan
interest rate option may be elected. This option may be changed by the
Contract Holder on any Contract Anniversary. Written notice of the change
must be received at SELIC's Home Office no more than 90 days nor less than 30
days prior to such Contract Anniversary. The Contract Loan interest rate
options are as follows:
Fixed Contract Loan Interest Rate. If a Fixed Contract Loan Interest Rate
- ---------------------------------
option is selected and a Contract Loan is outstanding, a fixed Contract Loan
interest rate of 6.00% will be assessed annually in arrears and added to the
Contract Loan principal on the Contract Anniversary.
Variable Contract Loan Interest Rate. On each Contract Anniversary, SELIC
- ------------------------------------
will declare the Variable Contract Loan Interest Rate that will apply to
outstanding Contract Loans for the next Contract Year. This rate will equal
the higher of a) or b), where a) is the Monthly Average of the Composite
Yield on Corporate Bonds as published by Moody's Investor Service, Inc. (or,
if it is no longer published, a substantially similar average) for the
calendar month ending two months before the Contract Year begins, and b) is
4.50%. If the rate calculated according to this formula is not at least .50%
higher than the rate in effect for the previous year, SELIC will not increase
the rate. If the rate calculated is at least .50% lower than the rate in
effect for the previous year, SELIC will decrease the rate.
If the Variable Contract Loan Interest Rate option is selected, SELIC will
inform the Contract Holder of the current Variable Contract Loan Interest
Rate at the time a Contract Loan is made. The current Variable Contract Loan
Interest Rate can be changed by SELIC on any Contract Anniversary, but the
rate will never exceed the maximum Contract Loan interest rate permitted by
the law of the Governing Jurisdiction.
INTEREST ON BORROWED FUND: Interest will be credited to amounts held in the
Borrowed Fund as collateral for Contract Loans. This rate of interest
credited on the Borrowed Fund will be at least equal to an annual effective
rate of 4.00%.
For the Fixed Contract Loan Interest Rate option, the rate of interest
credited on the Borrowed Fund is currently set equal to 5.65%. If a Variable
Contract Loan Interest Rate option is chosen, SELIC currently anticipates
that the rate of interest credited on the
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<PAGE> 159
Borrowed Fund will equal the Variable Contract Loan Interest Rate less a "loan
interest spread" of .35%. This "loan interest spread" is guaranteed never to
exceed .50%. The Borrowed Fund crediting rate may not be changed more
frequently than annually. Any change in the Borrowed Fund crediting rate for
the Contract will be effective on a Contract Anniversary. The Contract Holder
will be notified in advance of any such change.
Interest credited to the Borrowed Fund will be transferred to the Available
Divisions of the Separate Account and Fixed Fund on each Contract
Anniversary. The amount so transferred will be allocated among the Available
Divisions of the Separate Accounts and Fixed Fund in proportion to the
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
If Contract Loan interest due for the previous Contract Year has not been
paid when due, then on the Contract Anniversary, the Insurance Account Value
attributable to the Separate Account and Fixed Fund will be reduced by the
difference between the Contract Loan interest due and unpaid for the previous
Contract Year, and the interest credited to the Borrowed Fund during the
previous Contract Year.
On any given day the Insurance Account Value in the Borrowed Fund will be
equal to the Insurance Account Value in the Borrowed Fund on the previous day
plus:
(1) Any new amounts transferred to the Borrowed Fund from the Separate
Account and Fixed Fund due to new Contract Loans and/or
capitalized Contract Loan Interest; and
(2) Any interest credited to the Borrowed Fund.
and less:
(1) Any amounts transferred from the Borrowed Fund to the Separate Account
and/or Fixed Fund due to Contract Loan repayments or the transfer of
interest credited to the Borrowed Fund on a Contract Anniversary.
REPAYMENT: All funds received by SELIC will be credited to the Contract as
Premiums unless clearly designated as a Contract Loan repayment by the
Contract Holder.
All or part of the Contract Loan plus accrued Contract Loan interest may be
repaid at any time while the Contract is in force.
Any repayment of a Contract Loan will result in the transfer of values equal
to the repayment out of the Borrowed Fund and the application of those values
to the Available
- 30 -
<PAGE> 160
Divisions of the Separate Account and Fixed Fund. Unless other specific
instructions are received from the Contract Holder, these values will be applied
to the Separate Account's Available Divisions and the Fixed Fund in proportion
to the amount of the Contract Holder's then current Insurance Account Value in
each Available Division of the Separate Account and Fixed Fund.
SURRENDER AND PARTIAL WITHDRAWALS
At any time during the lifetime of the Insured and while the Contract is in
force, the Contract may be surrendered for its Net Cash Value on any
Valuation Date. The Contract Holder must request a surrender in writing and
in a form acceptable to SELIC. On surrender, SELIC will pay to the Contract
Holder in a single sum the Contract's Net Cash Value as of the Valuation Day
during which a proper surrender request is received. A Contract's Net Cash
Value is the Insurance Account Value less any outstanding Contract Loan and
accrued and unpaid Contract Loan interest. If a proper surrender request is
received on a Monthiversary, then Monthly Charges will not be deducted on
that Monthiversary. A surrender may have Federal income tax consequences.
(See "Federal Income Tax Considerations"). Once the Contract is surrendered,
SELIC's obligations under the Contract will cease. (See "Termination").
The Contract Holder may also request partial withdrawals of Net Cash Value
from one or more Available Divisions and the Fixed Fund. The withdrawal must
be requested by the Contract Holder in writing on a form acceptable to SELIC.
Unless other specific instructions are received from the Contract Holder, the
withdrawal will be taken from each Available Division and the Fixed Fund in
proportion to the Contract Holder's then current Insurance Account Value in
each Available Division and the Fixed Fund. (See "The Fixed Fund").
Surrender and partial withdrawal proceeds will generally be paid to the
Contract Holder within seven days. (See "Additional Provisions of the
Contract -- Availability of Funds" and "The Fixed Fund").
The Contract Holder may withdraw any amount of at least $1,000 per withdrawal
and up to the Contract's maximum withdrawal amount. The maximum withdrawal
amount for the Contract is equal to the Insurance Account Value less the sum
of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with the unpaid accrued
Contract Loan interest on the Contract Loan amount; and
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<PAGE> 161
(3) Contract Loan interest on the Contract Loan amount until the next
Contract Anniversary.
Partial withdrawals may increase the Net Amount at Risk, resulting in higher
Cost of Insurance Charges under the Contract.
The Death Benefit and Face Amount may be adjusted at the time a partial
withdrawal is taken, based on the amount withdrawn, the Death Benefit Option
then in effect for the Contract, and the Insurance Account Value. If the
Face Amount is reduced, the reduction in Face Amount for Death Benefit Option
1 or Death Benefit Option 3 will be equal to the amount of the withdrawal.
The Total Insurance Coverage remaining after the partial withdrawal may not
be less than the Minimum Insurance Coverage. A partial withdrawal request
that would reduce the Total Insurance Coverage below this minimum will not be
effected. If the Face Amount reflects previous Face Amount increases at the
time of a partial withdrawal which causes a reduction in Face Amount, then
partial withdrawals will be applied first to reduce the Initial Face Amount,
and then to each Face Amount increase in order, starting with the first
increase.
A partial withdrawal that decreases the Face Amount of the Contract will
result in a recalculation of the Target Premium, and generally will decrease
the Target Premium for future Contract Years.
A partial withdrawal may have Federal income tax consequences. (See "Federal
Income Tax Considerations".)
Split Dollar Exception: Notwithstanding the above limitations, SELIC will,
as a matter of administrative practice, at the time of a split dollar
rollout, allow the owner of a Death Benefit Option 3 Contract, the option of
reducing the accumulated Premiums before reducing the Face Amount. If the
withdrawal is greater than the accumulated Premiums, a reduction in Face
Amount will occur for the amount in excess of the accumulated Premiums.
DEATH BENEFITS UNDER THE CONTRACT
If the Insured dies while the Contract is in force, a Death Benefit is
payable to the Beneficiary when SELIC receives due proof of death and any
other requirements are satisfied. The amount of the Death Benefit payable
depends on the Death Benefit Option selected for the Contract by the Contract
Holder and in effect on the date of death of the Insured, and is adjusted for
outstanding Contract Loans and unpaid charges. (See "Payment of Death
Benefits"). The amount of the Death Benefit will be determined at the end of
the Valuation Period during which the Insured's death occurred. The Death
Benefit will be paid to the surviving Beneficiary or Beneficiaries specified
in the
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<PAGE> 162
Application or as subsequently changed. The Death Benefit under each Death
Benefit Option will never be less than the Contract's Face Amount as long as the
Contract remains in force. For modifications to this Section for Joint
Insureds, see Appendix B -- "Joint and Last Survivor Rider."
DEATH BENEFIT OPTIONS: The Contract Holder may select one of the following
Death Benefit Options:
Option 1: The Face Amount in effect at the date of death;
Option 2: The Face Amount plus the Insurance Account Value in effect at the
date of death; or
Option 3: The Face Amount in effect at the date of death, plus the
accumulated Premiums paid under the Contract up to the date of
death. In calculating the Death Benefit under this option,
the Premiums are accumulated from the date such Premiums were
credited to the Insurance Account Value to the date of death,
at a rate equal to the Death Benefit Option Accumulation Rate
shown in the Contract. This rate, which is selected by the
Contract Holder and subject to approval by SELIC, may be as
low as 0%, and does not have a maximum cap. A higher Death
Benefit Option Accumulation Rate will result in higher Cost of
Insurance Charges under a Contract.
To ensure that the Contract will qualify as life insurance under the Internal
Revenue Code, the Total Insurance Coverage will never be less than the
Minimum Death Benefit. The Minimum Death Benefit is equal to the Insurance
Account Value on the date of death multiplied by the appropriate Minimum
Death Benefit Factor as set forth in the Contract. Currently SELIC
calculates the Minimum Death Benefit Factor in accordance with Section
7702(a)(1) of the Internal Revenue Code ("The Cash Value Accumulation Test").
In the future SELIC may offer Contracts that will use Minimum Death Benefit
Factors and Premium limitations calculated in accordance with Section
7702(a)(2) of the Internal Revenue Code ("The Guideline Premium Test"). Once
a Contract is issued complying with either "The Cash Value Accumulation Test"
or "The Guideline Premium Test" that test and the Minimum Death Benefit
Factors will be employed throughout the life of the Contract.
- 33 -
<PAGE> 163
A table of representative Minimum Death Benefit Factors follows:
<TABLE>
MINIMUM DEATH BENEFIT FACTORS
<CAPTION>
UNISEX
AGE UNISMOKE
--- --------
<S> <C>
25 5.79
30 4.93
35 4.18
40 3.55
45 3.03
50 2.60
55 2.25
60 1.97
65 1.74
70 1.56
</TABLE>
Under Death Benefit Option 1 and Death Benefit Option 3, positive investment
performance (if any) will be reflected in Insurance Account Value, but not in
the Death Benefit, unless the Death Benefit equals the Minimum Death Benefit.
Under Death Benefit Option 2, the amount of Death Benefit will always vary as
the Insurance Account Value varies, but will never be less than the Face
Amount. In general, if Death Benefit Option 2 is selected, positive
investment performance (if any) will be reflected in the Death Benefit.
Subject to certain limitations, the Contract Holder may change the Death
Benefit Option for the Contract while the Contract is in effect by notifying
SELIC in writing. If SELIC approves the change, it will take effect on the
next Contract Anniversary that is at least 30 days after all the required
information has been provided to SELIC. The Cost of Insurance Charges for
the Contract will be adjusted to provide for the change. No such change will
be effective if the Insured dies before the effective date of the change.
Changing the Contract's Death Benefit Option may result in either an increase
or decrease in the Face Amount. If the Face Amount increases, SELIC may
require satisfactory evidence of insurability. If the Face Amount decreases,
the order in which the Face Amount is reduced is assessed in the same manner
as a decrease in Face Amount (See "Face Amount"). Any change in the Death
Benefit Option will not be effected if it would result in Total Insurance
Coverage that is less than the Minimum Insurance Coverage of the Contract.
SELIC also reserves the right not to effect a requested change in Face
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<PAGE> 164
Amount if the change would result in the Contract not satisfying the
requirements of the Internal Revenue Code of 1986, as amended.
A change in the Death Benefit Option will not result in an immediate change
in the amount of a Contract's Death Benefit or Insurance Account Value. If a
Contract is changed from Death Benefit Option 1 to Death Benefit Option 2,
then the Face Amount will equal the Face Amount prior to the change less the
Insurance Account Value on the effective date of the change. If a Contract
is changed from Death Benefit Option 3 to Death Benefit Option 2, then the
Face Amount will equal the Face Amount prior to the change plus the
accumulated Premiums less the Insurance Account Value on the effective date
of the change. If a Contract is changed from Option 2 or Option 3 to Option
1, then the Face Amount will equal the Death Benefit on the effective date of
the change. SELIC may require satisfactory evidence of insurability if the
Contract is changed from Option 2 or Option 3 to Option 1. If a Contract is
changed from Option 1 to Option 3, then the Face Amount will equal the Face
Amount prior to the change less the accumulated Premiums on the effective
date of change. If a Contract is changed from Option 2 to Option 3, then the
Face Amount will equal the Death Benefit less the accumulated Premiums on the
effective date of the change.
A change in Death Benefit Option may affect monthly Cost of Insurance
Charges, because the amount of this charge varies with a Contract's Net
Amount at Risk. Assuming the Death Benefit is not equal to the Minimum Death
Benefit, changing from Option 2 or Option 3 to Option 1 will generally
decrease Net Amount at Risk, and therefore decrease Cost of Insurance
Charges, on Monthiversaries following the effective date of the change.
Changing from Option 1 or Option 3 to Option 2 will generally result in a Net
Amount at Risk that remains level; however, under Option 2, Cost of Insurance
Charges will increase over time, because cost of insurance rates generally
increase with the age of the Insured. Finally a change from Option 1 or
Option 2 to Option 3 will result in a Net Amount at Risk that will vary based
upon the frequency and amount of Premium payments, as well as the rate at
which the Premiums are accumulated. Under Option 3, more frequent and higher
premium payments as well as a higher Death Benefit Option Accumulation Rate
generally will result in a higher Net Amount at Risk, and therefore higher
Cost of Insurance Charges.
FACE AMOUNT: The Minimum Face Amount under a Contract is $10,000. The
minimum Total Insurance Coverage is $25,000. The Initial Face Amount and
Supplemental Term Insurance Amount will be set forth in the Application. The
Contract Holder may, subject to approval of SELIC, change the Face Amount.
The Contract Holder must request the change by notifying SELIC in writing,
and SELIC reserves the right to require satisfactory evidence of insurability,
which may include a medical examination. If SELIC approves the change, it will
take effect on the next Contract Anniversary which is at least 30 days after all
the required information has been provided to SELIC. A partial
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<PAGE> 165
withdrawal may also reduce the Face Amount under a Contract. (See "The Contract
- -- Surrender and Partial Withdrawals"). Decreases in Face Amount cannot reduce
the Total Insurance Coverage to less than the Minimum Insurance Coverage. No
such change will be effective if the Insured dies before the date of such
change. SELIC reserves the right not to effect a requested change in Face
Amount if the change would result in the Contract not satisfying the
requirements of the Internal Revenue Code of 1986, as amended. The Net Cash
Value immediately following the increase in Face Amount must be sufficient to
cover Monthly Charges to be deducted on the next Monthiversary. If Net Cash
Value will not be sufficient, an additional Premium will be necessary before the
increase in Face Amount will be effected.
If the Face Amount is decreased, and the Contract's Face Amount before the
change in Death Benefit Option reflects previous Face Amount increases, then
the Face Amount reduction will result first in the reduction of the Face
Amount provided by the most recent increase, then the next most recent
increase successively, and finally the Initial Face Amount.
A decrease in the Face Amount of the Contract will also result in a
recalculation of the Target Premium, and generally will decrease the Target
Premium for future Contract Years.
Additional insurance coverage may be available under one or more riders to
the Contract, including a Supplemental Term Insurance Rider. (See Appendix B
- -- "Supplemental Term Insurance Rider".) Under certain circumstances, SELIC
may offer Contracts through which insurance coverage is provided primarily
through the Supplemental Term Insurance Rider. Because insurance coverage
under such riders may be purchased through deductions from Available
Divisions and/or the Fixed Fund that are not taken into account in
determining Target Premium, there may not be additional Premium Load
associated with this coverage. There may be circumstances in which it will
be to the Contract Holder's economic advantage to include a significant
portion or percentage of coverage under the Supplemental Term Insurance
Rider. These circumstances depend on many factors, including the Premium
levels and amount and duration of coverage, as well as the age (and, where
applicable, sex, smoker status, and/or risk classification) of the Insured.
As discussed above, SELIC reserves the right to refund promptly certain
Premium amounts paid during the first Contract Year in excess of Planned
Renewal Premium amounts. (See "The Contract -- Premiums"). In such cases,
SELIC will generally agree to accept such Premium amounts provided that the
Contract Holder elects to convert a portion of the Face Amount, as determined
by SELIC, to coverage under a Supplemental Term Insurance Rider. Contract
Holders should contact their agent for additional information.
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<PAGE> 166
A change in Face Amount may have Federal income tax consequences. (See
"Federal Income Tax Considerations").
PAYMENT OF DEATH BENEFIT: The amount of any Death Benefit payable is
adjusted as follows:
(1) By deducting the amount of any unpaid Monthly Charges against the
Insurance Account Value to the date of death (See "Charges and
Deductions");
(2) By deducting the amount of any Contract Loans outstanding against the
Insurance Account Value on the date of death plus accrued but
unpaid interest on such Contract Loans on the date of death (See
"The Contract -- Contract Loan Privilege"); and
(3) By deducting the amount of any unpaid charges provided by rider.
The Death Benefit will usually be paid in a lump sum within seven days of the
date due proof of the Insured's death is received by SELIC at its Home Office
and any other requirements are satisfied. Payment of any amount of Death
Benefit based upon the Separate Account may be delayed, however, during any
period that:
(1) The New York Stock Exchange (or its successor) is closed, except for
normal weekend or holiday closings, or trading is restricted; or
(2) The SEC determines that a state of emergency exists.
Settlement of any amounts not based upon the Separate Account will be made
not more than six months after due proof of death is received. Interest on
Death Benefits will be credited as prescribed by law. Payment of a Death
Benefit may be deferred by a separate written agreement between SELIC and the
Contract Holder or Beneficiary, subject to SELIC's approval. In such cases,
the interest that will be credited will be at least 1.00% per annum.
BENEFICIARY: The Contract Holder may name or change the Beneficiary by
sending written notice to SELIC. A Beneficiary may be revocable or
irrevocable. An irrevocable Beneficiary may not be changed without his or
her consent, and consent is also required prior to the Contract Holder's
exercise of certain other rights. There may be different classes of
Beneficiaries, such as primary and secondary. These classes set the order of
payments. There may be more than one Beneficiary in a class. The
Beneficiary designation in effect on the Issue Date is stated in the Contract
Application and in any related documents which are attached to and made a
part of the Contract.
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<PAGE> 167
CHARGES AND DEDUCTIONS
Certain charges will be deducted by SELIC from Premiums and from Insurance
Account Value as compensation for providing the insurance benefits under the
Contract, for administering the Contract, for assuming certain risks, and for
incurring certain expenses in distributing the Contract. A prospective
purchaser may request personalized hypothetical illustrations of the
Contract's Insurance Account Value and Death Benefits. Such hypothetical
illustrations will reflect the effect of the charges and deductions under the
Contract and may assist a prospective purchaser in understanding the
operation of the Contract.
PREMIUM LOAD
Before crediting a Premium to the Available Divisions and/or the Fixed Fund,
a Premium Load, consisting of a Distribution Charge, a DAC Tax charge and a
Premium Tax Charge, is deducted from that Premium. Premium Load is expressed
as a percentage of Premium; the percentage depends upon whether the Premium
is Target Premium or Excess Premium, on the Contract Year during which the
Premium is paid, and on the Issue Age of the Insured.
DISTRIBUTION CHARGE: The Distribution Charge, which is a sales load, is
comprised of a Premium Expense Load and a Commission Charge.
The Premium Expense Load will be deducted from each Premium and will equal a
percentage of the Premium. The percentage will be determined based on the
sum of the Initial Premiums for all Contracts in a Case, in accordance with
the following table:
<TABLE>
<CAPTION>
SUM OF THE INITIAL PREMIUMS
OF ALL CONTRACTS IN THE CASE PREMIUM EXPENSE LOAD
- ---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000 - $999,999 1.50%
$1,000,000 and more 1.25%
</TABLE>
A Commission Charge will be deducted from Premiums paid in each Contract Year
up to the Target Premium amount. There is no Commission Charge on any Excess
Premium amount paid during a Contract Year. The Commission Charge on
Premiums paid in a Contract Year up to the Target Premium amount is based
upon the Issue Age of the Insured and the Contract Year as follows:
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<PAGE> 168
<TABLE>
COMMISSION CHARGES DURING CONTRACT YEAR
---------------------------------------
<CAPTION>
Commission Charge
----------------------------------------------------
For Contract Year Contract Years Contract Years
Issue Ages 1 2-10 11-15
- ---------- - ---- -----
<S> <C> <C> <C>
20 - 51 28.00% 8.00% 6.00%
52 - 59 28.00% 6.33% 4.00%
60 - 67 28.00% 4.66% 4.00%
68 - 80 19.00% 4.00% 4.00%
81 - 85 13.00% 4.00% 4.00%
</TABLE>
For all Issue Ages the Commission Charge will be 2.00% for Year 16 and
thereafter.
For Single Premium Payments, the maximum Commission Charge will be 6.00% of
Premium paid. Single Premium Payments are the excess of the Premium received
in the first Contract Year over Planned Renewal Premium. Failure to pay
Planned Renewal Premium will not automatically result in lapse of the
Contract.
The Distribution Charge is intended to compensate SELIC for its expenses in
the distribution of the Contracts, including sales commissions, printing
prospectuses, preparing sales literature and paying for other promotional
activities. To the extent that those expenses are not recovered from the
Distribution Charge, those expenses may be recovered from other sources,
including profit, if any, the mortality and expense risk charge and mortality
gains. In accordance with applicable SEC regulations, Distribution Charge
amounts will not exceed nine percent of the sum of the "guideline annual
premiums" that would be paid during the period equal to the lesser of 20
years or the anticipated life expectancy of the Insured based on the 1980
Commissioners Standard Ordinary Mortality Table, as defined in such
regulations.
For modifications to this section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider." For modifications to this section with the
addition of a Term Rider, see Appendix B -- "Supplemental Term Rider
Insurance."
PREMIUM TAX CHARGE: SELIC also deducts from each Premium a Premium Tax
Charge approximately equal to the taxes that are based on such Premium
received under the Contract and that are imposed on SELIC by the state in
which the Contract Holder resides or by the state in which the Insured resides.
In general, for Cases with one Contract Holder and with less than 500 Contracts,
this charge will be determined as to any Contract in accordance with the law of
the state in which the Contract Holder resides. For Cases with a greater number
of Insureds and one Contract Holder, the amount of the
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charge as to any Contract will be determined in accordance with the law of the
state in which the Insured resides. State premium tax rates currently range
from .75% to 5.00%.
DAC TAX CHARGE: SELIC also deducts from each Premium a charge for federal
income taxes, equal to 1.00%, which compensates SELIC for an increased
federal tax burden resulting from the receipt of Premiums under Section 848
of the Internal Revenue Code. This charge for federal income taxes is
reasonable in relation to SELIC's federal tax burden under Section 848
resulting from the receipt of Premiums under the Contracts.
DAILY CHARGES
MORTALITY AND EXPENSE RISK CHARGE: Each Division of the Separate Account is
assessed a Mortality and Expense Risk Charge, which will never exceed an
annual effective rate of 0.50% of the Contract's Separate Account Value
attributable to that Division. Currently, the amount of this charge is an
annual effective rate of 0.35% of the Separate Account Value, which is
equivalent to 0.000957233% of the Separate Account Value attributable to the
Division on a daily basis.
The charge, which is designed to compensate SELIC for the mortality and
expense risks it assumes under the Contract, is deducted on a daily basis
from the Separate Account's assets.
The mortality risk assumed by SELIC under the Contract is that Insureds may,
on average, live for shorter periods of time than estimated and therefore
that the Cost of Insurance Charges specified in the Contract will be
insufficient to meet actual claims. The expense risk assumed by SELIC under
the Contract is the risk that other expenses of issuing and administering the
Contract and operating the Separate Account will be greater than the charges
imposed under the Contract to cover such expenses. If the money collected
from the Mortality and Expense Risk Charge is not needed to cover these
risks, it will be SELIC's gain and will be used for any proper purpose.
Conversely, if the money collected is insufficient to cover these risks,
SELIC will absorb any loss.
MONTHLY CHARGES
As of the Contract Date and on each Monthiversary thereafter, Monthly Charges
will be deducted from each Available Division and the Fixed Fund. Monthly
Charges consist of the Administration Charge, the Cost of Insurance Charge,
charges for additional benefits provided by Contract rider, and charges for
Special Insurance Class Rating, if any. These charges will be deducted from
each Available Division and the Fixed Fund in proportion to the Insurance
Account Value attributable to each Available Division and the Fixed Fund.
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ADMINISTRATION CHARGE: On each Monthiversary, a charge is deducted to
compensate SELIC for administrative expenses. The current amount of this
charge is $4.50 per month per Contract. This charge may change, but is
guaranteed not to exceed $8.00 per month per Contract. The Administration
Charge is assessed to reimburse SELIC for the expenses associated with the
administration and maintenance of the Contract and the Separate Account.
SELIC does not expect to profit from this charge.
COST OF INSURANCE CHARGE: A deduction for SELIC's cost of insurance
protection is made on each Monthiversary and, unless otherwise specified by
the Contract Holder, will be based on unisex and unismoke rates. The cost of
insurance rates generally increase as the Insured's Attained Age increases.
SELIC also offers rates, upon a Contract Holder's request, that vary based on
the sex (except Contracts sold in Montana; See "Unisex Requirements Under
Montana Law") and smoker class of the Insured. However, any variation by sex
and/or smoker class must be applied on a consistent basis for all Contracts
in the applicable Case.
The Cost of Insurance Charge is determined by multiplying the applicable cost
of insurance rate by the Net Amount at Risk each Contract Month. Any change
in the Net Amount at Risk will affect the total Cost of Insurance Charges
deducted from the applicable Insurance Account Value. Since the Net Amount at
Risk may not be constant, the charge could vary monthly.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract. Those
rates, as well as the rates used for Federal income tax purposes, are based
on the 1980 Commissioners Standard Ordinary (CSO) Mortality Tables, Age
Nearest Birthday that correspond to the applicable sex and smoker blend under
the Contract. Current Cost of Insurance Charges may be lower and may be
changed. The current Cost of Insurance Charges for the Contract Year are
shown in the Contract Holder's annual statement.
SELIC may offer insurance coverage up to $1 million on a guaranteed issue or
simplified issue basis under Contracts that meet all the following
requirements:
1) The Case to which the Contract belongs has at least 25 Insureds;
2) Each Insured under the Contracts in the applicable Case must at the
time of issue be actively at work for a common Employer for a
minimum of 1,000 hours annually;
3) 100% of "eligible persons," defined in a manner acceptable to SELIC,
must be named as an Insured under the applicable Case;
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4) The Face Amount, and any Supplemental Term Insurance Amount, for each
Contract in the applicable Case must be determined in all years by
a formula acceptable to SELIC;
5) The Face Amount increases, including any increases in Supplemental Term
Insurance Amount, in any given year for any Contract in the applicable
Case cannot exceed 10% and the cumulative increase in any Face Amount
cannot exceed the smaller of the initial Total Insurance Coverage or
$1,000,000;
6) The Contract Holder, Insured and Beneficiary of each Contract in the
applicable Case must be either an entity domiciled in the United
States or a United States citizen; and
7) The Insured under each Contract in the applicable Case must be between
the ages of 20 and 65.
For Simplified Issue Contracts, SELIC requires that certain medical
information regarding the prospective Insured be provided in the Application.
SELIC will also offer Contracts on a medically underwritten basis. In these
situations, the rating of an Insured will affect the cost of insurance rates.
SELIC will offer medically underwritten Contracts on a standard and
substandard rating basis. Standard rates will, in general, be less than
substandard rates.
For Contracts with applications dated prior to April 29, 1996 and issued on a
guaranteed issue or simplified issue basis, the Cost of Insurance Charges
will vary only by the Attained Age of the Insured. For Contracts with
applications dated on or after April 29, 1996 and issued on a guaranteed
issue basis, the Cost of Insurance Charges will vary only by the Attained Age
of the Insured but for Contracts issued on a simplified issue basis the Cost
of Insurance Charges will vary by the Issue Age and the number of completed
Contract Years under the Contract. For all Contracts issued on a medically
underwritten basis the Cost of Insurance Charges will vary by the Issue Age
and the number of Completed Contract Years under the Contract. In general,
cost of insurance rates under Contracts that are issued on a guaranteed issue
basis will be greater than cost of insurance rates on Contracts issued on a
simplified issue basis, which will be greater than cost of insurance rates on
Contracts that are issued on a standard medically underwritten basis.
SELIC may require medical underwriting for any transaction that increases its
Net Amount at Risk. If any medical underwriting has taken place, an Insured's
rate class may affect the guaranteed and current cost of insurance rate
applicable to that Insured, but not the cost of insurance rate applicable for
Federal income tax purposes which for all Contracts will be equal to 100% of the
applicable 1980 CSO table.
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<PAGE> 172
Each Insured is placed in a rate class when SELIC issues a Contract, based on
the Case to which the Contract belongs and underwriting information,
including medical underwriting, if any. When an increase in Face Amount is
requested, SELIC reserves the right: (i) to accept or reject the request,
with or without obtaining additional underwriting information; and (ii) to
obtain additional underwriting information, including medical underwriting,
before approving the increase to determine whether a different rate class
would apply to the increase. If the Insured's rate class at the time of the
increase has declined since the last change in coverage, and SELIC approves
the change in coverage, then the lower rate class will be applied to the Face
Amount increase only. If the Insured's rate class at the time of the
increase has improved since the last change in coverage, then the improved
rate class will be applied to the Total Insurance Coverage provided under the
Policy.
ADDITIONAL INSURANCE BENEFITS AND SPECIAL INSURANCE CLASS RATINGS: Subject
to certain requirements, one or more riders may be added to a Contract.
These riders and the charges associated therewith are described in Appendix B
to this Prospectus. (See "Additional Provisions of the Contract -- Entire
Contract"). Deductions will be made on each Monthiversary for applicable
charges for any additional benefits provided by Contract rider.
Deductions will also be made on each Monthiversary for any applicable Special
Insurance Class Rating Charges, which are imposed under the Contract if a
Contract is issued on a substandard basis. These charges are set forth in
the Contract.
UNDERWRITING CHARGES
An Underwriting Charge of up to $100 will be deducted from the Insurance
Account Value on the Issue Date if the Contract is issued on a medically
underwritten basis. Medically underwritten Contracts, for purposes of
deducting this charge, are all Contracts other than those issued on a
guaranteed issue or simplified issue basis (see "Charges and Deductions --
Monthly Charges -- Cost of Insurance Charges"). SELIC also reserves the
right to deduct an Underwriting Charge of up to $100 from the Contract's
Insurance Account Value on any Monthiversary following a Contract Month in
which medical underwriting has taken place due to an increase in SELIC's Net
Amount at Risk with respect to the Contract. The Underwriting Charge is
assessed to reimburse SELIC for the expenses associated with the underwriting
of the Contract. SELIC does not expect to profit from this charge.
SELIC may, in its sole discretion, reduce or waive the Underwriting Charge in
connection with the purchase of Contracts sold by licensed agents of SELIC
that are also registered representatives of selected broker-dealers or
through banks that have entered
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into written sales agreements with Walnut Street. Any reduction in or waiver of
the Underwriting Charge is reflected in the Contract.
The Underwriting Charge will be deducted from the Available Divisions and the
Fixed Fund in proportion to Insurance Account Value attributable to each
Division and the Fixed Fund.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
ANNUAL CHARGES
On each Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest
due and unpaid for the previous Contract Year; and (ii) increased by the
interest credited to the Borrowed Fund during the previous Contract Year.
The net result is that if Contract Loan interest is not paid when due, then
on the Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
OTHER CHARGES
TAXES AND OTHER GOVERNMENTAL CHARGES: SELIC does not currently make any
charges against the Divisions of the Separate Account for Federal, state or
local taxes attributable to them. However, SELIC may in the future impose
such a charge to provide for any tax liability of the Separate Account.
FEES AND EXPENSES OF UNDERLYING PORTFOLIOS: The value of an Accumulation
Unit of each Separate Account Division that invests in shares or interests of
an Underlying Portfolio will reflect the expenses incurred by that Underlying
Portfolio. The Underlying Portfolio's expenses will include its investment
management fee and its operating expenses. The management fees and operating
expenses of each Underlying Portfolio are set forth in the accompanying
prospectus for such underlying Portfolio.
ILLUSTRATIVE REPORT FEE: At the Contract Holder's request, SELIC will
provide an illustrative report in addition to the reports it customarily
provides. Depending upon the type and complexity of the requested report,
SELIC may charge a reasonable fee not to exceed $50.00 per report. (See
"Records and Reports") This fee must be paid by the Contract Holder
separately, and will not be considered a Premium payment.
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TERMINATION
The Contract terminates on the earliest to occur of the following:
(1) The end of the Grace Period following any Monthiversary in which the
Net Cash Value for the Contract is insufficient to pay the Monthly
Charges (See "Termination for Insufficient Net Cash Value," below);
(2) The surrender of the Contract by the Contract Holder;
(3) The Maturity Date of the Contract; or
(4) The fulfillment of all of SELIC's obligations under the Contract.
MATURITY DATE
No insurance coverage will be effective on or after the Maturity Date, which
is the Contract Anniversary on which the Insured reaches Attained Age 100.
If the Insured is living and the Contract is in force on the Maturity Date,
the Net Cash Value will be paid to the Contract Holder, the Contract will
terminate, and the liability of SELIC under the Contract will cease.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
TERMINATION FOR INSUFFICIENT NET CASH VALUE
A Contract will not terminate automatically for failure to pay a subsequent
Premium. However, if the Net Cash Value is not sufficient to cover the
Monthly Charges due with respect to a Contract on any Monthiversary, then the
Grace Period begins. This Grace Period begins on the Monthiversary on which
the Monthly Charges are due. The Grace Period ends 61 days from that
Monthiversary or, if later, 61 days after the date SELIC mails a written
notice to the Contract Holder at the last known address shown on SELIC's
records. This notice will state the Premium amount needed to keep the
Contract in force. During the Grace Period, the insurance coverage under the
Contract will continue in effect.
To continue the Contract's insurance coverage in force, the Contract Holder
must make a Premium payment before the Grace Period ends at least equal to
three times the Monthly Charges due when the Grace Period began, plus Premium
Load.
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<PAGE> 175
The Contract will terminate without value (and therefore the insurance
coverage will cease) at the end of the Grace Period if such amounts are not
paid.
REINSTATEMENT OF A CONTRACT TERMINATED FOR INSUFFICIENT VALUE
A Contract that has terminated for insufficient Net Cash Value may be
reinstated within five years from the date of Contract termination. The
Contract Holder must request the reinstatement in a form acceptable to SELIC
and pay the reinstatement Premium, which must be at least equal to the
Monthly Charges due and unpaid at the time of lapse, plus three times the
Monthly Charges due at the time of reinstatement, plus any applicable Premium
Load. Medical evidence of insurability will be required for reinstatement,
and the Insured must be living on the date the reinstatement becomes effective.
For Modification to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
THE FIXED FUND
Amounts invested in the Fixed Fund become part of the general assets of SELIC
held in SELIC's General Account. SELIC invests the assets of the General
Account in accordance with applicable state insurance laws. Because of
exemptive and exclusionary provisions, interests in the General Account have
not been registered under the Securities Act of 1933, and the General Account
has not been registered as an investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the General Account. The disclosure regarding the
General Account may, however, be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
This Prospectus describes a flexible premium variable life insurance
contract. This Prospectus together with the accompanying prospectuses for the
Underlying Portfolios, is generally intended to serve as a disclosure
document only for the aspects of the Contract relating to the Separate
Account. For complete details regarding the Fixed Fund, see the Contract
itself.
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GENERAL DESCRIPTION
The General Account consists of all assets owned by SELIC, other than those
in the Separate Account and other separate accounts. Subject to applicable
law, SELIC has sole discretion over the investment of the assets of the
General Account.
The allocation of amounts to the Fixed Fund does not entitle a Contract
Holder to share in the investment experience of the General Account. Instead,
SELIC guarantees that the Insurance Account Value in the Fixed Fund will
accrue interest at a rate of at least 4.00%, compounded annually, independent
of the actual investment experience of the General Account.
The Borrowed Fund is also part of the General Account. (See "The Contract --
Contract Loan Privilege").
ALLOCATION OF AMOUNTS TO THE FIXED FUND
At Contract issue, SELIC will determine the maximum percentage of the
non-borrowed Insurance Account Value that may be allocated, either initially or
by transfer, to the Fixed Fund. This maximum percentage is set forth in the
Contract (the "maximum allocation percentage"). The ability to allocate Net
Premiums or to transfer Insurance Account Value to the Fixed Fund may not be
made available or may be limited in accordance with the terms of the Contract.
SELIC may, from time to time, adjust the maximum allocation percentage. Such
adjustments may not be uniform to all Contracts. Subject to this maximum, a
Contract Holder may elect to allocate Net Premiums to the Fixed Fund, the
Separate Account, or both. Subject to this maximum, the Contract Holder may also
transfer the Insurance Account Value from the Available Divisions of the
Separate Account to the Fixed Fund.
FIXED FUND BENEFITS
If the Contract Holder allocates all Net Premiums only to the Fixed Fund and
makes no transfers, partial withdrawals, or Contract Loans, the entire
investment risk under the Contract will be borne by SELIC.
FIXED FUND INSURANCE ACCOUNT VALUE
Net Premiums allocated to the Fixed Fund are credited to the Insurance
Account Value. SELIC bears the full investment risk for these amounts and
guarantees that interest credited to each Contract Holder's Insurance Account
Value in the Fixed Fund will not be less than a rate of at least 4.00% per
year, compounded annually. SELIC may, in its sole discretion, credit a
higher rate of interest, although it is not obligated to credit
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interest in excess of 4.00% per year, and might not do so. ANY INTEREST
CREDITED ON THE CONTRACT'S INSURANCE ACCOUNT VALUE IN THE FIXED FUND IN EXCESS
OF THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF SELIC. THE CONTRACT HOLDER ASSUMES THE RISK THAT INTEREST
CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR. If
excess interest is credited, a different rate of interest may be applied to
the value in the Borrowed Fund. The value in the Fixed Fund will be
calculated on each Monthiversary of the Contract.
SELIC guarantees that, on each Valuation Date, the Insurance Account Value in
the Fixed Fund will be the amount of the Net Premiums allocated or Insurance
Account Value transferred to the Fixed Fund, plus interest at the rate of
4.00% per year, plus any excess interest which SELIC credits and any amounts
transferred into the Fixed Fund, less the sum of all Contract charges
allocable to the Fixed Fund and any amounts deducted from the Fixed Fund in
connection with partial withdrawals, surrender charges or transfers to the
Separate Account.
On any given day the Insurance Account Value in the Fixed Fund will be equal
to the Insurance Account Value in the Fixed Fund on the prior Valuation Day
plus:
(1) Any new Net Premium allocated to the Fixed Fund;
(2) Any amount transferred to the Fixed Fund from an Available Division or
the Borrowed Fund; and
(3) Any interest credited to the Fixed Fund;
and less:
(1) Any amount transferred from the Fixed Fund to an Available Division or
the Borrowed Fund;
(2) The Cost of Insurance Charges allocated to the Fixed Fund (deducted
only on a Monthiversary);
(3) The Administration Charges allocated to the Fixed Fund (deducted only
on a Monthiversary);
(4) Any partial withdrawals taken from such Contract and allocated to the
Fixed Fund;
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(5) Any charges allocated to the Fixed Fund that are deducted from the
Insurance Account Value for benefits provided by Contract riders;
(6) Any Underwriting Charges allocated to the Fixed Fund;
(7) Any charges for Special Insurance Class Rating allocated to the Fixed
Fund (deducted only on a Monthiversary); and
(8) Any other charges allocated to the Fixed Fund as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction". For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
FIXED FUND TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS
Prior to the Maturity Date, amounts may be transferred from the Fixed Fund to
the Available Divisions or partially withdrawn from the Fixed Fund.
Transfers from the Fixed Fund are subject to the following restrictions:
(a) The transfer must be made in the 30-day period following a Contract
Anniversary; and
(b) The amount transferred in any Contract Year may be no larger than
25% of the Insurance Account Value in the Fixed Fund on the date
of the transfer or withdrawal.
Contract Loans and partial withdrawals may also be made from the Contract's
Insurance Account Value in the Fixed Fund, subject to the conditions and
restrictions on Contract Loans and partial withdrawals described above. (See
"The Contract -- Contract Loan Privilege" and "The Contract -- Surrender and
Partial Withdrawals").
Transfers, surrenders, and partial withdrawals payable from the Fixed Fund
and the payment of Contract Loans allocated to the Fixed Fund may be delayed
for up to six months. However, if payment is deferred for 30 days or more,
SELIC will pay interest at the rate of 2.50% per year for the period of the
deferment. Amounts from the Fixed Fund used to pay Premiums on Contracts with
SELIC will not be delayed.
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FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Contracts and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon SELIC's understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Service.
1. TAX STATUS OF THE CONTRACT: Section 7702 of the Internal Revenue Code
of 1986, as amended (the "Code") sets forth a definition of a life
insurance contract for Federal tax purposes. The Section 7702
definition can be met if a life insurance contract satisfies
either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the
Contract is not directly addressed by Section 7702 or proposed
regulations issued under that section. The presence of these
Contract features, the absence of final regulations, and lack of
other pertinent interpretations of Section 7702, thus creates some
uncertainty about the application of Section 7702 to the Contract.
Nevertheless, SELIC believes that the Contract generally qualifies as
a life insurance contract for federal tax purposes. Because of the
absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether a Contract with a
joint and last survivor or a term rider added will, in all cases,
meet the statutory life insurance contract definition. If a
Contract were determined not to be a life insurance contract for
purposes of Section 7702, such contract would not provide most of
the tax advantages normally provided by a life insurance contract.
If it is subsequently determined that a Contract does not satisfy
Section 7702, SELIC will take whatever steps it deems are
appropriate and reasonable to cause a Contract to comply with
Section 7702. For these reasons, SELIC reserves the right to
modify the Contract as necessary to attempt to qualify a Contract
as a life insurance contract under Section 7702.
Section 817(h) of the Code requires the investments of the Separate
Accounts to be "adequately diversified" in accordance with
Treasury Regulations for the Contract to qualify as a life
insurance contract under Section 7702 of the Code. Failure to
comply with the diversification requirements may result in not
treating the Contract as life insurance. If the Contract does not
qualify as life
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insurance you may be subject to immediate taxation on the incremental
increases in Insurance Account Value of the Contract. Regulations
specifying the diversification requirements have been issued by the
Department of Treasury, and SELIC believes it complies fully with such
requirements. In connection with the issuance of the diversification
regulations, the Treasury Department stated that it anticipates the
issuance of regulations or rulings prescribing the circumstances in which
an owner's control of the investments of a separate account may cause the
contract owner rather than the insurance company, to be treated as the
owner of the assets in the separate account. If a Contract Holder is
considered the owner of the assets of the Separate Account, income and
gains from the Account would be included in the Holder's gross income.
Though no Regulations on the subject of an owner's control of the
investments of a separate account have been issued since the
Regulations specifying the diversification requirements were
issued, informal guidance is available from certain private letter
rulings issued by the Internal Revenue Service to individual
taxpayers. The ownership rights under the Contract are different
in certain respects from, those described by the Internal Revenue
Service in rulings in which it determined the owners were not
owners of separate account assets. For example, a Contract Holder
has additional flexibility in allocating premium payments and cash
values. These differences could result in the Contract Holder
being treated as the owner of a pro rata share of the assets of
the Separate Accounts. In addition, SELIC does not know what
standards will be set forth in any regulations or additional
rulings which the Treasury might issue. SELIC therefore reserves
the right to modify the Contract as necessary to attempt to
prevent the Contract Holder from being considered the owner of a
pro rata portion of the assets of the Separate Accounts or to
otherwise qualify the Contract for favorable tax treatment.
The following discussion assumes that each Contract will qualify as a
life insurance contract for Federal income tax purposes.
2. TAX TREATMENT OF CONTRACT BENEFITS: SELIC believes the death benefit
under the Contract should generally be excludable from the gross
income of the Beneficiaries under Section 101(a)(1) of the Code.
Many changes or transactions involving a Contract may have tax
consequences, depending on the circumstances. Such changes
include but are not limited to the exchange of the Contract, a
change in a Contract's Face Amount, a change of ownership, the
payment of a subsequent premium, a partial withdrawal from a
Contract, a complete surrender of a Contract, an assignment, a
Contract Loan, or a Contract lapse with an outstanding Contract
Loan. In addition,
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Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Contract proceeds depend on the
circumstance of each Contract Holder or Beneficiary. A competent tax
adviser should be consulted for further information.
Generally, the Contract Holder will not be deemed to be in constructive
receipt of the Insurance Account Value including increments
thereof, under the Contract until there is a distribution. The
tax consequences of distributions from, and loans taken from or
secured by, the Contract(s) should generally be determined on a
Contract by Contract basis. (See "Multiple Contracts," below.)
Such tax consequences further depend on whether the Contract from which
the distribution is made or Contract Loan is taken is classified
as a "modified endowment contract" under Section 7702A. However,
upon a complete surrender or lapse of any Contract, if the amount
received plus the amount of Indebtedness exceeds the total
investment in the Contract, the excess will generally be treated
as ordinary income subject to tax.
3. MODIFIED ENDOWMENT CONTRACTS: A Contract may be treated as a modified
endowment contract depending upon the amount of premiums paid in
relation to the death benefit provided in respect of such
Contract. The premium limitation rules for determining whether a
Contract is a modified endowment contract are complex. In
general, a Contract will be a modified endowment contract if the
accumulated premiums paid at any time during the first seven years
after the Contract is established exceeds the sum of the net level
premiums which would have been paid on or before such time if the
future benefits provided in respect of the Contract were deemed to
be paid-up after the payment of seven level annual premiums.
In addition, if the benefits or rights associated with a Contract are
"materially changed," it may cause such Contract to be treated as
a modified endowment contract. The material change rules for
determining whether a Contract is a modified endowment contract
are also complex. In general, however, the determination of
whether a Contract will be a modified endowment contract after a
material change generally depends upon the relationship among the
death benefit associated with the Contract at the time of such
change, the Insurance Account Value at the time of the change and
the additional premiums paid in respect of the Contract during the
seven years starting with the date on which the material change
occurs. Moreover, a life insurance contract received in exchange
for a life insurance contract classified as a modified endowment
contract will also be treated as a modified endowment contract.
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(a) Distributions from Contracts Classified as Modified
Endowment Contracts: Contracts classified as modified
endowment contracts will be subject to the following tax
rules: First, all distributions, including distributions
upon lapse or surrender, from such a Contract are treated
as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Insurance Account Value of
the Contract immediately before the distribution over the
investment in the Contract (described below) at such
time. Second, loans taken from or secured by, the
Insurance Account Value of such a Contract, as well as
due but unpaid interest thereon, are treated as
distributions from such Contract and taxed accordingly.
Third, a 10 percent additional income tax is imposed on
the portion of any distribution from, or loan taken from
or secured by, such a Contract that is included in income
except where the distribution or loan is made on or after
the taxpayer attains age 59 1/2, is attributable to the
taxpayer's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or
life expectancy) of the taxpayer or the joint lives (or
joint life expectancies) of the taxpayer and the
taxpayer's Beneficiary. Contract Holders that are not
natural persons are unlikely to meet these exceptions.
If a Contract becomes a modified endowment Contract after
it is issued, distributions made during the Contract year
in which it becomes a modified endowment Contract,
distributions in any subsequent Contract year and
distributions within two years before the Contract becomes
a modified endowment Contract will be subject to the tax
treatment described above. This means that a distribution
from a Contract that is not a modified endowment Contract
could later become taxable as a distribution from a
modified endowment Contract.
(b) Distributions From Contracts Not Classified as Modified
Endowment Contracts: Distributions from a Contract that is
not a modified endowment contract are generally treated as
first recovering the investment in the Contract (described
below) and then, only after the return of all such
investment in the Contract, as distributing taxable income.
An exception to this general rule may occur in the case of
a decrease in the death benefit provided in respect of a
Contract (possibly resulting from a partial withdrawal) or
any other change that reduces benefits associated with the
Contract in the first 15 years after the Contract is
established and that results in a cash distribution to the
Contract Holder in order for the Contract to continue
complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in
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whole or in part as ordinary income (to the extent of any
gain in the Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a
modified endowment contract are generally not treated as
distributions. Instead, such loans are generally treated as
indebtedness of the Contract Holder. However, if the
Service or a court were to deem the loan not 'bona fide',
it is possible that the loans from the Contract may be
treated as taxable distributions.
Neither distributions (including distributions upon
surrender or lapse) nor loans from, or secured by, a
Contract that is not a modified endowment contract are
subject to the 10% additional income tax. If a Contract
which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any
distribution made from the Contract within two years prior
to the date of such change in status may become taxable and
subject to the 10% additional income tax.
(c) Classification of Contract: Due to the Contract's
flexibility, classification of a Contract as a modified
endowment contract will depend upon the circumstances of
each Contract. SELIC has adopted administrative steps
designed to protect a Contract Holder against the
possibility that a Contract might become a modified
endowment contract. SELIC believes the safeguards are
adequate for most situations, but it cannot provide
complete assurance that a Contract will not be classified
as a modified endowment contract. At the time a Net
Premium is credited which (according to SELIC's
calculations) would cause a Contract to become a modified
endowment contract, SELIC will notify the Contract Holder
that unless a refund of the excess Premium is requested by
the Contract Holder, the Contract will be a modified
endowment contract. The Contract Holder will have 30 days
after receiving such notification to request the refund.
The excess Premium paid with 4.00% required annual interest
or gain, whichever is greater, will be returned to the
Contract Holder upon receipt by SELIC of the refund
request. The amount to be refunded will be deducted from
the Insurance Account Value in the Available Divisions and
in the Fixed Fund in the same proportion as the payment was
allocated.
A Contract Holder should contact a competent tax adviser before
purchasing a Contract to determine the circumstances under which a
Contract would be a modified endowment contract. In addition, a
Contract Holder should contact a competent tax adviser before
paying any additional premiums; making any other
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change to, including an exchange of, a Contract; or making a change to the
benefits provided under a Contract to determine whether such premium or
change would cause the Contract (or the new contract in the case of an
exchange) to be treated as a modified endowment contract.
4. LOAN INTEREST: Generally, interest paid on any loan under a life
insurance contract owned by an individual is not deductible. In
addition, interest on any loan under a life insurance contract
owned by a business taxpayer on the life of any individual who is
an officer of or is financially interested in the business carried
on by that taxpayer is deductible only under certain very limited
circumstances. A CONTRACT HOLDER SHOULD CONSULT A COMPETENT TAX
ADVISER BEFORE DEDUCTING ANY LOAN INTEREST.
5. INVESTMENT IN A CONTRACT: Investment in a Contract means (i) the
aggregate amount of any premiums or other consideration paid in
respect of a Contract, minus (ii) the aggregate amount received
under the Contract which is excluded from gross income of the
Contract Holder (except that the amount of any loan from, or
secured by, a Contract that is a modified endowment contract, to
the extent such amount is excluded from gross income, will be
disregarded), plus (iii) the amount of any loan from or secured by
a Contract that is a modified endowment contract to the extent
that such amount is included in the gross income of the Contract
Holder.
6. MULTIPLE CONTRACTS: All modified endowment contracts that are issued
by SELIC (or its affiliates) to the same Contract Holder during
any calendar year are treated as one modified endowment contract
for purposes of determining the amount includible in gross income
under section 72(e) of the Code. In view of this rule, in the
event that a number of Contracts are established at the same time
or during the same calendar year, it is important to determine how
many, if any, of the Contracts will be treated as modified
endowment contracts. A competent tax adviser should be consulted
for further information.
7. ALTERNATIVE MINIMUM TAX: There may also be an indirect tax upon the
inside build-up of the Contract under the corporate alternative
minimum tax.
8. OTHER TAX CONSEQUENCES. The Contract may be used in various
arrangements, including nonqualified deferred compensation or
salary continuance plans, split dollar insurance plans, executive
bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of
such plans may vary depending on the facts and circumstances of
each individual arrangement. Therefore, if you are contemplating
the use of the Contract in any arrangement the value of which
depends in part on its tax
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consequences, you should be sure to consult a qualified tax advisor
regarding the tax attributes of the particular arrangement and the
suitability of this product for the arrangement.
9. POSSIBLE CHARGE FOR TAXES: SELIC is presently taxed as a life
insurance company and does not incur federal income tax liability,
or state or local tax liability, attributable to investment income
or capital gains of the Separate Account. Based on these
assumptions, no charge is currently being made to the Separate
Account for federal income taxes, or state or local taxes.
However, SELIC may in the future impose such a charge if (i) the
tax treatment of SELIC is ultimately determined to be other than
what SELIC believes it to be, (ii) there are changes made in the
income tax treatment, or state or local tax treatment, of variable
life insurance at the company level, or of the separate accounts,
or (iii) there is a change in SELIC's status. Any such charge
would be designed to cover the taxes attributable to the
investment results of the Separate Accounts.
ADDITIONAL PROVISIONS OF THE CONTRACT
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
SELIC reserves the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held
by the Separate Account or that the Separate Account may purchase. SELIC
reserves the right to eliminate the shares of any of the Underlying
Portfolios and to substitute the shares of another registered open-end
investment company if the shares of an Underlying Portfolio are no longer
available for investment or if, in SELIC's judgment, further investment in
any Underlying Portfolio becomes inappropriate in view of the purposes of the
Separate Account. SELIC will not substitute any shares attributable to a
Contract Holder's interest in a Division of a Separate Account without notice
to the Contract Holder and prior approval of the SEC, to the extent required
by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of contracts, or from permitting a
conversion between series or classes of contracts on the basis of requests
made by Contract Holders.
The participation agreements pursuant to which Underlying Portfolios sell
shares to the Separate Account can be terminated by the Underlying Portfolio
or by SELIC under a variety of circumstances, with or without cause.
SELIC also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new investment company,
with a specified investment
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objective. New Divisions may be established when, in the sole discretion of
SELIC, marketing needs or investment conditions warrant, and any new Division
will be made available to existing Contract Holders on a basis to be determined
by SELIC. SELIC may also eliminate or combine one or more Divisions, substitute
one Division for another Division, or transfer assets between Divisions, if, in
its sole discretion, marketing, tax, or investment conditions warrant; such
changes will not occur without notice to the Contract Holder and prior approval
of the SEC, to the extent required by the 1940 Act or other applicable law.
In the event of a substitution or change, SELIC may, if it considers it
necessary, make changes in the Contract by appropriate endorsement. SELIC
will notify Contract Holders of any such changes.
If deemed by SELIC to be in the best interests of persons having voting
rights under the Contracts, and to the extent any necessary SEC approvals or
Contract Holder votes are obtained, the Separate Account may be: (a) operated
as a management company under the 1940 Act; (b) de-registered under that Act
in the event such registration is no longer required; or (c) combined with
other separate accounts of SELIC. To the extent permitted by applicable law,
SELIC may also transfer the assets of the Separate Account associated with
the Contract to another separate account.
Also, subject to the approval of the New York Superintendent of Insurance,
SELIC has the right to change the investment policy of any Separate Account
Division. If required, the process for obtaining approval of a material
change from the New York Superintendent of Insurance will be filed with the
insurance supervisory official of the Governing Jurisdiction. SELIC will
notify the Contract Holder if any material change of investment policy is
approved.
INCONTESTABILITY
SELIC must bring any legal action to contest the validity of any insurance
coverage under the Contract within two years from the applicable Issue Date
of the Contract, or from the effective date of any change in coverage
requiring medical evidence of insurability, as applicable.
CONVERSION RIGHTS
Once the Contract is issued and as long as the Contract is in force, a
Contract Holder may during the first 24 months, transfer all of the Insurance
Account Value into the Fixed Fund and receive fixed and guaranteed benefits
under the Contract. Once this right is exercised, no transfers out of the
Fixed Fund will be allowed and all Net Premiums paid after the election will be
allocated to the Fixed Fund. This request must be in
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writing and must specifically indicate that the transfer is being made pursuant
to the Conversion Right. This transfer will not be subject to any transfer
limitations or charges. At the time of such transfer, there will not be any
effect on the Contract's Death Benefit, Contract Loans, Face Amount, Net
Amount at Risk, Issue Age or insurance class. All benefits after a
conversion will be based upon the Fixed Fund.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated in the Application and
the misstatement is discovered after the Insured's death, the amount of Death
Benefit payable by SELIC will be that which the most recent mortality charges
would have purchased for the correct age and sex. If the Insured is still
living at the time of discovery, future amounts payable will be adjusted
based upon the correct facts.
SUICIDE
Subject to the insurance laws of the Governing Jurisdiction, if the Insured
commits suicide, while sane or insane, within two years from the date
coverage becomes effective with respect to such person under the Contract,
only a limited Death Benefit will be payable. In such case, the amount of
the Death Benefit will be equal to the amount of the Net Premiums paid, less
any partial withdrawals, and less any Contract Loans and any Contract Loan
interest accrued but unpaid.
If, after the expiration of the two year period described above, the Insured
commits suicide within two years from the date of receipt of any subsequent
Premium that increases the amount of the Death Benefit, the amount of the
Death benefit attributable to such increase will be limited to a refund of
the Cost of Insurance Charges made for such increase.
AVAILABILITY OF FUNDS
Cash payments from the Contract for partial withdrawals, Contract Loans, and
surrenders will usually be made within seven days after a written request is
received at the Home Office of SELIC. Transfers between or among Separate
Account Divisions will usually be effected on the date the transfer request
is received in good order. Payment or transfers may be delayed, however,
during any period that:
(1) The New York Stock Exchange (or its successor) is closed for trading;
or
(2) The SEC determines that a state of emergency exists.
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Payment of the portion of any amount payable from the Fixed Fund for Contract
Loans, partial withdrawals or surrender, and transfers to the Separate
Account Divisions may be delayed for not more than six months. If payment is
deferred for 30 days or more, SELIC will pay interest on such amounts at the
rate of 2.50% per year for the period of deferment.
ENTIRE CONTRACT
The Contract is issued in consideration of the Application and the Initial
Premium. The Contract and Application, a copy of which is attached to the
Contract, together with any Contract Schedules, any riders, and any other
related documents constitute the entire Contract. Any waiver or change of
any provision in the Contract must be in writing and signed by an officer of
SELIC. Additional insurance benefits may be made available under the
Contract by rider. Any such riders selected by the Contract Holder and
agreed to by SELIC will be attached to and made a part of the Contract.
The failure of SELIC to enforce any provision of the Contract does not
constitute and cannot be construed as a waiver of such provision or of the
right to enforce it at a later time, nor does the waiver of any provision by
SELIC on one or more occasions constitute nor can it be construed as a waiver
for all occasions, and SELIC cannot be stopped from enforcing any provision
of the Contract except as may be otherwise agreed to in writing by an officer
of SELIC.
REPRESENTATIONS IN APPLICATION
SELIC deems all statements in the Application to be representations and not
warranties. SELIC will not use any statement, in the absence of fraud, to
void the Contract or to defend a claim for the insurance benefits under the
Contract unless it is contained in the Application and a copy of the
Application is attached to the Contract on the Issue Date, or unless it is
contained in a related document and signed either by the Contract Holder or
by the proposed Insured, and a copy of such completed document is provided to
the Contract Holder on the Issue Date or on the effective date of any change
requiring evidence of insurability.
CONTRACT APPLICATION AND CONTRACT SCHEDULES
If any information contained in the Contract, Application, Contract
Schedules, or any other related documents for the Contract is inaccurate or
untrue on the date the Contract is issued, the Contract Holder is required
under the Contract to promptly notify SELIC and provide corrected information.
RIGHT TO AMEND CONTRACT
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<PAGE> 189
If any provision in the Contract is in conflict with the laws of the
Governing Jurisdiction, the provision will be deemed to be amended to conform
with such laws. SELIC may amend the Contract from time to time as may be
required to meet the definition of "life insurance" under the Internal
Revenue Code of 1986, as amended, or its regulations or published rulings.
COMPUTATION OF CONTRACT VALUES
A detailed statement of the method used to compute the Contract's benefits
and values is filed with the insurance regulatory authority of the Governing
Jurisdiction. These benefits and values are not less than those required by
the laws of the Governing Jurisdiction.
CLAIMS OF CREDITORS
The proceeds of the Contract will be free from creditors' claims to the
extent allowed by law.
NOTICE
Any written notice required by the Contract to be given by SELIC to the
Contract Holder will be effective five days after it is mailed by first class
mail or 15 days after it is mailed by third class mail (or when received, if
sent by any other means) to the Contract Holder at the Contract Holder's
current address as noted on the records of SELIC.
Any written notice required by the Contract to be given by the Contract
Holder to SELIC will be effective when received in a form acceptable to SELIC
at its Home Office. To be acceptable, a notice must be in written form, in
the English language (except where applicable law requires otherwise), must
include all pertinent information, and must be signed by the Contract Holder
or an individual authorized to act for the Contract Holder and so designated
on the records of SELIC.
ASSIGNMENTS
Neither the Contract nor any of the rights of the Contract Holder or
Beneficiary under it may be assigned or transferred without the written
permission of SELIC.
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CONSTRUCTION
In the event of a conflict between the Contract provisions and the
information contained in any Contract Schedule, the provisions of the
Contract will be controlling.
SEVERABILITY
In the event any provision of the Contract is declared illegal or otherwise
unenforceable, it will be severed from the Contract and the remainder of the
Contract will be valid and enforceable.
STATE VARIATIONS
Certain Contract features, including the "Free Look" provision, are subject
to state variations. The Contract Holder should read his or her Contract
carefully to determine whether any variations apply in the state in which the
Contract is issued.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The state of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the lives of its residents. Therefore, all Contracts
offered by this Prospectus and issued for delivery in Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account Divisions will be
maintained by SELIC. Each year within 30 days after the Contract Anniversary,
SELIC will mail a report to the Contract Holder. The report will show the
Insurance Account Value at the beginning of the previous Contract Year and all
Premiums paid since that time. It will also show the additions to, and
deductions from, the Insurance Account Value during the Contract Year, and the
Insurance Account Value, Death Benefit, Net Cash Value, any outstanding Contract
Loan amount and accrued Contract Loan interest as of the current Contract
Anniversary. The report will also include any additional information required
by applicable law or regulation. SELIC also will mail the Contract Holder any
other reports or documents required by applicable law or regulation.
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<PAGE> 191
In addition to the periodic reports, the Contract Holder may request an
illustrative report showing projected Contract values. There may be a charge
for providing an illustrative report. (See "Charges and Deductions -- Other
Charges").
SALE OF THE CONTRACT
The Contract will be sold by individuals who, in addition to being licensed
as life insurance agents for SELIC, are also registered representatives of
Walnut Street Securities, Inc. ("Walnut Street"), the distributors of the
Contract, or of broker-dealers or through banks who have entered into written
sales agreements with Walnut Street. Walnut Street was incorporated under the
laws of Missouri in 1984 and is an indirect subsidiary of General American
Life Insurance Company. Walnut Street is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. No director or officer
of Walnut Street owns any interest in the Separate Account, however, the
policies issued through the Separate Account may be used to fund nonqualified
deferred obligations of the depositor or its affiliates subject to any
regulatory requirements.
SELIC will pay writing agent compensation equal to the Commission Charge in
connection with the Contract Holder's purchase of the Contract plus a maximum
of 22% of Target Premium and a maximum of 5.00% of any Excess Premium.
VOTING RIGHTS
To the extent required by law, SELIC will vote shares of the Underlying
Portfolios held in the Separate Account at regular or special shareholder
meetings of the Underlying Portfolios in accordance with instructions
received from persons having voting interests in the corresponding Divisions
of the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the Underlying Portfolios in its own right, it may elect to do so.
The number of votes that a Contract Holder has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Contract Holder at the record date rather than the number of
units alone. Fractional shares will be counted. The number of votes of an
Underlying Portfolio that the Contract Holder has the right to instruct will
be determined as of the date established by that Underlying Portfolio for
determining eligibility to vote at the meetings of the Underlying Portfolio.
Voting instructions will be solicited by
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written communications prior to such meeting in accordance with procedures
established by the Underlying Portfolio.
SELIC will vote shares as to which no timely instructions are received in
proportion to the voting instructions which are received with respect to the
contracts participating in that Underlying Portfolio. SELIC will also vote
shares it owns that are not attributable to contracts in the same proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Underlying
Portfolio.
DISREGARD OF VOTING INSTRUCTIONS: SELIC may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification, or investment objective of an Underlying Portfolio, or
one or more of its Series, or to approve or disapprove an investment advisory
contract for an Underlying Portfolio. In addition, SELIC itself may
disregard voting instructions in favor of changes proposed by a Contract
Holder in the investment advisory agreement or the investment adviser of an
Underlying Portfolio if SELIC reasonably disapproves of such changes. A
proposed change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities, or SELIC
determines that the change would have an adverse effect on its General
Account in that the proposed investment advisory contract for an Underlying
Portfolio may result in overly speculative or unsound investments. In the
event SELIC does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next annual report to
Contract Holders.
STATE REGULATION OF THE COMPANY
SELIC, a stock life insurance company organized under the laws of New York,
is subject to regulation by the New York Department of Insurance. An annual
statement is filed with the Superintendent of Insurance on or before March
1st of each year covering the operations and reporting on the financial
condition of SELIC as of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of the
Company and the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.
In addition, SELIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
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<TABLE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS AND PRINCIPAL OFFICERS
<CAPTION>
NAME PRINCIPAL OCCUPATION(S) DURING PAST FIVE
YEARS
<S> <C>
Willard N. Archie SELIC Director; Vice Chairman, Mitchell,
Vice Chairman Titus & Company (CPA management consulting
Mitchell, Titus & Company firm). Prior to January 1996, Managing
One Battery Park Plaza Partner, Mitchell, Titus & Company.
New York, NY 10004-1461
Carson E. Beadle, SELIC Director; Managing Director, William
Managing Director M. Mercer Inc. (actuarial, employee
William M. Mercer, Inc. benefits, compensation and human resources
1166 Avenue of the Americas management consulting firm)
New York, NY 10036
James R. Elsesser SELIC Director; Vice President and Chief
Vice President & CFO Financial Officer, Ralston Purina Company
Ralston Purina Company (pet food, batteries, and bread business).
Checkerboard Square
St. Louis, MO 63164
Stanley Goldstein SELIC Director; Partner, Goldstein, Golub,
Goldstein, Golub, Kessler & Co. Kessler & Company (accounting services).
1185 Sixth Avenue
New York, NY 10036
David D. Holbrook SELIC Director; Chairman, Marsh &
Chairman McLennan, Inc. (insurance and reinsurance
Marsh & McLennan, Inc. brokers, consulting and investment
1166 Avenue of the Americas management).
New York, NY 10036
Richard A. Liddy SELIC Director; Chairman of the Board;
Chairman, President and CEO President and Chief Executive Officer,
General American Life Insurance Co. General American Life Insurance Co. (life
700 Market Street insurance). Prior to May 1992, President
St. Louis, MO 63101 and Chief Operations Officer.
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<PAGE> 194
<S> <C>
Fabio Pieroni SELIC Vice President, Treasurer &
Vice President, Treasurer & Controller; Prior to June 1993, 2nd Vice
Controller President of Finance and Administration,
Security Equity Life Insurance Co. First UNUM Life Insurance Company.
Leonard M. Rubenstein, SELIC Director; Executive Vice President -
Executive Vice President - Investments, General American Life
Investments Insurance Co. (life insurance).
General American Life Insurance Co.
700 Market Street
St. Louis, MO 63101
William C. Thater SELIC Director and President; Prior to
President June 1993, Vice President - Individual
Security Equity Life Insurance Co. Life, General American Life Insurance Co.
84 Business Park Drive, Suite #303 (life insurance). Prior to September
Armonk, NY 10504 1991, Adv. Sales Vice President, General
American Life Ins. Co. Prior to January
1990, Vice President, Marsh & McLennan
(insurance and reinsurance brokers,
consulting and investment management).
H. Edwin Trusheim SELIC Director; Retired Chairman, General
General American Life Insurance Co. American Life Insurance Co. (life
700 Market Street insurance). Prior to May 1993, Chairman &
St. Louis, MO 63101 CEO, General American Life Ins. Co.
Virginia V. Weldon, M.D. SELIC Director; Senior Vice President,
Senior Vice President Monsanto Company (chemicals diversified
Monsanto Company industry, pharmaceuticals, life science
800 North Lindbergh Blvd. products, and food ingredients business).
St. Louis, MO 63167
Ted C. Wetterau SELIC Director; Chairman and Chief
Chairman and CEO Executive Officer, Wetterau & Associates,
Wetterau Associates Inc. (retail and wholesale grocery,
1401 S. Brentwood, Suite 760 manufacturing business).
St. Louis, MO 63144
Ben H. Wolzenski, SELIC Director; Executive Vice President,
Executive Vice President - General American Life Insurance Co. (life
Individual insurance). Prior to October 1991, Vice
General American Life Insurance Co. President - Individual Life Products,
13045 Tesson Ferry Road General American Life Ins. Co.
St. Louis, MO 63128
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<PAGE> 195
<S> <C>
A. Greig Woodring SELIC Director; CEO & President,
CEO & President Reinsurance Group of American, Inc.
Reinsurance Group of America, Inc. (reinsurance). Prior Executive Vice
660 Mason Ridge Center Dr., Suite 300 President - Reinsurance, General American
St. Louis, MO 63141 Life Ins. Co.
</TABLE>
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<PAGE> 196
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
has been provided by Matthew P. McCauley, General Counsel, SELIC.
LEGAL PROCEEDINGS
Neither SELIC nor the Separate Account is involved in any material legal
proceedings.
EXPERTS
The audited financial statements of Security Equity Life Insurance Company
and the Separate Account have been included in this Prospectus in reliance on
the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and on the authority of said firm as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined by Ralph A.
Gorter of Security Equity Life Insurance Company, whose opinion is filed as
an exhibit to the registration statement for the Contracts.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Contracts. This Prospectus does not contain all the information set forth in
the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, SELIC and the Contracts.
Statements contained in this Prospectus as to the contents of the Contract
and other legal instruments are summaries. For a complete statement of the
terms thereof, reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of SELIC which are included in this Prospectus
should be distinguished from the financial statements of the Separate
Account, and should be considered only as bearing on the ability of SELIC to
meet its obligations under the Contract. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
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APPENDIX A -- UNDERLYING PORTFOLIOS
The Available Division of the Separate Account invests in shares or units of
an Underlying Portfolio from the following open-end, management investment
companies:
GENERAL AMERICAN CAPITAL COMPANY
Money Market Portfolio
FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY
Aggressive Equity Portfolio
Core Bond Portfolio
Multi-Style Equity Portfolio
Non-U.S. Portfolio
Each Underlying Portfolio operates as a separate investment vehicle, and the
income or losses of one Underlying Portfolio has no effect on the investment
performance of any other Underlying Portfolio.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH
UNDERLYING PORTFOLIO LISTED.
The prospectus for each Underlying Portfolio includes information regarding
the investment advisory fee and operating expenses of the Underlying
Portfolio, which are reflected in the value of the Accumulation Units of the
Division of the Separate Account that invests in such Underlying Portfolio.
The prospectus for each Underlying Portfolio also includes investment
strategies, objectives and investment advisor.
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<PAGE> 198
APPENDIX B -- CONTRACT RIDERS
JOINT AND LAST SURVIVOR RIDER
-----------------------------
The Joint and Last Survivor Rider modifies the Contract to provide insurance
coverage on the lives of two Insureds. The rider will be subject to all
terms in the Contract, and the addition of the rider will not change any
mechanics of the Contract, except as modified in the Contract and highlighted
below. Some of the discussions in the Prospectus applicable to the Contract
apply differently to a Contract to which a Joint and Last Survivor Rider has
been added. Set out below are the modifications to designated sections of
the Prospectus in the event that a Joint and Last Survivor Rider is added to
the Contract. Except as noted below, the discussions in the Prospectus
referencing a single Insured can be read as though the single Insured was two
Insureds under a Contract with a Joint and Last Survivor Rider.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Joint and Last Survivor
Rider:
FIRST INSURED: The first person of the two Insureds to die.
INSURED: A person whose life is insured under the terms of the Contract.
There are two Insureds under the Contract. Both Insureds are shown in the
Contract.
JOINT AND LAST SURVIVOR RIDER: A rider added attached to the Contract
described in this Prospectus, which will amend the Contract to pay a Death
Benefit after the death of Last Insured.
LAST INSURED: The last person of the two Insureds to die.
The following are the major differences between a Contract with a Joint and
Last Survivor Rider added, and a Contract without this rider.
1. All conditions of eligibility of a prospective Insured will be
applied to both Insureds in order for a Contract with a Joint
and Last Survivor Rider to be issued. (See "The Contract --
Availability of Insurance Coverage").
2. Death Benefits will be paid on a Temporary Insurance Coverage
basis only if both Insureds meet SELIC's usual and customary
underwriting standards for the
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applied for coverage (See "The Contract -- Availability of
Insurance Coverage").
3. All Contracts that are issued with a Joint and Last Survivor
Rider attached will require medical evidence of insurability.
(See "The Contract -- Evidence of Insurability").
4. All Contracts that are issued with a Joint and Last Survivor
Rider attached will pay a Death Benefit only on the death of
the Last Insured. No Death Benefit will be paid on the death
of the First Insured. (See "The Contract -- Death Benefits
Under the Contract").
5. No change in Death Benefit Option or Face Amount will be
effective if the Last Insured dies before the change is
effective. (See "The Contract -- Death Benefit Options" and
"The Contract -- Death Benefits Under the Contract").
6. In general, a Contract with a Joint and Last Survivor Rider will
have a lower Target Premium than a Contract issued on a single
Insured with the same Total Insurance Coverage. This will
result in lower Commission Charges for a Contract with the same
Total Insurance Coverage. (See "Charges and Deductions --
Premium Load").
7. A deduction for SELIC's cost of insurance protection is made on
each Monthiversary and in general will be based upon the sex
and smoker status of the two Insureds. The Joint and Last
Survivor cost of insurance rates will be blended rates based
upon the Issue Ages of the Insureds, the number of completed
Contract Years, as well as the sex and smoker status of the
Insureds. The cost of insurance rates may also vary by any
special insurance class charges.
The guaranteed cost of insurance rates will not be greater than
the guaranteed maximum cost of insurance rates set forth in the
Contract. These rates, as well as the rates used to calculate
the Minimum Death Benefit and limitations on Premiums payable
under the Contract, are based on the 1980 Commissioners
Standard Ordinary Tables, Age Nearest Birthday, that correspond
to the applicable ages, sex and smoker status of the Insureds.
Current cost of insurance rates may be lower.
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Since a benefit is paid only in the event that both Insureds have
died, Cost of Insurance Charges for Contracts with a Joint and
Last Survivor Rider attached will generally be lower than the
charges for a comparable single life Contract. (See "Charges
and Deductions -- Cost of Insurance Charge").
8. The calculation of the Minimum Death Benefit and any limitations
on Premiums will reflect the fact that no Death Benefit will be
paid until the death of the Last Insured. Assuming the same
amount of requested Insurance Coverage, any limitations on
Premiums payable under the Contract will be lower than those
based upon a single life, while the Minimum Death Benefits will
be higher than those based upon a single life. (See "The
Contract -- Death Benefits Under the Contract").
9. The Underwriting Charge for Contracts issued with a Joint and
Last Survivor Rider attached will be equal to the sum of a flat
fee and a charge per $1,000 of Total Insurance Coverage,
subject to a maximum charge. This charge is determined
separately for each Insured. The charges for each Insured are
added together to obtain the total charge for the Contact.
This charge is deducted on each Monthiversary for the first 12
Contract Months. The flat fee, charge per $1,000, and maximum
charge are shown in the table below.
<TABLE>
<CAPTION>
Per $1,000 of Maximum Total
Flat Fee Total Insurance Underwriting Charge
Issue Age Per Month Coverage Per Month Per Insured Per Month
<S> <C> <C> <C>
20 - 45 $4.17 $.00833 $37.50
46 - 60 $4.17 $.01250 $54.17
61 - 85 $4.17 $.01667 $54.17
</TABLE>
If there is a Contract change after issue which requires medical
underwriting, SELIC will deduct on the Monthiversary following
the underwriting an amount per Insured equal to $100, plus the
per thousand charge above multiplied by 12, multiplied by the
increase in the Net Amount at Risk to which the underwriting
relates, subject to the maximum charge shown above. (See
"Charges and Deductions -- Underwriting Charges")
SELIC may, in its sole discretion, reduce or waive the
Underwriting Charge in connection with the purchase of
Contracts sold by licensed agents of SELIC that are also
registered representatives of selected broker-dealers or
through banks
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that have entered into written sales agreements with Walnut Street.
Any reduction in or waiver of the Underwriting Charge will be
reflected in the Contract.
10. The Maturity Date of Contracts issued with a Joint and Last
Survivor Rider attached will be when the younger of the two
Insureds reaches the attained age of 100. (See "Termination --
Maturity Date").
11. For a Contract issued with a Joint and Last Survivor Rider
attached to be reinstated, both Insureds must be alive on the
date of reinstatement. (See "Termination -- Reinstatement of a
Contract Terminated for Insufficient Value").
12. A limited Death Benefit will be paid on a Contract issued with a
Joint and Last Survivor Rider if either Insured commits suicide
within two years from the date coverage becomes effective or
within two years from the date of receipt of a Subsequent
Premium payment which increases the Death Benefit. (See
"Additional Provisions of the Contract -- Suicide").
SUPPLEMENTAL TERM INSURANCE RIDER
---------------------------------
A Contract Holder may elect to add a Supplemental Term Insurance Rider to the
Contract at the time of the Application. The Supplemental Term Insurance
Rider increases the Total Insurance Amount under the Contract. The addition
of this Rider will allow SELIC to deduct additional monthly charges from the
Insurance Account Value of the Contract.
This rider may be added to a single life Contract, or a Contract to which a
Joint and Last Survivor Rider has been attached.
Set out below are additional definitions and other modifications applicable
when a Supplemental Term Rider is added to a Contract.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Supplemental Term
Insurance Rider:
DATE OF DEATH UPON WHICH DEATH BENEFIT BECOMES PAYABLE: The date of death of
the Insured, for a single life Contract, or the Last Insured for a Contract
to which a Joint and Last Survivor Rider has been added.
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RIDER DEATH BENEFIT: Is the amount of Supplemental Term Insurance Coverage
under the Rider.
SUPPLEMENTAL TERM INSURANCE RIDER: A rider added to the Contract described
in this Prospectus, which will increase the Total Insurance Amount under the
Contract.
SUPPLEMENTAL TERM INSURANCE BENEFIT
The Supplemental Term Insurance Rider provides term insurance coverage (the
Rider Death Benefit) that is in addition to insurance coverage provided under
the Contract. SELIC will pay the Rider Death Benefit to the beneficiary if
the Date of Death Upon Which Death Benefit becomes Payable occurs while the
rider is in force. SELIC must receive proof that such death occurred before
the Rider Expiry Date in the Contract, or the termination of the coverage
provided by the Supplemental Term Insurance Rider, if earlier, as specified
in the rider and the Contract.
The Contract Holder may, subject to the approval of the Company, change the
Supplemental Term Insurance Amount. The Contract Holder must request any
change not specified in the Contract by notifying SELIC in writing. Evidence
of Insurability will be required for any change that increases the
Supplemental Term Insurance Amount. If SELIC approves the change, it will
take effect on the next Monthiversary which is at least 30 days after all the
required information has been provided to SELIC. The Contract will be
amended to reflect any such change in the Supplemental Term Insurance Amount.
No change will be effective if the Date Upon Which Death Benefit becomes
Payable is before the date of the change.
MONTHLY CHARGES FOR SUPPLEMENTAL TERM INSURANCE AMOUNTS - COST OF INSURANCE
CHARGES
Charges for the Supplemental Term Insurance Rider, which consist of monthly
Cost of Insurance Charges for the Rider Death Benefit, are deducted from the
Insurance Account Value on each Monthiversary. The charges are determined by
multiplying the rider Net Amount At Risk by the current monthly Cost of
Insurance Rate for the rider.
The rider Net Amount at Risk on any Monthiversary is equal to:
(a) The Supplemental Term Insurance Amount discounted to such
Monthiversary at the rate specified in the Basis of Computation
Specified in the Contract; less
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(b) The excess, if any, of the Insurance Account Value on such
Monthiversary over the Death Benefit for the Contract
discounted to such Monthiversary at the rate specified in the
Basis of Computations Specified in the Contract.
The cost of insurance rates for the Supplemental Term Insurance Rider will be
equal to the current cost of insurance rates for the Face Amount under
Contract. On each Monthiversary on which the Supplemental Term Insurance
Rider is in force, the Cost of Insurance for the Supplemental Term Insurance
Rider will be added to the Monthly Charges deducted from the Insurance
Account Value.
TERMINATION OF THE SUPPLEMENTAL TERM INSURANCE RIDER
The Supplemental Term Insurance Rider may be terminated as of any
Monthiversary following a written request to the Company. The Supplemental
Term Insurance Rider will terminate automatically when any of the following
events occur:
(a) The lapse of the Contract;
(b) The surrender of the Contract;
(c) The Maturity Date of the Contract;
(d) The Date of Death Upon Which Death Benefits become Payable; or
(e) The Rider Expiry Date.
REINSTATEMENT OF SUPPLEMENTAL TERM INSURANCE RIDER
If the Supplemental Term Insurance Rider terminates, it may be reinstated
within five years of the earlier of the Contact termination or rider
termination provided that:
(a) If the Contract has terminated, it is also being reinstated;
(b) Satisfactory evidence of insurability is provided to SELIC; and
(c) Any charges due under the rider are paid as of the date of the
Reinstatement.
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The charges due will be equal to the amount of the charges for the rider due
and unpaid at the time that the rider terminated, plus three times the
charges for the rider due at the time of Reinstatement.
In order for the rider to be reinstated, the same number of Insureds under
the Contract must be alive as were alive when the rider terminated.
ADDITIONAL PROVISIONS OF THE RIDER - INCONTESTABILITY
In order for SELIC to contest the validity of any coverage provided by the
Supplemental Term Insurance Rider, legal action must be commenced within two
years from the rider effective date or from the effective date of any change
in rider coverage requiring evidence of insurability, including Reinstatement
of Coverage.
ADDITIONAL PROVISIONS OF THE RIDER - SUICIDE
If the Supplemental Term Insurance Rider is attached to a single life
Contract and the Insured dies by suicide, while sane or insane, within two
years from the rider Effective Date, the death benefit payable will be
limited to the sum of the Cost of Insurance Charges for the rider.
If this rider is attached to a Contract, to which a Joint and Last Survivor
Rider has been added, and either Insured dies by suicide, while sane or
insane, within two years from the rider Effective Date, the Death Benefit
payable will be limited to the sum of the Cost of Insurance Charges for the
rider.
The following are major modifications to a Contract when a Supplemental Term
Insurance Rider is added:
(1) Coverage provided by the Supplemental Term Insurance Rider is not
taken into account in determining the amount of Target Premium:
accordingly there may be no additional Premium Load associated
with this coverage. (See "The Contracts -- Premiums").
(2) In the event that a partial withdrawal results in a decrease in
the Face Amount, which would cause the Face Amount to be less than
the Minimum Face Amount of a Contract, the Supplemental Term
Insurance Amount will be decreased by the amount of the excess of
the withdrawal over the decreased Face Amount. (See "The Contract
-- Surrender and Partial Withdrawals").
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(3) The Supplemental Term Insurance Amount will be included in Total
Insurance Coverage in determining whether the Minimum Death
Benefit applies, and is not included in Death Benefit proceeds
when the Death Benefit payable under the Contract is equal to the
Minimum Death Benefit.
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APPENDIX C -- ILLUSTRATIONS OF DEATH BENEFITS
AND NET INSURANCE ACCOUNT VALUE
The following illustrations show hypothetically how the Insurance Account
Value and Death Benefit of a Contract change with the investment experience
of the Available Divisions of the Separate Account. The illustrations show
how the Insurance Account Value and Death Benefit of a Contract issued to an
Insured of a given Issue Age and at a given Premium would vary over time if
the investment return on the assets held in each Available Division of the
Separate Account were an assumed uniform, gross, after-tax annual rate of 0%,
6% or 12%. THE HYPOTHETICAL RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. The
illustrations illustrate a Contract issued to a Male, Issue Age 45 in a
nonsmoker rate class assuming Medical Underwriting. The values would be
different from those shown if the gross annual investment rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above and below
those averages for individual Contract Years. The actual values will depend
upon various factors, including age, sex, smoking status, and underwriting
status of the Insured.
The Insurance Account Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the assumed rate of return,
reflecting deduction of the maximum mortality and expense risk charge, the
maximum monthly administrative charges, and monthly charges for the cost of
insurance based on the maximum values allowed under the 1980 Commissioners
Standard Ordinary Mortality Table. The Insurance Account Value column under
the "Current" heading shows the accumulated value of the Net Premiums at the
assumed rate of return, reflecting deduction of the current mortality and
expense risk charge, the current monthly administrative charges, and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between illustrations depending
upon whether Death Benefit Option 1, Option 2, or Option 3 is illustrated.
The amounts shown for the Insurance Account Value and Death Benefit reflect
the fact that the investment rate of return is lower than the gross after-tax
return on the assets held in a Division due to the advisory fee (.03% of
aggregate average daily net assets is assumed) and operating expenses of the
Underlying Portfolio (which are assumed to be .87%). After deduction for
these amounts and the mortality and expense basis the illustrated gross
annual investment rates of return of 0%, 6% and 12% correspond to approximate
net annual rates of 1.25%, 4.75%, and 10.75%, respectively, on a current
basis, and 1.40%, 4.60%, and 10.60%, respectively, on a guaranteed basis.
The average advisory fee and fund expense reflects any voluntary expense
reimbursement arrangements between the various underlying funds and their
investment advisors. The investment advisors could terminate these
arrangements at any time. If any of these arrangements are terminated, the
above net annual
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rates of return would be reduced. The actual investment advisory fee applicable
to each Division is shown in the respective prospectuses for each Underlying
Portfolio. These Prospectuses for the Funds should also be consulted for
details about the nature and extent of expenses for each Underlying Portfolio.
The hypothetical values shown in the illustrations do not reflect any charges
for federal income taxes against the Separate Account, since Security Equity
Life Insurance Company is not currently making any such charges. However,
such charges may be made in the future and, in that event, the gross annual
investment rate of return of the Available Divisions would have to exceed 0%,
6% and 12% by an amount sufficient to cover the charges in order to produce
the Death Benefit and Insurance Account Value illustration. (See "Federal
Tax Matters").
The illustrations illustrate the Contract values that would result based upon
the investment rates of return if Premiums are paid as indicated, if all Net
Premiums are allocated evenly among Available Divisions, and if no Contract
Loans have been made. The illustrations are also based on the assumptions
that the Contract Holder has not requested an increase or decrease in the
Face Amount, that no partial withdrawals have been made, that no transfer
charges were incurred, and that no optional riders have been requested.
Upon request, Security Equity Life Insurance Company will provide a
comparable illustration based upon the proposed Insured's Issue Age, sex and
underwriting class, the Face Amount and Premium pattern requested, and any
available riders requested.
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<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.25% Net)<F*> (-1.40% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,070 1,070 100,000 767 767 100,000
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,579 2,579 100,000 1,985 1,985 100,000
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,038 4,038 100,000 3,161 3,161 100,000
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,457 5,457 100,000 4,297 4,297 100,000
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,840 6,840 100,000 5,388 5,388 100,000
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,189 8,189 100,000 6,435 6,435 100,000
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,506 9,506 100,000 7,431 7,431 100,000
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,792 10,792 100,000 8,373 8,373 100,000
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 12,052 12,052 100,000 9,256 9,256 100,000
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,270 13,270 100,000 10,073 10,073 100,000
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,505 14,505 100,000 10,858 10,858 100,000
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,701 15,701 100,000 11,567 11,567 100,000
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,857 16,857 100,000 12,198 12,198 100,000
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,960 17,960 100,000 12,744 12,744 100,000
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 19,008 19,008 100,000 13,198 13,198 100,000
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 20,064 20,064 100,000 13,628 13,628 100,000
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 21,053 21,053 100,000 13,946 13,946 100,000
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 21,976 21,976 100,000 14,137 14,137 100,000
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 22,834 22,834 100,000 14,183 14,183 100,000
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 23,631 23,631 100,000 14,065 14,065 100,000
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 26,405 26,405 100,000 10,332 10,332 100,000
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 26,394 26,394 100,000 - - -
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
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<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.75% Net)<F*> (4.60% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,138 1,138 100,000 826 826 100,000
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,812 2,812 100,000 2,180 2,180 100,000
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,533 4,533 100,000 3,572 3,572 100,000
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,313 6,313 100,000 5,004 5,004 100,000
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,161 8,161 100,000 6,475 6,475 100,000
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,081 10,081 100,000 7,985 7,985 100,000
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 12,077 12,077 100,000 9,532 9,532 100,000
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,156 14,156 100,000 11,112 11,112 100,000
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,326 16,326 100,000 12,723 12,723 100,000
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,576 18,576 100,000 14,361 14,361 100,000
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,971 20,971 100,000 16,064 16,064 100,000
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,463 23,463 100,000 17,791 17,791 100,000
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 26,054 26,054 100,000 19,542 19,542 100,000
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,740 28,740 100,000 21,315 21,315 100,000
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 31,525 31,525 100,000 23,105 23,105 100,000
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 34,485 34,485 100,000 24,991 24,991 100,000
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 37,554 37,554 100,000 26,890 26,890 100,000
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 40,742 40,742 100,000 28,794 28,794 100,000
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 44,060 44,060 100,000 30,695 30,695 100,000
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 47,521 47,521 100,000 32,584 32,584 100,000
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 67,238 67,238 106,235 41,632 41,632 100,000
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 90,767 90,767 129,796 48,932 48,932 100,000
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
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<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.75% Net)<F*> (10.60% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,207 1,207 100,000 885 885 100,000
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,053 3,053 100,000 2,383 2,383 100,000
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,065 5,065 100,000 4,015 4,015 100,000
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,271 7,271 100,000 5,797 5,797 100,000
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,698 9,698 100,000 7,742 7,742 100,000
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,370 12,370 100,000 9,868 9,868 100,000
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,318 15,318 100,000 12,189 12,189 100,000
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,573 18,573 100,000 14,724 14,724 100,000
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 22,174 22,174 100,000 17,493 17,493 100,000
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 26,145 26,145 100,000 20,520 20,520 100,000
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,590 30,590 100,000 23,875 23,875 100,000
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 35,506 35,506 100,000 27,552 27,552 100,000
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,946 40,946 100,000 31,589 31,589 100,000
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 46,962 46,962 100,000 36,033 36,033 100,000
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 53,605 53,605 109,353 40,931 40,931 100,000
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 60,979 60,979 121,347 46,429 46,429 100,000
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 69,074 69,074 133,313 52,518 52,518 101,359
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 77,959 77,959 146,563 59,177 59,177 111,253
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 87,713 87,713 160,514 66,401 66,401 121,513
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 98,416 98,416 176,164 74,215 74,215 132,845
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 169,555 169,555 267,898 123,885 123,885 195,738
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 281,346 281,346 402,325 195,558 195,558 279,647
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-5
<PAGE> 211
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.25% Net)<F*> (-1.40% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,069 1,069 101,069 764 764 100,764
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,576 2,576 102,576 1,974 1,974 101,974
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,029 4,029 104,029 3,137 3,137 103,137
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,439 5,439 105,439 4,254 4,254 104,254
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,809 6,809 106,809 5,320 5,320 105,320
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,142 8,142 108,142 6,335 6,335 106,335
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,438 9,438 109,438 7,291 7,291 107,291
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,699 10,699 110,699 8,184 8,184 108,184
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 11,928 11,928 111,928 9,008 9,008 109,008
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,108 13,108 113,108 9,754 9,754 109,754
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,300 14,300 114,300 10,455 10,455 110,455
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,446 15,446 115,446 11,067 11,067 111,067
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,541 16,541 116,541 11,583 11,583 111,583
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,572 17,572 117,572 12,000 12,000 112,000
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 18,531 18,531 118,531 12,306 12,306 112,306
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 19,480 19,480 119,480 12,568 12,568 112,568
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 20,340 20,340 120,340 12,696 12,696 112,696
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 21,112 21,112 121,112 12,674 12,674 112,674
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 21,798 21,798 121,798 12,482 12,482 112,482
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 22,399 22,399 122,399 12,101 12,101 112,101
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 23,732 23,732 123,732 6,783 6,783 106,783
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 21,256 21,256 121,256 - - -
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-6
<PAGE> 212
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.75% Net)<F*> (4.60% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,137 1,137 101,137 823 823 100,823
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,808 2,808 102,808 2,168 2,168 102,168
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,522 4,522 104,522 3,545 3,545 103,545
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,292 6,292 106,292 4,953 4,953 104,953
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,124 8,124 108,124 6,391 6,391 106,391
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,021 10,021 110,021 7,857 7,857 107,857
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 11,988 11,988 111,988 9,345 9,345 109,345
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,027 14,027 114,027 10,849 10,849 110,849
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,149 16,149 116,149 12,364 12,364 112,364
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,335 18,335 118,335 13,881 13,881 113,881
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,654 20,654 120,654 15,433 15,433 115,433
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,051 23,051 123,051 16,974 16,974 116,974
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 25,525 25,525 125,525 18,497 18,497 118,497
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,064 28,064 128,064 19,994 19,994 119,994
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 30,663 30,663 130,663 21,452 21,452 121,452
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 33,388 33,388 133,388 22,938 22,938 122,938
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 36,164 36,164 136,164 24,358 24,358 124,358
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 38,993 38,993 138,993 25,690 25,690 125,690
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 41,877 41,877 141,877 26,908 26,908 126,908
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 44,819 44,819 144,819 27,985 27,985 127,985
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 60,029 60,029 160,029 30,268 30,268 130,268
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 74,927 74,927 174,927 23,262 23,262 123,262
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-7
<PAGE> 213
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $1,948
<CAPTION>
=============================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.75% Net)<F*> (10.60% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,206 1,206 101,206 881 881 100,881
- -----------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,049 3,049 103,049 2,369 2,369 102,369
- -----------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,053 5,053 105,053 3,984 3,984 103,984
- -----------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,246 7,246 107,246 5,737 5,737 105,737
- -----------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,652 9,652 109,652 7,639 7,639 107,639
- -----------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,295 12,295 112,295 9,704 9,704 109,704
- -----------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,200 15,200 115,200 11,941 11,941 111,941
- -----------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,396 18,396 118,396 14,361 14,361 114,361
- -----------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 21,921 21,921 121,921 16,978 16,978 116,978
- -----------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 25,787 25,787 125,787 19,802 19,802 119,802
- -----------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,101 30,101 130,101 22,891 22,891 122,891
- -----------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 34,844 34,844 134,844 26,222 26,222 126,222
- -----------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,060 40,060 140,060 29,815 29,815 129,815
- -----------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 45,781 45,781 145,781 33,690 33,690 133,690
- -----------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 52,056 52,056 152,056 37,864 37,864 137,864
- -----------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 59,011 59,011 159,011 42,443 42,443 142,443
- -----------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 66,632 66,632 166,632 47,368 47,368 147,368
- -----------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 74,991 74,991 174,991 52,659 52,659 152,659
- -----------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 84,167 84,167 184,167 58,330 58,330 158,330
- -----------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 94,249 94,249 194,249 64,399 64,399 164,399
- -----------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 161,521 161,521 261,521 101,553 101,553 201,553
- -----------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 268,334 268,334 383,718 151,786 151,786 251,786
=============================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-8
<PAGE> 214
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- ------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.25% Net)<F*> (-1.40% Net)<F**>
- ------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,069 1,069 101,948 761 761 101,948
- ------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,574 2,574 103,896 1,964 1,964 103,896
- ------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,025 4,025 105,844 3,119 3,119 105,844
- ------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 5,431 5,431 107,792 4,222 4,222 107,792
- ------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 6,797 6,797 109,740 5,270 5,270 109,740
- ------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 8,123 8,123 111,688 6,261 6,261 111,688
- ------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 9,411 9,411 113,636 7,187 7,187 113,636
- ------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 10,660 10,660 115,584 8,040 8,040 115,584
- ------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 11,876 11,876 117,532 8,813 8,813 117,532
- ------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 13,038 13,038 119,480 9,495 9,495 119,480
- ------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 14,211 14,211 121,428 10,117 10,117 121,428
- ------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 15,332 15,332 123,376 10,629 10,629 123,376
- ------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 16,397 16,397 125,324 11,024 11,024 125,324
- ------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 17,389 17,389 127,272 11,291 11,291 127,272
- ------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 18,301 18,301 129,220 11,414 11,414 129,220
- ------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 19,188 19,188 131,168 11,452 11,452 131,168
- ------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 19,972 19,972 133,116 11,308 11,308 133,116
- ------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 20,651 20,651 135,064 10,952 10,952 135,064
- ------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 21,224 21,224 137,012 10,352 10,352 137,012
- ------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 21,689 21,689 138,960 9,468 9,468 138,960
- ------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 21,786 21,786 148,700 - - -
- ------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 16,138 16,138 158,440 - -
========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-9
<PAGE> 215
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- ------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.75% Net)<F*> (4.60% Net)<F**>
- ------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,137 1,137 101,948 819 819 101,948
- ------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 2,806 2,806 103,896 2,159 2,159 103,896
- ------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 4,519 4,519 105,844 3,527 3,527 105,844
- ------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 6,286 6,286 107,792 4,923 4,923 107,792
- ------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 8,114 8,114 109,740 6,344 6,344 109,740
- ------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 10,007 10,007 111,688 7,789 7,789 111,688
- ------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 11,969 11,969 113,636 9,250 9,250 113,636
- ------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 14,003 14,003 115,584 10,722 10,722 115,584
- ------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 16,119 16,119 117,532 12,196 12,196 117,532
- ------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 18,299 18,299 119,480 13,664 13,664 119,480
- ------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 20,614 20,614 121,428 15,157 15,157 121,428
- ------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 23,006 23,006 123,376 16,627 16,627 123,376
- ------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 25,477 25,477 125,324 18,065 18,065 125,324
- ------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 28,014 28,014 127,272 19,460 19,460 127,272
- ------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 30,616 30,616 129,220 20,797 20,797 129,220
- ------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 33,349 33,349 131,168 22,138 22,138 131,168
- ------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 36,139 36,139 133,116 23,386 23,386 133,116
- ------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 38,991 38,991 135,064 24,512 24,512 135,064
- ------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 41,910 41,910 137,012 25,481 25,481 137,012
- ------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 44,900 44,900 138,960 26,254 26,254 138,960
- ------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 60,720 60,720 148,700 25,554 25,554 148,700
- ------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 77,492 77,492 158,440 8,821 8,821 158,440
========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-10
<PAGE> 216
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $1,948
<CAPTION>
========================================================================================================================
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- ------------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.75% Net)<F*> (10.60% Net)<F**>
- ------------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,045 1,948 1,205 1,205 101,948 878 878 101,948
- ------------------------------------------------------------------------------------------------------------------------
2 47 4,193 1,948 3,047 3,047 103,896 2,360 2,360 103,896
- ------------------------------------------------------------------------------------------------------------------------
3 48 6,448 1,948 5,050 5,050 105,844 3,967 3,967 105,844
- ------------------------------------------------------------------------------------------------------------------------
4 49 8,816 1,948 7,242 7,242 107,792 5,709 5,709 107,792
- ------------------------------------------------------------------------------------------------------------------------
5 50 11,302 1,948 9,646 9,646 109,740 7,597 7,597 109,740
- ------------------------------------------------------------------------------------------------------------------------
6 51 13,913 1,948 12,288 12,288 111,688 9,645 9,645 111,688
- ------------------------------------------------------------------------------------------------------------------------
7 52 16,654 1,948 15,194 15,194 113,636 11,865 11,865 113,636
- ------------------------------------------------------------------------------------------------------------------------
8 53 19,532 1,948 18,395 18,395 115,584 14,266 14,266 115,584
- ------------------------------------------------------------------------------------------------------------------------
9 54 22,554 1,948 21,929 21,929 117,532 16,864 16,864 117,532
- ------------------------------------------------------------------------------------------------------------------------
10 55 25,727 1,948 25,812 25,812 119,480 19,673 19,673 119,480
- ------------------------------------------------------------------------------------------------------------------------
11 56 29,059 1,948 30,151 30,151 121,428 22,753 22,753 121,428
- ------------------------------------------------------------------------------------------------------------------------
12 57 32,557 1,948 34,935 34,935 123,376 26,086 26,086 123,376
- ------------------------------------------------------------------------------------------------------------------------
13 58 36,230 1,948 40,211 40,211 125,324 29,698 29,698 125,324
- ------------------------------------------------------------------------------------------------------------------------
14 59 40,087 1,948 46,023 46,023 127,272 33,617 33,617 127,272
- ------------------------------------------------------------------------------------------------------------------------
15 60 44,137 1,948 52,429 52,429 129,220 37,871 37,871 129,220
- ------------------------------------------------------------------------------------------------------------------------
16 61 48,389 1,948 59,574 59,574 131,168 42,582 42,582 131,168
- ------------------------------------------------------------------------------------------------------------------------
17 62 52,854 1,948 67,464 67,464 133,116 47,711 47,711 133,116
- ------------------------------------------------------------------------------------------------------------------------
18 63 57,542 1,948 76,178 76,178 143,215 53,301 53,301 135,064
- ------------------------------------------------------------------------------------------------------------------------
19 64 62,464 1,948 85,754 85,754 156,929 59,403 59,403 137,012
- ------------------------------------------------------------------------------------------------------------------------
20 65 67,633 1,948 96,261 96,261 172,307 66,079 66,079 138,960
- ------------------------------------------------------------------------------------------------------------------------
25 70 97,621 1,948 166,101 166,101 262,439 110,545 110,545 174,661
- ------------------------------------------------------------------------------------------------------------------------
30 75 135,894 1,948 275,852 275,852 394,469 175,681 175,681 251,224
========================================================================================================================
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The
Insurance Account Value, Net Cash Value and Death Benefit for a Contract
would be different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical
rate of return can be achieved for any one year, or sustained over any period
of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
</TABLE>
C-11
<PAGE> 217
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company
and Policyholders of Security Equity
Life Insurance Company Separate Account 13:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the General American Money Market Fund, Wells
Fargo Bank Asset Allocation Fund, Fidelity Growth Fund, Fidelity Investment
Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA Fund, Evergreen
Foundation Fund, and Evergreen Growth and Income Fund Divisions of Security
Equity Life Insurance Company Separate Account 13 (Separate Account) as of
December 31, 1996, and related statements of operations and changes in net
assets for the periods presented. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned at December 31,
1996 by correspondence with General American Capital Company, Wells Fargo
Bank Investment Adviser, Fidelity Investments, and Evergreen Asset
Management. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the General American Money
Market Fund, Wells Fargo Bank Asset Allocation Fund, Fidelity Growth Fund,
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA
Fund, Evergreen Foundation Fund, and Evergreen Growth and Income Fund
Divisions of Security Equity Life Insurance Company Separate Account 13 as of
December 31, 1996, and the results of their operations and changes in their
net assets for the periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 11, 1997
<PAGE> 218
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Net Assets
December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments, at market value $14,988,772 12,498 3,582,291 3,722,557 2,648,716 3,576,902 1,814,032 3,617,537
Payable to general account 3,003 12 6,033 7,928 7,982 171 87 173
---------- ------ --------- --------- --------- --------- --------- ---------
Total net assets $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
Total units 13,318,334 8,931 2,212,740 3,124,238 1,561,960 3,227,545 1,585,211 3,224,042
========== ====== ========= ========= ========= ========= ========= =========
Unit value $ 1.13 1.40 1.62 1.19 1.69 1.11 1.14 1.12
==== ==== ==== ==== ==== ==== ==== ====
Cost of investments $15,605,386 13,225 3,429,757 3,650,045 2,458,355 3,402,045 1,723,718 3,399,530
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 219
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on investments:
Proceeds from sales 9,427,292 545 2,657,607 964,149 996,124 34,167 17,279 36,201
Cost of investments
sold 9,821,858 577 2,601,002 967,181 961,682 32,848 16,419 34,638
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on sales (394,566) (32) 56,605 (3,032) 34,442 1,319 860 1,563
Realized gain from
distributions 662,558 - - - - - - -
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on
investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain (loss)
on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain
(loss) on
investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net gain (loss) on
investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
--------- ---- --------- ------- ------- ------- ------- -------
Mortality and expense
charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
--------- ---- --------- ------- ------- ------- ------- -------
Increase in assets
from operations $ 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
========= ==== ========= ======= ======= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE> 220
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Period September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
-------- ---- ----
Net realized gain on investments:
Proceeds from sales 8,244 -
Cost of investments sold 8,217 - -
-------- ---- ----
Net realized gain on sales 27 - -
Realized gain from distributions 494,746 - -
-------- ---- ----
Net realized gain on investments 494,773 - -
-------- ---- ----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
-------- ---- ----
Net unrealized gain (loss) on investments (477,414) (264) (141)
-------- ---- ----
Net gain (loss) on investments 17,359 (264) (141)
-------- ---- ----
Mortality and expense charges 910 1 1
-------- ---- ----
Increase (decrease) in assets
from operations $ 16,449 5 (142)
======== ==== ====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 221
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
---------- ------ --------- --------- --------- --------- --------- ---------
Net realized gain (loss)
on investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net gain (loss)
on investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
---------- ------ --------- --------- --------- --------- --------- ---------
Mortality and expense charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in assets
from operations 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
---------- ------ --------- --------- --------- --------- --------- ---------
Capital transactions:
Deposit into Separate
Account 16,201,970 6,223 1,854,129 1,992,244 1,139,931 1,799,979 899,908 1,799,969
Transfers to/from
Divisions (9,318,249) 3,087 1,757,397 1,878,412 1,439,294 1,696,024 848,012 1,696,024
Policy charges (864,845) (1,318) (241,335) (224,743) (164,854) (116,201) (58,256) (116,251)
---------- ------ --------- --------- --------- --------- --------- ---------
Net deposits into
Separate Account 6,018,876 7,992 3,370,191 3,645,913 2,414,371 3,379,802 1,689,664 3,379,742
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in net assets 6,139,213 8,391 3,572,336 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
Net assets, beginning of year 8,846,556 4,095 3,922 - - - - -
---------- ------ --------- --------- --------- --------- --------- ---------
Net assets, end of year $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 222
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Period from September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
--------- ----- -----
Net realized gain on investments 494,773 - -
--------- ----- -----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
--------- ----- -----
Net unrealized gain (loss) on investments (477,414) (264) (141)
--------- ----- -----
Net gain (loss) on investments 17,359 (264) (141)
--------- ----- -----
Mortality and expense charges 910 1 1
--------- ----- -----
Increase (decrease) in assets from operations 16,449 5 (142)
--------- ----- -----
Capital transactions:
Deposit into Separate Account 9,362,425 - -
Transfers to/from Divisions
and General Account (8,244) 4,131 4,104
Policy charges (524,074) (41) (40)
--------- ----- -----
Net deposits into Separate Account 8,830,107 4,090 4,064
--------- ----- -----
Increase in net assets 8,846,556 4,095 3,922
Net assets, beginning of period - - -
--------- ----- -----
Net assets, end of period $8,846,556 4,095 3,922
========= ===== =====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 223
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
December 31, 1996
(1) Organization
------------
Security Equity Life Insurance Company Separate Account 13 (the
Separate Account) commenced operations on November 15, 1994.
The Separate Account is registered under the Investment Company
Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account receives purchase payments from individual flexible
variable life contracts issued by Security Equity Life Insurance
Company (Security Equity).
The Separate Account is divided into a number of Divisions. Each
Division invests in shares of an underlying portfolio available
to policyholders as directed by the policyholders. The
portfolios available for investment through the Separate
Account are the General American Money Market Fund, Fidelity
Growth Fund, Fidelity Investment Grade Bond Fund, Fidelity
Asset Manager Fund, Fidelity Index 500 Fund, Bankers Trust
Emerging Market Fund, Bankers Trust Liquid Asset Fund, Bankers
Trust Limited Maturity Bond Fund, Evergreen VA Fund, Evergreen
Foundation Fund, Evergreen Growth and Income Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, Wells Fargo Bank Asset Allocation
Fund, and Wells Fargo Bank U.S. Government Allocation Fund.
Investments through the separate account Divisions in the General
American Money Market Fund, Wells Fargo Bank Asset Allocation
Fund, and Fidelity Growth Fund Divisions were initiated in the
Separate Account for policyholders on September 1, 1995.
Investments through the separate account Divisions in the
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund,
Evergreen VA Fund, Evergreen Foundation Fund, and Evergreen
Growth and Income Fund Divisions were initiated in the Separate
Account for policyholders during 1996. The remaining available
divisions had not commenced operations at December 31, 1996.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following is a summary of significant accounting policies followed
by the Separate Account in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
(a) Investments
-----------
The Separate Account's investments are valued daily, based on
the net asset value of the shares held. The first-in,
first-out method is used in determining the cost of
shares sold on withdrawals by the Separate Account.
Share transactions are recorded on the trade date, which
is the same as the settlement date.
(b) Federal Income Taxes
--------------------
Security Equity is taxed under federal law as a life
insurance company. The Separate Account is part of
Security Equity's total operations and is not taxed
separately. Under current federal income tax law, no
taxes are payable on investment income or realized
capital gains from sales of investments of the Separate
Account. Therefore, no federal income tax expense has
been provided.
(c) Dividend Reinvestment
---------------------
Dividends are recorded on the ex-dividend date and
immediately reinvested on the pay date.
(Continued)
<PAGE> 224
2
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(d) Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
increase and decrease in net assets from operations
during the period. Actual results could differ from
those estimates.
(3) Policy Charges
--------------
Charges are deducted from premiums and paid to Security Equity for
providing the insurance benefits set forth in the contracts and
any additional benefits by rider, administering the policies,
reimbursement of expenses incurred in distributing the
policies, and assuming certain risks in connection with the
policy.
The premium payment, less the premium load charge, equals the net
premium. The premium load is deducted from the initial premium and
from each subsequent premium paid by a policyholder, prior to
allocation to the Separate Account. The premium load includes a
distribution charge, a premium tax charge, and the DAC tax charge.
Distribution Charge: The distribution charge is composed of a premium
-------------------
expense load and a commission charge. The amount of the
distribution charge will depend on the amount of initial premium and
the sales commissions paid.
Premium Expense Load: The premium expense load will be deducted
--------------------
from each premium and will equal a percentage of the premium.
The percentage will be determined based on the sum of the initial
premiums for all policies in a case, in accordance with the
following table:
<TABLE>
<CAPTION>
Sum of the initial premiums
of all contracts in the case Premium expense load
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000-$999,999 1.50
$1,000,000 and more 1.25
====
</TABLE>
Commission Charge: A commission charge may be deducted from a
-----------------
premium. The commission charge deducted from a premium will be
equal to the full amount of commissions payable by Security
Equity on the target premium.
Premium Tax Charge: Various states and subdivisions impose a tax on
------------------
premiums received by insurance companies. Premium taxes vary from
state to state. The percentage deducted from each premium varies
based on the governing jurisdiction of the contract.
DAC Tax Charge: The DAC tax charge is equal to 1% of all premiums paid
--------------
in all contract years.
Charges are deducted monthly from the cash value of each policy to
compensate Security Equity for certain administrative costs, the
cost of insurance, and optional rider benefit charges.
(Continued)
<PAGE> 225
3
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
Administrative Costs: Security Equity has responsibility for the
--------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the
maintenance of each policy and the Separate Account, Security
Equity assesses a monthly administrative charge against each
policy. This monthly charge is $4.50 per policy. This cost may
change, but is guaranteed not to exceed $8.00 per month per
policy.
Cost of Insurance: The cost of insurance is deducted on each
-----------------
monthly anniversary for the following policy month. Because the
cost of insurance depends upon a number of variables, the cost
varies for each policy month. The cost of insurance is
determined by multiplying the applicable cost of insurance rate
by the net amount at risk each policy month.
Optional Rider Benefit Charges: This monthly deduction includes
------------------------------
charges for any additional benefits provided by rider.
In addition to the above policy charges, a daily charge against the
operations of each Division is made for the mortality and expense
risks assumed by Security Equity. The mortality and expense risk
charge assessed against each Division will never exceed an annual
effective rate of .50% of the policy's Separate Account value
attributable to that Division. Currently, the amount of this
charge is an annual effective rate of .35% of the Separate Account
value, which is equivalent to .000957233% of the Separate Account
value attributable to the Division on a daily basis. The
mortality risk assumed by Security Equity under the contract is
that insureds may, on average, live for shorter periods of time
than estimated. The expense risk assumed by Security Equity under
the contract is the risk that the cost of issuing and
administering the contract may be more than estimated.
(4) Purchases and Sales of Shares
-----------------------------
During the period ended December 31, 1996, purchases and proceeds from
the sales pertaining to the Separate Account were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
General American Money Market Fund $ 16,055,033 9,427,292
Wells Fargo Bank Asset Allocation Fund 9,287 545
Fidelity Growth Fund 6,026,650 2,657,607
Fidelity Investment Grade Fund 4,617,226 964,149
Fidelity Index 500 Fund 3,420,037 996,124
Evergreen VA Fund 3,434,893 34,167
Evergreen Foundation Fund 1,740,138 17,279
Evergreen Growth and Income Fund 3,434,170 36,201
========== =========
</TABLE>
There were no purchases or sales for the Fidelity Asset Manager Fund,
Bankers Trust Emerging Market Fund, Bankers Trust Liquid Asset
Fund, Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
(Continued)
<PAGE> 226
4
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(5) Unit Activity
-------------
For the year ended December 31, 1996, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund 8,266,085 13,774,894 (8,722,645) 13,318,334
Wells Fargo Bank
Asset Allocation
Fund 3,253 5,521 157 8,931
Fidelity Growth Fund 2,774 1,081,685 1,128,281 2,212,740
Fidelity Investment Grade Fund - 1,607,694 1,516,544 3,124,238
Fidelity Index 500 Fund - 653,667 908,293 1,561,960
Evergreen VA Fund - 1,569,119 1,658,426 3,227,545
Evergreen Foundation Fund - 755,933 829,278 1,585,211
Evergreen Growth and Income
Fund - 1,565,607 1,658,435 3,224,042
========= ========== ========== ==========
</TABLE>
For the period September 1, 1995 (inception) to December 31, 1995,
transactions in accumulation units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund - 8,273,816 (7,731) 8,266,085
Wells Fargo Bank
Asset Allocation
Fund - - 3,253 3,253
Fidelity Growth Fund - - 2,774 2,774
========== ========= ====== =========
</TABLE>
There have been no accumulation of units for the Fidelity Asset Manager
Fund, Bankers Trust Emerging Market Fund, Bankers Trust Liquid
Asset Fund, Bankers Trust Limited Maturity Bond Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
<PAGE> 227
Schedule
--------
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Schedule of Investments
December 31, 1996
<CAPTION>
Number of Market
shares value
------ -----
<S> <C> <C>
General American Money Market Fund 869,269 $ 14,988,772
Wells Fargo Bank Asset Allocation Fund 1,094 12,498
Fidelity Growth Fund 115,038 3,582,291
Fidelity Investment Grade Fund 304,130 3,722,557
Fidelity Index 500 Fund 29,717 2,648,716
Evergreen VA Fund 313,488 3,576,902
Evergreen Foundation Fund 160,392 1,814,032
Evergreen Growth and Income Fund 305,794 3,617,537
======= ==========
</TABLE>
There were no investments in the Fidelity Asset Manager Fund, Bankers
Trust Emerging Market Fund, Bankers Trust Liquid Asset Fund,
Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund.
<PAGE> 228
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company:
We have audited the accompanying balance sheets of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the related statements
of operations, stockholder's equity, and cash flows for each of the years in
the three-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 4, 1997
<PAGE> 229
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1996 and 1995
<CAPTION>
================================================================================================
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Bonds, at fair value $ 58,058,439 63,256,127
Policy loans 5,081,949 4,524,903
Cash and cash equivalents 5,534,380 1,977,082
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 68,674,768 69,758,112
Reinsurance benefits recoverable:
Future policy benefits 6,436,700 7,221,329
Policy and contract claims 2,048,247 1,704,918
Accrued investment income 1,230,483 1,279,216
Goodwill 1,349,013 1,428,369
Deferred policy acquisition costs 3,658,233 1,471,754
Value of business acquired 2,461,000 2,441,000
Deferred tax asset 3,403,349 2,251,570
Other assets 877,289 1,250,035
Separate account assets 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total assets $206,764,516 150,079,515
================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------------------------------------
Reserve for future policy benefits 54,516,590 55,520,856
Policy and contract claims 1,494,338 2,176,837
Other policyholders' funds 21,723 25,064
Advance premiums 1,861,279 1,057,064
Other liabilities and accrued expenses 6,622,653 2,290,147
Payable to affiliates 75,510 51,785
Separate account liabilities 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total liabilities 181,217,527 122,394,965
- ------------------------------------------------------------------------------------------------
Commitments and contingencies (note 10)
Stockholder's equity:
Common stock, par value $25; 100,000 shares authorized,
issued, and outstanding 2,500,000 2,500,000
Additional paid-in capital 27,447,892 27,447,892
Net unrealized gain on investments, net of taxes 59,112 1,990,132
Retained deficit (4,460,015) (4,253,474)
- ------------------------------------------------------------------------------------------------
Total stockholder's equity 25,546,989 27,684,550
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $206,764,516 150,079,515
================================================================================================
See accompanying notes to financial statements.
</TABLE>
1
<PAGE> 230
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Operations
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
===============================================================================================
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Premiums and contract charges $ 7,434,043 6,379,803 9,025,429
Net investment income 4,546,544 4,699,713 4,095,545
Other income 19,053 272 843,891
Realized investment gains (losses) 313,185 (179,830) (515,975)
- -----------------------------------------------------------------------------------------------
Total revenues 12,312,825 10,899,958 13,448,890
- -----------------------------------------------------------------------------------------------
Benefits and expenses:
Policy benefits 3,309,410 3,234,062 2,539,611
Policy surrenders, net 1,635,498 1,016,535 1,786,502
Change in reserve for future policy benefits (1,893,195) (2,791,166) 1,296,603
Interest credited 2,437,432 2,391,220 2,349,814
Commissions, net of capitalized costs 1,403,608 1,283,902 3,930,807
General and administrative expenses 4,795,193 4,966,525 5,531,872
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired, net (20,000) (28,000) (50,000)
Other expenses 849,064 619,517 1,131,898
- -----------------------------------------------------------------------------------------------
Total benefits and expenses 12,596,366 10,771,951 18,596,461
- -----------------------------------------------------------------------------------------------
Income (loss) from operations before
federal income tax expense (benefit) (283,541) 128,007 (5,147,571)
- -----------------------------------------------------------------------------------------------
Federal income tax expense (benefit):
Current 15,000 -- --
Deferred (92,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Total Federal income tax expense
(benefit) (77,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (206,541) 63,721 (4,317,195)
===============================================================================================
See accompanying notes to financial statements.
</TABLE>
2
<PAGE> 231
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
Net
unrealized
Additional gain (loss) on Total
Common paid-in investments, Retained stockholder's
stock capital net of taxes deficit equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $2,500,000 17,447,892 -- -- 19,947,892
Net loss -- -- -- (4,317,195) (4,317,195)
Contribution of capital from Parent -- 10,000,000 -- -- 10,000,000
Change in net unrealized gain
(loss) on investments -- -- (4,061,215) -- (4,061,215)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 2,500,000 27,447,892 (4,061,215) (4,317,195) 21,569,482
Net income -- -- -- 63,721 63,721
Change in net unrealized gain
(loss) on investments -- -- 6,051,347 -- 6,051,347
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 2,500,000 27,447,892 1,990,132 (4,253,474) 27,684,550
Net loss -- -- -- (206,541) (206,541)
Change in net unrealized gain
(loss) on investments -- -- (1,931,020) -- (1,931,020)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $2,500,000 27,447,892 59,112 (4,460,015) 25,546,989
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 232
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (206,541) 63,721 (4,317,195)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Change in:
Reinsurance benefits ceded 441,300 3,844,903 (1,354,981)
Accrued investment income 48,733 (36,253) (279,331)
Other assets 372,746 (824,660) (164,367)
Deferred policy acquisition costs, net (2,186,479) (1,471,754) --
Policy liabilities (1,004,266) (1,345,723) 2,392,502
Policy and contract claims (682,499) (2,880,980) 2,268,697
Other policyholders' funds (3,341) 2,425 534
Federal income tax payable 15,000 -- --
Advance premiums 804,215 393,064 664,000
Other liabilities and accrued expenses 4,317,506 190,733 1,295,393
Payable to affiliates 23,725 (17,141) (224,158)
Accretion of bond premiums, net 189,350 221,543 536,812
Deferred tax expense (benefit) (92,000) 64,286 (830,376)
Net (gain) loss on sale of investments (313,185) 179,830 515,975
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired (20,000) (28,000) (50,000)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,783,660 (1,564,650) 532,859
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investments (12,790,361) (17,056,300) (26,813,376)
Sale or maturity of investments 15,141,063 19,355,372 16,780,012
Increase in policy loans, net (557,046) (893,507) (747,167)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 1,793,656 1,405,565 (10,780,531)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Contribution of capital from Parent -- -- 10,000,000
Policyholder account balances:
Deposits on interest-sensitive life contracts 48,448,968 18,382,186 35,046,849
Transfers to separate account for
interest-sensitive life contracts, net (48,468,986) (27,178,119) (26,250,945)
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (20,018) (8,795,933) 18,795,904
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 3,557,298 (8,955,018) 8,548,232
Cash and cash equivalents at beginning of year 1,977,082 10,932,100 2,383,868
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,534,380 1,977,082 10,932,100
=========================================================================================================================
Supplemental disclosure of cash flow information -
taxes paid $ -- 20,000 --
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
4
<PAGE> 233
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1996 and 1995
=============================================================================
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Equity Life Insurance Company (SELIC or the Company) is a
wholly owned subsidiary of General American Life Insurance Company
(General American or the Parent). On December 31, 1993, Security
Mutual Life Insurance Company of New York (Security Mutual) sold
100% of the Company's stock to General American, as approved by
the State of New York Department of Insurance.
In 1986, the Company commenced direct writing of universal life
and term business, and in 1987 began marketing a single premium
whole life policy. In 1984, the Company began assuming single
premium deferred annuity (SPDA) and other insurance business
through reinsurance agreements with Security Mutual. The SPDA and
ordinary life insurance blocks of business were recaptured by
Security Mutual in 1992.
SELIC is licensed in 40 states and the District of Columbia.
Insurance operations have generally been limited to the sale of
individual life insurance products (term and universal life) made
through the general agency system, including career agents and
brokers.
With the sale of SELIC by Security Mutual to General American,
SELIC's activities have been redirected to serving the insurance
needs of publicly held corporations and New York state residents.
Additionally, SELIC focuses on accessing numerous and alternative
distribution channels in addition to a general agency system.
SELIC markets Corporate Owned Life Insurance (COLI) primarily
through specially designed variable products.
The acquisition of Security Equity by General American was
accounted for as a purchase transaction and, accordingly, the
purchase price was allocated to the assets and liabilities
acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. These allocations have
been reflected, or "pushed down," in the financial statements of
the Company. The total purchase price of $19,947,892 was
allocated among the fair value of tangible net assets of
$15,997,813, value of business acquired of $2,363,000, and
goodwill of $1,587,079 at the date of acquisition.
The accompanying financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of
financial statements requires the use of estimates by management
which affect the amounts reflected in the financial statements.
Actual results could differ from those estimates.
The significant accounting policies of the Company are as follows:
(a) RECOGNITION OF POLICY REVENUE AND RELATED EXPENSES
Policy revenue recognition varies depending upon the type of
insurance product. For traditional life products with fixed and
guaranteed premiums and benefits, such as whole life and term
insurance policies, premiums are recognized when due. Benefits
and other expenses
5 (Continued)
<PAGE> 234
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
of these products are associated with earned premiums and other
sources of earnings so as to result in recognition of profits
over the life of the contracts. This association is
accomplished by means of the provision for liabilities for
future benefits and the deferral and amortization of policy
acquisition costs. Premiums collected on universal life-type
policies are reported as deposits to the policyholder account
balance and not as income to SELIC. Income to SELIC on these
policies consists of the assessments for mortality costs,
surrenders, and expenses.
(b) Investment Securities
At December 31, 1996 and 1995, all long-term securities are
carried at market value with the unrealized gain (loss), net of
tax impact, being reflected as a separate component of
stockholder's equity as the Company considers all long-term
securities as available-for-sale. Short-term investments are
carried at cost which approximates market value. Policy loans
are valued at aggregate unpaid balances. The fair value of
policy loans is assumed to equal the carrying value because the
loans have no fixed maturity date and, therefore, it is not
practicable to determine a fair value.
Realized gains or losses on the sale of securities are
determined on the basis of specific identification and include
the impact of any related amortization of premium or accretion
of discount which is generally computed consistent with the
interest method.
(c) Value of Business Acquired
Value of business acquired (VOBA) represents the present value
of future profits resulting from the acquisition of insurance
policies in a purchase transaction. VOBA is amortized in
proportion to the estimated premiums or gross profits,
depending on the type of contract, with accretion of interest
on the unamortized discounted balance. In 1996, 1995 and 1994,
amortization of VOBA was $121,000, $112,000 and $89,000, and
the accretion of interest on the unamortized balance was
$140,000 and $139,000, respectively. The carrying value of
VOBA is periodically evaluated to ascertain recoverability from
future operations. Impairment would be recognized in current
operations when determined.
(d) Goodwill
Goodwill, representing the excess of purchase price over the
fair value of assets acquired, is amortized on a straight-line
basis over 20 years. The carrying value of goodwill is
periodically evaluated to ascertain recoverability from future
operations. Impairment would be recognized in current
operations when determined.
(e) Reserve for Future Policy Benefits
Liabilities for future benefits on life policies are
established in amounts adequate to meet the estimated future
obligations on policies in force. Liabilities for future
policy benefits on certain life insurance policies are computed
using the net level premium method and are based upon
assumptions as to future investment yield, mortality, and
withdrawals. Mortality and
6 (Continued)
<PAGE> 235
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
withdrawal assumptions for all policies have been based on
various actuarial tables which are consistent with the
Company's own experience. Liabilities for future benefits on
certain long-duration life insurance contracts are carried at
accumulated policyholder values.
(f) Federal Income Taxes
The Company is taxed as a life insurance company under the
Deficit Reduction Act of 1984. The Company establishes
deferred taxes under the asset and liability method of SFAS
No.109, Accounting for Income Taxes, and deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
those temporary differences are expected to be recovered or
settled. Under SFAS No.109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company filed its federal income tax return on a
consolidated basis with Security Mutual prior to 1994. The
Company will file its federal income tax return as a separate
entity for 1996, consistent with 1995 and 1994.
(g) Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on a
basis consistent with terms of the risk transfer reinsurance
contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable
reinsurance ceded for future policy benefits and claim
liabilities have been reported as assets for these items, and
commissions and expense allowances received in connection with
reinsurance ceded have been accounted for in income as earned
over the anticipated reinsurance contract life. Reinsurance
does not relieve the Company from its primary responsibility to
meet claim obligations.
(h) Deferred Policy Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable
from future premiums. Such costs may include commissions, as
well as certain costs of policy issuance and underwriting. In
1996 and 1995, the Company deferred $2.4 million and $1.5
million, respectively, in acquisition costs related to interest
sensitive products and recognized amortization of $168,000 and
$12,000, respectively, based on the estimated gross profits of
the underlying business. The Company did not defer any policy
acquisition costs in 1994 as a result of the nature of the
business written.
(i) Separate Account Business
The assets and liabilities of the separate account represent
segregated funds administered and invested by the Company for
purposes of funding variable life insurance contracts for the
7 (Continued)
<PAGE> 236
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
exclusive benefit of variable life insurance contract holders.
The Company receives administrative fees from the separate
account and retains varying amounts of withdrawal charges to
cover expenses in the event of early withdrawals by contract
holders. The assets and liabilities of the separate account
are carried at market value.
(j) FAIR MARKET DISCLOSURES
Fair value disclosures are required under SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. Such
fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instrument. These estimates do not reflect any
result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Although fair
value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates
should be used with care. The following assumptions were used
to estimate the fair market value of each class of financial
instrument for which it was practicable to estimate fair value:
Invested assets - Fixed maturities are valued using quoted
---------------
market prices, if available. If quoted market prices are not
available, fair value is estimated using quoted market prices
of similar securities. The carrying value of policy loans
approximates fair value.
Policyholder account balances - The fair value of policyholder
-----------------------------
account balances is equal to the discounted estimated future
cash flows using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts
with maturities consistent with those remaining for the
contracts being valued. The carrying value approximates fair
value at December 31, 1996 and 1995.
Cash and short-term investments - The carrying amount is a
-------------------------------
reasonable estimate of fair value.
(k) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial
paper, and repurchase agreements with original or remaining
maturities of 90 days or less when purchased.
(l) Reclassification
Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1995 presentation.
8 (Continued)
<PAGE> 237
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(2) INVESTMENTS
The sources of net investment income (principally interest) follow:
<TABLE>
<CAPTION>
================================================================================================
1996 1995 1994
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $4,291,428 4,458,159 3,840,763
Short-term investments 75,110 43,781 133,755
Policy loans and other 260,276 294,298 216,942
------------------------------------------------------------------------------------------------
4,626,814 4,796,238 4,191,460
Investment expenses 80,270 96,525 95,915
------------------------------------------------------------------------------------------------
Net investment income $4,546,544 4,699,713 4,095,545
================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 and 1995 are shown below. Market value is based upon market
prices obtained from independent pricing services which approximate
fair value.
<TABLE>
<CAPTION>
=========================================================================================================
1996
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 3,962,315 127,349 6,292 4,083,372
Corporate securities 40,917,820 1,299,830 902,482 41,315,168
Mortgage-backed securities 13,087,363 29,539 457,003 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 1,456,970 1,366,029 58,058,439
=========================================================================================================
</TABLE>
9 (Continued)
<PAGE> 238
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 9,299,846 287,844 273,583 9,314,107
Corporate securities 40,799,139 3,013,425 388,584 43,423,980
Mortgage-backed securities 10,095,402 432,140 9,502 10,518,040
---------------------------------------------------------------------------------------------------------
$60,194,387 3,733,409 671,669 63,256,127
=========================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
=========================================================================================================
Estimated
Amortized market
cost value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,257,740 1,255,992
Due after one year through five years 2,404,896 2,384,096
Due after five years through ten years 6,160,517 5,951,583
Due after ten years 35,056,982 35,806,869
Mortgage-backed securities 13,087,363 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 58,058,439
=========================================================================================================
</TABLE>
Proceeds from the sale, call, and maturity of investments in bonds
1996, 1995, and 1994 were $15,141,063, $19,355,372, and $16,780,012,
respectively. Gross gains of $381,856, $428,522, and $119,699 and gross
losses of $68,671, $608,352, and $635,674 were realized on those sales
in 1996, 1995, and 1994, respectively.
The Company has bonds on deposit with various state insurance
departments with an amortized cost of approximately $2,411,000 and
$2,421,000 at December 31, 1996 and 1995, respectively.
(3) REINSURANCE
The Company reinsures certain risks with other insurance companies as
the Company sets a maximum retention amount (currently $125,000)
to help reduce the loss on any single policy.
10 (Continued)
<PAGE> 239
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with affiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Reinsurance premiums ceded $1,632,262 1,956,568 2,391,067
Policy benefits ceded 1,397,188 305,947 2,340,522
Commissions and expenses ceded -- -- 169,453
- ----------------------------------------------------------------------------------------------------
</TABLE>
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with nonaffiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with nonaffiliates:
Reinsurance premiums ceded $5,744,060 5,489,407 6,299,344
Policy benefits ceded 3,824,327 2,682,132 3,050,824
Commissions and expenses ceded -- -- 674,438
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Company remains contingently liable with respect to any
reinsurance ceded and would become actually liable if the assuming
company was unable to meet its obligations under the reinsurance
treaty.
(4) FEDERAL INCOME TAXES
A reconciliation of the Company's "expected" federal income tax
expense (benefit), computed by applying the federal U.S. corporate
tax rate of 35% to income (loss) from operations before federal
income tax expense (benefit), is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $(99) 45 (1,802)
Amortization of intangibles, net 21 18 10
Other, net 1 1 962
- ----------------------------------------------------------------------------------------------------
Federal income tax expense (benefit) $(77) 64 (830)
====================================================================================================
</TABLE>
11 (Continued)
<PAGE> 240
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
================================================================================
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
December 31, 1996 and 1995 are presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
===========================================================================================
1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy acquisition costs $1,746 1,157
Reserves 1,694 2,072
Capital loss carryforward 148 243
Net operating loss carryforward -- 323
Other, net 685 410
-------------------------------------------------------------------------------------------
Total gross deferred tax assets 4,273 4,205
Less valuation allowance -- --
-------------------------------------------------------------------------------------------
Net deferred tax assets 4,273 4,205
-------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 80 1,097
Other, net 790 856
-------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 870 1,953
-------------------------------------------------------------------------------------------
Net deferred tax asset $3,403 2,252
===========================================================================================
</TABLE>
On December 31, 1993, General American purchased 100% of the Company.
Pursuant to the acquisition, the election was made under Internal
Revenue Code Section 338(h)(10) to treat the purchase of stock as a
purchase of assets for tax purposes. As a result, a revaluation of
the tax bases of the Company's assets and liabilities was made in
connection with the acquisition.
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. In
assessing the realization of deferred tax assets, the Company considers
whether it is more likely than not that the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Although the
Company has a limited history of earnings, its Parent does have a long
history of earnings. Pursuant to Internal Revenue Service regulations,
the Company cannot file a consolidated tax return with its Parent until
five years following the acquisition. However, after five years, the
Company will be able to file a consolidated tax return with its Parent,
and realization of the gross tax asset will not be dependent solely on
the Company's ability to generate its own taxable income. General
American has a proven history of earnings and it appears more likely
than not that the Company's gross deferred tax asset will
ultimately be fully realized.
The Company filed its federal income tax return on a consolidated basis
with Security Mutual prior to 1994. In connection with the Company's
transfer of stock ownership, Security Mutual agreed to assume all
unpaid tax liability incurred prior to the date of sale.
12 (Continued)
<PAGE> 241
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(5) RELATED-PARTY TRANSACTIONS
The Company purchases certain administrative services from
General American. Charges for services performed are based upon
personnel and other costs involved in providing such services.
The expenses incurred for these services were $529,000, $463,200,
and $407,000 for 1996, 1995, and 1994, respectively.
Effective January 1, 1994, the Company entered into an
administrative service agreement with Security Mutual. Under the
agreement, Security Mutual provides for the administration of
policies issued through December 31, 1993. The expenses incurred
for these services were $1,621,268, $1,842,320, and $1,980,812 for
1996, 1995, and 1994, respectively.
(6) PENSION, INCENTIVE, AND HEALTH AND LIFE INSURANCE BENEFIT PLANS
Associates of SELIC participate in a noncontributory multi-employer
defined benefit pension plan jointly sponsored by SELIC and
General American. The benefit is accrued are based on the number
of years of service and compensation level of each participant.
No pension expense was recognized in 1996, 1995, or 1994 due to
overfunding of the plan.
In addition, in 1995 SELIC adopted an associate bonus plan applicable
to full-time exempt associates. Bonuses are based on an economic
value-added model prepared annually by the Company. Total bonuses
accrued to Company employees were $144,000 and $59,500 in 1996 and
1995, respectively. In 1994, the Company accrued bonuses of
$150,000 under a nonrelated associate bonus plan.
SELIC provides for certain health care and life insurance benefits
for retired employees in accordance with SFAS No. 106, Employer's
Accounting for Postretirement Benefits Other Than Pensions. SFAS
No. 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services.
SFAS No. 106 allows recognition of the cumulative effect of the
liability in the year of the adoption or the amortization of the
transition obligation over a period of up to 20 years. The
Company has elected to recognize the initial postretirement
benfit obligation of approximately $16,427 over a period of 20
years. The unrecognized initial postretirement benefit obligation
was approximately $13,962 and $14,784 at December 31, 1996 and
1995, respectively. The net periodic post-retirement benefit cost
for the years ended December 31, 1996, 1995, and 1994 was $8,490,
$6,711, and $6,232, respectively. This includes expected costs of
benefits for newly eligible or vested employees, interest costs,
gains and losses from differences between actuarial and actual
experience, and amortization of the initial postretirement benefit
obligation. The accumulated post-retirement benefit obligation
was approximately $28,981 and $17,089 at December 31, 1996 and
1995, respectively. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% for all
years. The health care cost trend rates were 9% for the Indemnity
Plan, 8% for the HMO Plan, and 9% for the Dental Plan. These
rates were graded to 5.25% over the next 14 years. A one
percentage point increase in the assumed health care cost trend
rates would increase the December 31, 1996 accumulated
postretirement obligation by 12.9%, and the estimated service cost
and interest cost components of the net periodic postretirement
benefit cost for 1996 by 16.0%.
13 (Continued)
<PAGE> 242
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(7) STATUTORY FINANCIAL INFORMATION
The Company is subject to financial statement filing requirements of
the State of New York Department of Insurance, its state of
domicile, as well as the states in which it transacts business.
Such financial statements, generally referred to as statutory
financial statements, are prepared on a basis of accounting which
varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include:
(1)charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed
using required valuation standards which may vary in methodology
utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting
and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield
stabilization on fixed maturity dispositions prior to maturity
with asset valuation reserves based on statutorily determined
formulae and interest stabilization reserves designed to level
yields over their original purchase maturities; (5) deferred
premiums provided for statutory mean reserves; (6) annuity
contract deposits represent funds deposited by policyholders and
are included in premiums or contract charges; (7) non-recognition
of certain assets as nonadmitted through a direct charge to
surplus; and (8) valuation of investments in bonds at amortized
cost..
The stockholder's equity (surplus) and net loss of the Company at
December 31, 1996, 1995, and 1994, as determined using statutory
accounting practices, is summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================================
1996 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surplus as reported to regulatory authorities $12,441,081 15,125,968 17,264,148
Net loss as reported to regulatory authorities (2,778,942) (1,465,539) (3,779,205)
=========================================================================================================
</TABLE>
(8) DIVIDEND RESTRICTIONS
Dividend payments by the Company are restricted by state insurance
laws as to the amount that may be paid as well as the prior notice
and approval of the State of New York Department of Insurance.
The Company did not pay a dividend in 1996, 1995, or 1994.
(9) RISK-BASED CAPITAL
The insurance departments of various states, including the Company's
domiciliary state of New York, impose risk-based capital (RBC)
requirements on insurance enterprises. The RBC calculation serves
as a benchmark for the regulation of life insurance companies by
state insurance regulators. The requirements apply various
weighted factors to financial balances or activity levels based on
their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory authorities is required based on the ratio
of a company's actual total adjusted capital (sum of capital and
surplus and asset valuation reserve) to control levels determined
by the RBC formula. At December 31, 1996, the Company's actual
total adjusted capital was in excess of minimum levels which would
require action by the Company or regulatory authorities under the
RBC formula.
14 (Continued)
<PAGE> 243
SECURITY EQUITY INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(10) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under noncancellable
leases which expire in August 1998. The future minimum lease
obligations under the terms of the leases are summarized as
follows:
<TABLE>
<CAPTION>
========================================================================================
<S> <C>
Year ended December 31:
1997 $ 84,600
1998 58,600
----------------------------------------------------------------------------------------
$143,200
========================================================================================
</TABLE>
Rent expense totaled approximately $82,700, $83,900, and $50,700
in 1996, 1995, and 1994, respectively.
(11) SUBSEQUENT EVENT
Subsequent to December 31, 1996, a policyholder of the Company
utilized the "free-look" option of their variable life contract
which resulted in the return of approximately $13 million in
contract deposits to the policyholder and the nonrealization of
approximately $1.6 million in commissions and related expenses by
the Company. The impact to the Company's net income and financial
position is not significant. Management is maintaining continuing
discussions with this policyholder to provide an opportunity to
retain this business in 1997.
15
<PAGE> 244
PROSPECTUS
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY SECURITY EQUITY LIFE INSURANCE COMPANY
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
PROSPECTUS DATED MAY 1, 1997
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE
SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
<PAGE> 245
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE, SUITE 303
ARMONK, NY 10504
TEL:(914) 273-1290
This Prospectus describes the Individual Flexible Premium Variable Life
Insurance Contract (the "Contract") offered by Security Equity Life Insurance
Company ("SELIC" or the "Company"). The Contract is designed to provide
lifetime insurance protection to age 100 and at the same time provide maximum
flexibility to vary premium payments and change the level of death benefits
payable under the Contract. This flexibility allows a Contract Holder to
provide for changing insurance needs under a single insurance Contract. A
Contract Holder also has the opportunity to allocate Net Premiums among
several investment portfolios with different investment objectives.
The Contract provides for: (1) a Net Cash Value that can be obtained by
surrendering the Contract; (2) Contract loans; and (3) a Death Benefit
payable at the Insured's death. Contract Holders may also attach a rider
that amends the Contract to instead provide insurance coverage on the lives
of two Insureds, with proceeds payable upon the death of the last surviving
Insured. As long as a Contract remains in force, the Death Benefit will not
be less than the current Face Amount of the Contract. A Contract will remain
in force so long as its Net Cash Value is sufficient to pay certain monthly
charges imposed in connection with the Contract.
During the "Free Look" period, Net Premiums are allocated to the Money Market
Division as specified in Appendix A. After the end of the "Free Look"
period, Net Premiums may be allocated to one or more of the Available
Divisions of the Separate Account or to the Fixed Fund. If Net Premiums are
allocated to the Separate Account, the duration of the Contract and the
amount of the Insurance Account Value will vary to reflect the investment
performance of the Available Divisions selected by the Contract Holder, and
depending on the Death Benefit option elected, the amount of the Death
Benefit above the minimum may also vary with that investment performance. The
Contract Holder bears the entire investment risk for all amounts allocated to
the Separate Account; there is no minimum guaranteed Insurance Account Value.
Each Available Division of the Separate Account 13 will invest in one of the
Underlying Portfolios shown in Appendix A. The accompanying Prospectuses for
these portfolios describe the investment objectives and policies, and the
risks of the portfolios. This Prospectus generally describes only the
portion of the Contracts involving the Available Divisions of the Separate
Account. For a brief summary of the Fixed Fund, see "The Fixed Fund.
<PAGE> 246
It may not be advantageous to purchase a Contract as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another Flexible Premium Variable
Life Insurance Contract. Within certain limits, a Contract Holder may return
the Contract, or convert it to a Contract that provides benefits that do not
vary with the investment results of Available Divisions by exercising the
Conversion Right.
This Prospectus must be accompanied or preceded by the current prospectuses
for the Underlying Portfolios listed in Appendix A.
THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK OR DEPOSITORY INSTITUTION, AND THE CONTRACT IS NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY, AND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Contracts are not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
Please read this Prospectus carefully and retain it for future reference.
The date of this Prospectus is May 1, 1997.
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<PAGE> 247
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
Definitions 6
Summary of Contract 10
Explanation of a Case 10
Purpose of the Contract 10
The Contract Holder and Beneficiary 11
Availability of the Contract 12
Joint Insureds 12
Contract Values 12
The Separate Account 12
Death Benefit 13
Premiums 13
Charges and Deductions 13
Contract Loans 15
Surrender and Partial Withdrawals 15
Termination 16
Illustrations 16
Replacement of Existing Coverage 16
Tax Considerations 16
Free Look and Conversion Rights 17
Information About SELIC 17
The Separate Account 18
The Contract 19
Availability of Insurance Coverage 19
Evidence of Insurability 21
Premiums 21
Contract Values 23
Transfers 26
Contract Loan Privilege 27
Surrender and Partial Withdrawals 29
Death Benefits Under the Contract 31
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<PAGE> 248
<CAPTION>
TABLE OF CONTENTS
(continued)
PAGE
<S> <C>
Charges and Deductions 36
Premium Load 36
Daily Charges 38
Monthly Charges 39
Underwriting Charges 41
Annual Charges 42
Other Charges 42
Termination 43
Maturity Date 43
Termination for Insufficient Net Cash Value 43
Reinstatement of a Contract Terminated for Insufficient Value 44
The Fixed Fund 44
General Description 44
Allocation of Amounts to the Fixed Fund 45
Fixed Fund Benefits 45
Fixed Fund Insurance Account Value 45
Fixed Fund Transfers, Surrenders, Partial Withdrawals and Contract Loans 47
Federal Income Tax Considerations 47
Additional Provisions of the Contract 53
Addition, Deletion, or Substitution of Investments 53
Incontestability 55
Conversion Rights 55
Misstatement of Age or Sex 55
Suicide 55
Availability of Funds 56
Entire Contract 56
Representations in Application 56
Contract Application and Contract Schedules 57
Right to Amend Contract 57
Computation of Contract Values 57
Claims of Creditors 57
Notice 57
Assignments 58
Construction 58
Severability 58
State Variations 58
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<PAGE> 249
<CAPTION>
TABLE OF CONTENTS
(continued)
PAGE
<S> <C>
Unisex Requirements Under Montana Law 58
Records and Reports 58
Sale of the Contract 59
Voting Rights 59
State Regulation of the Company 60
Management of the Company 61-63
Legal Matters 64
Legal Proceedings 64
Experts 64
Additional Information 64
Financial Statements 64
Appendix A - Underlying Portfolios A1
Appendix B - Contract Riders B1-B7
Appendix C - Illustrations of Death Benefits and Net Insurance Account Value C1-C11
</TABLE>
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<PAGE> 250
DEFINITIONS
See Appendix B for modifications to Definitions in the event that riders are
added to the Contract.
ATTAINED AGE: The Insured's Issue Age under the Contract plus the number of
completed Contract Years.
APPLICATION: The application form that must be completed by any purchaser of
the Contract, before the Contract can be issued.
AVAILABLE DIVISION: A Division of the Separate Account to which Net Premiums
may be allocated or Separate Account Value or Fixed Fund Insurance Account
Value may be transferred under the Contracts. Each Available Division
invests exclusively in the shares of a corresponding Underlying Portfolio
listed in Appendix A.
BENEFICIARY: The person(s), entity or entities named on SELIC's records to
receive the insurance proceeds payable under the Contract after the Insured
dies.
BORROWED FUND: An account established in SELIC's General Account for any
amounts transferred from the Available Divisions and the Fixed Fund and held
as collateral for Contract Loans. (See "Contract Loan Privilege").
CASE: A grouping of one or more Contracts connected by a non-arbitrary
factor, presented to SELIC as a group. (An example of such a factor is a
common employer for the Insureds under each Contract in the grouping). (See
"Explanation of a Case").
CONTRACT: The Flexible Premium Variable Life Insurance Contract offered by
SELIC that is described in this Prospectus.
CONTRACT ANNIVERSARY: An anniversary of the Contract Date. It marks the
start of a new Contract Year.
CONTRACT DATE: The date used to begin calculating Monthly Charges and Annual
Charges under the Contract. The Contract Date is shown in the Contract.
CONTRACT HOLDER: The owner of the Contract, as shown in the records of
SELIC. All of the rights and benefits of the Contract belong to the Contract
Holder, unless otherwise stated in the Contract.
CONTRACT LOAN: An amount borrowed by the Contract Holder from the Insurance
Account Value of the Contract.
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<PAGE> 251
CONTRACT MONTH: Each one month period commencing on the Contract Date and on
each Monthiversary thereafter.
CONTRACT YEAR: Each successive twelve month period starting on the Contract
Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit payable to the Beneficiary when the Insured dies.
DEATH BENEFIT OPTION ACCUMULATION RATE: The rate at which Premiums are
accumulated for purposes of calculating Death Benefit Option 3.
DIVISION: A sub-account of the Separate Account. Only Available Divisions
(described in this Prospectus) are available for investment under the
Contracts.
EMPLOYER: A corporation, partnership, sole proprietorship, association,
trust, and other similar or related entity. Affiliated Employers are
considered one Employer.
EXCESS PREMIUM: Any amount of Premium paid in a Contract Year over and above
the Target Premium.
FACE AMOUNT: The amount of insurance under the contract, excluding any
Supplemental Term Insurance Amount. The Initial Face Amount on the Issue
Date is shown in the Contract. Thereafter, it may change in accordance with
the terms of the Contract.
FIXED FUND: The portion of the Insurance Account Value allocated to the
Company's General Account (excluding the Borrowed Fund).
GOVERNING JURISDICTION: The state or jurisdiction in which the Contract is
delivered and whose laws govern its terms. The Governing Jurisdiction is set
forth in the Contract.
HOME OFFICE: The principal administrative office of SELIC, which is located
at 84 Business Park Drive, Suite 303, Armonk, NY 10504.
INITIAL NET PREMIUM: The Initial Premium paid under the Contract less the
applicable Premium Load.
INITIAL PREMIUM: The first Premium paid under the Contract.
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<PAGE> 252
INSURANCE ACCOUNT VALUE: The total amount that a Contract provides for
investment at any time. It is equal to the total of the amounts credited to
the Contract Holder in the Separate Account, the Fixed Fund, and the Borrowed
Fund.
INSURED: The person whose life is insured under the terms of the Contract.
The Insured is shown in the Contract.
ISSUE AGE: The Insured's age at his/her nearest birthday as of the Contract
Date.
ISSUE DATE: The day the Initial Premium is received and accepted by SELIC.
This is also the date that insurance coverage becomes effective. All
Contract values based on the Separate Account are determined beginning on the
Issue Date. The Issue Date is shown in the Contract.
MATURITY DATE: The date on which the Contract will mature. The Maturity
Date is shown in the Contract.
MAXIMUM LOAN AMOUNT: The maximum amount of Insurance Account Value that can
be borrowed by the Contract Holder under the Contract.
MINIMUM INSURANCE COVERAGE: The minimum amount of Total Insurance Coverage,
which includes any Supplemental Term Insurance Amount, under the Contract.
It is currently $25,000.
MINIMUM PREMIUM: The Minimum Premium is equal to the Minimum Net Premium
plus any applicable Premium Load.
MINIMUM NET PREMIUM: The Minimum Net Premium at any time is equal to 12
times the Monthly Charges for the first month in the then current Contract
Year.
MONTHIVERSARY: The first day of each Contract Month. It is the day as of
which Monthly Charges are deducted from the Insurance Account Value. The
Monthiversary and the Contract Date coincide, except in months in which the
Monthiversary falls on a day which is not a Valuation Day. In such months,
the Monthiversary is deemed to fall on the next Valuation Day. If any
Monthiversary would fall on the 29th, 30th or 31st of a month that does not
have that number of days, then the Monthiversary is deemed to be the last day
of that month.
MONTHLY CHARGES: The Contract charges that are deducted monthly from
Insurance Account Value. Monthly Charges include the Administration Charge,
the Cost of Insurance Charge, any Monthly Charges for benefits provided by
Contract rider, and any charges for special insurance class rating. (See
"Charges and Deductions").
-8-
<PAGE> 253
NET AMOUNT AT RISK: The Net Amount at Risk is calculated on any
Monthiversary by subtracting the Insurance Account Value from the Death
Benefit, discounted one month at a 4.00% assumed annual effective interest
rate.
NET CASH VALUE: The Contract's Insurance Account Value minus any Contract
Loan balance and interest accrued thereon and unpaid.
NET PREMIUM: The amount of a Premium less applicable Premium Load.
PLANNED RENEWAL PREMIUM: An amount of Premium, specified in the
Application, which the Contract Holder anticipates will be paid in each
Contract Year after the first.
PREMIUM: Premiums are the payments made to SELIC under the Contract by the
Contract Holder to purchase insurance on the life of the Insured and to
contribute to the Insurance Account Value of the Contract. Each Premium
amount may consist of Target Premium, Excess Premium, or both.
PREMIUM LOAD: An amount deducted from each Premium prior to allocation of
the Premium to the Separate Account and/or the Fixed Fund. Premium Load
includes the Distribution Charge (comprised of a Premium Expense Load and a
Commission Charge), a Premium Tax Charge and a DAC Tax Charge.
SELIC: Security Equity Life Insurance Company, the issuer of the Contract.
SEPARATE ACCOUNT: A separate investment account established by the Board of
Directors of SELIC to support the benefits payable under the Contract. Each
Available Division of the Separate Account invests in a single corresponding
Underlying Portfolio.
SEPARATE ACCOUNT VALUE: The portion of the Contract's Insurance Account
Value invested in the Separate Account. It will be equal to the Contract's
Insurance Account Value, less the total of amounts in the Borrowed Fund and
in the Fixed Fund.
SUPPLEMENTAL TERM INSURANCE AMOUNT: The amount of insurance is provided by
the Supplemental Term Insurance Rider, if any. This amount is shown in the
Contract. The Supplemental Term Insurance Rider is described in Appendix B.
TARGET PREMIUM: An amount of Premium used to determine Premium Loads under
the Contract. The annual Target Premium is based upon the Face Amount and is
shown in the Contract. For Contracts with a Face Amount equal to the Minimum
Face Amount, the Target Premium will be zero (0).
-9-
<PAGE> 254
TOTAL INSURANCE COVERAGE: Total amount of insurance, including coverage
provided by any Supplemental Term Insurance Rider under the Contract.
UNDERLYING PORTFOLIO: An investment portfolio, managed by one or more
investment managers, the shares or units of which comprise the investment of
an Available Division of the Separate Account.
VALUATION DAY: A day that is a regular business day of SELIC and that the
New York Stock Exchange (or its successor) is open for trading. Each
Valuation Day ends at the Valuation Time.
VALUATION TIME: The close of trading on the New York Stock Exchange (or any
successor exchange), which is generally 4 p.m. Eastern Time.
VALUATION PERIOD: The period of time between Valuation Days. A Valuation
Period begins immediately after the Valuation Time on the previous Valuation
Day and ends as of the Valuation Time on the next succeeding Valuation Day.
SUMMARY OF THE CONTRACT
This summary provides a brief overview of the more significant aspects of the
Contract and should be read in conjunction with the detailed information
appearing elsewhere in this Prospectus. Further detail is provided in the
Contract, the Application, and the prospectuses for the Underlying
Portfolios. See Appendix B for modifications to this section in the event
that riders are added to the Contract.
EXPLANATION OF A CASE
Every Contract issued by SELIC will be part of a Case. A Case is a grouping
of one or more Contracts linked together by a non-arbitrary factor such as a
common Employer of each Insured under the Contracts. SELIC in its sole
discretion will determine what constitutes a Case. A Case may have one
Contract Holder (i.e., a single entity owns all the Contracts in the Case) or
as many Contract Holders as there are Contracts in the Case. The Premium
Load, Minimum Initial Premiums, and underwriting standards for an individual
Contract are determined based on the characteristics of the Case to which the
Contract belongs. (See "The Contract -- Charges and Deductions").
A Contract is the agreement between SELIC and the Contract Holder to provide
benefits on the life of an Insured. Every Contract will belong to a Case.
Each
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<PAGE> 255
Contract will be treated as an individual Contract, yet will also be linked
to the Case it belongs for purposes of determining certain Contract features
and charges.
PURPOSE OF THE CONTRACT
The Contract offers a means to obtain insurance protection relating to the
life of a person in whom the Contract Holder has an insurable interest. A
Death Benefit is payable to the applicable Beneficiary upon the death of the
Insured so long as the Contract remains in force. The accumulated values and
benefits under the Contract may be used by Contract Holders for any valid
purpose. Unlike traditional life insurance, which provides a guaranteed
Insurance Account Value, a Contract's Insurance Account Value will vary to
reflect investment results of the Available Divisions and interest credited
to the Fixed Fund.
Life insurance is not a short-term investment. Prospective Contract Holders
should evaluate the need for insurance and the Contract's long-term
investment potential and risks before purchasing a Contract.
THE CONTRACT HOLDER AND BENEFICIARY
The Contract Holder is the individual or entity set forth in the Application,
unless subsequently changed on the records of SELIC. The Contract Holder
retains all rights and responsibilities of ownership pertaining to its
interest in the Contract, including but not limited to, investment
allocation, payment of Premiums, borrowing, taking partial withdrawals, and
surrendering the Contract.
The Beneficiary is also named in the Application. The Contract Holder has
the right to change a revocable Beneficiary with prior written notice to
SELIC. The Beneficiary will receive all insurance benefits payable upon the
death of the Insured. UNLESS THE INSURED IS NAMED AS CONTRACT HOLDER, OR THE
------------------------------------------------------
CONTRACT HOLDER ASSIGNS THE RIGHT TO DESIGNATE THE BENEFICIARY TO THE
- ---------------------------------------------------------------------
INSURED, OR UNLESS OTHERWISE AGREED, THE INSURED HAS NO DIRECT OR INDIRECT
- --------------------------------------------------------------------------
INTEREST IN THE CONTRACT.
- ------------------------
The Contract is a long-term investment designed to provide a Death Benefit,
and should only be purchased for purposes consistent with these features.
The Death Benefit and Net Cash Value under Contracts in a Case may be used to
provide proceeds for various planning purposes. However, the Contracts are
not liquid investments: partial withdrawals may be currently taxable; and
Contract Loans and partial withdrawals may significantly affect current and
future Death Benefit proceeds and Net Cash Value, and cause Contracts to
lapse. (See "Termination -- Termination for Insufficient Net Cash Value"). In
addition, if the performance of the Available Divisions to which Insurance
Account Value is allocated is not sufficient to provide proceeds for the
specific planning purpose contemplated, or if insufficient premiums are paid
or Contract values
-11-
<PAGE> 256
maintained, then Contracts may not achieve the purpose for which they were
purchased, or may lapse. (See "Termination -- Termination for Insufficient Net
Cash Value"). Because the Contracts are designed to provide benefits on a
long-term basis, before purchasing Contracts for a specialized purpose, a
purchaser should consider whether the long-term nature of the Contract, and
the potential impact of any contemplated Contract Loans and partial
withdrawals, are consistent with the purpose for which the Contracts are being
considered. Using the Contracts for a specialized purpose may have tax
consequences. (See generally "Federal Income Tax Considerations," and in
particular, "Other Tax Consequences.")
AVAILABILITY OF THE CONTRACT
The Contract is offered only to individuals, corporations, partnerships, sole
proprietorships, associations, trusts, and other similar or related entities,
which satisfy certain suitability standards. The Contract may be purchased
to acquire insurance on the life of a person in whom the Contract Holder has
an appropriate insurable interest. Failure to establish an insurable
interest may result in adverse financial and tax consequences to the Contract
Holder.
JOINT INSUREDS
A rider may be added to the Contract to provide coverage on the lives of two
Insureds, with the Death Benefit payable on the death of the last surviving
Insured. Most of the discussions in this Prospectus referencing a single
Insured may also be read as though the single Insured were the two Insureds
under a joint Contract. Certain discussions in the Prospectus are modified
if a Joint and Last Survivor Rider is added to the Contract. (See Appendix B
- -- "Joint and Last Survivor Rider").
CONTRACT VALUES
Net Premiums are allocated to one or more Available Divisions and/or the
Fixed Fund. To the extent Net Premiums are allocated to the Available
Divisions, the Insurance Account Value will, and the Death Benefit may, vary
with the investment performance of the chosen Available Divisions. To the
extent Net Premiums are allocated to the Fixed Fund, the Insurance Account
Value will accrue interest at a guaranteed minimum rate (see "The Fixed
Fund"). To the extent that Net Premiums are allocated to the Available
Divisions of the Separate Account, the Contract Holder bears the entire
investment risk associated with the investments of the selected Available
Divisions, and there is no guaranteed minimum Insurance Account Value.
THE SEPARATE ACCOUNT
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<PAGE> 257
Several Divisions of the Separate Account are available for allocation of Net
Premiums paid under the Contract, subject to certain limitations set forth in
the Contract. (See "The Contract -- Premiums"). A list of each Available
Division --a Division of the Separate Account currently available under the
Contract for allocation of Net Premiums and transfers -- is set forth in
Appendix A of this Prospectus.
Each Available Division of the Separate Account invests its assets in shares
or units of an Underlying Portfolio managed by one or more investment
managers. Each Underlying Portfolio has a different investment objective, and
is described in the prospectus for the Underlying Portfolio which accompanies
this Prospectus.
In the future, Available Divisions may be added, and existing Available
Divisions may be deleted. The Contract Holder will be notified in writing of
any such change. (See "The Separate Account").
DEATH BENEFIT
Death Benefit proceeds are payable to the named Beneficiary when the Insured
under the Contract dies. The Death Benefit payable under the Contract will
depend upon the Death Benefit Option in effect for the Contract. So long as
the Contract remains in force, the minimum death benefit under each Death
Benefit Option will be at least equal to the current Face Amount of the
Contract. (See "The Contract -- Death Benefits Under the Contract").
PREMIUMS
A Contract Holder will have considerable flexibility under a Contract as to
both the timing and amount of Premiums. SELIC will not issue a Contract
unless it receives a Premium payment at least equal to the initial Minimum
Premium amount, which is equal to 12 times the Monthly Charges due under that
Contract in the first Contract Month, plus any applicable Premium Load. SELIC
may, in its sole discretion, require a reduced initial Minimum Premium in
connection with the purchase of certain Contracts. Each subsequent Premium
must be at least $50 per Contract. Subsequent Premiums may be paid at any
time and in any frequency, subject to certain restrictions. (See "The
Contract -- Premiums"). If the Initial Premium and subsequent Premiums prove
to be too low, insurance coverage under the Contract may cease.
The initial Net Premium will be allocated during the Free Look period to the
Money Market Division specified in Appendix A. After the Free Look period,
Separate Account Value will be allocated among the Available Divisions of the
Separate Account
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<PAGE> 258
and the Fixed Fund according to the Contract Holder's instructions as
specified in the Application or as subsequently changed prior to the end of
the Free Look period.
Insurance Account Value may be transferred among the Available Divisions of
the Separate Account and the Fixed Fund by written request, subject to
certain restrictions. Amounts may be transferred by dollar amounts or by
percentages. (See "The Contract -- Transfers").
CHARGES AND DEDUCTIONS
Certain charges are deducted from Premiums and from Insurance Account Value
under the Contract. For a more detailed discussion of the charges deducted
under the Contract, see "Charges and Deductions." For additional information
regarding the investment advisory fees and operating expenses of the
Underlying Portfolios, see the accompanying prospectuses for these
portfolios.
A Premium Load is deducted from the Initial Premium and from each subsequent
Premium paid, prior to allocation to the Separate Account or the Fixed Fund.
The Premium Load includes a Distribution Charge (which consists of a Premium
Expense Load and a Commission Charge), a Premium Tax Charge (which will be
made for any applicable state premium taxes), and the DAC Tax Charge.
The Distribution Charge is equal to a maximum of 30% of Premiums paid during
the first Contract Year up to one Target Premium (and 2% of first year
Premiums thereafter), and declines as a percentage of Premiums paid in
Contract Years 2-10 (to a maximum of 10% of Premiums paid during each
Contract Year up to a Target Premium; and 2% of Premiums thereafter);
Contract Years 11-15 (to a maximum of 8% of Premiums paid during each
Contract Year up to a Target Premium and 2% of Premiums thereafter), and
Contract Years 16 and thereafter (a maximum of 4% of Premiums paid during
each Contract Year up to a Target Premium and 2% of Premiums thereafter).
The Premium Tax Charge reflects the state premium taxes imposed under the
Contract. The DAC Tax Charge is equal to 1% of all Premiums paid in all
Contract Years.
A Daily Charge for mortality and expense risks assumed by SELIC under the
Contract is calculated and deducted daily as a percentage of the Insurance
Account Value attributable to each Division of the Separate Account.
Currently, this Daily Charge is equal to 0.35% on an annual basis; it is
guaranteed not to exceed 0.50% on an annual basis.
Monthly Charges are deducted directly from the Insurance Account Value as of
the Contract Date and on each Monthiversary thereafter. Monthly Charges
include an Administration Charge of $4.50 per month (guaranteed not to exceed
$8.00 per month)
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and a charge for the cost of insurance provided under the Contract. Monthly
Charges also include any charges for additional benefits provided by Contract
rider and charges for a special class rating, if applicable.
SELIC will deduct an Underwriting Charge, not to exceed $100, on the Issue
Date for Contracts issued on a medically underwritten basis, and on any
Monthiversary following any medical underwriting in connection with certain
Contract changes. This charge changes if a Joint and Last Survivor Rider is
added to the Contract. See Appendix B. SELIC may reduce or waive the
Underwriting Charge under certain circumstances.
On each Contract Anniversary the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest due
and unpaid for the previous Contract Year; and (ii) increased by the interest
credited to the Borrowed Fund during the previous Contract Year. The net
result is that if Contract Loan interest is not paid when due, then on the
Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
No charges are currently made to the Separate Account for federal, state or
local taxes that SELIC incurs which may be attributable to the Separate
Account. However, SELIC may impose such a charge in the future to provide
for any tax liability of the Separate Account.
Investment advisory fees and operating expenses of each Underlying Portfolio
are paid by such portfolio, and are reflected in the Separate Account Value
of a Contract.
At the Contract Holder's request, SELIC will provide an illustrative report
in addition to the reports it customarily provides. Depending upon the type
and complexity of the requested report, SELIC may charge a reasonable fee not
to exceed $50.
CONTRACT LOANS
The Contract Holder may obtain a Contract Loan under the Contract on any
Monthiversary. There is a maximum amount that may be borrowed, and interest
will be charged for any amount borrowed in accordance with the Contract Loan
interest rate option selected by the Contract Holder in the Application or as
subsequently changed. (See "Contract Loan Privilege").
Contract Loans are deducted from the amount payable on surrender of the
Contract and are also deducted from any Death Benefit proceeds. Contract
Loan interest accrues
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daily, and if it is not repaid each year, it is capitalized and added to the
Contract Loan. Depending upon the investment performance of the Available
Divisions and the amounts borrowed, Contract Loans may cause a Contract to
lapse. If the Contract lapses with a Contract Loan outstanding, adverse tax
consequences may result. A Contract Loan may also have other Federal income
tax consequences. (See "Federal Income Tax Considerations").
SURRENDER AND PARTIAL WITHDRAWALS
While the Insured is alive, the Contract may be surrendered at any time for
its Net Cash Value upon written request to SELIC's Home Office. To the
extent that the Insurance Account Value is allocated to the Available
Divisions of the Separate Account, SELIC does not guarantee any minimum Net
Cash Value. Partial withdrawals of Net Cash Value are permitted, subject to
certain restrictions. (See "The Contract - Surrender and Partial
Withdrawals").
A surrender or partial withdrawal may have Federal income tax consequences.
(See "Federal Income Tax Considerations").
TERMINATION
The Contract does not automatically terminate for failure to pay subsequent
Premiums. However, the Contract may terminate prior to its Maturity Date if
there is insufficient Net Cash Value to pay Monthly Charges. (See
"Termination").
ILLUSTRATIONS
Illustrations in this prospectus or used in connection with the purchase of a
Contract are based on hypothetical rates of return. These rates are not
guaranteed. They are illustrative only, and should not be deemed to be a
representation of past or potential investment performance. Actual rates of
return may be more or less than those in the illustrations and, therefore,
actual values will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, a prospective Contract Holder should consider
whether changing, or adding to, current insurance coverage would be
advantageous. Generally, it is not advisable to purchase another insurance
contract as a replacement for existing coverage. In particular, replacement
should be carefully considered if the decision to replace the coverage is
based solely on a comparison of contract illustrations.
TAX CONSIDERATIONS
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SELIC intends for the Contract to satisfy the definition of life insurance
contract under section 7702 of the Internal Revenue Code. Under certain
circumstances, a Contract may be a "modified endowment contract" under
federal tax law, depending upon the amount of payments made in relation to
the death benefit provided under the Contract. SELIC will monitor Contracts
and will attempt to notify a Contract Holder on a timely basis if his or her
Contract is in jeopardy of becoming a modified endowment contract. The
status under the Internal Revenue Code of Contracts issued with a
Supplemental Term Insurance Rider, or a Joint and Last Survivor Rider, is
less clear. For further discussion of the tax status of a Contract and the
tax consequences of being treated as a life insurance contract or a modified
endowment contract, see "Federal Income Tax Considerations."
FREE LOOK AND CONVERSION RIGHTS
In most states, the Contract may be canceled at any time within 10 days after
it is received by the Contract Holder, 10 days after SELIC mails or
personally delivers the Notice of Withdrawal Right to the Contract Holder, or
within 45 days after the date of the Application, whichever is later. The
Contract must be returned to SELIC at its Home Office along with written
notice of cancellation. If the Contract is canceled, it will be as though
the Contract had never been issued. A refund will be paid if the Contract is
canceled. The refund will equal any Premium(s) paid, minus any partial
withdrawals taken and any Contract Loans together with accrued but unpaid
Contract Loan interest.
Once issued and as long as the Contract is in force, a Contract Holder may
during the first 24 months transfer all of the Insurance Account Value out of
the Separate Account and into the Fixed Fund, and receive fixed and
guaranteed benefits under the Contract. Once this right is exercised, no
transfers out of the Fixed Fund will be allowed and all Net Premiums paid
after the election will be allocated to the Fixed Fund. (See "Additional
Provisions of The Contract - Conversion Rights").
INFORMATION ABOUT SELIC
SELIC is a stock life insurance company domiciled in New York. It is a
wholly-owned subsidiary of General American Life Insurance Company ("General
American"), a life insurance company domiciled in Missouri.
SELIC was established in 1983 as a wholly-owned subsidiary of Security Mutual
Life Insurance Company of New York. It was purchased by General American on
December 31, 1993.
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General American commenced operations in 1933 as a stock company and was
converted to a mutual company in a process that ended in 1946. General
American is principally engaged in issuing individual and group life and
health insurance contracts and annuity products. It is admitted to do
business in 49 states, the District of Columbia, and 10 Canadian provinces.
The principal offices of General American are located in St. Louis, Missouri.
SELIC is admitted to sell life insurance and annuities in 40 states and the
District of Columbia. SELIC concentrates on sales of corporate owned life
insurance products in all of these jurisdictions and sales of individual
products to residents of New York.
THE SEPARATE ACCOUNT
Security Equity Life Insurance Company Separate Account 13 (the "Separate
Account") was established by SELIC as a Separate Investment Account on
December 30,1994. The Separate Account will receive and invest the Net
Premiums paid under this Contract and allocated to it. In addition, the
Separate Account may receive and invest Net Premiums for other flexible
premium variable life insurance contracts that might be issued by SELIC.
The Separate Account is currently divided into a number of Divisions. Not all
Divisions are available for allocation of Net Premiums and transfers under
the Contract. Each Available Division invests exclusively in shares of an
Underlying Portfolio listed in Appendix A. Both realized and unrealized gains
or losses and income from the assets of each Division of the Separate Account
are credited to or charged against that Division without regard to income,
gains, or losses from any other Division of the Separate Account or from any
other business SELIC may conduct.
Obligations to Contract Holders and Beneficiaries that arise under the
Contract are obligations of SELIC. SELIC owns the assets of the Separate
Account. Those assets will only be used to support variable life insurance
contracts and for any other purposes permitted by applicable laws and
regulations. The portion of the assets of the Separate Account equal to the
reserves and other contract liabilities with respect to the Separate Account
will not be charged with liabilities that arise from any other business SELIC
may conduct. SELIC may, however, transfer from the Separate Account to its
General Account assets that exceed the reserves and other contract
liabilities in respect of the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Separate Account meets
the definition of a "separate account" under the federal securities laws.
Registration with the SEC does
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not involve supervision of the management or investment practices of the
Separate Account, the Contracts, or SELIC by the Commission.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES OF ANY UNDERLYING PORTFOLIO
WILL BE ACHIEVED.
Detailed information concerning the investment objectives, techniques and
restrictions pertaining to each Underlying Portfolio, and the expenses,
investment advisory services, and risks attendant to allocating Insurance
Account Value to each Underlying Portfolio, can be found in the current
prospectus with respect to each Underlying Portfolio, which accompanies this
Prospectus, and the current Statement of Additional Information for each
Underlying Portfolio. Such information has been prepared by the Underlying
Portfolio or the investment company of which it is a part, and SELIC is not
responsible for preparing this information. The Underlying Portfolio
prospectuses should be read carefully before any decision is made concerning
the allocation of Premium payments or transfers among the Available
Divisions.
Not all of the investment portfolios described in the accompanying
prospectuses are necessarily available under the Contract. Moreover, SELIC
cannot guarantee that each Underlying Portfolio will always be available for
the Contract. In the unlikely event that an Underlying Portfolio becomes
unavailable, SELIC will attempt to secure the availability of a comparable
Underlying Portfolio. Shares and units of each Underlying Portfolio are
purchased and redeemed at Net Asset Value, without a sales charge.
One or more of the Underlying Portfolios are available for investment by both
variable life insurance and variable annuity separate accounts. It is
conceivable that in the future it may be disadvantageous for both variable
life and variable annuity separate accounts to invest simultaneously in an
Underlying Portfolio that sells its shares to both types of separate
accounts. The Board of Directors or Trustees of such Underlying Portfolios,
the respective investment advisers of each Underlying Portfolio, and SELIC
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events of conflicts. Material conflicts
could arise from such things as changes in state insurance laws, changes in
federal income tax laws, changes in the investment management of an
Underlying Portfolio, or differences in the voting instructions given by
variable annuity contract owners and variable life insurance contract owners.
In the event of a material irreconcilable conflict, SELIC will take steps
necessary to protect our Contract Holders. This could include discontinuance
of investment in an Underlying Portfolio.
THE CONTRACT
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The Contract is a flexible premium variable life insurance contract that
provides insurance on the life of an Insured. A Contract may be sold
together with other related Contracts forming a Case. See Appendix B for
modifications to this Section in the event that a Joint and Last Survivor
Rider and/or a Supplemental Term Insurance Rider is added to the Contract.
AVAILABILITY OF INSURANCE COVERAGE
To be eligible for insurance under the Contract, a prospective Insured must
on the Contract Date:
(1) be at least 20 years of age and no more than 85 years of age;
(2) have elected or consented to be an Insured (if required by SELIC or the
Governing Jurisdiction); and
(3) have satisfied any necessary underwriting requirements of SELIC (see
"Charges and Deductions -- Monthly Charges -- Cost of Insurance
Charge").
A Contract can be issued if the Contract Holder:
(1) provides SELIC with the data it requires including, but not limited to
the prospective Insured's name, address, social security number,
sex, date of birth, smoker/nonsmoker status, and citizenship (SELIC
may also require submission of related documents that have been
completed by the prospective Insured);
(2) requests Total Insurance Coverage at least equal to the Minimum
Insurance Coverage for an Insured;
(3) designates the Beneficiary under the Contract; and
(4) pays the initial Minimum Premium for the first Contract Year.
Insurance coverage generally begins on the Issue Date for the Contract.
Temporary life insurance coverage may be provided under the terms of a
temporary insurance agreement. In accordance with SELIC's underwriting rules,
temporary life insurance coverage may not exceed the greater of $100,000 or
two times the Premium paid, and may not be in effect for more than 90 days.
This temporary insurance coverage will be issued on a conditional receipt
basis, which means that any Death Benefit under such temporary coverage will
only be paid if the Insured meets SELIC's usual and customary underwriting
standards for the applied-for coverage under the Contract (see "Charges and
Deductions -- Monthly Charges -- Cost of Insurance Charge").
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As provided for under state insurance law, a Contract Holder, to preserve
insurance age of the Insured, may be permitted to backdate the Contract. In
no case may the Contract Date be more than six months prior to the date that
the Application was completed. If any Contract in a Case is backdated, then
all Contracts in the Case must be backdated to the same date. Monthly
Charges for the backdated period will be deducted as of the Contract Date,
and each Monthiversary thereafter.
For modifications to this Section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider."
EVIDENCE OF INSURABILITY
SELIC may require medical evidence of insurability for any Contract that does
not meet SELIC's guaranteed issue or simplified issue standards when the
Contract is issued. (See "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge"). Medical evidence of insurability may also be required
for any transaction that increases the Net Amount at Risk for the Contract.
Transactions that increase the Net Amount at Risk may include but are not
limited to: payment of subsequent Premiums, change of Death Benefit Option,
change of Face Amount, partial withdrawals, and reinstatement of a Contract.
For modifications to this section for Joint Insureds, see Appendix B -- Last
Survivor Rider.
PREMIUMS
Premiums are the payments made to SELIC under the Contract to purchase
insurance on the life of the Insured and to contribute to the Insurance
Account Value of the Contract. All Premiums are payable to SELIC at its Home
Office. A Premium Load is deducted from any Premium received by SELIC prior
to its allocation to the Separate Account or to the Fixed Fund. The
resulting amount is the Net Premium. The applicable Premium Load percentage
depends upon the Case to which the Contract belongs, whether the Premium
consists of Target Premium or Excess Premium, and the Contract Year in which
the Premium is paid. (See "Charges and Deductions -- Premium Load).
Premiums may consist of Target Premium, Excess Premium or both. The Target
Premium depends upon the Insured's Issue Age, sex, underwriting class and
Face Amount. The Target Premium for the initial Face Amount is determined to
be the level annual premium payable to age 100 for a level death benefit that
under guaranteed cost of insurance rates and guaranteed policy expense
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charges and a 4.00% net interest rate (after the M&E charge) the cash value
will accumulate to equal the initial Face Amount at age 100. The Target
Premium is determined on the Issue Date. It is not recalculated if there is
an increase in the Face Amount. It is recalculated if there is a decrease in
the Face Amount, but only if the new Face Amount is below the initial Face
Amount.
SELIC has the right to refund promptly any amount of Premium paid if
necessary to keep the Contract in compliance with state and federal laws,
including federal income tax laws. In particular, if a Contract Holder pays
Premium amounts during the first Contract Year significantly in excess of the
Planned Renewal Premium, SELIC reserves the right to refund promptly part or
all of such excess if applicable state insurance law restricts the amount of
commissions that would otherwise be payable to the writing agent in
connection with part or all of such Premium amounts.
SELIC will not issue the Contract unless it receives a Premium payment at
least equal to the initial Minimum Premium amount. The initial Minimum
Premium under the Contract is equal to twelve times the Monthly Charges due
under the Contract in the first Contract Month, plus any applicable Premium
Load. SELIC may, in its sole discretion, require a reduced initial Minimum
Premium in connection with the purchase of Contracts sold by licensed agents
of SELIC that are also registered representatives of Walnut Street
Securities, Inc. ("Walnut Street"), the distributor of the Contracts, or
selected broker-dealers or through banks that have entered into written sales
agreements with Walnut Street.
After the Initial Premium has been received and accepted by SELIC, the
Contract Holder may pay subsequent Premiums on any Valuation Day provided
that each subsequent Premium is at least $50 per Contract. All payments
received by SELIC from the Contract Holder will be credited to the Contract
as Premiums, unless the Contract Holder specifies that such payments are
Contract Loan repayments. Subsequent Premiums may cause a Contract that was
not classified as a "modified endowment contract" to become classified as
such a contract. SELIC will take steps to monitor subsequent Premiums, and
will notify a Contract Holder if a subsequent Premium, or a portion thereof,
would cause a Contract to become a modified endowment contract. (See
"Federal Income Tax Considerations -- Modified Endowment Contracts").
ALLOCATION OF NET PREMIUMS: Generally, the initial Net Premium will be
credited to the Money Market Division of the Separate Account and the
Insurance Account Value will begin to vary with investment experience on the
Valuation Day next following receipt of the initial payment at the Home
Office. However, in situations where SELIC receives the initial payment with
the application and underwriting is required, then the
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payment will be held on deposit in SELIC's General Account until underwriting
is completed and the Contract is issued (the Issue Date). Any Net Premiums
received during the Free Look period will be allocated to the Money Market
Division. At the end of such period, Separate Account Value will be allocated
to or among any of the Available Divisions and the Fixed Fund, in accordance
with the Contract Holder's allocation instructions set forth in the
Application, or as subsequently changed prior to the end of the Free Look
period. No allocation or transfer instructions received from the Contract
Holder in the Application or during the Free Look period will be acted upon
until the Free Look period has expired. The duration of the Free Look period
depends upon the law of a Contract's Governing Jurisdiction. The Free Look
period under a Contract will expire after the number of days provided for in
the applicable Governing Jurisdiction's Free Look period has elapsed following
the date the Contract is delivered to the Contract Holder, as evidenced by a
signed delivery receipt or certified mail return receipt, or if later, 10
days after SELIC mails or personally delivers the Notice of Withdrawal Right
to the Contract Holder, or 45 days after the Application is signed. Transfer
of money to the Available Divisions and, or the Fixed Fund specified by the
Contract Holder will occur at the expiration of the Free Look period.
Net Premiums received after the Free Look period expires will be allocated
among the Available Divisions and the Fixed Fund in accordance with the
Contract Holder's instructions. Net Premiums that are received prior to the
Valuation Time on any Valuation Day will be allocated as of the date they are
received. Net Premiums received after such time will be allocated on the
next Valuation Day.
The maximum number of Available Divisions to which the Contract's Separate
Account Value may be allocated at any one time is five; amounts can also be
allocated to the Fixed Fund. If no instructions accompany a Premium, the
resulting Net Premium will be allocated to the Available Divisions and the
Fixed Fund in the same proportions as stated in the most recently recorded
Premium allocation instructions SELIC received from the Contract Holder.
The allocation of subsequent Premiums may be changed at any time upon SELIC's
receipt of written notice from the Contract Holder.
PREMIUMS TO PREVENT LAPSE: If the Contract is in danger of lapsing because
the Net Cash Value is insufficient to pay the Monthly Charges for the
Contract on a Monthiversary, the amount of Premium that must be paid to
prevent lapse will be equal to three times the Monthly Charges then due plus
any applicable Premium Load. (See "Termination -- Termination for
Insufficient Cash Value"). SELIC will send a notice to a Contract Holder
when such Premiums are required to keep the Contract in force.
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PREMIUMS TO REINSTATE A CONTRACT: When a Contract has lapsed due to
insufficient Net Cash Value, the amount of Premium that must be paid to
reinstate insurance coverage will be equal to the Monthly Charges due and
unpaid at the time of lapse, plus three times the Monthly Charges due at the
time of reinstatement, plus any applicable Premium Load. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient Value). When the
Contract has terminated, SELIC will send a notice specifying the Premiums
that are required to be paid to reinstate the Contract.
CONTRACT VALUES
The Insurance Account Value of the Contract is equal to the total amounts of
the Insurance Account Value in each Available Division of the Separate
Account, the Insurance Account Value in the Fixed Fund, and the Insurance
Account Value in the Borrowed Fund.
The Insurance Account Value allocated to each Available Division is measured
in "Accumulation Units." The value of an Accumulation Unit is determined as
of the Valuation Time on each Valuation Day. The value of any unit will vary
from Valuation Day to Valuation Day to reflect the investment performance of
the Available Division applicable to that Accumulation Unit.
The value of an Accumulation Unit in each Available Division is arbitrarily
set at $1.00 on the first Valuation Day for that Available Division. The
value of any Accumulation Unit on any subsequent Valuation Day is equal to
its value on the preceding Valuation Day multiplied by that Available
Division's Net Investment Factor for the Valuation Period. The Net
Investment Factor for an Available Division for a Valuation Period equals the
"gross investment rate" for such period plus one and minus the Mortality and
Expense Risk Charge for that Valuation Period.
The "gross investment rate" of an Available Division for any Valuation Period
is equal to the net earnings of that Available Division during the Valuation
Period, divided by the value of the total assets of that Available Division
at the beginning of the Valuation Period. The net earnings of each Available
Division during a Valuation Period are equal to the accrued investment income
and capital gains and losses (realized and unrealized) of that Available
Division, reduced by any amount charged against that Available Division for
premium taxes or other governmental charges paid or reserved by SELIC during
that Valuation Period.
The "gross investment rate" and net earnings of each Available Division will
be determined by SELIC in accordance with generally accepted accounting
principles and applicable laws, rules and regulations.
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Transactions which require the crediting and canceling of Accumulation Units
will be processed as of the Valuation Time on the Valuation Day in which the
transaction is effected. Premium payments, and requests for Contract Loans,
withdrawals, transfers, or any other transaction, received in proper form
before the Valuation Time on a Valuation Day will be effected as of the
Valuation Time on the day that the Premium payment, or transaction request,
is received. Premium payments, and transaction requests, received in proper
form after the Valuation Time on a Valuation Day, will be effected as of the
Valuation Time of the following Valuation Day.
The Insurance Account Value in the Money Market Division on the Issue Date is
equal to the Premium paid on that date, less any applicable Premium Load
less:
(1) Cost of Insurance Charges;
(2) Administration Charges;
(3) Any charges that are deducted from the Insurance Account Value for
benefits provided by Contract riders;
(4) Underwriting Charges, if any; and
(5) Charges for Special Insurance Class Rating, if any.
The Insurance Account Value in each Available Division as of the Valuation
Time on any subsequent Valuation Day is equal to the Insurance Account Value
in that Available Division on the prior Valuation Day plus:
(1) Any new Net Premium allocated to that Available Division;
(2) Any amounts transferred to that Available Division from another
Available Division, the Fixed Fund or the Borrowed Fund; and
(3) Any increase in value of the Available Division's investments due to
investment results (net of Daily Charges);
and less:
(1) Any amounts transferred from that Available Division to another
Available Division, the Fixed Fund or the Borrowed Fund;
(2) Any decrease in the value of the Available Division's investments due
to investment results net of Daily Charges;
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(3) The Cost of Insurance Charges allocated to that Available Division
(deducted only on a Monthiversary);
(4) The Administration Charges allocated to that Available Division
(deducted only on a Monthiversary);
(5) Any partial withdrawals taken from such Contract and allocated to that
Available Division;
(6) Any charges allocated to that Available Division that are deducted from
the Insurance Account Value for benefits provided by Contract riders;
(7) Any Underwriting Charges allocated to that Available Division;
(8) Any charges for Special Insurance Class Rating allocated to that
Available Division (deducted only on a Monthiversary); and
(9) Any other charges allocated to that Available Division as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
For description of the Insurance Account Value in the Fixed Fund and the
Borrowed Fund, see "The Contract -- The Fixed Fund" and "Contract Loan
Privilege."
TRANSFERS
The Contract provides that all or part of the Insurance Account Value (except
amounts in the Borrowed Fund) may be transferred between or among Available
Divisions and the Fixed Fund on any Valuation Day subject to the following
limitations:
(a) The Insurance Account Value cannot be allocated to more than five
Available Divisions and the Fixed Fund at any one time;
(b) Transfer requests must be in writing and in a form acceptable to SELIC;
(c) Except as described below, only one transfer is permitted in each
Contract Year;
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(d) SELIC reserves the right to limit the amount of any transfer.
Transfers from or among the Available Divisions must be in amounts
of at least $500, or, if smaller, the Insurance Account Value in
an Available Division; and
(e) Transfers to the Fixed Fund may be limited. Insurance Account Value in
the Fixed Fund after any transfer to the Fixed Fund may be no
greater than the amount specified in the Contract. (See "The
Fixed Fund -- Allocation of Amounts to the Fixed Fund").
Transfers from the Fixed Fund are also subject to the following limitations:
(a) The transfer must be made in the 30 day period following a Contract
Anniversary; and
(b) The amount transferred may be no larger than 25% of the Insurance
Account Value in the Fixed Fund on the date of the transfer.
Transfers may be requested by dollar amount or whole percentage. SELIC will
execute a transfer only upon receipt of a properly executed transfer request.
Written confirmation of each transfer will be sent to the Contract Holder.
Notwithstanding the above limitations, which are set forth in the Contract,
SELIC will, as a matter of administrative practice, allow up to 12 transfers
per year between or among Available Divisions. Contract Holders will be
notified in advance if this administrative practice is changed or eliminated.
For purposes of calculating the number of transfers requested in any Contract
Year, all transfer requests received on the same Valuation Day will be
counted as one transfer request. Transfers effected in connection with
Contract Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers permitted in each Contract Year.
CONTRACT LOAN PRIVILEGE
The Contract Holder may request a loan against the Contract. The Contract
must be assigned to the Company as the sole security for the Contract Loan.
A Contract Loan may take place on any Valuation Day. An amount equal to the
amount borrowed will be transferred from the Separate Account and the Fixed
Fund to the Borrowed Fund. The Borrowed Fund is a portion of SELIC's General
Account reserved for amounts held as collateral for Contract Loans. A
Contract Loan from, or secured by, the Contract may have federal income tax
consequences. In particular, if the Contract is a
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"modified endowment contract" loans may be currently taxable and subject to a
10% penalty tax. (See "Federal Income Tax Considerations").
SOURCE OF CONTRACT LOAN: Insurance Account Value equal to each Contract Loan
will be transferred to the Borrowed Fund, reducing the Insurance Account
Value in the Separate Account and the Fixed Fund. Unless other specific
instructions are received from the Contract Holder, the Contract Loan will be
taken from the Available Divisions of the Separate Account and the Fixed Fund
in proportion to the amount of the Contract Holder's then current Insurance
Account Value in each Available Division of the Separate Account and Fixed
Fund.
The maximum total of Contract Loans for each Contract is equal to the
Insurance Account Value less the sum of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with interest accrued but
unpaid; and
(3) Contract Loan interest charges until the next Contract Anniversary.
If a Contract Loan is requested that would cause this maximum to be exceeded,
SELIC will not process the request.
CONTRACT LOAN INTEREST: Contract Loan interest accrues daily and is due on
each Contract Anniversary. If it is not paid when due, the Contract Loan
interest will be added to the Contract Loan and, as part of the Contract
Loan, will bear the same interest rate. Any Contract Loan interest
capitalized on a Contract Anniversary will be treated as if it was a new
Contract Loan and will be transferred from the Available Division of the
Separate Account and Fixed Fund in proportion to the Insurance Account Value
therein.
A fixed Contract Loan interest rate option or a variable Contract Loan
interest rate option may be elected. This option may be changed by the
Contract Holder on any Contract Anniversary. Written notice of the change
must be received at SELIC's Home Office no more than 90 days nor less than 30
days prior to such Contract Anniversary. The Contract Loan interest rate
options are as follows:
Fixed Contract Loan Interest Rate. If a Fixed Contract Loan Interest Rate
- ---------------------------------
option is selected and a Contract Loan is outstanding, a fixed Contract Loan
interest rate of 6.00% will be assessed annually in arrears and added to the
Contract Loan principal on the Contract Anniversary.
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Variable Contract Loan Interest Rate. On each Contract Anniversary, SELIC
- ------------------------------------
will declare the Variable Contract Loan Interest Rate that will apply to
outstanding Contract Loans for the next Contract Year. This rate will equal
the higher of a) or b), where a) is the Monthly Average of the Composite
Yield on Corporate Bonds as published by Moody's Investor Service, Inc. (or,
if it is no longer published, a substantially similar average) for the
calendar month ending two months before the Contract Year begins, and b) is
4.50%. If the rate calculated according to this formula is not at least .50%
higher than the rate in effect for the previous year, SELIC will not increase
the rate. If the rate calculated is at least .50% lower than the rate in
effect for the previous year, SELIC will decrease the rate.
If the Variable Contract Loan Interest Rate option is selected, SELIC will
inform the Contract Holder of the current Variable Contract Loan Interest
Rate at the time a Contract Loan is made. The current Variable Contract Loan
Interest Rate can be changed by SELIC on any Contract Anniversary, but the
rate will never exceed the maximum Contract Loan interest rate permitted by
the law of the Governing Jurisdiction.
INTEREST ON BORROWED FUND: Interest will be credited to amounts held in the
Borrowed Fund as collateral for Contract Loans. This rate of interest
credited on the Borrowed Fund will be at least equal to an annual effective
rate of 4.00%.
For the Fixed Contract Loan Interest Rate option, the rate of interest
credited on the Borrowed Fund is currently set equal to 5.65%. If a Variable
Contract Loan Interest Rate option is chosen, SELIC currently anticipates
that the rate of interest credited on the Borrowed Fund will equal the
Variable Contract Loan Interest Rate less a "loan interest spread" of .35%.
This "loan interest spread" is guaranteed never to exceed .50%. The Borrowed
Fund crediting rate may not be changed more frequently than annually. Any
change in the Borrowed Fund crediting rate for the Contract will be effective
on a Contract Anniversary. The Contract Holder will be notified in advance
of any such change.
Interest credited to the Borrowed Fund will be transferred to the Available
Divisions of the Separate Account and Fixed Fund on each Contract
Anniversary. The amount so transferred will be allocated among the Available
Divisions of the Separate Accounts and Fixed Fund in proportion to the
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
If Contract Loan interest due for the previous Contract Year has not been
paid when due, then on the Contract Anniversary, the Insurance Account Value
attributable to the Separate Account and Fixed Fund will be reduced by the
difference between the
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Contract Loan interest due and unpaid for the previous Contract Year, and the
interest credited to the Borrowed Fund during the previous Contract Year.
On any given day the Insurance Account Value in the Borrowed Fund will be
equal to the Insurance Account Value in the Borrowed Fund on the previous day
plus:
(1) Any new amounts transferred to the Borrowed Fund from the Separate
Account and Fixed Fund due to new Contract Loans and/or
capitalized Contract Loan Interest; and
(2) Any interest credited to the Borrowed Fund.
and less:
(1) Any amounts transferred from the Borrowed Fund to the Separate Account
and/or Fixed Fund due to Contract Loan repayments or the transfer
of interest credited to the Borrowed Fund on a Contract
Anniversary.
REPAYMENT: All funds received by SELIC will be credited to the Contract as
Premiums unless clearly designated as a Contract Loan repayment by the
Contract Holder.
All or part of the Contract Loan plus accrued Contract Loan interest may be
repaid at any time while the Contract is in force.
Any repayment of a Contract Loan will result in the transfer of values equal
to the repayment out of the Borrowed Fund and the application of those values
to the Available Divisions of the Separate Account and Fixed Fund. Unless
other specific instructions are received from the Contract Holder, these
values will be applied to the Separate Account's Available Divisions and the
Fixed Fund in proportion to the amount of the Contract Holder's then current
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
SURRENDER AND PARTIAL WITHDRAWALS
At any time during the lifetime of the Insured and while the Contract is in
force, the Contract may be surrendered for its Net Cash Value on any
Valuation Date. The Contract Holder must request a surrender in writing and
in a form acceptable to SELIC. On surrender, SELIC will pay to the Contract
Holder in a single sum the Contract's Net Cash Value as of the Valuation Day
during which a proper surrender request is received. A Contract's Net Cash
Value is the Insurance Account Value less any outstanding Contract Loan and
accrued and unpaid Contract Loan interest. If a proper surrender request is
received on a Monthiversary, then Monthly Charges will
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not be deducted on that Monthiversary. A surrender may have Federal income tax
consequences. (See "Federal Income Tax Considerations"). Once the Contract is
surrendered, SELIC's obligations under the Contract will cease. (See
"Termination").
The Contract Holder may also request partial withdrawals of Net Cash Value
from one or more Available Divisions and the Fixed Fund. The withdrawal must
be requested by the Contract Holder in writing on a form acceptable to SELIC.
Unless other specific instructions are received from the Contract Holder, the
withdrawal will be taken from each Available Division and the Fixed Fund in
proportion to the Contract Holder's then current Insurance Account Value in
each Available Division and the Fixed Fund. (See "The Fixed Fund").
Surrender and partial withdrawal proceeds will generally be paid to the
Contract Holder within seven days. (See "Additional Provisions of the
Contract -- Availability of Funds" and "The Fixed Fund").
The Contract Holder may withdraw any amount of at least $1,000 per withdrawal
and up to the Contract's maximum withdrawal amount. The maximum withdrawal
amount for the Contract is equal to the Insurance Account Value less the sum
of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with the unpaid accrued
Contract Loan interest on the Contract Loan amount; and
(3) Contract Loan interest on the Contract Loan amount until the next
Contract Anniversary.
Partial withdrawals may increase the Net Amount at Risk, resulting in higher
Cost of Insurance Charges under the Contract.
The Death Benefit and Face Amount may be adjusted at the time a partial
withdrawal is taken, based on the amount withdrawn, the Death Benefit Option
then in effect for the Contract, and the Insurance Account Value. If the
Face Amount is reduced, the reduction in Face Amount for Death Benefit Option
1 or Death Benefit Option 3 will be equal to the amount of the withdrawal.
The Total Insurance Coverage remaining after the partial withdrawal may not
be less than the Minimum Insurance Coverage. A partial withdrawal request
that would reduce the Total Insurance Coverage below this minimum will not be
effected. If the Face Amount reflects previous Face Amount increases at the
time of a partial withdrawal which causes a reduction in Face Amount,
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then partial withdrawals will be applied first to reduce the Initial Face
Amount, and then to each Face Amount increase in order, starting with the
first increase
A partial withdrawal that decreases the Face Amount of the Contract will
result in a recalculation of the Target Premium, and generally will decrease
the Target Premium for future Contract Years.
A partial withdrawal may have Federal income tax consequences. (See "Federal
Income Tax Considerations").
Split Dollar Exception: Notwithstanding the above limitations, SELIC will,
as a matter of administrative practice, at the time of a split dollar
rollout, allow the owner of a Death Benefit Option 3 Contract, the option of
reducing the accumulated Premiums before reducing the Face Amount. If the
withdrawal is greater than the accumulated Premiums, a reduction in Face
Amount will occur for the amount in excess of the accumulated Premiums.
DEATH BENEFITS UNDER THE CONTRACT
If the Insured dies while the Contract is in force, a Death Benefit is
payable to the Beneficiary when SELIC receives due proof of death and any
other requirements are satisfied. The amount of the Death Benefit payable
depends on the Death Benefit Option selected for the Contract by the Contract
Holder and in effect on the date of death of the Insured, and is adjusted for
outstanding Contract Loans and unpaid charges. (See "Payment of Death
Benefits"). The amount of the Death Benefit will be determined at the end of
the Valuation Period during which the Insured's death occurred. The Death
Benefit will be paid to the surviving Beneficiary or Beneficiaries specified
in the Application or as subsequently changed. The Death Benefit under each
Death Benefit Option will never be less than the Contract's Face Amount as
long as the Contract remains in force. For modifications to this Section for
Joint Insureds, see Appendix B -- "Joint and Last Survivor Rider."
DEATH BENEFIT OPTIONS: The Contract Holder may select one of the following
Death Benefit Options:
Option 1: The Face Amount in effect at the date of death;
Option 2: The Face Amount plus the Insurance Account Value in effect at the
date of death; or
Option 3: The Face Amount in effect at the date of death, plus the
accumulated Premiums paid under the Contract up to the date
of death. In calculating the Death Benefit under this
option, the Premiums are accumulated from the
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date such Premiums were credited to the Insurance Account Value to
the date of death, at a rate equal to the Death Benefit Option
Accumulation Rate shown in the Contract. This rate, which is
selected by the Contract Holder and subject to approval by
SELIC, may be as low as 0%, and does not have a maximum cap.
A higher Death Benefit Option Accumulation Rate will result
in higher Cost of Insurance Charges under a Contract.
To ensure that the Contract will qualify as life insurance under the Internal
Revenue Code, the Total Insurance Coverage will never be less than the
Minimum Death Benefit. The Minimum Death Benefit is equal to the Insurance
Account Value on the date of death multiplied by the appropriate Minimum
Death Benefit Factor as set forth in the Contract. Currently SELIC
calculates the Minimum Death Benefit Factor in accordance with Section
7702(a)(1) of the Internal Revenue Code ("The Cash Value Accumulation Test").
In the future SELIC may offer Contracts that will use Minimum Death Benefit
Factors and Premium limitations calculated in accordance with Section
7702(a)(2) of the Internal Revenue Code ("The Guideline Premium Test"). Once
a Contract is issued complying with either "The Cash Value Accumulation Test"
or "The Guideline Premium Test" that test and the Minimum Death Benefit
Factors will be employed throughout the life of the Contract.
A table of representative Minimum Death Benefit Factors follows:
<TABLE>
==============================================================================
<CAPTION>
MINIMUM DEATH BENEFIT FACTORS
- ------------------------------------------------------------------------------
UNISEX
AGE UNISMOKE
==============================================================================
<S> <C>
25 5.79
- ------------------------------------------------------------------------------
30 4.93
- ------------------------------------------------------------------------------
35 4.18
- ------------------------------------------------------------------------------
40 3.55
- ------------------------------------------------------------------------------
45 3.03
- ------------------------------------------------------------------------------
50 2.60
- ------------------------------------------------------------------------------
55 2.25
- ------------------------------------------------------------------------------
60 1.97
- ------------------------------------------------------------------------------
65 1.74
- ------------------------------------------------------------------------------
70 1.56
==============================================================================
</TABLE>
Under Death Benefit Option 1 and Death Benefit Option 3, positive investment
performance (if any) will be reflected in Insurance Account Value, but not in
the Death Benefit, unless the Death Benefit equals the Minimum Death Benefit.
Under Death Benefit Option 2, the amount of Death Benefit will always vary as
the Insurance
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Account Value varies, but will never be less than the Face Amount. In general,
if Death Benefit Option 2 is selected, positive investment performance (if
any) will be reflected in the Death Benefit.
Subject to certain limitations, the Contract Holder may change the Death
Benefit Option for the Contract while the Contract is in effect by notifying
SELIC in writing. If SELIC approves the change, it will take effect on the
next Contract Anniversary that is at least 30 days after all the required
information has been provided to SELIC. The Cost of Insurance Charges for
the Contract will be adjusted to provide for the change. No such change will
be effective if the Insured dies before the effective date of the change.
Changing the Contract's Death Benefit Option may result in either an increase
or decrease in the Face Amount. If the Face Amount increases, SELIC may
require satisfactory evidence of insurability. If the Face Amount decreases,
the order in which the Face Amount is reduced is assessed in the same manner
as a decrease in Face Amount. (See "Face Amount").Any change in the Death
Benefit Option will not be effected if it would result in Total Insurance
Coverage that is less than the Minimum Insurance Coverage of the Contract.
SELIC also reserves the right not to effect a requested change in Face Amount
if the change would result in the Contract not satisfying the requirements of
the Internal Revenue Code of 1986, as amended.
A change in the Death Benefit Option will not result in an immediate change
in the amount of a Contract's Death Benefit or Insurance Account Value. If a
Contract is changed from Death Benefit Option 1 to Death Benefit Option 2,
then the Face Amount will equal the Face Amount prior to the change less the
Insurance Account Value on the effective date of the change. If a Contract
is changed from Death Benefit Option 3 to Death Benefit Option 2, then the
Face Amount will equal the Face Amount prior to the change plus the
accumulated Premiums less the Insurance Account Value on the effective date
of the change. If a Contract is changed from Option 2 or Option 3 to Option
1, then the Face Amount will equal the Death Benefit on the effective date of
the change. SELIC may require satisfactory evidence of insurability if the
Contract is changed from Option 2 or Option 3 to Option 1. If a Contract is
changed from Option 1 to Option 3, then the Face Amount will equal the Face
Amount prior to the change less the accumulated Premiums on the effective
date of change. If a Contract is changed from Option 2 to Option 3, then the
Face Amount will equal the Death Benefit less the accumulated Premiums on the
effective date of the change.
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A change in Death Benefit Option may affect monthly Cost of Insurance
Charges, because the amount of this charge varies with a Contract's Net
Amount at Risk. Assuming the Death Benefit is not equal to the Minimum Death
Benefit, changing from Option 2 or Option 3 to Option 1 will generally
decrease Net Amount at Risk, and therefore decrease Cost of Insurance
Charges, on Monthiversaries following the effective date of the change.
Changing from Option 1 or Option 3 to Option 2 will generally result in a Net
Amount at Risk that remains level; however, under Option 2, Cost of Insurance
Charges will increase over time, because cost of insurance rates generally
increase with the age of the Insured. Finally a change from Option 1 or
Option 2 to Option 3 will result in a Net Amount at Risk that will vary based
upon the frequency and amount of Premium payments, as well as the rate at
which the Premiums are accumulated. Under Option 3, more frequent and higher
premium payments as well as a higher Death Benefit Option Accumulation Rate
generally will result in a higher Net Amount at Risk, and therefore higher
Cost of Insurance Charges.
FACE AMOUNT: The Minimum Face Amount under a Contract is $10,000. The
minimum Total Insurance Coverage is $25,000. The Initial Face Amount and
Supplemental Term Insurance Amount will be set forth in the Application. The
Contract Holder may, subject to approval of SELIC, change the Face Amount.
The Contract Holder must request the change by notifying SELIC in writing,
and SELIC reserves the right to require satisfactory evidence of
insurability, which may include a medical examination. If SELIC approves the
change, it will take effect on the next Contract Anniversary which is at
least 30 days after all the required information has been provided to SELIC.
A partial withdrawal may also reduce the Face Amount under a Contract. (See
"The Contract -- Surrender and Partial Withdrawals"). Decreases in Face
Amount cannot reduce the Total Insurance Coverage to less than the Minimum
Insurance Coverage. No such change will be effective if the Insured dies
before the date of such change. SELIC reserves the right not to effect a
requested change in Face Amount if the change would result in the Contract
not satisfying the requirements of the Internal Revenue Code of 1986, as
amended. The Net Cash Value immediately following the increase in Face
Amount must be sufficient to cover Monthly Charges to be deducted on the next
Monthiversary. If Net Cash Value will not be sufficient, an additional
Premium will be necessary before the increase in Face Amount will be
effected.
If the Face Amount is decreased, and the Contract's Face Amount before the
change in Death Benefit Option reflects previous Face Amount increases, then
the Face Amount reduction will result first in the reduction of the Face
Amount provided by the most recent increase, then the next most recent
increase successively, and finally the Initial Face Amount.
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A decrease in the Face Amount of the Contract will also result in a
recalculation of the Target Premium, and generally will decrease the Target
Premium for future Contract Years.
Additional insurance coverage may be available under one or more riders to
the Contract, including a Supplemental Term Insurance Rider. (See Appendix B
- - "Supplemental Term Insurance Rider"). Under certain circumstances, SELIC
may offer Contracts through which insurance coverage is provided primarily
through the Supplemental Term Insurance Rider. Because insurance coverage
under such riders may be purchased through deductions from Available
Divisions and/or the Fixed Fund that are not taken into account in
determining Target Premium, there may not be additional Premium Load
associated with this coverage. There may be circumstances in which it will
be to the Contract Holder's economic advantage to include a significant
portion or percentage of coverage under the Supplemental Term Insurance
Rider. These circumstances depend on many factors, including the Premium
levels and amount and duration of coverage, as well as the age (and, where
applicable, sex, smoker status, and/or risk classification) of the Insured.
As discussed above, SELIC reserves the right to refund promptly certain
Premium amounts paid during the first Contract Year in excess of Planned
Renewal Premium amounts. (See "The Contract -- Premiums"). In such cases,
SELIC will generally agree to accept such Premium amounts provided that the
Contract Holder elects to convert a portion of the Face Amount, as determined
by SELIC, to coverage under a Supplemental Term Insurance Rider. Contract
Holders should contact their agent for additional information.
A change in Face Amount may have Federal income tax consequences. (See
"Federal Income Tax Considerations").
PAYMENT OF DEATH BENEFIT: The amount of any Death Benefit payable is
adjusted as follows:
(1) By deducting the amount of any unpaid Monthly Charges against the
Insurance Account Value to the date of death (See "Charges and
Deductions");
(2) By deducting the amount of any Contract Loans outstanding against the
Insurance Account Value on the date of death plus accrued but
unpaid interest on such Contract Loans on the date of death (See
"The Contract -- Contract Loan Privilege"); and
(3) By deducting the amount of any unpaid charges provided by rider.
The Death Benefit will usually be paid in a lump sum within seven days of the
date due proof of the Insured's death is received by SELIC at its Home Office
and any other
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requirements are satisfied. Payment of any amount of Death
Benefit based upon the Separate Account may be delayed, however, during any
period that:
(1) The New York Stock Exchange (or its successor) is closed, except for
normal weekend or holiday closings, or trading is restricted; or
(2) The SEC determines that a state of emergency exists.
Settlement of any amounts not based upon the Separate Account will be made
not more than six months after due proof of death is received. Interest on
Death Benefits will be credited as prescribed by law. Payment of a Death
Benefit may be deferred by a separate written agreement between SELIC and the
Contract Holder or Beneficiary, subject to SELIC's approval. In such cases,
the interest that will be credited will be at least 1.00% per annum.
BENEFICIARY: The Contract Holder may name or change the Beneficiary by
sending written notice to SELIC. A Beneficiary may be revocable or
irrevocable. An irrevocable Beneficiary may not be changed without his or
her consent, and consent is also required prior to the Contract Holder's
exercise of certain other rights. There may be different classes of
Beneficiaries, such as primary and secondary. These classes set the order of
payments. There may be more than one Beneficiary in a class. The
Beneficiary designation in effect on the Issue Date is stated in the Contract
Application and in any related documents which are attached to and made a
part of the Contract.
CHARGES AND DEDUCTIONS
Certain charges will be deducted by SELIC from Premiums and from Insurance
Account Value as compensation for providing the insurance benefits under the
Contract, for administering the Contract, for assuming certain risks, and for
incurring certain expenses in distributing the Contract. A prospective
purchaser may request personalized hypothetical illustrations of the
Contract's Insurance Account Value and Death Benefits. Such hypothetical
illustrations will reflect the effect of the charges and deductions under the
Contract and may assist a prospective purchaser in understanding the
operation of the Contract.
PREMIUM LOAD
Before crediting a Premium to the Available Divisions and/or the Fixed Fund,
a Premium Load, consisting of a Distribution Charge, a DAC Tax charge and a
Premium Tax Charge, is deducted from that Premium. Premium Load is expressed
as a percentage of Premium; the percentage depends upon whether the Premium
is Target
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Premium or Excess Premium, on the Contract Year during which the Premium is
paid, and on the Issue Age of the Insured.
DISTRIBUTION CHARGE: The Distribution Charge, which is a sales load, is
comprised of a Premium Expense Load and a Commission Charge.
The Premium Expense Load will be deducted from each Premium and will equal a
percentage of the Premium. The percentage will be determined based on the
sum of the Initial Premiums for all Contracts in a Case, in accordance with
the following table:
<TABLE>
<CAPTION>
SUM OF THE INITIAL PREMIUMS
OF ALL CONTRACTS IN THE CASE PREMIUM EXPENSE LOAD
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000 - $999,999 1.50%
$1,000,000 and more 1.25%
</TABLE>
A Commission Charge will be deducted from Premiums paid in each Contract Year
up to the Target Premium amount. There is no Commission Charge on any Excess
Premium amount paid during a Contract Year. The Commission Charge on
Premiums paid in a Contract Year up to the Target Premium amount is based
upon the Issue Age of the Insured and the Contract Year as follows:
<TABLE>
COMMISSION CHARGES DURING CONTRACT YEAR
---------------------------------------
<CAPTION>
Commission Charge
---------------------------------------------------------
For Contract Year Contract Years Contract Years
Issue Ages 1 2-10 11-15
---------- - ---- -----
<S> <C> <C> <C>
20 - 51 28.00% 8.00% 6.00%
52 - 59 28.00% 6.33% 4.00%
60 - 67 28.00% 4.66% 4.00%
68 - 80 19.00% 4.00% 4.00%
81 - 85 13.00% 4.00% 4.00%
</TABLE>
For all Issue Ages the Commission Charge will be 2.00% for Year 16 and
thereafter.
For Single Premium Payments, the maximum Commission Charge will be 6.00% of
Premium paid. Single Premium Payments are the excess of the Premium received
in the first Contract Year over Planned Renewal Premium. Failure to pay
Planned Renewal Premium will not automatically result in lapse of the
Contract.
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The Distribution Charge is intended to compensate SELIC for its expenses in
the distribution of the Contracts, including sales commissions, printing
prospectuses, preparing sales literature and paying for other promotional
activities. To the extent that those expenses are not recovered from the
Distribution Charge, those expenses may be recovered from other sources,
including profit, if any, the mortality and expense risk charge and mortality
gains. In accordance with applicable SEC regulations, Distribution Charge
amounts will not exceed nine percent of the sum of the "guideline annual
premiums" that would be paid during the period equal to the lesser of 20
years or the anticipated life expectancy of the Insured based on the 1980
Commissioners Standard Ordinary Mortality Table, as defined in such
regulations.
For modifications to this section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider." For modifications to this section with the
addition of a Term Rider, see Appendix B -- Supplemental Term Rider
Insurance.
PREMIUM TAX CHARGE: SELIC also deducts from each Premium a Premium Tax
Charge approximately equal to the taxes that are based on such Premium
received under the Contract and that are imposed on SELIC by the state in
which the Contract Holder resides or by the state in which the Insured
resides. In general, for Cases with one Contract Holder and with less than
500 Contracts, this charge will be determined as to any Contract in
accordance with the law of the state in which the Contract Holder resides.
For Cases with a greater number of Insureds and one Contract Holder, the
amount of the charge as to any Contract will be determined in accordance with
the law of the state in which the Insured resides. State premium tax rates
currently range from .75% to 5.00%.
DAC TAX CHARGE: SELIC also deducts from each Premium a charge for federal
income taxes, equal to 1.00%, which compensates SELIC for an increased
federal tax burden resulting from the receipt of Premiums under Section 848
of the Internal Revenue Code. This charge for federal income taxes is
reasonable in relation to SELIC's federal tax burden under Section 848
resulting from the receipt of Premiums under the Contracts.
DAILY CHARGES
MORTALITY AND EXPENSE RISK CHARGE: Each Division of the Separate Account is
assessed a Mortality and Expense Risk Charge, which will never exceed an
annual effective rate of 0.50% of the Contract's Separate Account Value
attributable to that Division. Currently, the amount of this charge is an
annual effective rate of 0.35% of the Separate Account Value, which is
equivalent to 0.000957233% of the Separate Account Value attributable to the
Division on a daily basis.
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The charge, which is designed to compensate SELIC for the mortality and
expense risks it assumes under the Contract, is deducted on a daily basis
from the Separate Account's assets.
The mortality risk assumed by SELIC under the Contract is that Insureds may,
on average, live for shorter periods of time than estimated and therefore
that the Cost of Insurance Charges specified in the Contract will be
insufficient to meet actual claims. The expense risk assumed by SELIC under
the Contract is the risk that other expenses of issuing and administering the
Contract and operating the Separate Account will be greater than the charges
imposed under the Contract to cover such expenses. If the money collected
from the Mortality and Expense Risk Charge is not needed to cover these
risks, it will be SELIC's gain and will be used for any proper purpose.
Conversely, if the money collected is insufficient to cover these risks,
SELIC will absorb any loss.
MONTHLY CHARGES
As of the Contract Date and on each Monthiversary thereafter, Monthly Charges
will be deducted from each Available Division and the Fixed Fund. Monthly
Charges consist of the Administration Charge, the Cost of Insurance Charge,
charges for additional benefits provided by Contract rider, and charges for
Special Insurance Class Rating, if any. These charges will be deducted from
each Available Division and the Fixed Fund in proportion to the Insurance
Account Value attributable to each Available Division and the Fixed Fund.
ADMINISTRATION CHARGE: On each Monthiversary, a charge is deducted to
compensate SELIC for administrative expenses. The current amount of this
charge is $4.50 per month per Contract. This charge may change, but is
guaranteed not to exceed $8.00 per month per Contract. The Administration
Charge is assessed to reimburse SELIC for the expenses associated with the
administration and maintenance of the Contract and the Separate Account.
SELIC does not expect to profit from this charge.
COST OF INSURANCE CHARGE: A deduction for SELIC's cost of insurance
protection is made on each Monthiversary and, unless otherwise specified by
the Contract Holder, will be based on unisex and unismoke rates. The cost of
insurance rates generally increase as the Insured's Attained Age increases.
SELIC also offers rates, upon a Contract Holder's request, that vary based on
the sex (except Contracts sold in Montana; See "Unisex Requirements Under
Montana Law") and smoker class of the Insured. However, any variation by sex
and/or smoker class must be applied on a consistent basis for all Contracts
in the applicable Case.
The Cost of Insurance Charge is determined by multiplying the applicable cost
of insurance rate by the Net Amount at Risk each Contract Month. Any change
in the Net
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Amount at Risk will affect the total Cost of Insurance Charges deducted from
the applicable Insurance Account Value. Since the Net Amount at Risk may not
be constant, the charge could vary monthly.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract. Those
rates, as well as the rates used for Federal income tax purposes, are based
on the 1980 Commissioners Standard Ordinary (CSO) Mortality Tables, Age
Nearest Birthday that correspond to the applicable sex and smoker blend under
the Contract. Current Cost of Insurance Charges may be lower and may be
changed. The current Cost of Insurance Charges for the Contract Year are
shown in the Contract Holder's annual statement.
SELIC may offer insurance coverage up to $1 million on a guaranteed issue or
simplified issue basis under Contracts that meet all the following
requirements:
1) The Case to which the Contract belongs has at least 25 Insureds;
2) Each Insured under the Contracts in the applicable Case must at the
time of issue be actively at work for a common Employer for a
minimum of 1,000 hours annually;
3) 100% of "eligible persons," defined in a manner acceptable to SELIC,
must be named as an Insured under the applicable Case;
4) The Face Amount, and any Supplemental Term Insurance Amount, for each
Contract in the applicable Case must be determined in all years by
a formula acceptable to SELIC;
5) The Face Amount increases, including any increases in Supplemental Term
Insurance Amount, in any given year for any Contract in the
applicable Case cannot exceed 10% and the cumulative increase in
any Face Amount cannot exceed the smaller of the initial Total
Insurance Coverage or $1,000,000;
6) The Contract Holder, Insured and Beneficiary of each Contract in the
applicable Case must be either an entity domiciled in the United
States or a United States citizen; and
7) The Insured under each Contract in the applicable Case must be between
the ages of 20 and 65.
For Simplified Issue Contracts, SELIC requires that certain medical
information regarding the prospective Insured be provided in the Application.
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SELIC will also offer Contracts on a medically underwritten basis. In these
situations, the rating of an Insured will affect the cost of insurance rates.
SELIC will offer medically underwritten Contracts on a standard and
substandard rating basis. Standard rates will, in general, be less than
substandard rates.
For Contracts with applications dated prior to April 29, 1996 and issued on a
guaranteed issue or simplified issue basis the Cost of Insurance Charges will
vary only by the Attained Age of the Insured. For Contracts with applications
dated on or after April 29, 1996 and issued on a guaranteed issue basis the
Cost of Insurance Charges will vary only by the Attained Age of the Insured
but for Contracts issued on a simplified issue basis the Cost of Insurance
Charges will vary by the Issue Age and the number of completed Contract Years
under the Contract. For all Contracts issued on a medically underwritten
basis the Cost of Insurance Charges will vary by the Issue Age and the number
of Completed Contract Years under the Contract. In general cost of insurance
rates under Contracts that are issued on a guaranteed issue basis will be
greater than cost of insurance rates on Contracts issued on a Simplified
Issue basis, which will be greater than cost of insurance rates on Contracts
that are issued on a standard medically underwritten basis.
SELIC may require medical underwriting for any transaction that increases its
Net Amount at Risk. If any medical underwriting has taken place, an
Insured's rate class may affect the guaranteed and current cost of insurance
rate applicable to that Insured, but not the cost of insurance rate
applicable for Federal income tax purposes which for all Contracts will be
equal to 100% of the applicable 1980 CSO table.
Each Insured is placed in a rate class when SELIC issues a Contract, based on
the Case to which the Contract belongs and underwriting information,
including medical underwriting, if any. When an increase in Face Amount is
requested, SELIC reserves the right: (i) to accept or reject the request,
with or without obtaining additional underwriting information; and (ii) to
obtain additional underwriting information, including medical underwriting,
before approving the increase to determine whether a different rate class
would apply to the increase. If the Insured's rate class at the time of the
increase has declined since the last change in coverage, and SELIC approves
the change in coverage, then the lower rate class will be applied to the Face
Amount increase only. If the Insured's rate class at the time of the
increase has improved since the last change in coverage, then the improved
rate class will be applied to the Total Insurance Coverage provided under the
Policy.
ADDITIONAL INSURANCE BENEFITS AND SPECIAL INSURANCE CLASS RATINGS: Subject
to certain requirements, one or more riders may be added to a Contract.
These riders and the charges associated therewith are described in Appendix B
to this Prospectus. (See "Additional Provisions of the Contract -- Entire
Contract"). Deductions will be made
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on each Monthiversary for applicable charges for any additional benefits
provided by Contract rider.
Deductions will also be made on each Monthiversary for any applicable Special
Insurance Class Rating Charges, which are imposed under the Contract if a
Contract is issued on a substandard basis. These charges are set forth in
the Contract.
UNDERWRITING CHARGES
An Underwriting Charge of up to $100 will be deducted from the Insurance
Account Value on the Issue Date if the Contract is issued on a medically
underwritten basis. Medically underwritten Contracts, for purposes of
deducting this charge, are all Contracts other than those issued on a
guaranteed issue or simplified issue basis (see "Charges and Deductions --
Monthly Charges -- Cost of Insurance Charges"). SELIC also reserves the
right to deduct an Underwriting Charge of up to $100 from the Contract's
Insurance Account Value on any Monthiversary following a Contract Month in
which medical underwriting has taken place due to an increase in SELIC's Net
Amount at Risk with respect to the Contract. The Underwriting Charge is
assessed to reimburse SELIC for the expenses associated with the underwriting
of the Contract. SELIC does not expect to profit from this charge.
SELIC may, in its sole discretion, reduce or waive the Underwriting Charge in
connection with the purchase of Contracts sold by licensed agents of SELIC
that are also registered representatives of selected broker-dealers or
through banks that have entered into written sales agreements with Walnut
Street. Any reduction in or waiver of the Underwriting Charge is reflected
in the Contract.
The Underwriting Charge will be deducted from the Available Divisions and the
Fixed Fund in proportion to Insurance Account Value attributable to each
Division and the Fixed Fund.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
ANNUAL CHARGES
On each Contract Anniversary, the Insurance Account Value attributable to
the Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest
due and unpaid for the previous Contract Year; and (ii) increased by the
interest credited to the Borrowed Fund during the previous Contract Year.
The net result is that if Contract Loan interest is not paid when due, then
on the Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will
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be reduced by the difference between the Contract Loan interest due and unpaid
for the previous Contract Year and the interest credited to the Borrowed Fund
during the previous Contract Year.
OTHER CHARGES
TAXES AND OTHER GOVERNMENTAL CHARGES: SELIC does not currently make any
charges against the Divisions of the Separate Account for Federal, state or
local taxes attributable to them. However, SELIC may in the future impose
such a charge to provide for any tax liability of the Separate Account.
FEES AND EXPENSES OF UNDERLYING PORTFOLIOS: The value of an Accumulation
Unit of each Separate Account Division that invests in shares or interests of
an Underlying Portfolio will reflect the expenses incurred by that Underlying
Portfolio. The Underlying Portfolio's expenses will include its investment
management fee and its operating expenses. The management fees and operating
expenses of each Underlying Portfolio are set forth in the accompanying
prospectus for such underlying Portfolio.
ILLUSTRATIVE REPORT FEE: At the Contract Holder's request, SELIC will
provide an illustrative report in addition to the reports it customarily
provides. Depending upon the type and complexity of the requested report,
SELIC may charge a reasonable fee not to exceed $50.00 per report. (See
"Records and Reports"). This fee must be paid by the Contract Holder
separately and will not be considered a Premium payment.
TERMINATION
The Contract terminates on the earliest to occur of the following:
(1) The end of the Grace Period following any Monthiversary in which the
Net Cash Value for the Contract is insufficient to pay the Monthly
Charges (See "Termination for Insufficient Net Cash Value,"
below);
(2) The surrender of the Contract by the Contract Holder;
(3) The Maturity Date of the Contract; or
(4) The fulfillment of all of SELIC's obligations under the Contract.
MATURITY DATE
No insurance coverage will be effective on or after the Maturity Date, which
is the Contract Anniversary on which the Insured reaches Attained Age 100.
If the Insured is
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living and the Contract is in force on the Maturity Date, the Net Cash Value
will be paid to the Contract Holder, the Contract will terminate, and the
liability of SELIC under the Contract will cease.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
TERMINATION FOR INSUFFICIENT NET CASH VALUE
A Contract will not terminate automatically for failure to pay a subsequent
Premium. However, if the Net Cash Value is not sufficient to cover the
Monthly Charges due with respect to a Contract on any Monthiversary, then the
Grace Period begins. This Grace Period begins on the Monthiversary on which
the Monthly Charges are due. The Grace Period ends 61 days from that
Monthiversary or, if later, 61 days after the date SELIC mails a written
notice to the Contract Holder at the last known address shown on SELIC's
records. This notice will state the Premium amount needed to keep the
Contract in force. During the Grace Period, the insurance coverage under the
Contract will continue in effect.
To continue the Contract's insurance coverage in force, the Contract Holder
must make a Premium payment before the Grace Period ends at least equal to
three times the Monthly Charges due when the Grace Period began, plus Premium
Load.
The Contract will terminate without value (and therefore the insurance
coverage will cease) at the end of the Grace Period if such amounts are not
paid.
REINSTATEMENT OF A CONTRACT TERMINATED FOR INSUFFICIENT VALUE
A Contract that has terminated for insufficient Net Cash Value may be
reinstated within five years from the date of Contract termination. The
Contract Holder must request the reinstatement in a form acceptable to SELIC
and pay the reinstatement Premium, which must be at least equal to the
Monthly Charges due and unpaid at the time of lapse, plus three times the
Monthly Charges due at the time of reinstatement, plus any applicable Premium
Load. Medical evidence of insurability will be required for reinstatement,
and the Insured must be living on the date the reinstatement becomes
effective.
For Modification to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
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THE FIXED FUND
Amounts invested in the Fixed Fund become part of the general assets of SELIC
held in SELIC's General Account. SELIC invests the assets of the General
Account in accordance with applicable state insurance laws. Because of
exemptive and exclusionary provisions, interests in the General Account have
not been registered under the Securities Act of 1933, and the General Account
has not been registered as an investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the General Account. The disclosure regarding the
General Account may, however, be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
This Prospectus describes a flexible premium variable life insurance
contract. This Prospectus together with the accompanying prospectuses for the
Underlying Portfolios, is generally intended to serve as a disclosure
document only for the aspects of the Contract relating to the Separate
Account. For complete details regarding the Fixed Fund, see the Contract
itself.
GENERAL DESCRIPTION
The General Account consists of all assets owned by SELIC, other than those
in the Separate Account and other separate accounts. Subject to applicable
law, SELIC has sole discretion over the investment of the assets of the
General Account.
The allocation of amounts to the Fixed Fund does not entitle a Contract
Holder to share in the investment experience of the General Account. Instead,
SELIC guarantees that the Insurance Account Value in the Fixed Fund will
accrue interest at a rate of at least 4.00%, compounded annually, independent
of the actual investment experience of the General Account.
The Borrowed Fund is also part of the General Account. (See "The Contract --
Contract Loan Privilege").
ALLOCATION OF AMOUNTS TO THE FIXED FUND
At Contract issue, SELIC will determine the maximum percentage of the
non-borrowed Insurance Account Value that may be allocated, either initially
or by transfer, to the Fixed Fund. This maximum percentage is set forth in
the Contract (the "maximum allocation percentage"). The ability to allocate
Net Premiums or to transfer Insurance Account Value to the Fixed Fund may not
be made available or may be limited in
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accordance with the terms of the Contract. SELIC may, from time to time,
adjust the maximum allocation percentage. Such adjustments may not be uniform
to all Contracts. Subject to this maximum, a Contract Holder may elect to
allocate Net Premiums to the Fixed Fund, the Separate Account, or both.
Subject to this maximum, the Contract Holder may also transfer the Insurance
Account Value from the Available Divisions of the Separate Account to the
Fixed Fund.
FIXED FUND BENEFITS
If the Contract Holder allocates all Net Premiums only to the Fixed Fund and
makes no transfers, partial withdrawals, or Contract Loans, the entire
investment risk under the Contract will be borne by SELIC.
FIXED FUND INSURANCE ACCOUNT VALUE
Net Premiums allocated to the Fixed Fund are credited to the Insurance
Account Value. SELIC bears the full investment risk for these amounts and
guarantees that interest credited to each Contract Holder's Insurance Account
Value in the Fixed Fund will not be less than a rate of at least 4.00% per
year, compounded annually. SELIC may, in its sole discretion, credit a
higher rate of interest, although it is not obligated to credit interest in
excess of 4.00% per year, and might not do so. ANY INTEREST CREDITED ON THE
CONTRACT'S INSURANCE ACCOUNT VALUE IN THE FIXED FUND IN EXCESS OF THE
GUARANTEED MINIMUM RATE OF 4.00% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF SELIC. THE CONTRACT HOLDER ASSUMES THE RISK THAT INTEREST
CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR. If
excess interest is credited, a different rate of interest may be applied to
the value in the Borrowed Fund. The value in the Fixed Fund will be
calculated on each Monthiversary of the Contract.
SELIC guarantees that, on each Valuation Date, the Insurance Account Value in
the Fixed Fund will be the amount of the Net Premiums allocated or Insurance
Account Value transferred to the Fixed Fund, plus interest at the rate of
4.00% per year, plus any excess interest which SELIC credits and any amounts
transferred into the Fixed Fund, less the sum of all Contract charges
allocable to the Fixed Fund and any amounts deducted from the Fixed Fund in
connection with partial withdrawals, surrender charges or transfers to the
Separate Account.
On any given day the Insurance Account Value in the Fixed Fund will be equal
to the Insurance Account Value in the Fixed Fund on the prior Valuation Day
plus:
(1) Any new Net Premium allocated to the Fixed Fund;
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(2) Any amount transferred to the Fixed Fund from an Available Division or
the Borrowed Fund; and
(3) Any interest credited to the Fixed Fund;
and less:
(1) Any amount transferred from the Fixed Fund to an Available Division or
the Borrowed Fund;
(2) The Cost of Insurance Charges allocated to the Fixed Fund (deducted
only on a Monthiversary);
(3) The Administration Charges allocated to the Fixed Fund (deducted only
on a Monthiversary);
(4) Any partial withdrawals taken from such Contract and allocated to the
Fixed Fund;
(5) Any charges allocated to the Fixed Fund that are deducted from the
Insurance Account Value for benefits provided by Contract riders;
(6) Any Underwriting Charges allocated to the Fixed Fund;
(7) Any charges for Special Insurance Class Rating allocated to the Fixed
Fund (deducted only on a Monthiversary); and
(8) Any other charges allocated to the Fixed Fund as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction". For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
FIXED FUND TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS
Prior to the Maturity Date, amounts may be transferred from the Fixed Fund to
the Available Divisions or partially withdrawn from the Fixed Fund.
Transfers from the Fixed Fund are subject to the following restrictions:
(a) The transfer must be made in the 30-day period following a Contract
Anniversary; and
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(b) The amount transferred in any Contract Year may be no larger than 25%
of the Insurance Account Value in the Fixed Fund on the date of
the transfer or withdrawal.
Contract Loans and partial withdrawals may also be made from the Contract's
Insurance Account Value in the Fixed Fund, subject to the conditions and
restrictions on Contract Loans and partial withdrawals described above. (See
"The Contract -- Contract Loan Privilege" and "The Contract -- Surrender and
Partial Withdrawals").
Transfers, surrenders, and partial withdrawals payable from the Fixed Fund
and the payment of Contract Loans allocated to the Fixed Fund may be delayed
for up to six months. However, if payment is deferred for 30 days or more,
SELIC will pay interest at the rate of 2.50% per year for the period of the
deferment. Amounts from the Fixed Fund used to pay Premiums on Contracts with
SELIC will not be delayed.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Contracts and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon SELIC's understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Service.
1. TAX STATUS OF THE CONTRACT: Section 7702 of the Internal Revenue Code
of 1986, as amended (the "Code") sets forth a definition of a life
insurance contract for Federal tax purposes. The Section 7702
definition can be met if a life insurance contract satisfies
either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the
Contract is not directly addressed by Section 7702 or proposed
regulations issued under that section. The presence of these
Contract features, the absence of final regulations, and lack of
other pertinent interpretations of Section 7702, thus creates some
uncertainty about the application of Section 7702 to the Contract.
Nevertheless, SELIC believes that the Contract generally qualifies as a
life insurance contract for federal tax purposes. Because of the
absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether a Contract with a
joint and last survivor or a term rider added will, in all cases,
meet the statutory life insurance contract definition. If a Contract
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were determined not to be a life insurance contract for purposes of
Section 7702, such contract would not provide most of the tax advantages
normally provided by a life insurance contract.
If it is subsequently determined that a Contract does not satisfy
Section 7702, SELIC will take whatever steps it deems are
appropriate and reasonable to cause a Contract to comply with
Section 7702. For these reasons, SELIC reserves the right to
modify the Contract as necessary to attempt to qualify a Contract
as a life insurance contract under Section 7702.
Section 817(h) of the Code requires the investments of the Separate
Accounts to be "adequately diversified" in accordance with
Treasury Regulations for the Contract to qualify as a life
insurance contract under Section 7702 of the Code. Failure to
comply with the diversification requirements may result in not
treating the Contract as life insurance. If the Contract does not
qualify as life insurance you may be subject to immediate taxation
on the incremental increases in Insurance Account Value of the
Contract. Regulations specifying the diversification requirements
have been issued by the Department of Treasury, and SELIC believes
it complies fully with such requirements. In connection with the
issuance of the diversification regulations, the Treasury
Department stated that it anticipates the issuance of regulations
or rulings prescribing the circumstances in which an owner's
control of the investments of a separate account may cause the
contract owner rather than the insurance company, to be treated as
the owner of the assets in the separate account. If a Contract
Holder is considered the owner of the assets of the Separate
Account, income and gains from the Account would be included in
the Holder's gross income.
Though no Regulations on the subject of an owner's control of the
investments of a separate account have been issued since the
Regulations specifying the diversification requirements were
issued, informal guidance is available from certain private letter
rulings issued by the Internal Revenue Service to individual
taxpayers. The ownership rights under the Contract are different
in certain respects from, those described by the Internal Revenue
Service in rulings in which it determined the owners were not
owners of separate account assets. For example, a Contract Holder
has additional flexibility in allocating premium payments and cash
values. These differences could result in the Contract Holder
being treated as the owner of a pro rata share of the assets of
the Separate Accounts. In addition, SELIC does not know what
standards will be set forth in any regulations or additional
rulings which the Treasury might issue. SELIC therefore reserves
the right to modify the Contract as necessary to attempt to
prevent the Contract Holder from being considered the owner of a
pro rata portion of the assets of the Separate Accounts or to
otherwise qualify the Contract for favorable tax treatment.
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The following discussion assumes that each Contract will qualify as a
life insurance contract for Federal income tax purposes.
2. TAX TREATMENT OF CONTRACT BENEFITS: SELIC believes the death benefit
under the Contract should generally be excludable from the gross
income of the Beneficiaries under Section 101(a)(1) of the Code.
Many changes or transactions involving a Contract may have tax
consequences, depending on the circumstances. Such changes
include but are not limited to the exchange of the Contract, a
change in a Contract's Face Amount, a change of ownership, the
payment of a subsequent premium, a partial withdrawal from a
Contract, a complete surrender of a Contract, an assignment, a
Contract Loan, or a Contract lapse with an outstanding Contract
Loan. In addition, Federal estate and state and local estate,
inheritance, and other tax consequences of ownership or receipt of
Contract proceeds depend on the circumstance of each Contract
Holder or Beneficiary. A competent tax adviser should be
consulted for further information.
Generally, the Contract Holder will not be deemed to be in constructive
receipt of the Insurance Account Value including increments
thereof, under the Contract until there is a distribution. The
tax consequences of distributions from, and loans taken from or
secured by, the Contract(s) should generally be determined on a
Contract by Contract basis. (See "Multiple Contracts," below).
Such tax consequences further depend on whether the Contract from which
the distribution is made or Contract Loan is taken is classified
as a "modified endowment contract" under Section 7702A. However,
upon a complete surrender or lapse of any Contract, if the amount
received plus the amount of Indebtedness exceeds the total
investment in the Contract, the excess will generally be treated
as ordinary income subject to tax.
3. MODIFIED ENDOWMENT CONTRACTS: A Contract may be treated as a modified
endowment contract depending upon the amount of premiums paid in
relation to the death benefit provided in respect of such
Contract. The premium limitation rules for determining whether a
Contract is a modified endowment contract are complex. In
general, a Contract will be a modified endowment contract if the
accumulated premiums paid at any time during the first seven years
after the Contract is established exceeds the sum of the net level
premiums which would have been paid on or before such time if the
future benefits provided in respect of the Contract were deemed to
be paid-up after the payment of seven level annual premiums.
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In addition, if the benefits or rights associated with a Contract are
"materially changed," it may cause such Contract to be treated as
a modified endowment contract. The material change rules for
determining whether a Contract is a modified endowment contract
are also complex. In general, however, the determination of
whether a Contract will be a modified endowment contract after a
material change generally depends upon the relationship among the
death benefit associated with the Contract at the time of such
change, the Insurance Account Value at the time of the change and
the additional premiums paid in respect of the Contract during the
seven years starting with the date on which the material change
occurs. Moreover, a life insurance contract received in exchange
for a life insurance contract classified as a modified endowment
contract will also be treated as a modified endowment contract.
(a) Distributions from Contracts Classified as Modified Endowment
Contracts: Contracts classified as modified endowment
contracts will be subject to the following tax rules: First,
all distributions, including distributions upon lapse or
surrender, from such a Contract are treated as ordinary
income subject to tax up to the amount equal to the excess
(if any) of the Insurance Account Value of the Contract
immediately before the distribution over the investment in
the Contract (described below) at such time. Second, loans
taken from or secured by, the Insurance Account Value of such
a Contract, as well as due but unpaid interest thereon, are
treated as distributions from such Contract and taxed
accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or loan
taken from or secured by, such a Contract that is included in
income except where the distribution or loan is made on or
after the taxpayer attains age 59 1/2, is attributable to the
taxpayer's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and the taxpayer's Beneficiary.
Contract Holders that are not natural persons are unlikely to
meet these exceptions.
If a Contract becomes a modified endowment Contract after it is
issued, distributions made during the Contract year in which
it becomes a modified endowment Contract, distributions in
any subsequent Contract year and distributions within two
years before the Contract becomes a modified endowment
Contract will be subject to the tax treatment described
above. This means that a distribution from a Contract that
is not a modified endowment Contract could later become
taxable as a distribution from a modified endowment
Contract.
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(b) Distributions From Contracts Not Classified as Modified Endowment
Contracts: Distributions from a Contract that is not a
modified endowment contract are generally treated as first
recovering the investment in the Contract (described below)
and then, only after the return of all such investment in
the Contract, as distributing taxable income. An exception
to this general rule may occur in the case of a decrease in
the death benefit provided in respect of a Contract
(possibly resulting from a partial withdrawal) or any other
change that reduces benefits associated with the Contract in
the first 15 years after the Contract is established and
that results in a cash distribution to the Contract Holder
in order for the Contract to continue complying with the
Section 7702 definitional limits. Such a cash distribution
will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Contract) under rules prescribed
in Section 7702.
Loans from, or secured by, a Contract that is not a modified
endowment contract are generally not treated as
distributions. Instead, such loans are generally treated as
indebtedness of the Contract Holder. However, if the Service
or a court were to deem the loan not 'bona fide', it is
possible that the loans from the Contract may be treated as
taxable distributions.
Neither distributions (including distributions upon surrender or
lapse) nor loans from, or secured by, a Contract that is not
a modified endowment contract are subject to the 10%
additional income tax. If a Contract which is not a
modified endowment contract subsequently becomes a modified
endowment contract, then any distribution made from the
Contract within two years prior to the date of such change
in status may become taxable and subject to the 10%
additional income tax.
(c) Classification of Contract: Due to the Contract's flexibility,
classification of a Contract as a modified endowment
contract will depend upon the circumstances of each
Contract. SELIC has adopted administrative steps designed
to protect a Contract Holder against the possibility that a
Contract might become a modified endowment contract. SELIC
believes the safeguards are adequate for most situations,
but it cannot provide complete assurance that a Contract
will not be classified as a modified endowment contract. At
the time a Net Premium is credited which (according to
SELIC's calculations) would cause a Contract to become a
modified endowment contract, SELIC will notify the Contract
Holder that unless a refund of the excess Premium is
requested by the Contract Holder, the Contract will be a
modified
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endowment contract. The Contract Holder will have 30 days after
receiving such notification to request the refund. The excess
Premium paid with 4.00% required annual interest or gain,
whichever is greater, will be returned to the Contract Holder upon
receipt by SELIC of the refund request. The amount to be refunded
will be deducted from the Insurance Account Value in the Available
Divisions and in the Fixed Fund in the same proportion as the
payment was allocated.
A Contract Holder should contact a competent tax adviser before
purchasing a Contract to determine the circumstances under which a
Contract would be a modified endowment contract. In addition, a
Contract Holder should contact a competent tax adviser before
paying any additional premiums; making any other change to,
including an exchange of, a Contract; or making a change to the
benefits provided under a Contract to determine whether such
premium or change would cause the Contract (or the new contract in
the case of an exchange) to be treated as a modified endowment
contract.
4. LOAN INTEREST: Generally, interest paid on any loan under a life
insurance contract which is owned by an individual is not
deductible. In addition, interest on any loan under a life insurance
contract owned by a business taxpayer on the life of any individual
who is an officer of or is financially interested in the business
carried on by that taxpayer is deductible only under certain very
limited circumstances. A CONTRACT HOLDER SHOULD CONSULT A COMPETENT
TAX ADVISER BEFORE DEDUCTING ANY LOAN INTEREST.
5. INVESTMENT IN A CONTRACT: Investment in a Contract means (i) the
aggregate amount of any premiums or other consideration paid in
respect of a Contract, minus (ii) the aggregate amount received
under the Contract which is excluded from gross income of the
Contract Holder (except that the amount of any loan from, or
secured by, a Contract that is a modified endowment contract, to
the extent such amount is excluded from gross income, will be
disregarded), plus (iii) the amount of any loan from or secured by
a Contract that is a modified
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endowment contract to the extent that such amount is included in the
gross income of the Contract Holder.
6. MULTIPLE CONTRACTS: All modified endowment contracts that are issued
by SELIC (or its affiliates) to the same Contract Holder during any
calendar year are treated as one modified endowment contract for
purposes of determining the amount includible in gross income under
section 72(e) of the Code. In view of this rule, in the event that
a number of Contracts are established at the same time or during the
same calendar year, it is important to determine how many, if any,
of the Contracts will be treated as modified endowment contracts. A
competent tax adviser should be consulted for further information.
7. ALTERNATIVE MINIMUM TAX: There may also be an indirect tax upon the
inside build-up of the Contract under the corporate alternative minimum
tax.
8. OTHER TAX CONSEQUENCES. The Contract may be used in various
arrangements, including nonqualified deferred compensation or
salary continuance plans, split dollar insurance plans, executive
bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of
such plans may vary depending on the facts and circumstances of
each individual arrangement. Therefore, if you are contemplating
the use of the Contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to
consult a qualified tax advisor regarding the tax attributes of the
particular arrangement and the suitability of this product for the
arrangement.
9. POSSIBLE CHARGE FOR TAXES: SELIC is presently taxed as a life
insurance company and does not incur federal income tax liability,
or state or local tax liability, attributable to investment income
or capital gains of the Separate Account. Based on these
assumptions, no charge is currently being made to the Separate
Account for federal income taxes, or state or local taxes.
However, SELIC may in the future impose such a charge if (i) the
tax treatment of SELIC is ultimately determined to be other than
what SELIC believes it to be, (ii) there are changes made in the
income tax treatment, or state or local tax treatment, of variable
life insurance at the company level, or of the separate accounts,
or (iii) there is a change in SELIC's status. Any such charge
would be designed to cover the taxes attributable to the investment
results of the Separate Accounts.
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ADDITIONAL PROVISIONS OF THE CONTRACT
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
SELIC reserves the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held
by the Separate Account or that the Separate Account may purchase. SELIC
reserves the right to eliminate the shares of any of the Underlying
Portfolios and to substitute the shares of another registered open-end
investment company if the shares of an Underlying Portfolio are no longer
available for investment or if, in SELIC's judgment, further investment in
any Underlying Portfolio becomes inappropriate in view of the purposes of the
Separate Account. SELIC will not substitute any shares attributable to a
Contract Holder's interest in a Division of a Separate Account without notice
to the Contract Holder and prior approval of the SEC, to the extent required
by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of contracts, or from permitting a
conversion between series or classes of contracts on the basis of requests
made by Contract Holders.
The participation agreements pursuant to which Underlying Portfolios sell
shares to the Separate Account can be terminated by the Underlying Portfolio
or by SELIC under a variety of circumstances, with or without cause.
SELIC also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new investment company,
with a specified investment objective. New Divisions may be established
when, in the sole discretion of SELIC, marketing needs or investment
conditions warrant, and any new Division will be made available to existing
Contract Holders on a basis to be determined by SELIC. SELIC may also
eliminate or combine one or more Divisions, substitute one Division for
another Division, or transfer assets between Divisions, if, in its sole
discretion, marketing, tax, or investment conditions warrant; such changes
will not occur without notice to the Contract Holder and prior approval of
the SEC, to the extent required by the 1940 Act or other applicable law.
In the event of a substitution or change, SELIC may, if it considers it
necessary, make changes in the Contract by appropriate endorsement. SELIC
will notify Contract Holders of any such changes.
If deemed by SELIC to be in the best interests of persons having voting
rights under the Contracts, and to the extent any necessary SEC approvals or
Contract Holder votes are obtained, the Separate Account may be: (a) operated
as a management company under the 1940 Act; (b) de-registered under that Act
in the event such registration is no longer required; or (c) combined with
other separate accounts of SELIC. To the extent
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permitted by applicable law, SELIC may also transfer the assets of the
Separate Account associated with the Contract to another separate account.
Also, subject to the approval of the New York Superintendent of Insurance,
SELIC has the right to change the investment policy of any Separate Account
Division. If required, the process for obtaining approval of a material
change from the New York Superintendent of Insurance will be filed with the
insurance supervisory official of the Governing Jurisdiction. SELIC will
notify the Contract Holder if any material change of investment policy is
approved.
INCONTESTABILITY
SELIC must bring any legal action to contest the validity of any insurance
coverage under the Contract within two years from the applicable Issue Date
of the Contract, or from the effective date of any change in coverage
requiring medical evidence of insurability, as applicable.
CONVERSION RIGHTS
Once the Contract is issued and as long as the Contract is in force, a
Contract Holder may during the first 24 months transfer all of the Insurance
Account Value into the Fixed Fund and receive fixed and guaranteed benefits
under the Contract. Once this right is exercised, no transfers out of the
Fixed Fund will be allowed and all Net Premiums paid after the election will be
allocated to the Fixed Fund. This request must be in writing and must
specifically indicate that the transfer is being made pursuant to the
Conversion Right. This transfer will not be subject to any transfer
limitations or charges. At the time of such transfer, there will not be any
effect on the Contract's Death Benefit, Contract Loans, Face Amount, Net
Amount at Risk, Issue Age or insurance class. All benefits after a
conversion will be based upon the Fixed Fund.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated in the Application and
the misstatement is discovered after the Insured's death, the amount of Death
Benefit payable by SELIC will be that which the most recent mortality charges
would have purchased for the correct age and sex. If the Insured is still
living at the time of discovery, future amounts payable will be adjusted
based upon the correct facts.
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SUICIDE
Subject to the insurance laws of the Governing Jurisdiction, if the Insured
commits suicide, while sane or insane, within two years from the date
coverage becomes effective with respect to such person under the Contract,
only a limited Death Benefit will be payable. In such case, the amount of
the Death Benefit will be equal to the amount of the Net Premiums paid, less
any partial withdrawals, and less any Contract Loans and any Contract Loan
interest accrued but unpaid.
If, after the expiration of the two year period described above, the Insured
commits suicide within two years from the date of receipt of any subsequent
Premium that increases the amount of the Death Benefit, the amount of the
Death benefit attributable to such increase will be limited to a refund of
the Cost of Insurance Charges made for such increase.
AVAILABILITY OF FUNDS
Cash payments from the Contract for partial withdrawals, Contract Loans, and
surrenders will usually be made within seven days after a written request is
received at the Home Office of SELIC. Transfers between or among Separate
Account Divisions will usually be effected on the date the transfer request
is received in good order. Payment or transfers may be delayed, however,
during any period that:
(1) The New York Stock Exchange (or its successor) is closed for trading;
or
(2) The SEC determines that a state of emergency exists.
Payment of the portion of any amount payable from the Fixed Fund for Contract
Loans, partial withdrawals or surrender, and transfers to the Separate
Account Divisions may be delayed for not more than six months. If payment is
deferred for 30 days or more, SELIC will pay interest on such amounts at the
rate of 2.50% per year for the period of deferment.
ENTIRE CONTRACT
The Contract is issued in consideration of the Application and the Initial
Premium. The Contract and Application, a copy of which is attached to the
Contract, together with any Contract Schedules, any riders, and any other
related documents constitute the entire Contract. Any waiver or change of
any provision in the Contract must be in writing and signed by an officer of
SELIC. Additional insurance benefits may be made available under the
Contract by rider. Any such riders selected by the Contract Holder and
agreed to by SELIC will be attached to and made a part of the Contract.
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The failure of SELIC to enforce any provision of the Contract does not
constitute and cannot be construed as a waiver of such provision or of the
right to enforce it at a later time, nor does the waiver of any provision by
SELIC on one or more occasions constitute nor can it be construed as a waiver
for all occasions, and SELIC cannot be stopped from enforcing any provision
of the Contract except as may be otherwise agreed to in writing by an officer
of SELIC.
REPRESENTATIONS IN APPLICATION
SELIC deems all statements in the Application to be representations and not
warranties. SELIC will not use any statement, in the absence of fraud, to
void the Contract or to defend a claim for the insurance benefits under the
Contract unless it is contained in the Application and a copy of the
Application is attached to the Contract on the Issue Date, or unless it is
contained in a related document and signed either by the Contract Holder or
by the proposed Insured, and a copy of such completed document is provided to
the Contract Holder on the Issue Date or on the effective date of any change
requiring evidence of insurability.
CONTRACT APPLICATION AND CONTRACT SCHEDULES
If any information contained in the Contract, Application, Contract
Schedules, or any other related documents for the Contract is inaccurate or
untrue on the date the Contract is issued, the Contract Holder is required
under the Contract to promptly notify SELIC and provide corrected
information.
RIGHT TO AMEND CONTRACT
If any provision in the Contract is in conflict with the laws of the
Governing Jurisdiction, the provision will be deemed to be amended to conform
with such laws. SELIC may amend the Contract from time to time as may be
required to meet the definition of "life insurance" under the Internal
Revenue Code of 1986, as amended, or its regulations or published rulings.
COMPUTATION OF CONTRACT VALUES
A detailed statement of the method used to compute the Contract's benefits
and values is filed with the insurance regulatory authority of the Governing
Jurisdiction. These benefits and values are not less than those required by
the laws of the Governing Jurisdiction.
CLAIMS OF CREDITORS
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The proceeds of the Contract will be free from creditors' claims to the
extent allowed by law.
NOTICE
Any written notice required by the Contract to be given by SELIC to the
Contract Holder will be effective five days after it is mailed by first class
mail or 15 days after it is mailed by third class mail (or when received, if
sent by any other means) to the Contract Holder at the Contract Holder's
current address as noted on the records of SELIC.
Any written notice required by the Contract to be given by the Contract
Holder to SELIC will be effective when received in a form acceptable to SELIC
at its Home Office. To be acceptable, a notice must be in written form, in
the English language (except where applicable law requires otherwise), must
include all pertinent information, and must be signed by the Contract Holder
or an individual authorized to act for the Contract Holder and so designated
on the records of SELIC.
ASSIGNMENTS
Neither the Contract nor any of the rights of the Contract Holder or
Beneficiary under it may be assigned or transferred without the written
permission of SELIC.
CONSTRUCTION
In the event of a conflict between the Contract provisions and the
information contained in any Contract Schedule, the provisions of the
Contract will be controlling.
SEVERABILITY
In the event any provision of the Contract is declared illegal or otherwise
unenforceable, it will be severed from the Contract and the remainder of the
Contract will be valid and enforceable.
STATE VARIATIONS
Certain Contract features, including the "Free Look" provision, are subject
to state variations. The Contract Holder should read his or her Contract
carefully to determine whether any variations apply in the state in which the
Contract is issued.
UNISEX REQUIREMENTS UNDER MONTANA LAW
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The state of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the lives of its residents. Therefore, all Contracts
offered by this Prospectus and issued for delivery in Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account Divisions will be
maintained by SELIC. Each year within 30 days after the Contract
Anniversary, SELIC will mail a report to the Contract Holder. The report
will show the Insurance Account Value at the beginning of the previous
Contract Year and all Premiums paid since that time. It will also show the
additions to, and deductions from, the Insurance Account Value during the
Contract Year, and the Insurance Account Value, Death Benefit, Net Cash
Value, any outstanding Contract Loan amount and accrued Contract Loan
interest as of the current Contract Anniversary. The report will also
include any additional information required by applicable law or regulation.
SELIC also will mail the Contract Holder any other reports or documents
required by applicable law or regulation.
In addition to the periodic reports, the Contract Holder may request an
illustrative report showing projected Contract values. There may be a charge
for providing an illustrative report. (See "Charges and Deductions -- Other
Charges").
SALE OF THE CONTRACT
The Contract will be sold by individuals who, in addition to being licensed
as life insurance agents for SELIC, are also registered representatives of
Walnut Street Securities, Inc. ("Walnut Street"), the distributors of the
Contract, or of broker-dealers or through banks who have entered into written
sales agreements with Walnut Street. Walnut Street was incorporated under
the laws of Missouri in 1984 and is an indirect subsidiary of General
American Life Insurance Company. Walnut Street is registered with the SEC as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. No director or officer
of Walnut Street owns any interest in the Separate Account, however, the
policies issued through the Separate Account may be used to fund nonqualified
deferred obligations of the depositor or its affiliates subject to any
regulatory requirements.
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SELIC will pay writing agent compensation equal to the Commission Charge in
connection with the Contract Holder's purchase of the Contract, plus a
maximum of 14.00% of any Excess Premiums paid in any Contract Year on
Contracts issued without any riders attached.
VOTING RIGHTS
To the extent required by law, SELIC will vote shares of the Underlying
Portfolios held in the Separate Account at regular or special shareholder
meetings of the Underlying Portfolios in accordance with instructions
received from persons having voting interests in the corresponding Divisions
of the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the Underlying Portfolios in its own right, it may elect to do so.
The number of votes that a Contract Holder has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Contract Holder at the record date rather than the number of
units alone. Fractional shares will be counted. The number of votes of an
Underlying Portfolio that the Contract Holder has the right to instruct will
be determined as of the date established by that Underlying Portfolio for
determining eligibility to vote at the meetings of the Underlying Portfolio.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the Underlying
Portfolio.
SELIC will vote shares as to which no timely instructions are received in
proportion to the voting instructions which are received with respect to the
contracts participating in that Underlying Portfolio. SELIC will also vote
shares it owns that are not attributable to contracts in the same proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Underlying
Portfolio.
DISREGARD OF VOTING INSTRUCTIONS: SELIC may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification, or investment objective of an Underlying Portfolio, or
one or more of its Series, or to approve or disapprove an investment advisory
contract for an Underlying Portfolio. In addition, SELIC itself may disregard
voting instructions in favor of changes proposed by a Contract Holder in the
investment advisory agreement or the investment
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adviser of an Underlying Portfolio if SELIC reasonably disapproves of such
changes. A proposed change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or SELIC
determines that the change would have an adverse effect on its General Account
in that the proposed investment advisory contract for an Underlying Portfolio
may result in overly speculative or unsound investments. In the event
SELIC does disregard voting instructions, a summary of that action and the
reasons for such action will be included in the next annual report to Contract
Holders.
STATE REGULATION OF THE COMPANY
SELIC, a stock life insurance company organized under the laws of New York,
is subject to regulation by the New York Department of Insurance. An annual
statement is filed with the Superintendent of Insurance on or before March
1st of each year covering the operations and reporting on the financial
condition of SELICas of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of the
Company and the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.
In addition, SELIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
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<TABLE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS AND PRINCIPAL OFFICERS
<CAPTION>
NAME PRINCIPAL OCCUPATION(S) DURING PAST
FIVE YEARS
<S> <C>
Willard N. Archie SELIC Director; Vice Chairman,
Vice Chairman Mitchell, Titus & Company (CPA
Mitchell, Titus & Company, LLP management consulting firm). Prior
One Battery Park Plaza to January, 1996, Managing Partner,
New York, NY 10004-1461 Mitchell, Titus & Company.
Carson E. Beadle, SELIC Director; Managing Director,
Managing Director William M. Mercer Inc. (actuarial,
William M. Mercer, Inc. employee benefits, compensation and
1166 Avenue of the Americas human resources management
New York, NY 10036 consulting firm).
James R. Elsesser SELIC Director; Vice President and
Vice President & CFO Chief Financial Officer, Ralston
Ralston Purina Company Purina Company (pet food,
Checkerboard Square batteries, and bread business).
St. Louis, MO 63164
Stanley Goldstein SELIC Director; Partner, Goldstein,
Goldstein, Golub, Kessler & Co. Golub, Kessler & Company
1185 Sixth Avenue (accounting services).
New York, NY 10036
David D. Holbrook SELIC Director; Chairman, Marsh &
Chairman McLennan, Inc. (insurance and
Marsh & McLennan, Inc. reinsurance brokers, consulting and
1166 Avenue of the Americas investment management).
New York, NY 10036
Richard A. Liddy SELIC Director; Chairman of the
Chairman, President and CEO Board; President and Chief
General American Life Insurance Co. Executive Officer, General American
700 Market Street Life Insurance Co. (life
St. Louis, MO 63101 insurance). Prior to May 1992,
President and Chief Operations
Officer.
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Fabio Pieroni SELIC Vice President, Treasurer &
Vice President, Treasurer & Controller Controller; Prior to June 1993, 2nd
Security Equity Life Insurance Co. Vice President of Finance and
Administration, First UNUM Life
Insurance Company.
Leonard M. Rubenstein, SELIC Director; Executive Vice
Executive Vice President - Investments President - Investments, General
General American Life Insurance Co. American Life Insurance Co. (life
700 Market Street insurance).
St. Louis, MO 63101
William C. Thater SELIC Director and President; Prior
President to June 1993, Vice President -
Security Equity Life Insurance Co. Individual Life, General American
84 Business Park Drive, Suite #303 Life Insurance Co. (life
Armonk, NY 10504 insurance). Prior to September
1991, Adv. Sales Vice President,
General American Life Ins. Co.
Prior to January 1990, Vice
President, Marsh & McLennan
(insurance and reinsurance brokers,
consulting and investment
management).
H. Edwin Trusheim SELIC Director; Retired Chairman,
General American Life Insurance Co. General American Life Insurance Co.
700 Market Street (life insurance). Prior to May
St. Louis, MO 63101 1993, Chairman & CEO, General
American Life Ins. Co.
Virginia V. Weldon, M.D. SELIC Director; Senior Vice
Senior Vice President President, Monsanto Company
Monsanto Company (chemicals diversified industry,
800 North Lindbergh Blvd. pharmaceuticals, life science
St. Louis, MO 63167 products, and food ingredients
business)
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Ted C. Wetterau SELIC Director; Chairman and Chief
Chairman and CEO Executive Officer, Wetterau &
Wetterau Associates Associates, Inc. (retail and
1401 S. Brentwood, Suite 760 wholesale grocery, manufacturing
St. Louis, MO 63144 business).
Ben H. Wolzenski, SELIC Director; Executive Vice
Executive Vice President - Individual President, General American Life
General American Life Insurance Co. Insurance Co. (life insurance).
13045 Tesson Ferry Road Prior to October 1991, Vice
St. Louis, MO 63128 President - Individual Life
Products, General American Life
Ins. Co.
A. Greig Woodring SELIC Director; CEO & President,
CEO & President Reinsurance Group of American, Inc.
Reinsurance Group of America, Inc. (reinsurance). Prior Executive
660 Mason Ridge Center Dr., Suite 300 Vice President - Reinsurance,
St. Louis, MO 63141 General American Life Ins. Co.
</TABLE>
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LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
has been provided by Matthew P. McCauley, General Counsel, SELIC.
LEGAL PROCEEDINGS
Neither SELIC nor the Separate Account is involved in any material legal
proceedings.
EXPERTS
The audited financial statements of Security Equity Life Insurance Company
and the Separate Account have been included in the Prospectus in reliance on
the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and on the authority of said firm as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined by Ralph A.
Gorter of Security Equity Life Insurance Company, whose opinion is filed as
an exhibit to the registration statement for the Contracts.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Contracts. This Prospectus does not contain all the information set forth in
the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, SELIC and the Contracts.
Statements contained in this Prospectus as to the contents of the Contract
and other legal instruments are summaries. For a complete statement of the
terms thereof, reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of SELIC which are included in this Prospectus
should be distinguished from the financial statements of the Separate
Account, and should be considered only as bearing on the ability of SELIC to
meet its obligations under the Policy. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
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APPENDIX A -- UNDERLYING PORTFOLIOS
The Available Division invests in shares or units of an Underlying Portfolio
from the following open-end, management investment companies:
EVERGREEN VARIABLE TRUST
Evergreen VA Portfolio
Evergreen VA Foundation Portfolio
Evergreen VA Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
Money Market Portfolio
VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
Each Underlying Portfolio operates as a separate investment vehicle, and the
income or losses of one Underlying Portfolio has no effect on the investment
performance of any other Underlying Portfolio.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH
UNDERLYING PORTFOLIO LISTED.
The prospectus for each Underlying Portfolio includes information regarding
the investment advisory fee and operating expenses of the Underlying
Portfolio, which are reflected in the value of the Accumulation Units of the
Division of the Separate Account that invests in such Underlying Portfolio.
The prospectus for each Underlying Portfolio also includes investment
strategies, objectives and investment advisor.
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APPENDIX B -- CONTRACT RIDERS
JOINT AND LAST SURVIVOR RIDER
-----------------------------
The Joint and Last Survivor modifies the Contract to provide insurance
coverage on the lives of two Insureds. The rider will be subject to all
terms in the Contract, and the addition of the rider will not change any
mechanics of the Contract, except as modified in the Contract and highlighted
below. Some of the discussions in the Prospectus applicable to the Contract
apply differently to a Contract to which a Joint and Last Survivor Rider has
been added. Set out below are the modifications to designated sections of
the Prospectus in the event that a Joint and Last Survivor Rider is added to
the Contract. Except as noted below, the discussions in the Prospectus
referencing a single Insured can be read as though the single Insured was two
Insureds under a Contract with a Joint and Last Survivor Rider.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Joint and Last Survivor
Rider:
FIRST INSURED: The first person of the two Insureds to die.
INSURED: A person whose life is insured under the terms of the Contract.
There are two Insureds under the Contract. Both Insureds are shown in the
Contract.
JOINT AND LAST SURVIVOR RIDER: A rider added attached to the Contract
described in this Prospectus, which will amend the Contract to pay a Death
Benefit after the death of Last Insured.
LAST INSURED: The last person of the two Insureds to die.
The following are the major differences between a Contract with a Joint and
Last Survivor rider added and one without.
1. All conditions of eligibility of a prospective Insured will be applied
to both Insureds in order for a Contract with a Joint and Last
Survivor Rider to be issued. (See "The Contract -- Availability
of Insurance Coverage").
2. Death Benefits will be paid on a Temporary Insurance Coverage basis
only if both Insureds meet SELIC's usual and customary
underwriting standards for the applied for coverage (See "The
Contract -- Availability of Insurance Coverage").
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3. All Contracts that are issued with a Joint and Last Survivor Rider
attached will require medical evidence of insurability. (See "The
Contract -- Evidence of Insurability").
4. All Contracts that are issued with a Joint and Last Survivor Rider
attached will pay a Death Benefit only on the death of the Last
Insured. No Death Benefit will be paid on the death of the First
Insured. (See "The Contract -- Death Benefits Under the
Contract").
5. No change in Death Benefit Option or Face Amount will be effective if
the Last Insured dies before the change is effective. (See "The
Contract -- Death Benefit Options" on page 30 and "The Contract --
Death Benefits Under the Contract").
6. In general, a Contract with a Joint and Last Survivor Rider will have
a lower Target Premium than a Contract issued on a single Insured
with the same Total Insurance Coverage. This will result in lower
Commission Charges for a Contract with the same Total Insurance
Coverage. (See "Charges and Deductions -- Premium Load").
7. A deduction for SELIC's cost of insurance protection is made on each
Monthiversary and in general will be based upon the sex and smoker
status of the two Insureds. The Joint and Last Survivor cost of
insurance rates will be blended rates based upon the Issue Ages of
the Insureds, the number of completed Contract Years, as well as
the sex and smoker status of the Insureds. The cost of insurance
rates may also vary by any special insurance class charges.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the
Contract. These rates, as well as the rates used to calculate the
Minimum Death Benefit and limitations on Premiums payable under
the Contract, are based on the 1980 Commissioners Standard
Ordinary Tables, Age Nearest Birthday, that correspond to the
applicable ages, sex and smoker status of the Insureds. Current
cost of insurance rates may be lower.
Since a benefit is paid only in the event that both Insureds have died,
Cost of Insurance Charges for Contracts with a Joint and Last
Survivor Rider attached will generally be lower than the charges
for a comparable single life Contract. (See " Charges and
Deductions -- Cost of Insurance Charge").
8. The calculation of the Minimum Death Benefit and any limitations on
Premiums will reflect the fact that no Death Benefit will be paid
until the death of the Last Insured. Assuming the same amount of
requested Insurance Coverage, any limitations on Premiums payable
under the Contract will be lower than those
B-2
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based upon a single life, while the Minimum Death Benefits will be
higher than those based upon a single life. (See "The Contract -- Death
Benefits Under the Contract").
9. The Underwriting Charge for Contracts issued with a Joint and Last
Survivor Rider attached will be equal to the sum of a flat fee and
a charge per $1,000 of Total Insurance Coverage, subject to a
maximum charge. This charge is determined separately for each
Insured. The charges for each Insured are added together to
obtain the total charge for the Contact. This charge is deducted
on each Monthiversary for the first 12 Contract Months. The flat
fee, charge per $1,000, and maximum charge are shown in the table
below.
<TABLE>
<CAPTION>
Per $1,000 of Total Maximum Total
Flat Fee Insurance Coverage Underwriting Charge
Issue Age Per Month Per Month Per Insured Per Month
<S> <C> <C> <C>
20 - 45 $4.17 $.00833 $37.50
46 - 60 $4.17 $.01250 $54.17
61 - 85 $4.17 $.01667 $54.17
</TABLE>
If there is a Contract change after issue which requires medical
underwriting, SELIC will deduct on the Monthiversary following the
underwriting an amount per Insured equal to $100, plus the per
thousand charge above multiplied by 12, multiplied by the increase
in the Net Amount at Risk to which the underwriting relates,
subject to the maximum charge shown above. (See "Charges and
Deductions -- Underwriting Charges").
SELIC may, in its sole discretion, reduce or waive the Underwriting
Charge in connection with the purchase of Contracts sold by
licensed agents of SELIC that are also registered representatives
of selected broker-dealers or banks that have entered into written
sales agreements with Walnut Street Securities, Inc., the
distributor of the Contracts. Any reduction in or waiver of the
Underwriting Charge will be reflected in the Contract.
10. The Maturity Date of Contracts issued with a Joint and Last Survivor
Rider attached will be when the younger of the two Insureds
reaches the attained age of 100. (See "Termination -- Maturity
Date").
11. For a Contract issued with a Joint and Last Survivor Rider attached to
be reinstated, both Insureds must be alive on the date of
reinstatement. (See "Termination -- Reinstatement of a Contract
Terminated for Insufficient Value").
B-3
<PAGE> 316
12. Death Benefit will be paid on a Contract issued with a Joint and Last
Survivor Rider if either Insured commits suicide within two years
from the date coverage becomes effective or within two years from
the date of receipt of a Subsequent Premium payment which
increases the Death Benefit. (See " Additional Provisions of the
Contract -- Suicide").
SUPPLEMENTAL TERM INSURANCE RIDER
---------------------------------
A Contract Holder may elect to add a Supplemental Term Insurance Rider to the
Contract at the time of the Application. The Supplemental Term Insurance
Rider increases the Total Insurance Amount under the Contract. The addition
of this Rider will allow SELIC to deduct additional monthly charges from the
Insurance Account Value of the Contract.
This rider may be added to a single life Contract, or a Contract to which a
Joint and Last Survivor Rider has been attached.
Set out below are additional definitions and other modifications applicable
when a Supplemental Term Rider is added to a Contract.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Supplemental Term
Insurance Rider:
DATE OF DEATH UPON WHICH DEATH BENEFIT BECOMES PAYABLE: The date of death of
the Insured, for a single life Contract, or the Last Insured for a Contract
to which a Joint and Last Survivor Rider has been added.
RIDER DEATH BENEFIT: Is the amount of Supplemental Term Insurance Coverage
under the Rider.
SUPPLEMENTAL TERM INSURANCE RIDER: A rider added to the Contract described
in this Prospectus, which will increase the Total Insurance Amount under the
Contract.
SUPPLEMENTAL TERM INSURANCE BENEFIT
The Supplemental Term Insurance Rider provides term insurance coverage (the
Rider Death Benefit) that is in addition to insurance coverage provided under
the Contract. SELIC will pay the Rider Death Benefit to the beneficiary if
the Date of Death Upon Which Death Benefit becomes Payable occurs while the
rider is in force. SELIC must receive proof that such death occurred before
the Rider Expiry Date in the Contract,
B-4
<PAGE> 317
or the termination of the coverage provided by the Supplemental Term Insurance
rider, if earlier, as specified in the Rider and the Contract.
The Contract Holder may, subject to the approval of the Company, change the
Supplemental Term Insurance Amount. The Contract Holder must request any
change not specified in the Contract by notifying SELIC in writing. Evidence
of Insurability will be required for any change that increases the
Supplemental Term Insurance Amount. If SELIC approves the change, it will
take effect on the next Monthiversary which is at least 30 days after all the
required information has been provided to SELIC. The Contract will be
amended to reflect any such change in the Supplemental Term Insurance Amount.
No change will be effective if the Date Upon Which Death Benefit becomes
Payable is before the date of the change.
MONTHLY CHARGES FOR SUPPLEMENTAL TERM INSURANCE AMOUNTS - COST OF INSURANCE
CHARGES
Charges for the Supplemental Term Insurance Rider, which consist of monthly
Cost of Insurance Charges for the Rider Death Benefit, are deducted from the
Insurance Account Value on each Monthiversary. The charges are determined by
multiplying the rider Net Amount At Risk by the current monthly Cost of
Insurance Rate for the rider.
The rider Net Amount at Risk on any Monthiversary is equal to:
(a) The Supplemental Term Insurance Amount discounted to such
Monthiversary at the rate specified in the Basis of
Computation Specified in the Contract; less
(b) The excess, if any, of the Insurance Account Value on such
Monthiversary over the Death Benefit for the Contract
discounted to such Monthiversary at the rate specified in
the Basis of Computations Specified in the Contract.
The cost of insurance rates for the Supplemental Term Insurance Rider will be
equal to the current cost of insurance rates for the Face Amount under
Contract. On each Monthiversary on which the Supplemental Term Insurance
Rider is in force, the Cost of Insurance for the Supplemental Term Insurance
Rider will be added to the Monthly Charges deducted from the Insurance
Account Value.
TERMINATION OF THE SUPPLEMENTAL TERM INSURANCE RIDER
B-5
<PAGE> 318
The Supplemental Term Insurance Rider may be terminated as of any
Monthiversary following a written request to the Company. The Supplemental
Term Insurance Rider will terminate automatically when any of the following
events occur:
(a) The lapse of the Contract;
(b) The surrender of the Contract;
(c) The Maturity Date of the Contract;
(d) The Date of Death Upon Which Death Benefits become Payable; or
(e) The Rider Expiry Date.
REINSTATEMENT OF SUPPLEMENTAL TERM INSURANCE RIDER
If the Supplemental Term Insurance Rider terminates, it may be reinstated
within five years of the earlier of the Contact termination or rider
termination provided that:
(a) If the Contract has terminated, it is also being reinstated;
(b) Satisfactory evidence of insurability is provided to SELIC; and
(c) Any charges due under the rider are paid as of the date of the
Reinstatement.
The charges due will be equal to the amount of the charges for the rider due
and unpaid at the time that the rider terminated, plus three times the
charges for the rider due at the time of Reinstatement.
In order for the rider to be reinstated, the same number of Insureds under
the Contract must be alive as were alive when the rider terminated.
ADDITIONAL PROVISIONS OF THE RIDER - INCONTESTABILITY
In order for SELIC to contest the validity of any coverage provided by the
Supplemental Term Insurance Rider, legal action must be commenced within two
years from the rider effective date or from the effective date of any change
in rider coverage requiring evidence of insurability, including Reinstatement
of Coverage.
B-6
<PAGE> 319
ADDITIONAL PROVISIONS OF THE RIDER - SUICIDE
If the Supplemental Term Insurance Rider is attached to a single life
Contract and the Insured dies by suicide, while sane or insane, within two
years from the rider Effective Date, the death benefit payable will be
limited to the sum of the Cost of Insurance Charges for the rider.
If this rider is attached to a Contract, to which a Joint and Last Survivor
Rider has been added, and either Insured dies by suicide, while sane or
insane, within two years from the rider Effective Date, the Death Benefit
payable will be limited to the sum of the Cost of Insurance Charges for the
rider.
The following are major modifications to a Contract when a Supplemental Term
Insurance Rider is added:
(1) Coverage provided by the Supplemental Term Insurance Rider is not taken
into account in determining the amount of Target Premium:
accordingly there may be no additional Premium Load associated
with this coverage. (See "The Contracts -- Premiums").
(2) In the event that a partial withdrawal results in a decrease in the
Face Amount, which would cause the Face Amount to be less than the
Minimum Face Amount of a Contract, the Supplemental Term
Insurance Amount will be decreased by the amount of the excess of
the withdrawal over the decreased Face Amount. (See "The Contract
-- Surrender and Partial Withdrawals").
(3) The Supplemental Term Insurance Amount will be included in Total
Insurance Coverage in determining whether the Minimum Death
Benefit applies, and is not included in Death Benefit proceeds
when the Death Benefit payable under the Contract is equal to the
Minimum Death Benefit.
B-7
<PAGE> 320
APPENDIX C -- ILLUSTRATIONS OF DEATH BENEFITS
AND NET INSURANCE ACCOUNT VALUE
The following illustrations illustrate hypothetically how the Insurance
Account Value and Death Benefit of a Contract change with the investment
experience of the Available Division of the Separate Account. The
illustrations show how the Insurance Account Value and Death Benefit of a
Contract issued to an Insured of a given Issue Age and at a given Premium
would vary over time if the investment return on the assets held in each
Available Division of the Separate Account were an assumed uniform, gross,
after-tax annual rate of 0%, 6% or 12%. THE HYPOTHETICAL RATES OF RETURN ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT PERFORMANCE. The illustrations illustrate a Contract issued to a
Male, Issue Age 45 in a nonsmoker rate class assuming guaranteed issue. The
values would be different from those shown if the gross annual investment
rates of return averaged 0%, 6% or 12% over a period of years, but fluctuated
above and below those averages for individual Contract Years. The actual
values will depend upon various factors, including age, sex, smoking status,
and underwriting status of the Insured.
The Insurance Account Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the assumed rate of return,
reflecting deduction of the maximum mortality and expense risk charge, the
maximum monthly administrative charges, and monthly charges for the cost of
insurance based on the maximum values allowed under the 1980 Commissioners
Standard Ordinary Mortality Table. The Insurance Account Value column under
the "Current" heading shows the accumulated value of the Net Premiums at the
assumed rate of return, reflecting deduction of the current mortality and
expense risk charge, the current monthly administrative charges, and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between illustrations depending
upon whether Death Benefit Option 1, Option 2, or Option 3 is illustrated.
The amounts shown for the Insurance Account Value and Death Benefit reflect
the fact that the investment rate of return is lower than the gross after-tax
return on the assets held in a Division due to the advisory fee ( .61% of
aggregate average daily net assets is assumed) and operating expenses of the
Underlying Portfolio (which are assumed to be .10%). After deduction for
these amounts and the mortality and expense basis the illustrated gross
annual investment rates of return of 0%, 6% and 12% correspond to approximate
net annual rates of -1.06%, 4.94%, and 10.94%, respectively, on a current
basis, and -1.21%, 4.79%, and 10.79%, respectively, on a guaranteed basis.
The average advisory fee and fund expense reflects any voluntary expense
reimbursement arrangements between the various underlying funds and their
investment advisors. The investment advisors could terminate these
arrangements at any time. If any of these arrangements are
C-1
<PAGE> 321
terminated, the above net annual rates of return would be reduced. The actual
investment advisory fee applicable to each Division is shown in the respective
prospectuses for each Underlying Portfolio. These Prospectuses for the Funds
should also be consulted for details about the nature and extent of expenses
for each Underlying Portfolio.
The hypothetical values shown in the illustrations do not reflect any charges
for federal income taxes against the Separate Account, since Security Equity
Life Insurance Company is not currently making any such charges. However,
such charges may be made in the future and, in that event, the gross annual
investment rate of return of the Available Divisions would have to exceed 0%,
6% and 12% by an amount sufficient to cover the charges in order to produce
the Death Benefit and Insurance Account Value illustration. (See "Federal
Tax Matters").
The illustrations illustrate the Contract values that would result based upon
the investment rates of return if Premiums are paid as indicated, if all Net
Premiums are allocated evenly among Available Divisions, and if no Contract
Loans have been made. The illustrations are also based on the assumptions
that the Contract Holder has not requested an increase or decrease in the
Face Amount, that no partial withdrawals have been made, that no transfer
charges were incurred, and that no optional riders have been requested.
Upon request, Security Equity Life Insurance Company will provide a
comparable illustration based upon the proposed Insured's Issue Age, sex and
underwriting class, the Face Amount and Premium pattern requested, and any
available riders requested.
C-2
<PAGE> 322
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,201 4,201 100,000 4,139 4,139 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,372 8,372 100,000 8,232 8,232 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,493 12,493 100,000 12,262 12,262 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,566 16,566 100,000 16,229 16,229 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,589 20,589 100,000 20,133 20,133 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,528 24,528 100,000 23,976 23,976 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 28,421 28,421 100,000 27,757 27,757 100,000
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 27,668 27,668 100,000 26,879 26,879 100,000
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 26,897 26,897 100,000 25,965 25,965 100,000
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 26,102 26,102 100,000 25,008 25,008 100,000
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 25,187 25,187 100,000 24,002 24,002 100,000
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 24,242 24,242 100,000 22,940 22,940 100,000
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 23,263 23,263 100,000 21,815 21,815 100,000
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 22,247 22,247 100,000 20,621 20,621 100,000
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 21,192 21,192 100,000 19,346 19,346 100,000
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 19,923 19,923 100,000 17,977 17,977 100,000
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 18,601 18,601 100,000 16,500 16,500 100,000
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 17,220 17,220 100,000 14,896 14,896 100,000
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 15,769 15,769 100,000 13,141 13,141 100,000
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 14,242 14,242 100,000 11,210 11,210 100,000
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 8,043 8,043 100,000 <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 <F***> <F***> <F***> <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years indicated
and assume any additional premiums shown are received on the Contract
Anniversaries.
<PAGE> 323
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,466 4,466 100,000 4,403 4,403 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,170 9,170 100,000 9,023 9,023 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 14,103 14,103 100,000 13,852 13,852 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 19,277 19,277 100,000 18,901 18,901 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,705 24,705 100,000 24,183 24,183 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 30,367 30,367 100,000 29,711 29,711 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 36,314 36,314 100,000 35,499 35,499 100,000
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 37,683 37,683 100,000 36,685 36,685 100,000
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 39,106 39,106 100,000 37,898 37,898 100,000
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 40,581 40,581 100,000 39,135 39,135 100,000
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 42,036 42,036 100,000 40,393 40,393 100,000
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 43,548 43,548 100,000 41,671 41,671 100,000
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 45,117 45,117 100,000 42,970 42,970 100,000
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 46,747 46,747 100,000 44,289 44,289 100,000
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 48,444 48,444 100,000 45,624 45,624 100,000
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 50,097 50,097 100,000 46,973 46,973 100,000
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 51,819 51,819 100,012 48,333 48,333 100,000
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 53,615 53,615 100,796 49,699 49,699 100,000
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 55,482 55,482 101,532 51,063 51,063 100,000
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 57,419 57,419 102,780 52,420 52,420 100,000
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 69,711 69,711 110,144 58,954 58,954 100,000
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 84,013 84,013 120,138 64,313 64,313 100,000
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged
the rate shown over a period of years, but also fluctuated above or below that
average for individual Contract Years. No representation can be made by
SELIC, Walnut Street Securities, the Underlying Portfolios, their various
investment managers, or any representative thereof, that this hypothetical rate
of return can be achieved for any one year, or sustained over any period of
time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 324
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,732 4,732 100,000 4,666 4,666 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 10,001 10,001 100,000 9,845 9,845 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,844 15,844 100,000 15,572 15,572 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 22,330 22,330 100,000 21,911 21,911 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,528 29,528 100,000 28,931 28,931 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 37,490 37,490 100,474 36,712 36,712 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 46,269 46,269 119,837 45,276 45,276 117,265
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 50,831 50,831 127,585 49,579 49,579 124,443
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 55,844 55,844 136,258 54,278 54,278 132,439
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 61,349 61,349 144,784 59,410 59,410 140,207
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 67,286 67,286 154,086 65,007 65,007 148,865
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 73,797 73,797 164,567 71,103 71,103 158,559
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 80,942 80,942 174,834 77,749 77,749 167,938
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 88,779 88,779 186,437 84,988 84,988 178,474
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 97,381 97,381 198,656 92,866 92,866 189,446
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 106,583 106,583 212,100 101,423 101,423 201,832
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 116,679 116,679 225,190 110,728 110,728 231,706
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 127,741 127,741 240,153 120,822 120,822 227,146
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 139,859 139,859 255,943 131,761 131,761 241,123
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 153,120 153,120 274,084 143,580 143,580 257,007
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 246,241 246,241 389,060 218,564 218,564 345,331
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 393,001 393,001 561,992 326,542 326,542 466,955
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,136 4,136 104,136 4,074 4,074 104,074
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,265 8,265 108,265 8,123 8,123 108,123
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,328 12,328 112,328 12,092 12,092 112,092
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,327 16,327 116,327 15,977 15,977 115,977
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,257 20,257 120,257 19,778 19,778 119,778
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,071 24,071 124,071 23,492 23,492 123,492
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 27,814 27,814 127,814 27,115 27,115 127,115
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 26,922 26,922 126,922 26,086 26,086 126,086
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 26,010 26,010 126,010 25,014 25,014 125,014
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 25,068 25,068 125,068 23,890 23,890 123,890
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 23,971 23,971 123,971 22,708 22,708 122,708
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 22,843 22,843 122,843 21,461 21,461 121,461
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 21,677 21,677 121,677 20,144 20,144 120,144
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 20,474 20,474 120,474 18,751 18,751 118,751
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 19,232 19,232 119,232 17,271 17,271 117,271
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 17,732 17,732 117,732 15,694 15,694 115,694
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 16,187 16,187 116,187 14,007 14,007 114,007
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 14,590 14,590 114,590 12,193 12,193 112,193
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 12,932 12,932 112,932 10,233 10,233 110,233
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 11,208 11,208 111,208 8,106 8,106 108,106
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 4,535 4,535 104,535 <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 <F***> <F***> <F***> <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 325
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,398 4,398 104,398 4,334 4,334 104,334
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,052 9,052 109,052 8,902 8,902 108,902
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 13,913 13,913 113,913 13,655 13,655 113,655
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 18,991 18,991 118,991 18,600 18,600 118,600
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,292 24,292 124,292 23,742 23,742 123,742
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 29,777 29,777 129,777 29,087 29,087 129,087
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 35,501 35,501 135,501 34,639 34,639 134,639
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 36,632 36,632 136,632 35,569 35,569 135,569
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 37,787 37,787 137,787 36,484 36,484 136,484
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 38,956 38,956 138,956 37,374 37,374 137,374
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 40,011 40,011 140,011 38,231 38,231 138,231
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 41,072 41,072 141,072 39,045 39,045 139,045
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 42,132 42,132 142,132 39,809 39,809 139,809
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 43,192 43,192 143,192 40,513 40,513 140,513
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 44,248 44,248 144,248 41,142 41,142 141,142
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 45,075 45,075 145,075 41,680 41,680 141,680
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 45,877 45,877 145,877 42,108 42,108 142,108
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 46,647 46,647 146,647 42,404 42,404 142,404
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 47,371 47,371 147,371 42,539 42,539 142,539
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 48,044 48,044 148,044 42,482 42,482 142,482
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 53,936 53,936 153,936 38,257 38,257 138,257
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 57,104 57,104 157,104 23,052 23,052 123,052
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 326
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,659 4,659 104,659 4,593 4,593 104,593
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,870 9,870 109,870 9,712 9,712 109,712
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,627 15,627 115,627 15,347 15,347 115,347
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 21,989 21,989 121,989 21,553 21,553 121,553
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,018 29,018 129,018 28,386 28,386 128,386
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 36,734 36,734 136,734 35,912 35,912 135,912
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 45,259 45,259 145,259 44,196 44,196 144,196
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 49,561 49,561 149,561 48,205 48,205 148,205
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 54,298 54,298 154,298 52,583 52,583 152,583
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 59,505 59,505 159,505 57,360 57,360 157,360
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 65,102 65,102 165,102 62,571 62,571 162,571
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 71,259 71,259 171,259 68,253 68,253 168,253
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 78,031 78,031 178,031 74,453 74,453 174,453
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 85,484 85,484 185,484 81,218 81,218 181,218
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 93,690 93,690 193,690 88,595 88,595 188,595
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 102,497 102,497 203,969 96,638 96,638 196,638
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 112,183 112,183 216,512 105,403 105,403 205,403
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 122,814 122,814 230,890 114,949 114,949 216,103
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 134,463 134,463 246,067 125,324 125,324 229,342
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 147,209 147,209 263,505 136,557 136,557 244,438
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 236,723 236,723 374,022 207,845 207,845 328,395
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 377,797 377,797 540,250 310,498 310,498 444,013
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.15% Net)<F*> (-1.30% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,186 4,186 104,880 4,123 4,123 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,325 8,325 109,760 8,182 8,182 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,395 12,395 114,640 12,155 12,155 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,397 16,397 119,520 16,042 16,042 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,326 20,326 124,400 19,838 19,838 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,132 24,132 129,280 23,540 23,540 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 27,860 27,860 134,160 27,142 27,142 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 26,933 26,933 134,160 26,069 26,069 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 25,979 25,979 134,160 24,942 24,942 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 24,986 24,986 134,160 23,751 23,751 134,160
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 23,817 23,817 134,160 22,485 22,485 134,160
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 22,603 22,603 134,160 21,135 21,135 134,160
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 21,337 21,337 134,160 19,693 19,693 134,160
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 20,017 20,017 134,160 18,149 18,149 134,160
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 18,639 18,639 134,160 16,485 16,485 134,160
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 16,947 16,947 134,160 14,685 14,685 134,160
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 15,178 15,178 134,160 12,728 12,728 134,160
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 13,323 13,323 134,160 10,586 10,586 134,160
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 11,366 11,366 134,160 8,226 8,226 134,160
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 9,299 9,299 134,160 5,610 5,610 134,160
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 1,058 1,058 134,160 <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 <F***> <F***> <F***> <F***> <F***> <F***>
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 327
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.85% Net)<F*> (4.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,450 4,450 104,880 4,386 4,386 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,120 9,120 109,760 8,969 8,969 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 13,997 13,997 114,640 13,737 13,737 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 19,092 19,092 119,520 18,697 18,697 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,412 24,412 124,400 23,855 23,855 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 29,919 29,919 129,280 29,218 29,218 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 35,669 35,669 134,160 34,792 34,792 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 36,820 36,820 134,160 35,735 35,735 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 38,002 38,002 134,160 36,671 36,671 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 39,208 39,208 134,160 37,592 37,592 134,160
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 40,318 40,318 134,160 38,490 38,490 134,160
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 41,449 41,449 134,160 39,358 39,358 134,160
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 42,596 42,596 134,160 40,191 40,191 134,160
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 43,761 43,761 134,160 40,981 40,981 134,160
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 44,945 44,945 134,160 41,716 41,716 134,160
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 45,948 45,948 134,160 42,383 42,383 134,160
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 46,955 46,955 134,160 42,966 42,966 134,160
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 47,963 47,963 134,160 43,445 43,445 134,160
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 48,963 48,963 134,160 43,795 43,795 134,160
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 49,953 49,953 134,160 43,987 43,987 134,160
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 57,668 57,668 134,160 41,486 41,486 134,160
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 64,819 64,819 134,160 27,501 27,501 134,160
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 328
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.85% Net)<F*> (10.70% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,716 4,716 104,880 4,649 4,649 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,948 9,948 109,760 9,789 9,789 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,732 15,732 114,640 15,450 15,450 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 22,128 22,128 119,520 21,689 21,689 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,202 29,202 124,400 28,566 28,566 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 36,983 36,983 129,280 36,154 36,154 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 45,599 45,599 134,160 44,527 44,527 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 50,012 50,012 134,160 48,647 48,647 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 54,903 54,903 134,160 53,185 53,185 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 60,307 60,307 142,326 58,183 58,183 137,311
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 66,143 66,143 151,467 63,661 63,661 145,785
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 72,542 72,542 161,769 69,629 69,629 155,273
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 79,564 79,564 171,859 76,136 76,136 164,454
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 87,268 87,268 183,262 83,222 83,222 174,767
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 95,722 95,722 195,272 90,934 90,934 185,506
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 104,766 104,766 208,485 99,312 99,312 197,631
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 114,689 114,689 221,349 108,421 108,421 209,253
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 125,561 125,561 236,055 118,303 118,303 222,410
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 137,472 137,472 251,574 129,012 129,012 236,091
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 150,505 150,505 269,404 140,581 140,581 251,640
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 242,030 242,030 382,408 213,987 213,987 338,099
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 386,275 386,275 552,374 319,692 319,692 457,159
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
<PAGE> 329
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.06% Net)<F*> (-1.21% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,205 4,205 100,000 4,143 4,143 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,384 8,384 100,000 8,244 8,244 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,516 12,516 100,000 12,285 12,285 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,604 16,604 100,000 16,267 16,267 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,646 20,646 100,000 20,189 20,189 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,607 24,607 100,000 24,054 24,054 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 28,526 28,526 100,000 27,860 27,860 100,000
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 27,798 27,798 100,000 27,006 27,006 100,000
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 27,051 27,051 100,000 26,115 26,115 100,000
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 26,279 26,279 100,000 25,181 25,181 100,000
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 25,387 25,387 100,000 24,197 24,197 100,000
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 24,464 24,464 100,000 23,155 23,155 100,000
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 23,506 23,506 100,000 22,050 22,050 100,000
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 22,510 22,510 100,000 20,874 20,874 100,000
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 21,475 21,475 100,000 19,617 19,617 100,000
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 20,224 20,224 100,000 18,265 18,265 100,000
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 18,921 18,921 100,000 16,805 16,805 100,000
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 17,557 17,557 100,000 15,216 15,216 100,000
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 16,123 16,123 100,000 13,476 13,476 100,000
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 14,611 14,611 100,000 11,557 11,557 100,000
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 8,466 8,466 100,000 - - <F***>
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 - - <F***> - - <F***>
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-3
<PAGE> 330
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.94% Net)<F*> (4.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,470 4,470 100,000 4,407 4,407 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,183 9,183 100,000 9,035 9,035 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 14,128 14,128 100,000 13,876 13,876 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 19,320 19,320 100,000 18,944 18,944 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,772 24,772 100,000 24,249 24,249 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 30,464 30,464 100,000 29,807 29,807 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 36,447 36,447 100,000 35,630 35,630 100,000
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 37,856 37,856 100,000 36,855 36,855 100,000
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 39,323 39,323 100,000 38,110 38,110 100,000
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 40,845 40,845 100,000 39,392 39,392 100,000
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 42,352 42,352 100,000 40,700 40,700 100,000
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 43,919 43,919 100,000 42,032 42,032 100,000
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 45,549 45,549 100,000 43,389 43,389 100,000
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 47,246 47,246 100,000 44,771 44,771 100,000
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 49,014 49,014 100,000 46,176 46,176 100,000
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 50,745 50,745 100,982 47,599 47,599 100,000
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 52,550 52,550 101,422 49,041 49,041 100,000
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 54,431 54,431 102,329 50,495 50,495 100,000
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 56,384 56,384 103,183 51,957 51,957 100,000
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 58,405 58,405 104,546 53,421 53,421 100,000
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 71,219 71,219 112,527 60,685 60,685 100,000
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 86,207 86,207 123,275 67,377 67,377 100,000
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-4
<PAGE> 331
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 1. Level Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.94% Net)<F*> (10.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,736 4,736 100,000 4,670 4,670 100,000
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 10,014 10,014 100,000 9,858 9,858 100,000
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,872 15,872 100,000 15,599 15,599 100,000
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 22,378 22,378 100,000 21,959 21,959 100,000
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,606 29,606 100,000 29,008 29,008 100,000
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 37,608 37,608 100,789 36,828 36,828 100,000
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 46,437 46,437 120,271 45,440 45,440 117,690
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 51,056 51,056 128,151 49,799 49,799 124,997
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 56,137 56,137 136,974 54,564 54,564 133,137
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 61,722 61,722 145,663 59,772 59,772 141,062
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 67,750 67,750 155,149 65,457 65,457 149,897
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 74,367 74,367 165,838 71,654 71,654 159,789
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 81,633 81,633 176,328 78,417 78,417 169,380
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 89,611 89,611 188,184 85,788 85,788 180,155
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 98,373 98,373 200,682 93,817 93,817 191,387
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 107,758 107,758 214,438 102,547 102,547 204,069
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 118,061 118,061 227,858 112,048 112,048 216,252
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 129,360 129,360 243,196 122,363 122,363 230,042
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 141,748 141,748 259,399 133,551 133,551 244,398
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 155,314 155,314 278,012 145,649 145,649 260,712
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 250,791 250,791 396,249 222,627 222,627 351,750
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 401,897 401,897 574,713 333,978 333,978 477,589
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-5
<PAGE> 332
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.06% Net)<F*> (-1.21% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,191 4,191 104,191 4,129 4,129 104,129
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,342 8,342 108,342 8,199 8,199 108,199
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,430 12,430 112,430 12,192 12,192 112,192
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,457 16,457 116,457 16,106 16,106 116,106
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,418 20,418 120,418 19,938 19,938 119,938
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,267 24,267 124,267 23,687 23,687 123,687
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 28,048 28,048 128,048 27,346 27,346 127,346
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 27,179 27,179 127,179 26,339 26,339 126,339
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 26,288 26,288 126,288 25,287 25,287 125,287
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 25,366 25,366 125,366 24,182 24,182 124,182
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 24,288 24,288 124,288 23,017 23,017 123,017
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 23,178 23,178 123,178 21,786 21,786 121,786
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 22,029 22,029 122,029 20,484 20,484 120,484
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 20,841 20,841 120,841 19,105 19,105 119,105
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 19,613 19,613 119,613 17,637 17,637 117,637
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 18,126 18,126 118,126 16,070 16,070 116,070
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 16,592 16,592 116,592 14,392 14,392 114,392
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 15,004 15,004 115,004 12,585 12,585 112,585
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 13,354 13,354 113,354 10,630 10,630 110,630
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 11,636 11,636 111,636 8,507 8,507 108,507
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 4,977 4,977 104,977 - - -
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-6
<PAGE> 333
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.94% Net)<F*> (4.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,455 4,455 104,455 4,391 4,391 104,391
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,136 9,136 109,136 8,985 8,985 108,985
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 14,028 14,028 114,028 13,770 13,770 113,770
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 19,144 19,144 119,144 18,752 18,752 118,752
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,489 24,489 124,489 23,937 23,937 123,937
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 30,025 30,025 130,025 29,332 29,332 129,332
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 35,807 35,807 135,807 34,941 34,941 134,941
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 36,985 36,985 136,985 35,916 35,916 135,916
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 38,191 38,191 138,191 36,880 36,880 136,880
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 39,413 39,413 139,413 37,821 37,821 137,821
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 40,526 40,526 140,526 38,733 38,733 138,733
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 41,647 41,647 141,647 39,605 39,605 139,605
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 42,772 42,772 142,772 40,431 40,431 140,431
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 43,901 43,901 143,901 41,200 41,200 141,200
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 45,031 45,031 145,031 41,898 41,898 141,898
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 45,935 45,935 145,935 42,508 42,508 142,508
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 46,820 46,820 146,820 43,013 43,013 143,013
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 47,677 47,677 147,677 43,389 43,389 143,389
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 48,494 48,494 148,494 43,609 43,609 143,609
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 49,264 49,264 149,264 43,640 43,640 143,640
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 55,736 55,736 155,736 39,919 39,919 139,919
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 59,665 59,665 159,665 25,309 25,309 125,309
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-7
<PAGE> 334
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 2. Return of Account Value Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.94% Net)<F*> (10.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,720 4,720 104,720 4,654 4,654 104,654
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,962 9,962 109,962 9,804 9,804 109,804
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,758 15,758 115,758 15,478 15,478 115,478
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 22,169 22,169 122,169 21,732 21,732 121,732
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,258 29,258 129,258 28,624 28,624 128,624
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 37,046 37,046 137,046 36,220 36,220 136,220
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 45,658 45,658 145,658 44,590 44,590 144,590
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 50,044 50,044 150,044 48,681 48,681 148,681
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 54,878 54,878 154,878 53,154 53,154 153,154
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 60,198 60,198 160,198 58,039 58,039 158,039
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 65,924 65,924 165,924 63,374 63,374 163,374
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 72,229 72,229 172,229 69,200 69,200 169,200
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 79,171 79,171 179,171 75,562 75,562 175,562
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 86,818 86,818 186,818 82,513 82,513 182,513
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 95,247 95,247 195,247 90,103 90,103 190,103
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 104,303 104,303 207,562 98,388 98,388 198,388
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 114,265 114,265 220,531 107,428 107,428 207,428
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 125,199 125,199 235,373 117,280 117,280 220,487
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 137,186 137,186 251,051 127,990 127,990 234,221
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 150,314 150,314 269,062 139,580 139,580 249,848
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 242,706 242,706 383,475 213,325 213,325 337,053
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 388,930 388,930 556,170 319,999 319,999 457,599
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-8
<PAGE> 335
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 0%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(-1.06% Net)<F*> (-1.21% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,189 4,189 104,880 4,127 4,127 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 8,336 8,336 109,760 8,193 8,193 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 12,418 12,418 114,640 12,178 12,178 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 16,435 16,435 119,520 16,079 16,079 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 20,382 20,382 124,400 19,893 19,893 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 24,210 24,210 129,280 23,617 23,617 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 27,964 27,964 134,160 27,244 27,244 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 27,061 27,061 134,160 26,194 26,194 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 26,130 26,130 134,160 25,090 25,090 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 25,160 25,160 134,160 23,919 23,919 134,160
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 24,012 24,012 134,160 22,674 22,674 134,160
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 22,819 22,819 134,160 21,343 21,343 134,160
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 21,572 21,572 134,160 19,919 19,919 134,160
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 20,271 20,271 134,160 18,392 18,392 134,160
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 18,910 18,910 134,160 16,744 16,744 134,160
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 17,234 17,234 134,160 14,958 14,958 134,160
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 15,481 15,481 134,160 13,014 13,014 134,160
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 13,640 13,640 134,160 10,883 10,883 134,160
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 11,695 11,695 134,160 8,533 8,533 134,160
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 9,639 9,639 134,160 5,925 5,925 134,160
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 1,425 1,425 134,160 - - -
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-9
<PAGE> 336
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 6%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(4.94% Net)<F*> (4.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,454 4,454 104,880 4,390 4,390 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,132 9,132 109,760 8,981 8,981 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 14,022 14,022 114,640 13,762 13,762 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 19,135 19,135 119,520 18,739 18,739 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 24,479 24,479 124,400 23,920 23,920 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 30,015 30,015 129,280 29,313 29,313 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 35,801 35,801 134,160 34,922 34,922 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 36,991 36,991 134,160 35,903 35,903 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 38,216 38,216 134,160 36,880 36,880 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 39,468 39,468 134,160 37,845 37,845 134,160
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 40,628 40,628 134,160 38,790 38,790 134,160
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 41,812 41,812 134,160 39,710 39,710 134,160
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 43,018 43,018 134,160 40,598 40,598 134,160
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 44,246 44,246 134,160 41,448 41,448 134,160
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 45,498 45,498 134,160 42,248 42,248 134,160
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 46,575 46,575 134,160 42,984 42,984 134,160
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 47,663 47,663 134,160 43,643 43,643 134,160
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 48,758 48,758 134,160 44,204 44,204 134,160
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 49,852 49,852 134,160 44,643 44,643 134,160
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 50,944 50,944 134,160 44,932 44,932 134,160
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 59,276 59,276 134,160 43,073 43,073 134,160
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 67,389 67,389 134,160 30,199 30,199 134,160
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exactcombination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-10
<PAGE> 337
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Contract Face Amount: $100,000 Male Nonsmoker Age 45
Death Benefit Option: Option 3. Return of Premium @0.00% Annual Premium: $4,880
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For Separate Account 13
Hypothetical Gross Annual Rate of Return @ 12%
- -----------------------------------------------------------------------------------------------------------------------
Current Guaranteed
(10.94% Net)<F*> (10.79% Net)<F**>
- -----------------------------------------------------------------------------------------------------------------------
Premium Insurance Net Insurance Net
Accum. Annual Account Cash Death Account Cash Death
Year Age @5% Premium Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,124 4,880 4,719 4,719 104,880 4,653 4,653 104,880
- -----------------------------------------------------------------------------------------------------------------------
2 47 10,504 4,880 9,961 9,961 109,760 9,802 9,802 109,760
- -----------------------------------------------------------------------------------------------------------------------
3 48 16,153 4,880 15,759 15,759 114,640 15,477 15,477 114,640
- -----------------------------------------------------------------------------------------------------------------------
4 49 22,085 4,880 22,176 22,176 119,520 21,736 21,736 119,520
- -----------------------------------------------------------------------------------------------------------------------
5 50 28,313 4,880 29,280 29,280 124,400 28,643 28,643 124,400
- -----------------------------------------------------------------------------------------------------------------------
6 51 34,853 4,880 37,100 37,100 129,280 36,269 36,269 129,280
- -----------------------------------------------------------------------------------------------------------------------
7 52 41,720 4,880 45,766 45,766 134,160 44,691 44,691 134,160
- -----------------------------------------------------------------------------------------------------------------------
8 53 43,806 0 50,239 50,239 134,160 48,870 48,870 134,160
- -----------------------------------------------------------------------------------------------------------------------
9 54 45,996 0 55,202 55,202 134,692 53,477 53,477 134,160
- -----------------------------------------------------------------------------------------------------------------------
10 55 48,296 0 60,687 60,687 143,222 58,555 58,555 138,190
- -----------------------------------------------------------------------------------------------------------------------
11 56 50,710 0 66,614 66,614 152,546 64,122 64,122 146,840
- -----------------------------------------------------------------------------------------------------------------------
12 57 53,246 0 73,118 73,118 163,054 70,191 70,191 156,526
- -----------------------------------------------------------------------------------------------------------------------
13 58 55,908 0 80,262 80,262 173,366 76,814 76,814 165,917
- -----------------------------------------------------------------------------------------------------------------------
14 59 58,704 0 88,105 88,105 185,021 84,032 84,032 176,467
- -----------------------------------------------------------------------------------------------------------------------
15 60 61,639 0 96,719 96,719 197,307 91,895 91,895 187,466
- -----------------------------------------------------------------------------------------------------------------------
16 61 64,721 0 105,945 105,945 210,830 100,444 100,444 199,883
- -----------------------------------------------------------------------------------------------------------------------
17 62 67,957 0 116,073 116,073 224,022 109,747 109,747 211,812
- -----------------------------------------------------------------------------------------------------------------------
18 63 71,355 0 127,181 127,181 239,100 119,848 119,848 225,315
- -----------------------------------------------------------------------------------------------------------------------
19 64 74,922 0 139,359 139,359 255,028 130,805 130,805 239,372
- -----------------------------------------------------------------------------------------------------------------------
20 65 78,669 0 152,696 152,696 273,326 142,652 142,652 255,347
- -----------------------------------------------------------------------------------------------------------------------
25 70 100,403 0 246,557 246,557 389,561 218,033 218,033 344,493
- -----------------------------------------------------------------------------------------------------------------------
30 75 128,143 0 395,108 395,108 565,004 327,075 327,075 467,718
- -----------------------------------------------------------------------------------------------------------------------
<FN>
<F*> These values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F**> These values reflect investment results using guaranteed mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
<F***> The Contract would lapse under these assumptions. Additional premium
would be required to keep the Contract in force.
</TABLE>
The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Contract
Holder, and the investment results for the Underlying Portfolios. The Insurance
Account Value, Net Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the rate shown
over a period of years, but also fluctuated above or below that average for
individual Contract Years. No representation can be made by SELIC, Walnut
Street Securities, the Underlying Portfolios, their various investment managers,
or any representative thereof, that this hypothetical rate of return can be
achieved for any one year, or sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-11
<PAGE> 338
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company
and Policyholders of Security Equity
Life Insurance Company Separate Account 13:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the General American Money Market Fund, Wells
Fargo Bank Asset Allocation Fund, Fidelity Growth Fund, Fidelity Investment
Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA Fund, Evergreen
Foundation Fund, and Evergreen Growth and Income Fund Divisions of Security
Equity Life Insurance Company Separate Account 13 (Separate Account) as of
December 31, 1996, and related statements of operations and changes in net
assets for the periods presented. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned at December 31,
1996 by correspondence with General American Capital Company, Wells Fargo
Bank Investment Adviser, Fidelity Investments, and Evergreen Asset
Management. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the General American Money
Market Fund, Wells Fargo Bank Asset Allocation Fund, Fidelity Growth Fund,
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund, Evergreen VA
Fund, Evergreen Foundation Fund, and Evergreen Growth and Income Fund
Divisions of Security Equity Life Insurance Company Separate Account 13 as of
December 31, 1996, and the results of their operations and changes in their
net assets for the periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 11, 1997
<PAGE> 339
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Net Assets
December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments, at market value $14,988,772 12,498 3,582,291 3,722,557 2,648,716 3,576,902 1,814,032 3,617,537
Payable to general account 3,003 12 6,033 7,928 7,982 171 87 173
---------- ------ --------- --------- --------- --------- --------- ---------
Total net assets $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
Total units 13,318,334 8,931 2,212,740 3,124,238 1,561,960 3,227,545 1,585,211 3,224,042
========== ====== ========= ========= ========= ========= ========= =========
Unit value $ 1.13 1.40 1.62 1.19 1.69 1.11 1.14 1.12
==== ==== ==== ==== ==== ==== ==== ====
Cost of investments $15,605,386 13,225 3,429,757 3,650,045 2,458,355 3,402,045 1,723,718 3,399,530
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 340
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on investments:
Proceeds from sales 9,427,292 545 2,657,607 964,149 996,124 34,167 17,279 36,201
Cost of investments
sold 9,821,858 577 2,601,002 967,181 961,682 32,848 16,419 34,638
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on sales (394,566) (32) 56,605 (3,032) 34,442 1,319 860 1,563
Realized gain from
distributions 662,558 - - - - - - -
--------- ---- --------- ------- ------- ------- ------- -------
Net realized gain
(loss) on
investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain (loss)
on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain
(loss) on
investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
--------- ---- --------- ------- ------- ------- ------- -------
Net gain (loss) on
investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
--------- ---- --------- ------- ------- ------- ------- -------
Mortality and expense
charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
--------- ---- --------- ------- ------- ------- ------- -------
Increase in assets
from operations $ 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
========= ==== ========= ======= ======= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE> 341
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Operations
Period September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
-------- ---- ----
Net realized gain on investments:
Proceeds from sales 8,244 -
Cost of investments sold 8,217 - -
-------- ---- ----
Net realized gain on sales 27 - -
Realized gain from distributions 494,746 - -
-------- ---- ----
Net realized gain on investments 494,773 - -
-------- ---- ----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
-------- ---- ----
Net unrealized gain (loss) on investments (477,414) (264) (141)
-------- ---- ----
Net gain (loss) on investments 17,359 (264) (141)
-------- ---- ----
Mortality and expense charges 910 1 1
-------- ---- ----
Increase (decrease) in assets
from operations $ 16,449 5 (142)
======== ==== ====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 342
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Year ended December 31, 1996
<CAPTION>
Wells
General Fargo Evergreen
American Bank Fidelity Growth
Money Asset Fidelity Investment Fidelity Evergreen Evergreen and
Market Allocation Growth Grade Bond Index 500 VA Foundation Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ - 913 2,581 6,207 6,742 23,667 34,619 20,978
---------- ------ --------- --------- --------- --------- --------- ---------
Net realized gain (loss)
on investments 267,992 (32) 56,605 (3,032) 34,442 1,319 860 1,563
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) on investments:
Beginning of year (477,414) (264) (141) - - - - -
End of year (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net unrealized gain
(loss) (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
---------- ------ --------- --------- --------- --------- --------- ---------
Net gain (loss)
on investments 128,792 (495) 209,280 69,480 224,803 176,176 91,174 219,570
---------- ------ --------- --------- --------- --------- --------- ---------
Mortality and expense charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in assets
from operations 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
---------- ------ --------- --------- --------- --------- --------- ---------
Capital transactions:
Deposit into Separate
Account 16,201,970 6,223 1,854,129 1,992,244 1,139,931 1,799,979 899,908 1,799,969
Transfers to/from
Divisions (9,318,249) 3,087 1,757,397 1,878,412 1,439,294 1,696,024 848,012 1,696,024
Policy charges (864,845) (1,318) (241,335) (224,743) (164,854) (116,201) (58,256) (116,251)
---------- ------ --------- --------- --------- --------- --------- ---------
Net deposits into
Separate Account 6,018,876 7,992 3,370,191 3,645,913 2,414,371 3,379,802 1,689,664 3,379,742
---------- ------ --------- --------- --------- --------- --------- ---------
Increase in net assets 6,139,213 8,391 3,572,336 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
Net assets, beginning of year 8,846,556 4,095 3,922 - - - - -
---------- ------ --------- --------- --------- --------- --------- ---------
Net assets, end of year $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 343
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Statements of Changes in Net Assets
Period from September 1, 1995 (inception) to December 31, 1995
<CAPTION>
Wells
General Fargo
American Bank
Money Asset Fidelity
Market Allocation Growth
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Dividend income $ - 270 -
--------- ----- -----
Net realized gain on investments 494,773 - -
--------- ----- -----
Net unrealized gain (loss) on investments:
Beginning of period - - -
End of period (477,414) (264) (141)
--------- ----- -----
Net unrealized gain (loss) on investments (477,414) (264) (141)
--------- ----- -----
Net gain (loss) on investments 17,359 (264) (141)
--------- ----- -----
Mortality and expense charges 910 1 1
--------- ----- -----
Increase (decrease) in assets from operations 16,449 5 (142)
--------- ----- -----
Capital transactions:
Deposit into Separate Account 9,362,425 - -
Transfers to/from Divisions
and General Account (8,244) 4,131 4,104
Policy charges (524,074) (41) (40)
--------- ----- -----
Net deposits into Separate Account 8,830,107 4,090 4,064
--------- ----- -----
Increase in net assets 8,846,556 4,095 3,922
Net assets, beginning of period - - -
--------- ----- -----
Net assets, end of period $8,846,556 4,095 3,922
========= ===== =====
See accompanying notes to financial statements.
</TABLE>
<PAGE> 344
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
December 31, 1996
(1) Organization
------------
Security Equity Life Insurance Company Separate Account 13 (the
Separate Account) commenced operations on November 15, 1994.
The Separate Account is registered under the Investment Company
Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account receives purchase payments from individual flexible
variable life contracts issued by Security Equity Life Insurance
Company (Security Equity).
The Separate Account is divided into a number of Divisions. Each
Division invests in shares of an underlying portfolio available
to policyholders as directed by the policyholders. The
portfolios available for investment through the Separate
Account are the General American Money Market Fund, Fidelity
Growth Fund, Fidelity Investment Grade Bond Fund, Fidelity
Asset Manager Fund, Fidelity Index 500 Fund, Bankers Trust
Emerging Market Fund, Bankers Trust Liquid Asset Fund, Bankers
Trust Limited Maturity Bond Fund, Evergreen VA Fund, Evergreen
Foundation Fund, Evergreen Growth and Income Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, Wells Fargo Bank Asset Allocation
Fund, and Wells Fargo Bank U.S. Government Allocation Fund.
Investments through the separate account Divisions in the General
American Money Market Fund, Wells Fargo Bank Asset Allocation
Fund, and Fidelity Growth Fund Divisions were initiated in the
Separate Account for policyholders on September 1, 1995.
Investments through the separate account Divisions in the
Fidelity Investment Grade Bond Fund, Fidelity Index 500 Fund,
Evergreen VA Fund, Evergreen Foundation Fund, and Evergreen
Growth and Income Fund Divisions were initiated in the Separate
Account for policyholders during 1996. The remaining available
divisions had not commenced operations at December 31, 1996.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following is a summary of significant accounting policies followed
by the Separate Account in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
(a) Investments
-----------
The Separate Account's investments are valued daily, based on
the net asset value of the shares held. The first-in,
first-out method is used in determining the cost of
shares sold on withdrawals by the Separate Account.
Share transactions are recorded on the trade date, which
is the same as the settlement date.
(b) Federal Income Taxes
--------------------
Security Equity is taxed under federal law as a life
insurance company. The Separate Account is part of
Security Equity's total operations and is not taxed
separately. Under current federal income tax law, no
taxes are payable on investment income or realized
capital gains from sales of investments of the Separate
Account. Therefore, no federal income tax expense has
been provided.
(c) Dividend Reinvestment
---------------------
Dividends are recorded on the ex-dividend date and
immediately reinvested on the pay date.
(Continued)
<PAGE> 345
2
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(d) Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
increase and decrease in net assets from operations
during the period. Actual results could differ from
those estimates.
(3) Policy Charges
--------------
Charges are deducted from premiums and paid to Security Equity for
providing the insurance benefits set forth in the contracts and
any additional benefits by rider, administering the policies,
reimbursement of expenses incurred in distributing the
policies, and assuming certain risks in connection with the
policy.
The premium payment, less the premium load charge, equals the net
premium. The premium load is deducted from the initial premium and
from each subsequent premium paid by a policyholder, prior to
allocation to the Separate Account. The premium load includes a
distribution charge, a premium tax charge, and the DAC tax charge.
Distribution Charge: The distribution charge is composed of a premium
-------------------
expense load and a commission charge. The amount of the
distribution charge will depend on the amount of initial premium and
the sales commissions paid.
Premium Expense Load: The premium expense load will be deducted
--------------------
from each premium and will equal a percentage of the premium.
The percentage will be determined based on the sum of the initial
premiums for all policies in a case, in accordance with the
following table:
<TABLE>
<CAPTION>
Sum of the initial premiums
of all contracts in the case Premium expense load
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000-$999,999 1.50
$1,000,000 and more 1.25
====
</TABLE>
Commission Charge: A commission charge may be deducted from a
-----------------
premium. The commission charge deducted from a premium will be
equal to the full amount of commissions payable by Security
Equity on the target premium.
Premium Tax Charge: Various states and subdivisions impose a tax on
------------------
premiums received by insurance companies. Premium taxes vary from
state to state. The percentage deducted from each premium varies
based on the governing jurisdiction of the contract.
DAC Tax Charge: The DAC tax charge is equal to 1% of all premiums paid
--------------
in all contract years.
Charges are deducted monthly from the cash value of each policy to
compensate Security Equity for certain administrative costs, the
cost of insurance, and optional rider benefit charges.
(Continued)
<PAGE> 346
3
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
Administrative Costs: Security Equity has responsibility for the
--------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the
maintenance of each policy and the Separate Account, Security
Equity assesses a monthly administrative charge against each
policy. This monthly charge is $4.50 per policy. This cost may
change, but is guaranteed not to exceed $8.00 per month per
policy.
Cost of Insurance: The cost of insurance is deducted on each
-----------------
monthly anniversary for the following policy month. Because the
cost of insurance depends upon a number of variables, the cost
varies for each policy month. The cost of insurance is
determined by multiplying the applicable cost of insurance rate
by the net amount at risk each policy month.
Optional Rider Benefit Charges: This monthly deduction includes
------------------------------
charges for any additional benefits provided by rider.
In addition to the above policy charges, a daily charge against the
operations of each Division is made for the mortality and expense
risks assumed by Security Equity. The mortality and expense risk
charge assessed against each Division will never exceed an annual
effective rate of .50% of the policy's Separate Account value
attributable to that Division. Currently, the amount of this
charge is an annual effective rate of .35% of the Separate Account
value, which is equivalent to .000957233% of the Separate Account
value attributable to the Division on a daily basis. The
mortality risk assumed by Security Equity under the contract is
that insureds may, on average, live for shorter periods of time
than estimated. The expense risk assumed by Security Equity under
the contract is the risk that the cost of issuing and
administering the contract may be more than estimated.
(4) Purchases and Sales of Shares
-----------------------------
During the period ended December 31, 1996, purchases and proceeds from
the sales pertaining to the Separate Account were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
General American Money Market Fund $ 16,055,033 9,427,292
Wells Fargo Bank Asset Allocation Fund 9,287 545
Fidelity Growth Fund 6,026,650 2,657,607
Fidelity Investment Grade Fund 4,617,226 964,149
Fidelity Index 500 Fund 3,420,037 996,124
Evergreen VA Fund 3,434,893 34,167
Evergreen Foundation Fund 1,740,138 17,279
Evergreen Growth and Income Fund 3,434,170 36,201
========== =========
</TABLE>
There were no purchases or sales for the Fidelity Asset Manager Fund,
Bankers Trust Emerging Market Fund, Bankers Trust Liquid Asset
Fund, Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
(Continued)
<PAGE> 347
4
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Notes to Financial Statements
(5) Unit Activity
-------------
For the year ended December 31, 1996, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund 8,266,085 13,774,894 (8,722,645) 13,318,334
Wells Fargo Bank
Asset Allocation
Fund 3,253 5,521 157 8,931
Fidelity Growth Fund 2,774 1,081,685 1,128,281 2,212,740
Fidelity Investment Grade Fund - 1,607,694 1,516,544 3,124,238
Fidelity Index 500 Fund - 653,667 908,293 1,561,960
Evergreen VA Fund - 1,569,119 1,658,426 3,227,545
Evergreen Foundation Fund - 755,933 829,278 1,585,211
Evergreen Growth and Income
Fund - 1,565,607 1,658,435 3,224,042
========= ========== ========== ==========
</TABLE>
For the period September 1, 1995 (inception) to December 31, 1995,
transactions in accumulation units were as follows:
<TABLE>
<CAPTION>
Units, Transfers Units,
beginning Net between end of
of period deposits Divisions of period
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
General American
Money Market Fund - 8,273,816 (7,731) 8,266,085
Wells Fargo Bank
Asset Allocation
Fund - - 3,253 3,253
Fidelity Growth Fund - - 2,774 2,774
========== ========= ====== =========
</TABLE>
There have been no accumulation of units for the Fidelity Asset Manager
Fund, Bankers Trust Emerging Market Fund, Bankers Trust Liquid
Asset Fund, Bankers Trust Limited Maturity Bond Fund, Frank
Russell Aggressive Equity Portfolio, Frank Russell Core Bond
Portfolio, Frank Russell Multi-Style Equity Portfolio, Frank
Russell Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund Divisions during 1996.
<PAGE> 348
Schedule
--------
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13
Schedule of Investments
December 31, 1996
<CAPTION>
Number of Market
shares value
------ -----
<S> <C> <C>
General American Money Market Fund 869,269 $ 14,988,772
Wells Fargo Bank Asset Allocation Fund 1,094 12,498
Fidelity Growth Fund 115,038 3,582,291
Fidelity Investment Grade Fund 304,130 3,722,557
Fidelity Index 500 Fund 29,717 2,648,716
Evergreen VA Fund 313,488 3,576,902
Evergreen Foundation Fund 160,392 1,814,032
Evergreen Growth and Income Fund 305,794 3,617,537
======= ==========
</TABLE>
There were no investments in the Fidelity Asset Manager Fund, Bankers
Trust Emerging Market Fund, Bankers Trust Liquid Asset Fund,
Bankers Trust Limited Maturity Bond Fund, Frank Russell
Aggressive Equity Portfolio, Frank Russell Core Bond Portfolio,
Frank Russell Multi-Style Equity Portfolio, Frank Russell
Non-U.S. Portfolio, or Wells Fargo Bank U.S. Government
Allocation Fund.
<PAGE> 349
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company:
We have audited the accompanying balance sheets of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the related statements
of operations, stockholder's equity, and cash flows for each of the years in
the three-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security Equity Life
Insurance Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 4, 1997
<PAGE> 350
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1996 and 1995
<CAPTION>
================================================================================================
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Bonds, at fair value $ 58,058,439 63,256,127
Policy loans 5,081,949 4,524,903
Cash and cash equivalents 5,534,380 1,977,082
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 68,674,768 69,758,112
Reinsurance benefits recoverable:
Future policy benefits 6,436,700 7,221,329
Policy and contract claims 2,048,247 1,704,918
Accrued investment income 1,230,483 1,279,216
Goodwill 1,349,013 1,428,369
Deferred policy acquisition costs 3,658,233 1,471,754
Value of business acquired 2,461,000 2,441,000
Deferred tax asset 3,403,349 2,251,570
Other assets 877,289 1,250,035
Separate account assets 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total assets $206,764,516 150,079,515
================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------------------------------------
Reserve for future policy benefits 54,516,590 55,520,856
Policy and contract claims 1,494,338 2,176,837
Other policyholders' funds 21,723 25,064
Advance premiums 1,861,279 1,057,064
Other liabilities and accrued expenses 6,622,653 2,290,147
Payable to affiliates 75,510 51,785
Separate account liabilities 116,625,434 61,273,212
- ------------------------------------------------------------------------------------------------
Total liabilities 181,217,527 122,394,965
- ------------------------------------------------------------------------------------------------
Commitments and contingencies (note 10)
Stockholder's equity:
Common stock, par value $25; 100,000 shares authorized,
issued, and outstanding 2,500,000 2,500,000
Additional paid-in capital 27,447,892 27,447,892
Net unrealized gain on investments, net of taxes 59,112 1,990,132
Retained deficit (4,460,015) (4,253,474)
- ------------------------------------------------------------------------------------------------
Total stockholder's equity 25,546,989 27,684,550
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $206,764,516 150,079,515
================================================================================================
See accompanying notes to financial statements.
</TABLE>
1
<PAGE> 351
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Operations
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
===============================================================================================
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Premiums and contract charges $ 7,434,043 6,379,803 9,025,429
Net investment income 4,546,544 4,699,713 4,095,545
Other income 19,053 272 843,891
Realized investment gains (losses) 313,185 (179,830) (515,975)
- -----------------------------------------------------------------------------------------------
Total revenues 12,312,825 10,899,958 13,448,890
- -----------------------------------------------------------------------------------------------
Benefits and expenses:
Policy benefits 3,309,410 3,234,062 2,539,611
Policy surrenders, net 1,635,498 1,016,535 1,786,502
Change in reserve for future policy benefits (1,893,195) (2,791,166) 1,296,603
Interest credited 2,437,432 2,391,220 2,349,814
Commissions, net of capitalized costs 1,403,608 1,283,902 3,930,807
General and administrative expenses 4,795,193 4,966,525 5,531,872
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired, net (20,000) (28,000) (50,000)
Other expenses 849,064 619,517 1,131,898
- -----------------------------------------------------------------------------------------------
Total benefits and expenses 12,596,366 10,771,951 18,596,461
- -----------------------------------------------------------------------------------------------
Income (loss) from operations before
federal income tax expense (benefit) (283,541) 128,007 (5,147,571)
- -----------------------------------------------------------------------------------------------
Federal income tax expense (benefit):
Current 15,000 -- --
Deferred (92,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Total Federal income tax expense
(benefit) (77,000) 64,286 (830,376)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (206,541) 63,721 (4,317,195)
===============================================================================================
See accompanying notes to financial statements.
</TABLE>
2
<PAGE> 352
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
Net
unrealized
Additional gain (loss) on Total
Common paid-in investments, Retained stockholder's
stock capital net of taxes deficit equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $2,500,000 17,447,892 -- -- 19,947,892
Net loss -- -- -- (4,317,195) (4,317,195)
Contribution of capital from Parent -- 10,000,000 -- -- 10,000,000
Change in net unrealized gain
(loss) on investments -- -- (4,061,215) -- (4,061,215)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 2,500,000 27,447,892 (4,061,215) (4,317,195) 21,569,482
Net income -- -- -- 63,721 63,721
Change in net unrealized gain
(loss) on investments -- -- 6,051,347 -- 6,051,347
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 2,500,000 27,447,892 1,990,132 (4,253,474) 27,684,550
Net loss -- -- -- (206,541) (206,541)
Change in net unrealized gain
(loss) on investments -- -- (1,931,020) -- (1,931,020)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $2,500,000 27,447,892 59,112 (4,460,015) 25,546,989
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 353
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
<CAPTION>
=========================================================================================================================
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (206,541) 63,721 (4,317,195)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Change in:
Reinsurance benefits ceded 441,300 3,844,903 (1,354,981)
Accrued investment income 48,733 (36,253) (279,331)
Other assets 372,746 (824,660) (164,367)
Deferred policy acquisition costs, net (2,186,479) (1,471,754) --
Policy liabilities (1,004,266) (1,345,723) 2,392,502
Policy and contract claims (682,499) (2,880,980) 2,268,697
Other policyholders' funds (3,341) 2,425 534
Federal income tax payable 15,000 -- --
Advance premiums 804,215 393,064 664,000
Other liabilities and accrued expenses 4,317,506 190,733 1,295,393
Payable to affiliates 23,725 (17,141) (224,158)
Accretion of bond premiums, net 189,350 221,543 536,812
Deferred tax expense (benefit) (92,000) 64,286 (830,376)
Net (gain) loss on sale of investments (313,185) 179,830 515,975
Amortization of goodwill 79,356 79,356 79,354
Accretion of value of business acquired (20,000) (28,000) (50,000)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,783,660 (1,564,650) 532,859
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investments (12,790,361) (17,056,300) (26,813,376)
Sale or maturity of investments 15,141,063 19,355,372 16,780,012
Increase in policy loans, net (557,046) (893,507) (747,167)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 1,793,656 1,405,565 (10,780,531)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Contribution of capital from Parent -- -- 10,000,000
Policyholder account balances:
Deposits on interest-sensitive life contracts 48,448,968 18,382,186 35,046,849
Transfers to separate account for
interest-sensitive life contracts, net (48,468,986) (27,178,119) (26,250,945)
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (20,018) (8,795,933) 18,795,904
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 3,557,298 (8,955,018) 8,548,232
Cash and cash equivalents at beginning of year 1,977,082 10,932,100 2,383,868
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,534,380 1,977,082 10,932,100
=========================================================================================================================
Supplemental disclosure of cash flow information -
taxes paid $ -- 20,000 --
=========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
4
<PAGE> 354
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1996 and 1995
=============================================================================
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Equity Life Insurance Company (SELIC or the Company) is a
wholly owned subsidiary of General American Life Insurance Company
(General American or the Parent). On December 31, 1993, Security
Mutual Life Insurance Company of New York (Security Mutual) sold
100% of the Company's stock to General American, as approved by
the State of New York Department of Insurance.
In 1986, the Company commenced direct writing of universal life
and term business, and in 1987 began marketing a single premium
whole life policy. In 1984, the Company began assuming single
premium deferred annuity (SPDA) and other insurance business
through reinsurance agreements with Security Mutual. The SPDA and
ordinary life insurance blocks of business were recaptured by
Security Mutual in 1992.
SELIC is licensed in 40 states and the District of Columbia.
Insurance operations have generally been limited to the sale of
individual life insurance products (term and universal life) made
through the general agency system, including career agents and
brokers.
With the sale of SELIC by Security Mutual to General American,
SELIC's activities have been redirected to serving the insurance
needs of publicly held corporations and New York state residents.
Additionally, SELIC focuses on accessing numerous and alternative
distribution channels in addition to a general agency system.
SELIC markets Corporate Owned Life Insurance (COLI) primarily
through specially designed variable products.
The acquisition of Security Equity by General American was
accounted for as a purchase transaction and, accordingly, the
purchase price was allocated to the assets and liabilities
acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. These allocations have
been reflected, or "pushed down," in the financial statements of
the Company. The total purchase price of $19,947,892 was
allocated among the fair value of tangible net assets of
$15,997,813, value of business acquired of $2,363,000, and
goodwill of $1,587,079 at the date of acquisition.
The accompanying financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of
financial statements requires the use of estimates by management
which affect the amounts reflected in the financial statements.
Actual results could differ from those estimates.
The significant accounting policies of the Company are as follows:
(a) RECOGNITION OF POLICY REVENUE AND RELATED EXPENSES
Policy revenue recognition varies depending upon the type of
insurance product. For traditional life products with fixed and
guaranteed premiums and benefits, such as whole life and term
insurance policies, premiums are recognized when due. Benefits
and other expenses
5 (Continued)
<PAGE> 355
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
of these products are associated with earned premiums and other
sources of earnings so as to result in recognition of profits
over the life of the contracts. This association is
accomplished by means of the provision for liabilities for
future benefits and the deferral and amortization of policy
acquisition costs. Premiums collected on universal life-type
policies are reported as deposits to the policyholder account
balance and not as income to SELIC. Income to SELIC on these
policies consists of the assessments for mortality costs,
surrenders, and expenses.
(b) Investment Securities
At December 31, 1996 and 1995, all long-term securities are
carried at market value with the unrealized gain (loss), net of
tax impact, being reflected as a separate component of
stockholder's equity as the Company considers all long-term
securities as available-for-sale. Short-term investments are
carried at cost which approximates market value. Policy loans
are valued at aggregate unpaid balances. The fair value of
policy loans is assumed to equal the carrying value because the
loans have no fixed maturity date and, therefore, it is not
practicable to determine a fair value.
Realized gains or losses on the sale of securities are
determined on the basis of specific identification and include
the impact of any related amortization of premium or accretion
of discount which is generally computed consistent with the
interest method.
(c) Value of Business Acquired
Value of business acquired (VOBA) represents the present value
of future profits resulting from the acquisition of insurance
policies in a purchase transaction. VOBA is amortized in
proportion to the estimated premiums or gross profits,
depending on the type of contract, with accretion of interest
on the unamortized discounted balance. In 1996, 1995 and 1994,
amortization of VOBA was $121,000, $112,000 and $89,000, and
the accretion of interest on the unamortized balance was
$140,000 and $139,000, respectively. The carrying value of
VOBA is periodically evaluated to ascertain recoverability from
future operations. Impairment would be recognized in current
operations when determined.
(d) Goodwill
Goodwill, representing the excess of purchase price over the
fair value of assets acquired, is amortized on a straight-line
basis over 20 years. The carrying value of goodwill is
periodically evaluated to ascertain recoverability from future
operations. Impairment would be recognized in current
operations when determined.
(e) Reserve for Future Policy Benefits
Liabilities for future benefits on life policies are
established in amounts adequate to meet the estimated future
obligations on policies in force. Liabilities for future
policy benefits on certain life insurance policies are computed
using the net level premium method and are based upon
assumptions as to future investment yield, mortality, and
withdrawals. Mortality and
6 (Continued)
<PAGE> 356
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
withdrawal assumptions for all policies have been based on
various actuarial tables which are consistent with the
Company's own experience. Liabilities for future benefits on
certain long-duration life insurance contracts are carried at
accumulated policyholder values.
(f) Federal Income Taxes
The Company is taxed as a life insurance company under the
Deficit Reduction Act of 1984. The Company establishes
deferred taxes under the asset and liability method of SFAS
No.109, Accounting for Income Taxes, and deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
those temporary differences are expected to be recovered or
settled. Under SFAS No.109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company filed its federal income tax return on a
consolidated basis with Security Mutual prior to 1994. The
Company will file its federal income tax return as a separate
entity for 1996, consistent with 1995 and 1994.
(g) Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on a
basis consistent with terms of the risk transfer reinsurance
contracts. Premiums ceded to other companies have been
reported as a reduction of premium income. Amounts applicable
reinsurance ceded for future policy benefits and claim
liabilities have been reported as assets for these items, and
commissions and expense allowances received in connection with
reinsurance ceded have been accounted for in income as earned
over the anticipated reinsurance contract life. Reinsurance
does not relieve the Company from its primary responsibility to
meet claim obligations.
(h) Deferred Policy Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable
from future premiums. Such costs may include commissions, as
well as certain costs of policy issuance and underwriting. In
1996 and 1995, the Company deferred $2.4 million and $1.5
million, respectively, in acquisition costs related to interest
sensitive products and recognized amortization of $168,000 and
$12,000, respectively, based on the estimated gross profits of
the underlying business. The Company did not defer any policy
acquisition costs in 1994 as a result of the nature of the
business written.
(i) Separate Account Business
The assets and liabilities of the separate account represent
segregated funds administered and invested by the Company for
purposes of funding variable life insurance contracts for the
7 (Continued)
<PAGE> 357
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
exclusive benefit of variable life insurance contract holders.
The Company receives administrative fees from the separate
account and retains varying amounts of withdrawal charges to
cover expenses in the event of early withdrawals by contract
holders. The assets and liabilities of the separate account
are carried at market value.
(j) FAIR MARKET DISCLOSURES
Fair value disclosures are required under SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. Such
fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instrument. These estimates do not reflect any
result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Although fair
value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates
should be used with care. The following assumptions were used
to estimate the fair market value of each class of financial
instrument for which it was practicable to estimate fair value:
Invested assets - Fixed maturities are valued using quoted
---------------
market prices, if available. If quoted market prices are not
available, fair value is estimated using quoted market prices
of similar securities. The carrying value of policy loans
approximates fair value.
Policyholder account balances - The fair value of policyholder
-----------------------------
account balances is equal to the discounted estimated future
cash flows using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts
with maturities consistent with those remaining for the
contracts being valued. The carrying value approximates fair
value at December 31, 1996 and 1995.
Cash and short-term investments - The carrying amount is a
-------------------------------
reasonable estimate of fair value.
(k) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial
paper, and repurchase agreements with original or remaining
maturities of 90 days or less when purchased.
(l) Reclassification
Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1995 presentation.
8 (Continued)
<PAGE> 358
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(2) INVESTMENTS
The sources of net investment income (principally interest) follow:
<TABLE>
<CAPTION>
================================================================================================
1996 1995 1994
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $4,291,428 4,458,159 3,840,763
Short-term investments 75,110 43,781 133,755
Policy loans and other 260,276 294,298 216,942
------------------------------------------------------------------------------------------------
4,626,814 4,796,238 4,191,460
Investment expenses 80,270 96,525 95,915
------------------------------------------------------------------------------------------------
Net investment income $4,546,544 4,699,713 4,095,545
================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 and 1995 are shown below. Market value is based upon market
prices obtained from independent pricing services which approximate
fair value.
<TABLE>
<CAPTION>
=========================================================================================================
1996
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 3,962,315 127,349 6,292 4,083,372
Corporate securities 40,917,820 1,299,830 902,482 41,315,168
Mortgage-backed securities 13,087,363 29,539 457,003 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 1,456,970 1,366,029 58,058,439
=========================================================================================================
</TABLE>
9 (Continued)
<PAGE> 359
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 9,299,846 287,844 273,583 9,314,107
Corporate securities 40,799,139 3,013,425 388,584 43,423,980
Mortgage-backed securities 10,095,402 432,140 9,502 10,518,040
---------------------------------------------------------------------------------------------------------
$60,194,387 3,733,409 671,669 63,256,127
=========================================================================================================
</TABLE>
The amortized cost and estimated market value of bonds at December 31,
1996 by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
=========================================================================================================
Estimated
Amortized market
cost value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,257,740 1,255,992
Due after one year through five years 2,404,896 2,384,096
Due after five years through ten years 6,160,517 5,951,583
Due after ten years 35,056,982 35,806,869
Mortgage-backed securities 13,087,363 12,659,899
---------------------------------------------------------------------------------------------------------
$57,967,498 58,058,439
=========================================================================================================
</TABLE>
Proceeds from the sale, call, and maturity of investments in bonds
1996, 1995, and 1994 were $15,141,063, $19,355,372, and $16,780,012,
respectively. Gross gains of $381,856, $428,522, and $119,699 and gross
losses of $68,671, $608,352, and $635,674 were realized on those sales
in 1996, 1995, and 1994, respectively.
The Company has bonds on deposit with various state insurance
departments with an amortized cost of approximately $2,411,000 and
$2,421,000 at December 31, 1996 and 1995, respectively.
(3) REINSURANCE
The Company reinsures certain risks with other insurance companies as
the Company sets a maximum retention amount (currently $125,000)
to help reduce the loss on any single policy.
10 (Continued)
<PAGE> 360
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with affiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Reinsurance premiums ceded $1,632,262 1,956,568 2,391,067
Policy benefits ceded 1,397,188 305,947 2,340,522
Commissions and expenses ceded -- -- 169,453
- ----------------------------------------------------------------------------------------------------
</TABLE>
Premiums and related reinsurance amounts for the years ended
December 31, 1996, 1995, and 1994 as they relate to transactions
with nonaffiliates are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with nonaffiliates:
Reinsurance premiums ceded $5,744,060 5,489,407 6,299,344
Policy benefits ceded 3,824,327 2,682,132 3,050,824
Commissions and expenses ceded -- -- 674,438
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Company remains contingently liable with respect to any
reinsurance ceded and would become actually liable if the assuming
company was unable to meet its obligations under the reinsurance
treaty.
(4) FEDERAL INCOME TAXES
A reconciliation of the Company's "expected" federal income tax
expense (benefit), computed by applying the federal U.S. corporate
tax rate of 35% to income (loss) from operations before federal
income tax expense (benefit), is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
====================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $(99) 45 (1,802)
Amortization of intangibles, net 21 18 10
Other, net 1 1 962
- ----------------------------------------------------------------------------------------------------
Federal income tax expense (benefit) $(77) 64 (830)
====================================================================================================
</TABLE>
11 (Continued)
<PAGE> 361
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
================================================================================
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
December 31, 1996 and 1995 are presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
===========================================================================================
1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy acquisition costs $1,746 1,157
Reserves 1,694 2,072
Capital loss carryforward 148 243
Net operating loss carryforward -- 323
Other, net 685 410
-------------------------------------------------------------------------------------------
Total gross deferred tax assets 4,273 4,205
Less valuation allowance -- --
-------------------------------------------------------------------------------------------
Net deferred tax assets 4,273 4,205
-------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 80 1,097
Other, net 790 856
-------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 870 1,953
-------------------------------------------------------------------------------------------
Net deferred tax asset $3,403 2,252
===========================================================================================
</TABLE>
On December 31, 1993, General American purchased 100% of the Company.
Pursuant to the acquisition, the election was made under Internal
Revenue Code Section 338(h)(10) to treat the purchase of stock as a
purchase of assets for tax purposes. As a result, a revaluation of
the tax bases of the Company's assets and liabilities was made in
connection with the acquisition.
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. In
assessing the realization of deferred tax assets, the Company considers
whether it is more likely than not that the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Although the
Company has a limited history of earnings, its Parent does have a long
history of earnings. Pursuant to Internal Revenue Service regulations,
the Company cannot file a consolidated tax return with its Parent until
five years following the acquisition. However, after five years, the
Company will be able to file a consolidated tax return with its Parent,
and realization of the gross tax asset will not be dependent solely on
the Company's ability to generate its own taxable income. General
American has a proven history of earnings and it appears more likely
than not that the Company's gross deferred tax asset will
ultimately be fully realized.
The Company filed its federal income tax return on a consolidated basis
with Security Mutual prior to 1994. In connection with the Company's
transfer of stock ownership, Security Mutual agreed to assume all
unpaid tax liability incurred prior to the date of sale.
12 (Continued)
<PAGE> 362
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(5) RELATED-PARTY TRANSACTIONS
The Company purchases certain administrative services from
General American. Charges for services performed are based upon
personnel and other costs involved in providing such services.
The expenses incurred for these services were $529,000, $463,200,
and $407,000 for 1996, 1995, and 1994, respectively.
Effective January 1, 1994, the Company entered into an
administrative service agreement with Security Mutual. Under the
agreement, Security Mutual provides for the administration of
policies issued through December 31, 1993. The expenses incurred
for these services were $1,621,268, $1,842,320, and $1,980,812 for
1996, 1995, and 1994, respectively.
(6) PENSION, INCENTIVE, AND HEALTH AND LIFE INSURANCE BENEFIT PLANS
Associates of SELIC participate in a noncontributory multi-employer
defined benefit pension plan jointly sponsored by SELIC and
General American. The benefit is accrued are based on the number
of years of service and compensation level of each participant.
No pension expense was recognized in 1996, 1995, or 1994 due to
overfunding of the plan.
In addition, in 1995 SELIC adopted an associate bonus plan applicable
to full-time exempt associates. Bonuses are based on an economic
value-added model prepared annually by the Company. Total bonuses
accrued to Company employees were $144,000 and $59,500 in 1996 and
1995, respectively. In 1994, the Company accrued bonuses of
$150,000 under a nonrelated associate bonus plan.
SELIC provides for certain health care and life insurance benefits
for retired employees in accordance with SFAS No. 106, Employer's
Accounting for Postretirement Benefits Other Than Pensions. SFAS
No. 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services.
SFAS No. 106 allows recognition of the cumulative effect of the
liability in the year of the adoption or the amortization of the
transition obligation over a period of up to 20 years. The
Company has elected to recognize the initial postretirement
benfit obligation of approximately $16,427 over a period of 20
years. The unrecognized initial postretirement benefit obligation
was approximately $13,962 and $14,784 at December 31, 1996 and
1995, respectively. The net periodic post-retirement benefit cost
for the years ended December 31, 1996, 1995, and 1994 was $8,490,
$6,711, and $6,232, respectively. This includes expected costs of
benefits for newly eligible or vested employees, interest costs,
gains and losses from differences between actuarial and actual
experience, and amortization of the initial postretirement benefit
obligation. The accumulated post-retirement benefit obligation
was approximately $28,981 and $17,089 at December 31, 1996 and
1995, respectively. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% for all
years. The health care cost trend rates were 9% for the Indemnity
Plan, 8% for the HMO Plan, and 9% for the Dental Plan. These
rates were graded to 5.25% over the next 14 years. A one
percentage point increase in the assumed health care cost trend
rates would increase the December 31, 1996 accumulated
postretirement obligation by 12.9%, and the estimated service cost
and interest cost components of the net periodic postretirement
benefit cost for 1996 by 16.0%.
13 (Continued)
<PAGE> 363
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(7) STATUTORY FINANCIAL INFORMATION
The Company is subject to financial statement filing requirements of
the State of New York Department of Insurance, its state of
domicile, as well as the states in which it transacts business.
Such financial statements, generally referred to as statutory
financial statements, are prepared on a basis of accounting which
varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include:
(1)charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed
using required valuation standards which may vary in methodology
utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting
and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield
stabilization on fixed maturity dispositions prior to maturity
with asset valuation reserves based on statutorily determined
formulae and interest stabilization reserves designed to level
yields over their original purchase maturities; (5) deferred
premiums provided for statutory mean reserves; (6) annuity
contract deposits represent funds deposited by policyholders and
are included in premiums or contract charges; (7) non-recognition
of certain assets as nonadmitted through a direct charge to
surplus; and (8) valuation of investments in bonds at amortized
cost.
The stockholder's equity (surplus) and net loss of the Company at
December 31, 1996, 1995, and 1994, as determined using statutory
accounting practices, is summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================================
1996 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surplus as reported to regulatory authorities $12,441,081 15,125,968 17,264,148
Net loss as reported to regulatory authorities (2,778,942) (1,465,539) (3,779,205)
=========================================================================================================
</TABLE>
(8) DIVIDEND RESTRICTIONS
Dividend payments by the Company are restricted by state insurance
laws as to the amount that may be paid as well as the prior notice
and approval of the State of New York Department of Insurance.
The Company did not pay a dividend in 1996, 1995, or 1994.
(9) RISK-BASED CAPITAL
The insurance departments of various states, including the Company's
domiciliary state of New York, impose risk-based capital (RBC)
requirements on insurance enterprises. The RBC calculation serves
as a benchmark for the regulation of life insurance companies by
state insurance regulators. The requirements apply various
weighted factors to financial balances or activity levels based on
their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory authorities is required based on the ratio
of a company's actual total adjusted capital (sum of capital and
surplus and asset valuation reserve) to control levels determined
by the RBC formula. At December 31, 1996, the Company's actual
total adjusted capital was in excess of minimum levels which would
require action by the Company or regulatory authorities under the
RBC formula.
14 (Continued)
<PAGE> 364
SECURITY EQUITY INSURANCE COMPANY
Notes to Financial Statements
===============================================================================
(10) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under noncancellable
leases which expire in August 1998. The future minimum lease
obligations under the terms of the leases are summarized as
follows:
<TABLE>
<CAPTION>
========================================================================================
<S> <C>
Year ended December 31:
1997 $ 84,600
1998 58,600
----------------------------------------------------------------------------------------
$143,200
========================================================================================
</TABLE>
Rent expense totaled approximately $82,700, $83,900, and $50,700
in 1996, 1995, and 1994, respectively.
(11) SUBSEQUENT EVENT
Subsequent to December 31, 1996, a policyholder of the Company
utilized the "free-look" option of their variable life contract
which resulted in the return of approximately $13 million in
contract deposits to the policyholder and the nonrealization of
approximately $1.6 million in commissions and related expenses by
the Company. The impact to the Company's net income and financial
position is not significant. Management is maintaining continuing
discussions with this policyholder to provide an opportunity to
retain this business in 1997.
15
<PAGE> 365
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file
with the Securities an Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to the Depositor's Articles of Incorporation, and to
Article VII of the Depositor's By-Laws, each filed as an exhibit to this
Registration Statement. Specifically, Section VII.1. of Article VII of the
Depositor's By-Laws provides that the Depositor may indemnify a director or
officer ("Indemnified Person") for amounts paid in settlement and reasonable
expenses in connection with an action (i) brought by or in the right of the
Depositor, if the Indemnified Person acted in good faith for a purpose
reasonably believed by the Indemnified Person to be in (or, under certain
circumstances, not opposed to) the best interests of the Depositor; or (ii)
other than an action brought by or in the right of the Depositor, if the
Indemnified Person acted in good faith for a purpose reasonably believed by
the Indemnified Person to be in (or, under certain circumstances, not opposed
to) the best interests of Depositor, and in criminal actions or proceedings,
in addition, had no reasonable cause to believe that his or her conduct was
unlawful. Section VII.1. further provides that such indemnification must be
authorized by the Board of Directors of the Depositor acting by a quorum
consisting of directors who are not parties to the action or proceeding, or if
such quorum is unobtainable or if a quorum of disinterested directors so
directs, by the Board of Directors upon an opinion of independent legal
counsel, or by the Depositor's shareholders, in each case provided that
certain findings are made. Section VII.1. further provides that the Depositor
will indemnify a director or officer in connection with actions described
under (i) and (ii) above if the Indemnified Person has been successful in the
defense of a civil or criminal or proceeding as described in (i) and (ii)
above. Section VII.1. further provides that a notification of payment of
indemnification, advancement or allowance under Sections 721 to 726,
inclusive, of the Business Corporation Law of New York shall be made unless a
notice has been filed with Superintendent of Insurance of the State of New
York as specified in Section VII.1. This description is qualified in its
entirety by the provisions of the By-Laws filed as an exhibit to this
Registration Statement.
II-1
<PAGE> 366
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification may be against public policy as expressed in
the Act and may be, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer, or controlling person of
the Registration in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
REASONABLENESS OF FEES AND CHARGES
Security Equity Life Insurance Company, of which Registrant forms a part,
hereby represents that the fees and charges deducted under the terms of the
Contracts are, in the aggregate, reasonable in relationship to the services
rendered, the expenses expected, and the risks assumed by Security Equity Life
Insurance Company.
II-2
<PAGE> 367
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
* The facing sheet.
* A reconciliation and tie of the information shown in the information
shown in the prospectuses with the items of Form N-8B-2.
* Prospectus Version A consisting of 108 pages, Prospectus Version B
consisting of 88 pages, and Prospectus Version C consisting of 94 pages.
* The Undertaking to File Reports.
* The Rule 484 Undertaking.
* Reasonableness of Fees and Charges.
* The signatures.
* The following exhibits:
1. The following exhibits correspond to the numbers under paragraph A
of the instructions for exhibits to Form N-8B-2:
(1) Resolutions Establishing Security Equity
Life Insurance Company Separate Account 13.<F1>
(2) None.
(3)(a) Principal Underwriting Agreement between SELIC and Walnut
Street Securities, Inc.<F1>
(3)(b) Form of Selling Agreement between Walnut Street
Securities, Inc. and Selling Firms.<F1>
(3)(c) Schedule of Sales Commissions.<F2>
(4) None.
(5)(a) Specimen of Contract.<F1>
(5)(b) Riders and Endorsements.<F1>
(6) Certificate of Incorporation and By-Laws of SELIC.<F1>
(7) None.
(8) None.
(9)(a) Form of Participation Agreement.<F2>
(9)(b) Participation Agreement Among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Security
Equity Life Insurance Company.<F2>
(9)(c) Participation Agreement Among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Security
Equity Life Insurance Company.<F2>
(9)(d) Form of Amendment No. 1 to Participation Agreement Among
Variable Insurance Products Fund, Fidelity Distributors
Corporation and Security Equity Life Insurance Company.<F3>
II-3
<PAGE> 368
(9)(e) Form of Amendment No. 1 to Participation Agreement Among
Variable Insurance Products Fund II, Fidelity Distributors
Corporation and Security Equity Life Insurance Company.<F3>
(9)(f) Form of Participation Agreement between Evergreen Variable
Trust and Security Equity Life Insurance Company.<F3>
(9)(g) Fund Participation Agreement Among Tomorrow Funds
Retirement Trust, Weiss, Peck & Greer, L.L.C., and Security
Equity Life Insurance Company.
(9)(h) Form of Participation Agreement Among Security Equity Life
Insurance Company, Russell Insurance Funds, and Russell
Fund Distributors, Inc.
(9)(i) Form of Participation Agreement Among Life & Annuity Trust,
Stephens, Inc., Wells Fargo Bank, and Security Equity Life
Insurance Company.
(10) Specimen of Application for Policy.<F1>
2. See Exhibit 3.(i).
3.(i) Opinion of Juanita M. Thomas, Esq. as to the legality of
Securities Being Issued and Consent.<F2>
3.(ii) Opinion of Victor Bertolozzi, FSA, MAAA and Consent.<F2>
3.(iii) Opinion of Ralph A. Gorter, FSA, and Consent.
4. None.
5. Inapplicable.
6. Inapplicable.
7. Powers of Attorney.<F1>
8. Form of Notice of Withdrawal Right.<F2>
9. Consent of KPMG Peat Marwick LLP.
NOTES
[FN]
<F1.> Incorporated by reference to Registrant's registration statement on Form
S-6 (File No. 88524), filed January 13, 1995.
<F2.> Incorporated by reference to Registrant's Pre-Effective Amendment No. 1
to registration statement on Form S-6 (File No. 33-88524), filed
August 30, 1995.
<F3.> Incorporated by reference to Registrant's Post-Effective Amendment No. 1
to registration statement on Form S-6 (file Nos. 33-88524 and 811-8938),
filed April 29, 1996.
II-4
<PAGE> 369
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Security Equity
Life Insurance Company and Security Equity Life Insurance Company Separate
Account 13 certify that they meet all of the requirements for effectiveness of
this amended Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and have duly caused this amended Registration
Statement to be signed on their behalf by the undersigned thereunto duly
authorized, and the seal of Security Equity Life Insurance Company to be
hereunto affixed and attested, all in the City of Armonk and State of New
York, on the 23rd day of April, 1997.
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13 (Registrant)
By: SECURITY EQUITY LIFE INSURANCE COMPANY
(for Registrant and as Depositor)
Attest: /s/ Matthew P. McCauley By: /s/ William C. Thater
---------------------------- -----------------------
Matthew P. McCauley, William C. Thater,
Secretary President
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William C. Thater 4/23/97
- -------------------------------
William C. Thater President & Director
/s/ Fabio Pieroni 4/23/97
- -------------------------------
Fabio Pieroni Vice President, Treasurer,
and Controller
<F*> 4/23/97
- -------------------------------
Willard N. Archie Director
<F*> 4/23/97
- -------------------------------
Carson E. Beadle Director
<F*> 4/23/97
- -------------------------------
James R. Elsesser Director
<PAGE> 370
<S> <C> <C>
<F*> 4/23/97
- -------------------------------
Stanley Goldstein Director
<F*> 4/23/97
- -------------------------------
David D. Holbrook Director
<F*> 4/23/97
- -------------------------------
Richard A. Liddy Director
<F*> 4/23/97
- -------------------------------
Leonard M. Rubenstein Director
<F*> 4/23/97
- -------------------------------
H. Edwin Trusheim Director
<F*> 4/23/97
- -------------------------------
Virginia V. Weldon, M.D. Director
<F*> 4/23/97
- -------------------------------
Ted C. Wetterau Director
<F*> 4/23/97
- -------------------------------
Ben H. Wolzenski Director
<F*> 4/23/97
- -------------------------------
A. Greig Woodring Director
By: /s/ William C. Thater 4/23/97
---------------------------
William C. Thater
<FN>
<F*> Copies of powers of attorney authorizing William C. Thater to sign the
Registration Statement and amendments thereto on behalf of the Directors
of Security Equity Life Insurance Company are on file with the
Securities and Exchange Commission.
</TABLE>
II-6
<PAGE> 371
<TABLE>
<CAPTION>
EXHIBIT INDEX
<C> <S>
1.A.(9)(g) Fund Participation Agreement Among Tomorrow Funds
Retirement Trust, Weiss, Peck & Greer, L.L.C., and
Security Equity Life Insurance Company.
1.A.(9)(h) Form of Participation Agreement Among Security Equity
Life Insurance Company, Russell Insurance Funds, and Russell
Fund Distributors, Inc.
1.A. (9)(i) Form of Participation Agreement Among Life & Annuity
Trust, Stephens, Inc., Wells Fargo Bank, and Security
Equity Life Insurance Company.
3.(iii) Opinion of Ralph A. Gorter, FSA, and Consent.
9. Consent of KPMG Peat Marwick LLP.
</TABLE>
<PAGE> 1
EXHIBIT 1.A.(9)(g)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 30th day of September, 1996, by and among
TOMORROW FUNDS RETIREMENT TRUST ("TRUST"), a Delaware business trust, WEISS,
PECK & GREER, L.L.C. ("WPG"), a Delaware Limited Liability Company, and
Security Equity Life Insurance Company ("LIFE COMPANY"), a life insurance
company organized under the laws of the State of New York.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the " `40 Act"),
as an open-end, diversified management investment company and its shares of
beneficial interest are registered under the Securities Act of 1933 (the " `33
Act"); and
WHEREAS, TRUST is organized as a series fund comprised of several Funds
("Funds"), those currently available are listed on Appendix A hereto; and
WHEREAS, TRUST was organized to act as the investment vehicle for
certain variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts
("Separate Accounts") of such life insurance companies ("Participating
Insurance Companies") and also offers its shares to certain qualified pension
and retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the `40 Act, and Rules 6e-2(b)
(15) and 6e-3(T) (b) (15) ("Exemptive Order") thereunder, to the extent
necessary to permit shares of the Funds of the TRUST to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies which have
entered into fund participation agreements substantially identical to this
Agreement and Qualified Plans; and
WHEREAS, LIFE COMPANY has duly organized and has established or will
establish pursuant to state insurance laws and regulations one or more
Separate Accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having TRUST as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, LIFE COMPANY has registered or will register certain Variable
Contracts under the `33 Act; and
WHEREAS, WPG is registered with the SEC as an investment adviser under
the Investment Advisers Act of 1940, and acts as the Trust's investment
adviser; and
<PAGE> 2
WHEREAS, WPG is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934 and, pursuant to a dully approved contract
with the TRUST, acts as the principal underwriter of the TRUST's shares; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of Trust to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares
to LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and WPG agree as follows:
Article I. SALE OF TRUST SHARES
--------------------
1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Funds as listed on Appendix B for investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Registration Statement.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the
selected Funds of TRUST which LIFE COMPANY orders, executing such orders on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of the designated Fund of TRUST. For
purposes of this Section 1.2, LIFE COMPANY shall be the designee of TRUST for
receipt of such orders from the designated Separate Account and receipt by
such designee shall constitute receipt by TRUST; provided that LIFE COMPANY
receives the order by 4:00 p.m. New York time and TRUST receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and
LIFE COMPANY may agree in writing) of such order by 10:00 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which TRUST
calculates its Fund net asset values pursuant to the rules of the Securities
and Exchange Commission ("SEC").
1.3 TRUST agrees to redeem for cash on LIFE COMPANY's request, any
full or fractional shares of the Funds of the TRUST held by LIFE COMPANY,
executing such requests on a daily basis at the net asset value next computed
after receipt by TRUST or its designee of the request for redemption, in
accordance with the provisions of this Agreement and TRUST's Registration
Statement. For purposes of this Section 1.3, LIFE COMPANY shall be the
designee of TRUST for receipt of requests for redemption from the designated
Separate Account and receipt by such designee shall constitute receipt by
TRUST; provided that LIFE COMPANY receives the request for redemption by 4:00
p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or
facsimile (or by such other means as TRUST and LIFE COMPANY may agree in
writing) of such request for redemption by 10:00 a.m. New York time on the
next following Business Day.
2
<PAGE> 3
1.4 TRUST shall furnish, on or before the payable date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Fund of TRUST. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Fund's shares in additional shares of the Fund. TRUST shall notify LIFE
COMPANY or its designee of the number of shares so issued as payment of such
dividends and distributions.
1.5 TRUST shall make the net asset value per share for the selected
Fund(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use
its best efforts to make such net asset value available by 6:30 p.m. New York
time. If TRUST provided LIFE COMPANY with materially incorrect share net
asset value information through no fault of LIFE COMPANY, LIFE COMPANY on
behalf of the Separate Accounts, shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct share net asset
value. Any material error in the calculation of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar
amount of TRUST shares which shall be purchased or redeemed at that day's
closing net asset value per share. The net purchase or redemption orders so
determined shall be transmitted to TRUST by LIFE COMPANY by 10:00 a.m. New
York time on the Business Day next following LIFE COMPANY's receipt of such
requests and premiums in accordance with the terms of Sections 1.2 and 1.3
hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares,
LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or
its designated custodial account by 11:00 a.m., New York time on the day the
order is transmitted by LIFE COMPANY. If LIFE COMPANY's order requests a net
redemption resulting in a payment of redemption proceeds to LIFE COMPANY TRUST
shall use its best efforts to wire the redemption proceeds to LIFE COMPANY by
the next Business Day, unless doing so would require TRUST to dispose of Fund
securities or otherwise incur additional costs. In any event, proceeds shall
be wired to LIFE COMPANY within three Business Days or such longer period
permitted by the `40 Act or the rules, orders or regulations thereunder and
TRUST shall notify the person designated in writing by LIFE COMPANY as the
recipient for such notice of such delay by 3:00 p.m. New York time the same
Business Day that LIFE COMPANY transmits the redemption order to TRUST. If
LIFE COMPANY's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another Fund advised by WPG,
TRUST shall so apply such proceeds the same Business DAY that LIFE COMPANY
transmits such order to TRUST.
3
<PAGE> 4
1.8 TRUST agrees that all shares of the Funds of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of
the Funds of Trust will not be sold directly to the general public.
1.9 TRUST may refuse to sell shares of any Fund to any person, or
suspend or terminate the offering of the shares of or liquidate any Fund or
Trust if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the
Trust (the "Board"), acting in good faith and in light of its duties under
federal and any applicable state laws, deemed necessary or desirable and in
the best interests of the shareholders of such Funds.
1.10 Issuance and transfer of Fund shares will be by book entry
only. Stock certificates will not be issued to LIFE COMPANY or the Separate
Accounts. Shares ordered from Fund will be recorded in appropriate book entry
titles for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 LIFE COMPANY represents and warrants that it is an insurance
company duly organized and in good standing under the laws of New York and
that it has legally and validly established each Separate Account as a
segregated asset account under such laws, and that Walnut Street Securities,
Inc., the principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 (the " `34 Act") and
is a member of the National Association of Securities Dealers, Inc.
2.2 LIFE COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the `40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the variable Contracts,
unless an exemption from registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable
Contracts will be registered under the `33 Act unless an exemption from
registration is available prior to any issuance or sale of the Variable
Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all
material respects with state insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable
Contracts are currently and at the time of issuance will be treated as life
insurance, endowment or annuity contracts under applicable provisions of the
Code, that it will maintain such treatment and that it will notify TRUST
immediately upon having a reasonable basis for believing that the
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Variable Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5 TRUST represents and warrants that the Fund shares offered and
sold pursuant to this Agreement will be registered under the `33 Act and sold
in accordance with all applicable federal and state laws, and TRUST shall be
registered under the `40 Act prior to and at the time of any issuance or sale
of such shares. TRUST, subject to Section 1.9 above, shall amend its
Registration Statement under the `33 Act and the `40 Act from time to time as
required in order to effect the continuous offering of its shares. TRUST
shall register and qualify its shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by TRUST.
2.6 TRUST represents and warrants that each Fund will comply with
the diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Fund has ceased to comply or might not so
comply and will immediately take all reasonable steps to adequately diversify
the Fund to achieve compliance.
2.7 TRUST represents and warrants that each fund invested in by the
Separate Account intends to elect to be treated as a "regulated investment
company" under Subchapter M of the Code, and that it will make every effort to
continue to qualify for such treatment for each taxable year and will notify
LIFE COMPANY immediately upon having a reasonable basis for believing it has
ceased to so qualify or might not so qualify in the future.
2.8 WPG represents and warrants that it is and will be a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD")
and is and will be registered as a broker-dealer with the SEC. WPG further
represents that it will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations, including without
limitation the `33 Act, the `34 Act and the `40 Act. WPG represents that its
operations are and shall at all times remain in material compliance with the
laws of the State of Delaware to the extent required to perform this
Agreement.
2.9 WPG represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable Federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and Federal
laws.
2.10 TRUST represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the `40 Act.
2.11 WPG represents and warrants that its directors, officers and
employees, investment managers and other individuals or entities dealing with
the money and/or securities of the TRUST are and shall continue to be at all
times covered by a blanket fidelity bond or
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similar coverage for the benefit of the TRUST in an amount not less than the
minimal coverage as currently required by Section 17(g) of the `40 Act or may be
promulgated from time to time.
Article III. PROSPECTUS AND PROXY STATEMENTS
-------------------------------
3.1 TRUST shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials), prospectuses and statements
of additional information of TRUST. TRUST shall bear the costs of
registration and qualification of shares of the Funds, preparation and filing
of the documents listed in this Section 3.1 and all taxes and filing fees to
which an issuer is subject on the issuance and transfer of its shares.
3.2 At least annually, TRUST or its designee shall provide LIFE
COMPANY, free of charge, with as many copies of the current prospectus and
statement of additional information ("SAI") for the shares of the Funds as
LIFE COMPANY may reasonably request for distribution to existing Variable
Contract owners whose designee shall provide LIFE COMPANY, at LIFE COMPANY's
expense, with as many copies of the current prospectus and SAI for the shares
of the TRUST as LIFE COMPANY may reasonably request for distribution to
prospective purchasers of Variable Contracts. If requested by LIFE COMPANY in
lieu thereof, TRUST or its designee shall provide such documentation
(including a "camera ready" copy of the new prospectus and SAI as set in type
or, at the request of LIFE COMPANY, as a diskette in the form sent to the
financial printer) and other assistance as is reasonably necessary in order
for the parties hereto once a year (or more frequently if the prospectus or
SAI for the shares is supplemented or amended) to have the prospectus for the
Variable Contracts and the prospectus for the TRUST shares printed together in
one document and the SAI for the Trust shares printed. The expenses of such
printing will be apportioned between (a) LIFE COMPANY and (b) TRUST in
proportion to the number of pages of the Variable Contract and shares'
prospectus, taking account of other relevant factors affecting the expense of
printing, such as covers, columns, graphs and charts; TRUST to bear the cost
of printing the shares' prospectus portion of such document for distribution
only to owners of existing Variable Contracts funded by the TRUST shares and
LIFE COMPANY to bear the expense of printing the portion of such documents
relating to the Separate Account; provided, however, LIFE COMPANY shall bear
all printing expenses of such combined documents where used for distribution
to prospective purchasers or to owners of existing Variable Contracts not
funded by the shares. In the event that LIFE COMPANY requests that TRUST or
its designee provide TRUST's prospectus or SAI in a "camera ready" or diskette
format, TRUST shall be responsible for providing the prospectus and SAI in the
format in which it is accustomed to formatting prospectuses and shall bear the
expense of providing the prospectus and SAIs in such format (e.g. typesetting
expenses), and LIFE COMPANY shall bear the expense of adjusting or changing
the format to conform with any of its prospectuses.
3.3 TRUST will provide LIFE COMPANY with at least one complete copy
of all prospectuses, statements of additional information, annual and
semi-annual reports, proxy
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statements, exemptive applications and all amendments or supplements to any of
the above that relate to the Funds promptly after the filing of each such
document with the SEC or other regulatory authority. LIFE COMPANY will provide
TRUST with at least one complete copy of all registration statements,
prospectuses, statements of additional information, annual reports, exemptive
applications and all amendments or supplements to any of the above that relate
to the Separate Account promptly after the filing of each such documents with
the SEC or other regulatory authority.
3.4 The TRUST's prospectus shall state from whom a Statement of
Additional Information for the TRUST is available and the TRUST, at its
expense, shall reproduce such Statement free of charge to LIFE COMPANY and/or
any Variable Contract owner or prospective purchaser who requests such a
Statement.
3.5 The TRUST, at its expense, shall provide LIFE COMPANY with
copies of its proxy material, reports to stockholders and other communications
to stockholders in such quantity as the Company shall reasonably require for
distributing to Variable Contract owners.
3.6 If required by current law, LIFE COMPANY shall:
(i) Solicit voting instructions from Contract owners;
(ii) vote the TRUST shares in accordance with instructions received
from Contract owners; and
(iii) vote TRUST shares for which no instructions have been received
in the same proportion as TRUST shares of such portfolio for
which instructions have been received, to the extent that the
Securities and Exchange Commission continues to interpret the
`40 Act to require pass-through voting privileges for Variable
Contract owners. LIFE COMPANY reserves the right to vote TRUST
shares held in any segregated asset account in its own right,
to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their
separate accounts participating in the TRUST calculates voting
privileges in a similar manner.
Article IV. SALES MATERIALS
---------------
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to
TRUST and WPG, each piece of sales literature or other promotional material in
which TRUST or WPG is named, at least fifteen (15) Business Days prior to its
intended use. No such material will be used if TRUST or WPG objects to its
use in writing within ten (10) Business Days after receipt of such material.
4.2 TRUST and WPG will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least fifteen (15)
Business Days prior to its
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intended use. No such material will be used if LIFE COMPANY objects to its use
in writing within ten (10) Business Days after receipt of such material.
4.3 TRUST and its affiliates and agents shall not give any
information or make any representations on behalf of LIFE COMPANY or
concerning LIFE COMPANY, the Separate Accounts, or the Variable Contracts
issued by LIFE COMPANY, other than the information or representations
contained in a registration statement (including prospectus) for such Variable
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports of the Separate Accounts or
reports prepared for distribution to owners of such Variable Contracts, or in
sales literature or other promotional material approved by LIFE COMPANY or its
designee, except with the written permission of LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement (including prospectus) for TRUST, as such registration statement and
prospectus may be amended or supplemented from time to time, or in sales
literature or other promotional material approved by TRUST or its designee,
except with the written permission of TRUST.
4.5 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use,
in a newspaper, magazine or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures or
other public media), sales literature (such as any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, or reprints or excerpts of any other advertisement, sales literature,
or published article), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, registration statements, prospectuses, statements of additional
information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under National Association of
Securities Dealers, Inc., rules, the `40 Act or the `33 Act.
4.6 LIFE COMPANY will provide to the TRUST at least one copy of all
solicitations for voting instructions, sales literature and other promotional
materials, requests for no-action letters and all amendments to the above,
that relate to the Variable Contracts or the Separate Account(s) of LIFE
COMPANY promptly after filing of each with the SEC or other regulatory
authority.
Article V. POTENTIAL CONFLICTS
-------------------
5.1 The TRUST has received an Exemptive Order from the SEC granting
relief from various provisions of the `40 Act and the rules thereunder to the
extent necessary to permit TRUST shares to be sold to and held by variable
annuity and variable life insurance
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separate accounts of both affiliated and unaffiliated Participating Insurance
Companies and Qualified Plans. The Exemptive Order requires the TRUST and each
Participating Insurance Company to comply with conditions and undertakings as
provided in this Section 5. The TRUST will not enter into a participation
agreement with any other Participating Insurance Company unless it imposes the
same conditions and undertakings as are imposed on LIFE COMPANY hereby.
5.2 The Board of Trustees of the TRUST will monitor the TRUST for
the existence of any material irreconcilable conflict between the interests of
Variable Contract owners of all separate accounts investing in the Trust. An
irreconcilable material conflict may arise for a variety of reasons, which may
include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling or any similar action
by insurance, tax or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Trust are being managed; (e) a difference in voting
instructions given by variable annuity and variable life insurance Contract
owners; (f) a decision by a Participating Insurance Company to disregard the
voting instructions of Variable Contract owners and (g) if applicable, a
decision by a Qualified Plan to disregard the voting instructions of plan
participants.
5.3 LIFE COMPANY will report any potential or existing conflicts to
the Board. LIFE COMPANY will be responsible for assisting the Board in
carrying out its duties in this regard by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
The responsibility includes, but is not limited to, an obligation by the LIFE
COMPANY to inform the Board whenever it has determined to disregard Variable
Contract owner voting instructions. These responsibilities of LIFE COMPANY
will be carried out with a view only to the interests of the Variable Contract
owners.
5.4 If a majority of the Board of Trustees of the Trust or majority
of its disinterested trustees, determines that a material irreconcilable
conflict exists, affecting LIFE COMPANY, LIFE COMPANY, at its expense and to
the extent reasonably practicable (as determined by a majority of the Board's
disinterested trustees), will take any steps necessary to remedy or eliminate
the irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Trust or any Fund
thereof and reinvesting those assets in a different investment medium, which
may include another Fund of the Trust, or another investment company; (b)
submitting the questions as to whether such segregation should be implemented
to a vote of all affected Variable Contract owners and as appropriate,
segregating the assets of any appropriate group (i.e., variable annuity or
variable life insurance Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Variable Contract owners the option of making such a change; and (c)
establishing a new registered management investment company (or series
thereof) or managed separate account. If a material irreconcilable conflict
arises because of LIFE COMPANY's decision to disregard Variable Contract owner
voting instructions, and that decision represents a minority position or would
preclude a majority vote, LIFE COMPANY may be required, at the election of the
TRUST, to withdraw the
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Separate Account's investment in the TRUST, and no charge or penalty will be
imposed as a result of such withdrawal. Any such withdrawal must take place
within six (6) months after the TRUST gives written notice that this provision
is being implemented. The responsibility to take such remedial action shall be
carried out with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposes action
adequately remedies any irreconcilable material conflict but in no event will
the TRUST or WPG (or any other investment advisor of the TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE
COMPANY shall not be required by this Section 5.4 to establish a new funding
medium for any Variable Contracts if any offer to do so has been declined by a
vote of a majority of Variable Contract owners materially and adversely
affected by the irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less frequently than annually, LIFE COMPANY shall submit to
the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out its obligations. Such reports,
materials, and data shall be submitted more frequently if deemed appropriate
by the Board.
Article VI. VOTING
------
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the `40 Act
as requiring pass-through voting privileges for Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Fund held
in its Separate Accounts in a manner consistent with voting instructions
timely received from its Variable Contract owners. LIFE COMPANY will be
responsible for assuring that each of its Separate Accounts that participates
in TRUST calculates voting privileges in a manner consistent with other
Participating Insurance Companies. LIFE COMPANY will vote shares for which it
has not received timely voting instructions, as well as shares it owns, in the
same proportion as its votes those shares for which it has receiving voting
instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3 (T) are amended,
or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the `40 Act or the rules thereunder with respect to mixed and shared funding
on terms and conditions materially different from any exemption granted in the
Exemptive Order, then TRUST, and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule
6e-2 and Rule 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the extent
such Rules are applicable.
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Article VII. INDEMNIFICATION
---------------
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to
-------------------------------
indemnify and hold harmless TRUST, WPG and each of their Trustees, directors,
principals, officers, employees and agents and each person, if any, who
controls TRUST or WPG within the meaning of Section 15 of the `33 Act
(collectively, the "Indemnified Parties" for purposes of this Article VII)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of LIFE COMPANY, which consent
shall not be unreasonably withheld) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of TRUST's shares or the
Variable Contracts and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement or prospectus for the Variable Contracts
or contained in the Variable Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY by or on
behalf of TRUST for use in the registration statement or
prospectus for the Variable Contracts or the Variable Contracts
or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts or TRUST shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of TRUST
not supplied by LIFE COMPANY, or persons under its control) or
wrongful conduct of LIFE COMPANY or persons under its control,
with respect to the sale or distribution of the Variable
Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of TRUST or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to TRUST by or on behalf
of LIFE COMPANY; or
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(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnification Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY
of any such claim shall not relieve LIFE COMPANY from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, LIFE COMPANY shall be entitled
to participate at its own expense in the defense of such action. LIFE COMPANY
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from LIFE COMPANY
to such party of LIFE COMPANY's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and LIFE COMPANY will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.4 Indemnification by WPG. WPG agrees to indemnify and hold
----------------------
harmless LIFE COMPANY and each of its directors, officers, employees and
agents and each person, if any, who controls LIFE COMPANY within the meaning
of Section 15 of the `33 Act (collectively, the "Indemnified Parties" for
purposes of this Article VII) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
WPG, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
TRUST's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales
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literature of TRUST (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to WPG or TRUST
by or on behalf of LIFE COMPANY for use in the registration
statement or prospectus for TRUST or in sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Variable Contracts or TRUST shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts not supplied by WPG or persons under its
control) or wrongful conduct of TRUST or WPG or persons under
their control, with respect to the sale or distribution of the
Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable
Contracts, or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY for inclusion therein by or on behalf of TRUST; or
(d) arise as a result of (i) a failure by TRUST to provide
substantially the services and furnish the materials under the
terms of this Agreement; or (ii) a failure by a Fund(s)
invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or
(iii) a failure by a Fund(s) invested in by the Separate
Account to qualify as a "regulated investment company" under
Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by WPG in this Agreement or
arise out of or result from any other material breach of this
Agreement by WPG.
7.5 WPG shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
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7.6 WPG shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified WPG in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify WPG of any such claim shall not
relieve WPG from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, WPG shall be entitled to participate at its own expense
in the defense thereof. WPG also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from WPG to such party of WPG's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and WPG will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
Article VIII. TERM: TERMINATION
------------------
8.1 This Agreement shall be effective as of the date hereof and
shall continue in force until terminated in accordance with the provisions
herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or TRUST at any time from the
date hereof upon 90 days' written notice, unless a shorter time
is agreed to by the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not
reasonably available to meet the requirements of the Variable
Contracts as determined by LIFE COMPANY. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY, said
termination to be effective ten days after receipt of notice
unless TRUST makes available a sufficient number of shares to
reasonably meet the requirements of the Variable Contracts
within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST by the SEC, the National Association
of Securities Dealers, Inc., or any other regulatory body, the
expected or anticipated ruling, judgment or outcome of which
would, in LIFE COMPANY's reasonable judgment, materially impair
TRUST's ability to meet and perform TRUST's obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by LIFE COMPANY with said termination to be
effective upon receipt of notice;
(d) At the option of TRUST, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the National
Association of Securities Dealers,
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Inc., or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in TRUST's reasonable
judgment, materially impair LIFE COMPANY's ability to meet and
perform its obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by TRUST with said
termination to be effective upon receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold
in accordance with applicable state or federal law, or such law
precludes the use of such shares as the underlying investment
medium of Variable Contracts issued or to be issued by LIFE
COMPANY. Termination shall be effective upon such occurrence
without notice;
(f) At the option of TRUST if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if TRUST reasonably believes
that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice by LIFE
COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of LIFE COMPANY within ten days after
written notice of such breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of TRUST within ten days after
written notice of such breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice;
(j) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, TRUST, and WPG, termination
shall be effective immediately upon such occurrence without
notice.
8.3 Notwithstanding any termination by the Trust or WPG of this
Agreement pursuant to Section 8.2 hereof, TRUST at its option may elect to
continue to make available additional TRUST shares, as provided below, for so
long as TRUST desires pursuant to the terms and conditions of this Agreement,
for all Variable Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts").
Notwithstanding any termination by the LIFE COMPANY of this Agreement pursuant
to Section 8.2 hereof, LIFE COMPANY at its option may elect to continue to
make available additional TRUST shares, as provided below, for so long as LIFE
COMPANY desires pursuant to the terms and conditions of this Agreement, for
all Existing Contracts. Specifically, without limitation, if a party so
elects to make additional TRUST shares
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available, the owners of the Existing Contracts or LIFE COMPANY, whichever shall
have legal authority to do so, shall be permitted to reallocate investments in
TRUST, redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, the party with the option to
continue to make available additional TRUST shares to Existing Contracts, as
promptly as is practicable under the circumstances, shall notify the other party
whether it elects to continue to make TRUST shares available after such
termination. If TRUST shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, in accordance with Section 8.2 hereof.
8.4 Except as necessary to implement Variable Contract owner
initiated transactions, or as required by state insurance laws or regulations,
LIFE COMPANY shall not redeem the shares attributable to the Variable
Contracts (as opposed to the shares attributable to LIFE COMPANY's assets held
in the Separate Accounts), and LIFE COMPANY shall not prevent Variable
Contract owners from allocating payments to a Fund that was otherwise
available under the Variable Contracts until thirty (30) days after the LIFE
COMPANY shall have notified TRUST of its intention to do so.
Article IX. NOTICES
-------
Any notice hereunder shall be given by registered or certified mail
return receipt requested to the other party at the address of such party set
forth below or at such other address as such party may from time to time
specify in writing to the other party.
If to TRUST, or WPG:
Weiss, Peck & Greer, L.L.C.
One New York Plaza
New York, NY 10004
Attention: Jay C. Nadel
If to LIFE COMPANY:
Security Equity Life Insurance Company
84 Business Park Drive
Suite 303A
Armonk, NY 10504
Attention: Bill Thater
16
<PAGE> 17
With a copy to:
Christopher A. Martin
General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
-------------
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
10.4 This agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
It shall also be subject to the provisions of the federal securities laws and
the rules and regulations thereunder and to any orders of the SEC granting
exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Fund nor the Trustees or officers of the TRUST
or any Fund shall be personally liable hereunder. No Fund shall be liable for
the liabilities of any other Fund. All persons dealing with the TRUST or a
Fund must look solely to the property of the TRUST or that Fund, respectively,
for enforcement of any claims against the TRUST or that Fund. It is also
understood that each of the Funds shall be deemed to be entering into a
separate Agreement with LIFE COMPANY so that it is as if each of the Funds had
signed a separate Agreement with LIFE COMPANY and that a single document is
being signed simply to facilitate the execution and administration of the
Agreement.
10.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the National Association of Securities Dealers, Inc., and state insurance
regulators) and shall permit such authorities reasonable assess to its books
and records in connection with any authorized inspection, investigation or
inquiry relating to this Agreement or the transactions contemplated hereby.
17
<PAGE> 18
10.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
10.8 No provision of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
Trust, WPG and the LIFE COMPANY.
IN WITNESS WHEREOF, the parties shave caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.
TOMORROW FUNDS RETIREMENT TRUST
By: /s/ Joseph Reardon
-------------------
Name: Joseph Reardon
Title: Vice President
WEISS, PECK & GREER, L.L.C.
By: /s/ [xxx]
Name:
Title:
LIFE COMPANY
By: /s/ William C. Thater
----------------------
Name: William C. Thater
Title: President
18
<PAGE> 1
EXHIBIT 1.A.(9)(h)
FORM OF PARTICIPATION AGREEMENT
THIS AGREEMENT is made and entered into as of this ---th day of
April, 1997, by and among SECURITY EQUITY LIFE INSURANCE COMPANY, a New York
insurance company (hereinafter the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth on Schedule A hereto
as such schedule may be amended from time to time (each such account
hereinafter referred to as the "Account" and collectively as the "Accounts"),
and RUSSELL INSURANCE FUNDS, a Massachusetts Business Trust (hereinafter the
"Investment Company"), and RUSSELL FUND DISTRIBUTORS, INC. a Washington
corporation (hereinafter the "Underwriter").
WHEREAS, Investment Company engages in business as a
diversified open-end management investment company and is available to act as
the investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively, the "Variable
Insurance Products"); and
WHEREAS, the beneficial interest in the Investment Company is
divided into several series of shares, referred to individually as "Funds" and
representing the interest in a particular managed portfolio of securities and
other assets; and
WHEREAS, Investment Company is registered as an open-end
management investment company under the 1940 Act, and its shares are
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, Frank Russell Investment Management Company (the
"Adviser") is registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life contracts under the 1933 Act, and offers or will offer for sale
certain variable life contracts which are or will be exempt from registration;
and
WHEREAS, Each Account is a duly organized, validly existing,
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to
set aside and invest assets attributable to one or more variable life
contracts; and
WHEREAS, The Company has registered or will register one of
the Accounts as a unit investment trust under the 1940 Act and other Accounts
are exempt from registration; and
WHEREAS, The Underwriter is registered as a broker/dealer
with the SEC under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act") and is a member
<PAGE> 2
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Funds on behalf
of each Account to fund certain of the aforesaid variable life contracts, and
the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value.
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
SALE OF INVESTMENT COMPANY SHARES
---------------------------------
1.1. The Underwriter agrees to sell to the Company those shares of
Investment Company which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Investment
Company or its designee of the order for the shares of the Investment Company.
For purposes of this Section 1.1, the Company shall be the designee of the
Investment Company for receipt of such orders from each Account and receipt by
such designee shall constitute receipt by the Investment Company; provided
that the Investment Company receives notice of such order by 8:00 a.m. Pacific
time on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which Investment
Company calculates its net asset value pursuant to the rules of the Securities
and Exchange Commission.
1.2. The Investment Company agrees to make its shares available
indefinitely for purchase at the applicable net asset value per share by the
Company and its Accounts on those days on which the Investment Company
calculates its net asset value pursuant to rules of the Securities and
Exchange Commission, and the Investment Company shall use reasonable efforts
to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Investment Company (hereinafter the "Board") may refuse to
sell shares of any Fund, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Fund.
1.3. The Investment Company and the Underwriter agree that no shares
of any Fund will be sold to the general public.
1.4. The Investment Company agrees to redeem for cash, on the
Company's request, any full or fractional shares of the Investment Company
held by the Company, executing such requests on a daily basis at the net asset
value next computed after receipt by the Investment Company or its designee of
the request for redemption. For purposes of this Section 1.4, the Company
shall be the designee of the Investment Company for receipt of requests for
redemption
2
<PAGE> 3
from each Account, and receipt by such designee shall constitute receipt by the
Investment Company; provided that the Investment Company receives notice of such
request for redemption by 8:00 a.m. Pacific time on the next following Business
Day.
1.5. The Company agrees to purchase and redeem the shares of
selected Funds offered by the then-current prospectus of the Investment
Company and in accordance with the provisions of such prospectus. The parties
agree that all net amounts available under the variable life contracts with
the form numbers(s) which are listed on Schedule B attached hereto and
incorporated herein by this reference, as such Schedule B may be amended from
time to time hereafter by mutual written agreement of all the parties hereto
(the "Contracts"), may be invested in the Investment Company, in other
investment companies, or in the Company's general account or other separate
accounts.
1.6. The Company shall pay for Investment Company shares on the next
Business Day after an order to purchase Investment Company shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire.
1.7. Issuance and transfer of the Investment Company's shares will
be by book entry only. Stock certificates will not be issued to the Company
or any Account. Shares ordered from the Investment Company will be recorded
in an appropriate title for each Account.
1.8. The Investment Company shall furnish same day notice (by wire,
facsimile transmission, or telephone, followed by written confirmation) to the
Company of any income dividends or capital gain distributions payable on the
Investment Company's shares. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on the Fund
shares in additional shares of that Fund. The Company reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash. Investment Company shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.9. The Investment Company shall make the net asset value per share
for each Fund available to the Company on a daily basis by 3:00 p.m., Pacific
Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1. The Company represents and warrants that the Contracts are
registered under the 1933 Act or are exempt from registration thereunder; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under applicable state insurance
law and that each Account is or will be registered as a unit investment trust in
3
<PAGE> 4
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts or is exempt from registration
thereunder.
2.2. The Investment Company represents and warrants that Investment
Company shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with the laws of
the State of Washington and all applicable federal and state securities laws
and that the Investment Company is and shall remain registered under the 1940
Act. The Investment Company shall amend the registration statement for its
shares under the 1933 and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Investment Company shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Investment
Company or the Underwriter.
2.3. The Investment Company represents that it is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended, (the "Code) and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity, or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Investment Company and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5. The Investment Company currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act or otherwise, although it may make such payments in the future. To
the extent that it decides to finance distribution expenses pursuant to Rule
12b-1, the Investment Company undertakes to have a board of trustees, a
majority of whom are not interested persons of the Investment Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Investment Company makes no representation as to whether
any aspect of its operations (including, but not limited to, fees and expenses
and investment policies) complies with the insurance laws or regulations of
the various states.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the
Investment Company shares in accordance with any applicable state laws and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Investment Company represents that it is lawfully organized
and validly existing under the laws of the Commonwealth of Massachusetts and
that it does and will comply in all material respects with the 1940 Act.
4
<PAGE> 5
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Investment Company in compliance in all material respects
any applicable state laws and federal securities laws.
2.10. The Investment Company and Underwriter represent and warrant
that all of their directors, officers, employees, investment advisers, and
other individuals/entities dealing with the money or securities of the
Investment Company are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Investment
Company in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Investment Company are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Investment Company in an amount not less than five million
dollars ($5 million). The aforesaid Bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company.
ARTICLE III
PROSPECTUSES AND PROXY STATEMENTS; VOTING
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed
copies of the Investment Company's current prospectus and statement of
additional information as the Company may reasonably request. If requested by
the Company in lieu thereof, the Investment Company shall provide camera-ready
film or computer diskettes containing the Investment Company's prospectus and
statement of additional information and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or statement of additional information for the Investment
Company is amended during the year) to have the prospectus for the Contracts
and the Investment Company's prospectus printed together in one document, and
to have the statement of additional information for the Investment Company and
the statement of additional information for the Contracts printed together in
one document. Alternatively, the Company may print the Investment Company's
prospectus and/or its statement of additional information in combination with
other fund companies' prospectuses and statements of additional information.
Except as provided in the following three sentences, all expenses of printing
and distributing Investment Company prospectuses and statements of additional
information shall be the expense of the Company. For prospectuses and
statements of additional information provided by the Company to its existing
owners of Contracts in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Investment
Company. If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Investment Company's
prospectus, the Investment Company will reimburse the Company in an
5
<PAGE> 6
amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Investment
Company's per unit cost of typesetting and printing the Investment Company's
prospectus. The same procedures shall be followed with respect to the Investment
Company's statement of additional information.
The Company agrees to provide the Investment Company or its designee
with such information as may be reasonably requested by the Investment Company
to assure that the Investment Company's expenses do not include the cost of
printing any prospectuses or statements of additional information other than
those actually distributed to existing owners of the Contracts.
3.2. The Investment Company's prospectus shall state that the
statement of additional information for the Investment Company is available
from the Underwriter or the Company (or in the Fund's discretion, the
prospectus shall state that such statement of additional information is
available from the Investment Company).
3.3. The Investment Company, at its expense, shall provide the
Company with copies of its proxy statements, reports to shareholders, and
other required communications (except for prospectuses and statements of
additional information, which are covered in Section 3.1) to shareholders in
such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote Investment Company shares in accordance with instructions
received from Contract owners: and
(iii) vote Investment Company shares for which no instructions have
been received in the same proportion as Investment Company
shares of such Fund for which instructions have been received.
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote
Investment Company shares held in any segregated asset account in its own
right, to the extent permitted by law.
3.5. The Investment Company will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular the Investment
Company will either provide for annual or special meetings or comply with the
requirements of Section 16(c) of the 1940 Act (although the Investment Company
is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the
Investment Company will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the SEC may promulgate with respect thereto.
6
<PAGE> 7
ARTICLE IV
SALES MATERIAL AND INFORMATION
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to
the Investment Company or its designee, each piece of sales literature or
other promotional material, or component thereof, in which the Investment
Company, the Adviser, or the Underwriter is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Investment
Company or its designee object to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Investment Company or
concerning the Investment Company in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus for the Investment Company shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Investment Company, or in
sales literature or other promotional material approved by the Investment
Company or its designee or by the Underwriter, except with the permission of
the Investment Company or the Underwriter or the designee of either.
4.3. The Investment Company, the Underwriter, or their designees
shall furnish, or shall cause to be furnished, to the Company or its designee,
each piece of sales literature or other promotional material, or component
thereof, in which the Company or its separate Accounts are named at least
fifteen Business Days prior to its use. No such material shall be used if the
Company or its designee objects to such use within fifteen Business Days after
receipt of such material.
4.4. The Investment Company and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or offering
materials for the Contracts, as such may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Investment Company will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Investment
Company or its shares, contemporaneously with the filing of such document with
the Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Investment Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports,
7
<PAGE> 8
solicitations for voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. In the case of unregistered Contracts, in lieu of
providing prospectuses and statements of additional information, the Company
shall provide the Investment Company with one complete copy of the offering
materials for the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, electronic media, or other
public media), sales literature (i.e., any written communication distributed
----
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V
FEES AND EXPENSES
-----------------
5.1. The Investment Company and the Underwriter shall pay no fee or
other compensation to the Company under this Agreement, except that if the
Investment Company or any Fund adopts and implements a plan pursuant to Rule
12b-1 to finance distribution expenses, then the Underwriter may make payments
to the Company or to the underwriter for the Contracts if and in amounts
agreed to by the Underwriter in writing and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits of the
Underwriter, or other resources available to the Underwriter. No such
payments shall be made directly by the Investment Company. Currently, no such
payments are contemplated.
5.2. All expenses incident to performance by the Investment Company
under this Agreement shall be paid by the Investment Company. The Investment
Company shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Investment Company, in accordance with applicable
state laws prior to their sale. The Investment Company shall bear the
expenses for the cost of registration and qualification of the Investment
Company's shares, preparation and filing of the Investment Company's
prospectus and registration statement, proxy materials and reports, setting
the prospectus in type, setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Investment Company's shares.
5.3. The Company shall bear the expenses of distributing the
Investment Company's prospectus, proxy materials, and reports to owners of
Contracts issued by the Company.
8
<PAGE> 9
ARTICLE VI
DIVERSIFICATION
---------------
6.1. The Investment Company will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Investment
Company will at all times comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or other
modifications to such Section or Regulations.
ARTICLE VII
INDEMNIFICATION
---------------
7.1. INDEMNIFICATION BY THE COMPANY
------------------------------
7.1(a). The Company agrees to indemnify and hold harmless the
Investment Company and each member of the Board and officers and each person,
if any, who controls the Investment Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements are related to the sale or
acquisition of the Investment Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
registration statement, prospectus or other offering materials for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Investment Company for use in any
registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Investment Company's shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature of the
Investment Company not supplied by the Company, or
9
<PAGE> 10
persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Investment Company shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Investment Company or any
amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information furnished to
the Investment Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of a result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Investment Company, whichever is applicable.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company
to such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
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7.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Investment Company shares or the Contracts or
the operation of the Investment Company.
7.2. INDEMNIFICATION BY THE UNDERWRITER
----------------------------------
7.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Investment Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Investment Company (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Investment Company by or on
behalf of the Company for use in the registration statement or
prospectus for the Investment Company or in the sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Investment Company shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
any registration statement, prospectus, other offering materials or
sales literature for the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the Investment
Company, Adviser, or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Investment
Company shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, other offering materials or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon
11
<PAGE> 12
information furnished to the Company by or on behalf of the Investment
Company; or
(iv) arise as a result of any failure by the Investment Company
to provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Underwriter; as limited by and in accordance with the provisions
of Sections 7.2(b) and 7.2(c) hereof.
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or each Account, whichever is
applicable.
7.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Underwriter of any such claim shall not relieve the Underwriter
from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the Underwriter's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Underwriter will
not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of any Account.
12
<PAGE> 13
7.3. INDEMNIFICATION BY THE INVESTMENT COMPANY
-----------------------------------------
7.3(a). The Investment Company agrees to indemnify and hold
harmless the Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Investment Company or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are related to the
operations of the Investment Company and:
(i) arise as a result of any failure by the Investment Company
to provide the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation or warranty made by the Investment Company in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Investment Company, as limited by and in
accordance with the provisions of Sections 7.3(b) and 7.3(c) hereof.
7.3(b). The Investment Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Investment Company, the
Underwriter or any Account, whichever is applicable.
7.3(c). The Investment Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Investment Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but
failure to notify the Investment Company of any such claim shall not relieve
the Investment Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Investment Company will be entitled to participate,
at its own expense, in the defense thereof. The Investment Company also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Investment Company to such
party of the Investment Company's election to assume the defense thereof, the
Indemnified Party
13
<PAGE> 14
shall bear the fees and expenses of any additional counsel retained by it, and
the Investment Company will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.3(d). The Company and the Underwriter agree promptly to notify
the Investment Company of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in connection with
this Agreement, the issuance or sale of the Contracts, with respect to the
operation of any Account, or the sale or acquisition of shares of the
Investment Company.
ARTICLE VIII
APPLICABLE LAW
--------------
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Washington.
8.2. To the extent they are applicable, this Agreement shall be
subject to the provisions of the 1933, 1934 and 1940 acts, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the Securities and Exchange Commission may
grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX
TERMINATION OF AGREEMENT
------------------------
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund based
upon the Company's determination that shares of such Fund are not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event any of the Fund's shares are not registered, issued, or sold
materially in accordance with applicable state or federal law or such
law precludes the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event that such
14
<PAGE> 15
Fund ceases to qualify as a Regulated Investment Company under Subchapter
M of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Investment Company may fail to so
qualify; or
(e) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event that such Fund fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Investment Company or the
Underwriter by written notice to the Company, if either one or both of
the Investment Company or the Underwriter respectively, shall determine,
in their sole judgment exercised in good faith, that the Company or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition, or Prospects since the date
of this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Investment Company and the Underwriter, if the Company shall determine,
in its sole judgment exercised in good faith, that either the Investment
Company or the Underwriter has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date
of this Agreement or is the subject of material adverse publicity.
9.2. Notwithstanding any termination of this Agreement, the
Investment Company and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Investment Company
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investment
in the Investment Company, redeem investments in the Investment Company, or
invest in the Investment Company upon the making of additional purchase
payments under the Existing Contracts.
9.3. The Company shall not redeem Investment Company shares
attributable to the Contracts (as opposed to Investment Company shares
attributable to the Company's assets held in any of the Accounts) except (i)
as necessary to implement Contract Owner initiated transactions, or (ii) as
required by state or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally
Required Redemption"). Upon request, the Company will promptly furnish to the
Investment Company and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Investment Company and
the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Fund that was otherwise
available under the Contracts without first giving the Investment Company or
the Underwriter ninety (90) days notice of its intention to do so.
15
<PAGE> 16
ARTICLE X
NOTICES
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Investment Company:
Russell Insurance Funds
909 A Street
Tacoma, Washington 98402
Attention: Karl J. Ege, Esq.
If to the Company:
Security Equity Life Insurance Company
84 Business Park Drive, Suite 303
Armonk, New York 10504
Attention: William C. Thater
If to the Underwriter:
Russell Fund Distributors, Inc.
909 A Street
Tacoma, Washington 98402
Attention: Karl J. Ege, Esq.
ARTICLE XI
MISCELLANEOUS
-------------
11.1. All persons dealing with the Investment Company must look
solely to the property of the Investment Company for the enforcement of any
claims against the Investment Company as neither the Board, officers, agents
or shareholders assume any personal liability for obligations entered into on
behalf of the Investment Company.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
16
<PAGE> 17
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the California Insurance Commissioner
with any information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to ascertain
whether the variable life insurance operations of the Company are being
conducted in a manner consistent with the California Variable Life Insurance
Regulations and any other applicable law or regulations.
11.7. The Investment Company and Underwriter agree that to the extent
any advisory or other fees received by the Investment Company, the
Underwriter, or the Adviser are determined to be unlawful in legal or
administrative proceedings under the 1973 NAIC model variable life insurance
regulation in the states of California, Colorado, Maryland, or Michigan, the
Underwriter shall indemnify and reimburse the Company for any out of pocket
expenses and actual damages the Company has incurred as a result of any such
proceeding; provided however that the provisions of Section 7.2(b) and 7.2(c)
shall apply to such indemnification and reimbursement obligation. Such
indemnification and reimbursement obligation shall be in addition to any other
indemnification and reimbursement obligations of the Investment Company or the
Underwriter under this Agreement.
11.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
11.9. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement.
11.10. The Company shall furnish, or shall cause to be furnished, to
the Investment Company or its designee copies of the following reports:
17
<PAGE> 18
(a) the Company's annual statement prepared under statutory
accounting principles, as soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's quarterly statement (statutory), as soon as
practical and in any event within 45 days after the end of each
quarterly period; and
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders or policyholders, as soon as
practical after the delivery thereof.
11.11. The Master Trust Agreement dated 11 July 1996, as amended
from time to time, establishing the Investment Company, which is hereby
referred to and a copy of which is on file with the Secretary of The
Commonwealth of Massachusetts, provides that the name Russell Insurance Funds
means the Trustees from time to time serving (as Trustees but not personally)
under said Master Trust Agreement. It is expressly acknowledged and agreed
that the obligations of the Investment Company hereunder shall not be binding
upon any of the shareholders, Trustees, officers, employees or agents of the
Investment Company, personally, but shall bind only the trust property of the
Investment Company, as provided in its Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the Trustees of the
Investment Company and signed by the President of the Investment Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of the personally,
but shall bind only the trust property of the Investment Company as provided
in its Master Trust Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed in its name and on behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
first written above.
SECURITY EQUITY LIFE INSURANCE COMPANY
Attest: ------------------- By: --------------------------
Secretary President
RUSSELL INSURANCE FUNDS
Attest: ------------------- By: ---------------------------
Secretary President
18
<PAGE> 19
RUSSELL FUND DISTRIBUTORS, INC.
Attest: ------------------- By: ---------------------------
Secretary President
19
<PAGE> 20
SCHEDULE A
----------
ACCOUNTS
--------
NAME OF ACCOUNT DATE OF RESOLUTION OF COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT
Separate Account 13 April 1, 1997
Separate Account 38 April 1, 1997
Separate Account 39 April 1, 1997
Separate Account 40 April 1, 1997
Separate Account 41 April 1, 1997
<PAGE> 21
SCHEDULE B
----------
CONTRACTS
---------
Contract Form Numbers:
LCL1 (G)(I)
LCL2
<PAGE> 1
EXHIBIT 1.A.(9)(i)
FORM OF PARTICIPATION AGREEMENT
-------------------------------
Among
LIFE & ANNUITY TRUST
STEPHENS, INC.
WELLS FARGO BANK
And
SECURITY EQUITY LIFE INSURANCE COMPANY
--------------------------------------
THIS AGREEMENT is made and entered into as of this ------ day of
- -------------- , 1994, by and among SECURITY EQUITY LIFE INSURANCE COMPANY
(hereinafter referred to as the "Company"), a New York corporation, on its own
behalf and on behalf of each segregated asset account set forth in Schedule A
hereto, as such schedule may be amended from time to time (each such account
hereinafter referred to as the "Account" or collectively as the "Accounts"),
and Life & Annuity Trust, a business trust organized under the laws of
Delaware (hereinafter referred to as the "Fund"), and Stephens, Inc.
(hereinafter referred to as the "Underwriter"), and Arkansas corporation, and
Wells Fargo Bank a California corporation (hereinafter referred to as the
"Adviser").
WHEREAS, the Fund engages in business as an open-end series investment company
and is available to act as an investment vehicle for separate accounts
established for variable life insurance policies and variable annuity
contracts offered by life insurance companies which have entered into
participation agreements with the Fund and the Underwriter (hereinafter,
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (the "SEC"), dated -------------- , ---- (File No. 812- ---- ), or
will, if and to the extent necessary, obtain an order granting Participating
Insurance Companies and variable life insurance separate accounts exemptions
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order");
and
WHEREAS, the Fund is registered as an open-end series investment company under
the 1940 Act, and its shares are registered under the Securities Act of 1933,
as amended (hereinafter, the "1933 Act"); and
<PAGE> 2
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") and any applicable state
securities laws; and
WHEREAS, the Company has developed or intends to develop certain variable life
insurance policies (hereinafter, the "Contracts"), set forth in Schedule B
hereto, for sale to "accredited investors," as that term is defined in
Regulation D, promulgated under the 1933 Act (hereinafter, "Regulation D"), or
other investors permitted by Regulation D; and
WHEREAS, each Account is or will be a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to one or more
variable life insurance policies; and
WHEREAS, the Company does not intend to make a "public offering" of the
Contracts, as that term is defined in Section 4(2) of the 1933 Act and
Regulation D; and
WHEREAS, the Underwriter is registered as a broker/dealer with the SEC under
the Securities Exchange Act of 1934, as amended (hereinafter, the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (hereinafter, the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in certain Portfolios on behalf of the
Accounts to fund certain of the Contracts and the Underwriter is authorized to
sell such shares to segregated asset accounts of life insurance companies,
such as each Account, at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1 The Underwriter agrees to sell to the Company, for each Account listed
on Schedule A, shares of the corresponding Portfolios of the Fund, also listed
on such schedule, which the Company orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for such shares.
For purposes of this Section 1.1, the Company shall be the designee of
the Fund for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such order by 8:30 a.m. Eastern Time at the principal business
office of the Fund on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset values pursuant to the rules of the
SEC.
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates its net asset value on each day which
the New York Stock Exchange is open for
<PAGE> 3
trading. Notwithstanding the foregoing, the Board of Directors [Trustees] of
the Fund (hereinafter, the "Board") may refuse to sell shares of any Portfolio
if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell fund shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 1.1, 1.2, 1.3, 1.5, 1.7, and 1.11 and
Article VII of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Accounts or the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of the Portfolios
offered by the then current prospectus of the Fund and in accordance with the
various provisions of the prospectus.
1.7 The parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's shares may be sold to other
Participating Insurance Companies (subject to Sections 1.3 and 1.4, and
Article VI hereof) and the cash value of the Contracts may be invested in
other investment companies.
1.8 The Fund agrees not to delete any of the selected Portfolios of the Fund
nor to make any material changes to the investment policy of any such
Portfolio without providing the Company with at least six months prior written
notice of any such change.
1.9 The Fund agrees not to increase any of the fees or charges assessed
against the assets of any Portfolio without providing at least three months
prior written notice of any such change.
1.10 The Company agrees that it shall not substitute shares of the Portfolios
of the Fund in the Accounts unless the SEC shall have approved the
substitution pursuant to Section 26 of the 1940 Act.
<PAGE> 4
1.11 The Company shall pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire
and/or credit for any shares purchased the same day as the redemption. For
purposes of Section 2.2(e), upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.12 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or to any Account.
Shares from the Fund will be recorded in an appropriate title for each
Account.
1.13 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to
receive all such income, dividends and capital gain distributions as are
payable on the Portfolio shares in additional shares of the Portfolio. The
Company reserves the right to revoke this election and to receive all such
income, dividends and capital gain distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.14 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated and shall use its best
efforts to make such net asset value per share available by 5:30 p.m. Eastern
Time at the principal office address of the Company. If the Fund provides
incorrect share net asset value information, the Company shall be entitled to
an adjustment to the number of shares purchased or redeemed to reflect the
correct net asset value per share (and, if and to the extent necessary, the
Company shall make adjustments to the number of units credited and/or unit
values for the Contracts for the periods affected). Any error in the
calculation or reporting of net asset value per share, dividend or capital
gains information greater than or equal to $.01 per share shall be reported
immediately upon discovery to the Company. Any error of a lesser amount shall
be corrected in the next Business Day's net asset value per share.
1.15 The Fund will provide the Company with as much advance notice as is
reasonably practicable, but in any event with at least ninety (90) days
advance notice, of any material change affecting the Fund (including, but not
limited to, any material change in its registration statement or prospectus
and any proxy solicitation) and consult with the Company in order to implement
any such change in an orderly manner, recognizing the expenses of such change.
The Fund agrees to share equitably in expenses incurred by the Company as a
result of actions taken by the Fund.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Company represents and warrants as follows:
<PAGE> 5
(a) that it is a life insurance company duly organized and in good
standing under applicable law and that it has legally and validly established
each Account prior to any issuance or sale thereof as a segregated asset
account under the New York insurance laws.
(b) that the Contracts are or will be issued and sold in compliance in
all material respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
(c) that it will use its best efforts to assure that the Accounts are
and will remain excluded from the definition of an investment company under
the 1940 Act, and that it will immediately notify the Underwriter and the Fund
upon having a reasonable basis for believing that the accounts have ceased to
be so exempt or that they might cease to be exempt in the future.
(d) that the distributor of the Contracts is and will at all times
while the Contracts are in effect be a broker/dealer registered with the SEC
under the 1934 Act.
(e) that each Account will invest exclusively in shares of one
Portfolio, as shown on Schedule A, hereto.
(f) that the Company and each Account will not substitute the shares
of the Portfolios unless the SEC shall have approved the substitution pursuant
to Section 26 of the 1940 Act.
(g) that the Company and each Account will seek voting instructions
from its Contract owners with regard to voting on all proxies issued by the
Fund and will vote such proxies only in accordance with such instructions or
vote the shares held by it in the same proportion as the vote of all other
holders of such shares.
(h) that the Contracts are currently treated as life insurance or
endowment contracts, under applicable provisions of the Internal Revenue Code
of 1986, as amended (hereinafter, the "Code"), and that it will make every
effort to maintain such treatment and that it will notify the Underwriter and
the Fund immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.2 The Fund and the Adviser represent and warrant as follows:
(a) that Fund shares sold pursuant to this Agreement shall be
registered under the 1933 Act, duly authorized for issuance and sold in
compliance with all applicable state and federal securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend
the registration statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
required by applicable law.
<PAGE> 6
(b) that the Fund is currently qualified as a Regulated Investment
Company under Subchapter M of the Code, and that it will maintain such
qualification (under Subchapter M or any successor or similar provision) as
long as this Agreement is in effect and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
comply or that it might not comply in the future with the Subchapter M
qualification requirements.
(c) that the Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent
that it decides to finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have a board of directors [trustees], a majority of whom
are not interested persons of the Fund, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
(d) that the Fund's investment policies, fees and expenses are and
shall at all times remain in compliance with the laws of the state of New York
and any other applicable state to the extent required to perform this
Agreement. The Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the state of New York and any other applicable state to the extent
required to perform this Agreement.
In this regard, the Fund and the Adviser represent that none of the Portfolios
listed in Schedule A will invest in shares of the Company or its affiliates
for as long as this Agreement shall remain in effect or for as long as any
assets of the Accounts are invested in such Portfolios, whichever is longer.
(e) that all of the Fund's directors, officers, employees, the Adviser
and each sub-adviser, and other individuals/entities dealing with the money or
securities of the Fund, including the Underwriter, are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-1 of the 1940 Act or related provisions as may
be promulgated from time to time. The aforesaid Bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable bonding
company.
2.3 The Adviser represents and warrants that it, and each sub-adviser, if
applicable, is and shall remain duly registered or exempt from registration
under all applicable federal and state securities laws, including but not
limited to registration as an investment adviser under the Advisers Act, and
that it, and each sub-adviser, if applicable, shall perform its obligations
for the Fund in compliance with the laws of the State of New York and any
applicable state and federal securities laws.
2.4 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the state of New
<PAGE> 7
York and all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.5 The Fund, the Adviser, and the Underwriter represent and warrant that
none of them has not entered into or will not enter into, without the prior
written consent of the Company, any arrangement for the sale of shares of any
Portfolio of the Fund to any insurance company or separate account under which
the terms granted to that insurance company or separate account are more
favorable than those granted hereunder to the Company and the Accounts.
ARTICLE III. Fund Prospectuses and Proxy Statements Voting
---------------------------------------------
3.1 At least annually, the Underwriter (at its expense) shall provide the
Company with as many copies of the Fund's current prospectus as the Company
may reasonably request. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
as set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the disclosure document for the
Contracts and the Fund's prospectus printed together in one document (the cost
of printing the Fund prospectus portion of such document to be paid by the
Underwriter).
3.2 If applicable state of federal laws or regulations require that the
statement of additional information for the Fund be distributed to all
Contract owners, then the Underwriter shall provide the Company with the
Fund's statement of additional information for the Fund in such quantities
and/or with expenses to be borne in accordance with paragraph 3.1 hereof.
3.3 The Fund's prospectus shall state the statement of additional
information for the Fund is available from the Underwriter (or in the Fund's
discretion, the prospectus shall state that such statement is available from
the Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such statement.
3.4 The Fund, at its expense, shall provide the Company with copies of its
prospectus, proxy material, reports to stockholders and other communications
to stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.5 It is understood and agreed that the Company is not responsible for the
content of the prospectus or statement of additional information for the Fund.
It is also understood and agreed that, except with respect to information
regarding the Fund, Adviser or the Underwriter, neither the Fund nor
Underwriter are responsible for the content of the disclosure statement for
the Contracts.
3.6 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
<PAGE> 8
(ii) vote the Fund shares in accordance with instructions received from
Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Portfolio for which
instructions have been received:
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for the Contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the fund calculates voting privileges in a
consistent manner, as required by the Shared Funding Exemptive Order.
3.7 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well
as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Contract Sales: Sales Material and Information
-----------------------------------------------
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, the disclosure document and each piece of Contract sales
material in which the Fund, the Adviser or the Underwriter is named, at least
ten (10) Business Days prior to its use. No such material shall be used if
the Fund or its designee object to such use within ten (10) Business Days
after receipt of such material.
4.2 The Company shall not give any information or make any written
representations or statements on behalf of the Fund or concerning the fund in
connection with the sale of the Contracts other than the information or
representations contained in the then current registration statement or
prospectus for the Fund shares, as such registration statement and prospectus
for the Fund shares may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in Fund sales literature approved
by the Fund or its designee or by the Underwriter, except with the permission
of the Fund or the Underwriter or the designee of either.
4.3 The Fund, the Adviser, and the Underwriter understand and acknowledge
that each Account is relying on Section 3(c)(1) of the 1940 Act to be excluded
from the definition of investment company under the 1940 Act, and that the
Contracts are relying on Regulation D for an exemption from registration under
the 1933 Act. Accordingly, each of the Fund, the Adviser, and the Underwriter
agree that it will not, orally or in the fund sales literature or
<PAGE> 9
otherwise in writing, give any information or make any representations
concerning the Company, each Account, or the Contracts, without the prior
written consent of the Company.
4.4 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports proxy statements, Fund sales literature, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.5 The Company will provide to the Fund at least one complete copy of all
disclosure documents, reports, solicitations for voting instructions, and
Contract sales material, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts
or each Account.
4.6 For purposes of this Article IV, the phrase "fund sales literature"
includes, but is not limited to, advertisements (such as material published,
or designed for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature (i.e.,
---
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Expenses
--------
5.1 All expenses incident to performance by the fund under this Agreement
shall be paid by the Fund. The Fund shall ensure that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type
and printing the proxy materials and reports to shareholders (including the
costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state
law, all taxes on the issuance or transfer of the Fund's shares.
5.2 The Company shall bear the expenses of distributing the Fund's
prospectus to Contract owners and of distributing the Fund's proxy materials
and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1 The Fund, the Adviser, and the Underwriter represent that the Fund will
at all times invest money from the Contracts in such a manner as to ensure
that the Contracts will be
<PAGE> 10
treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will at all
times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity, endowment,
or life insurance contracts, and with 817(d) of the Code, relating to the
definition of a variable contract, as well as any amendments or other
modifications to such Sections or Regulations issued under those Sections.
6.2 The Fund, the Adviser, and the Underwriter acknowledge that full
compliance with the requirements referred to in Sections 6.1 and 2.2(b) hereof
is the principal inducement for the Company to enter into this Agreement
because any failure to meet those requirements would result in the Contracts
not being treated as life insurance for federal income tax purposes, which
would have adverse tax consequences for Contract owners and could also
adversely affect the Company corporate tax liability. The Fund also
acknowledges that it is solely within its power and control to meet those
requirements. Accordingly, without in any way limiting the effect of Section
8.2 hereof and without in any way limiting or restricting any other remedies
available to the Company, the Adviser, and/or the Underwriter will pay on a
joint and several basis all costs associated with or arising out of any
failure, or any anticipated or reasonably foreseeable failure, of the Fund or
any Portfolio to comply with Sections 6.1 or 2.2(b) hereof, including all
costs associated with correcting or responding to any such failure; such costs
may include, but are not limited to, the costs involved in creating,
organizing, and registering a new investment company as a funding medium for
the Contracts and/or the costs of obtaining whatever regulatory authorizations
are required to substitute shares of another investment company for those of
the failed Fund or Portfolio (including but not limited to an order pursuant
to Section 26(b) of the 1940 Act); such costs are to include, but are not
limited to, fees and expenses of legal counsel and other advisors to the
Company and any federal income taxes or tax penalties (or "toll charges" or
exactments or amounts paid in settlement) incurred by the Company in
connection with any such failure or anticipated or reasonably foreseeable
failure. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the
Underwriter and/or the Adviser under this Agreement.
ARTICLE VII. Potential Conflicts
-------------------
7.0 IF the Fund has a Shared Funding Exemptive Order, then Sections 7.1
-- ---
through 7.7, inclusive, of this Agreement shall apply. IF the Fund does not
----- -- --------
have a Shared Funding Exemptive Order, then Sections 7.1 through 7.7,
inclusive, of this Agreement shall not apply. Therefore, the Fund must
--------- ----
initial one of the following two statements:
(a) Yes, the Fund has a Shared Funding Exemptive Order and Sections
7.1 through 7.7, inclusive, are applicable.
-----
(b) No, the Fund does not have a Shared Funding Exemptive Order and
Sections 7.1 through 7.7, inclusive, are not applicable.
-----
<PAGE> 11
7.1 The Board of Trustees of the Fund (the "Board") will monitor the Fund
for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which it
is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract
---
owners, life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment
in the Fund and terminate this Agreement; provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
<PAGE> 12
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement within
six (6) months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six (6) month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that
such withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.6, 3.7, 7.1, 7.2, 7.3,
7.4 and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1 Indemnification By The Company
------------------------------
(a) The Company agrees to indemnify and hold harmless the Fund and
each of its trustees and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 8.1) against any
and all losses, claims, damages, liabilities (including
<PAGE> 13
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
disclosure document for the Contracts or contained in the
Contracts or Contract sales material (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Company by or
on behalf of the Fund for use in the disclosure document for
the Contracts or in the Contracts or Contract sales material
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or Fund sales literature not
supplied by the Company, or persons under its control) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Contracts or
Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or Fund sales literature or any amendment thereof
or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
a statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company;
<PAGE> 14
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnification Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
pon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation. If the Company does not assume the
defense, it shall not be liable for any settlement of any proceeding
effected without its written consent but if settled, with such consent
or if there be a final judgment for the plaintiff, the Company agrees to
indemnify the Indemnified Party from and against any loss or liability
by reason of such settlement or judgment.
(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.2 Indemnification by the Underwriter
----------------------------------
(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter)
or litigation (including legal and other expenses) to which the
Indemnified Parties may
<PAGE> 15
become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition
of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's
registration statement or prospectus or statement of additional
information or Fund sales literature (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or
Fund by or on behalf of the Company for use in the registration
statement or prospectus or the statement of additional
information for the fund or in Fund sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
disclosure document for the Contracts or Contract sales
material not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a disclosure document for the
Contracts or Contract sales material, or any amendment thereof
or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information urnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials, or otherwise perform its
obligations under the terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise,
to comply with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out
<PAGE> 16
of or result from any other material breach of this Agreement
by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Underwriter specified in Article
VI hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to each
Company or the Accounts, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
erved upon such Indemnified Party (or after such Indemnified Party shall
ave received notice of such service of any designated agent), but
failure to notify the Underwriter of any such claim shall not relieve
the Underwriter from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than an account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Underwriter to such party of the Underwriter's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the
Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation. If the Underwriter does not assume
the defense, it shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or
if there be a final judgment for the plaintiff, the Underwriter agrees
to indemnify the Indemnified Party from and against all loss or
liability by reason of such settlement or judgment.
(d) The Company agrees promptly to notify the Underwriter of the
ommencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
8.3 Indemnified By the Adviser
--------------------------
(a) The Adviser agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls
the Company within the
<PAGE> 17
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or statement of additional
information for the Fund or Fund sales literature (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Adviser or Fund by
or on behalf of the Company for use in the registration
statement or prospectus or statement of additional information
for the Fund or in Fund sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
disclosure document for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct of
the Fund or Adviser or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a disclosure document for the
Contracts or Contract sales material, or any amendment thereof
or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of
the Adviser or Fund; or
(iv) arise as a result of any failure by the Fund or Adviser to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise,
<PAGE> 18
to comply with the diversification and other qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or Adviser in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Adviser;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Adviser specified in Article VI
hereof.
(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified party's reckless disregard of
obligation and duties under this Agreement or to the Company or the
Accounts, whichever is applicable.
(c) The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Adviser will be entitled to participate, at its own
expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation. If the Adviser does not assume the
defense, it shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or
if there be a final judgment for the plaintiff, the Adviser agrees to
indemnify the Indemnified Party from and against all loss or liability
by reason of such settlement or judgment.
(d) The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against itself or any of
its officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
<PAGE> 19
8.4 Indemnification By the Fund
---------------------------
(a) The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
8.4) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or
otherwise, insofar as such losses claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements result from the
gross negligence, bad faith or willful misconduct of the Trustees or any
member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject be reason of
such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Fund, the Underwriter
or each Account, whichever is applicable.
(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve the Fund from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party
<PAGE> 20
shall bear the fees and expenses of any additional counsel retained by it,
and the Fund will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs of
investigation. If the Fund does not assume the defense, it shall not be
liable for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final judgment
for the plaintiff, the Fund agrees to indemnify the Indemnified Party
from and against all loss or liability by reason of such settlement or
judgment.
(d) The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either Account, or the sale or acquisition of shares of the
Fund.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder to the
extent applicable thereto, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including, but not
limited to, the Shared Funding Exemptive Order) and the terms hereof
shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1 This Agreement shall terminate:
(a) at the option of any party upon six (6) months advance
written notice to the other parties; provided, however such notice shall
not be given earlier than six (6) months following the date of this
Agreement; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of the
Contracts as determined by the Company, provided, however, that such
termination shall apply only to the Portfolio(s) not reasonably
available. Prompt notice of the election to terminate for such cause
shall be furnished by the Company, said termination to be effective ten
(10) days after receipt of notice; or
(c) at the option of the Fund in the event that formal administrative
proceedings are instituted against the Company by the NASD, the SEC, the
insurance department, or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, with respect to the operation of any Account, or the
<PAGE> 21
purchase of the Fund shares, provided, however, that the Fund determines
in its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Company to perform its obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund, the Adviser,
or Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Company determines in its sole judgment exercised in good
faith, that any such administrative proceedings will result in a loss of
1934 Act registration as a broker/dealer with the SEC or will have a
material adverse effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(e) with respect to any Account, at the option of the Company or the
Fund, upon receipt of any necessary regulatory approval and/or the
requisite vote of the Contract owners sharing an interest in such
Account (or any sub-account) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio
shares had been selected to serve as the underlying investment media.
The Company will give 30 days' prior written notice to the Fund of the
date of any proposed vote to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the Fund's
shares are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or to be issued
by the Company; or
(g) at the option of the Company, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund and the Adviser fail to
invest money from the Contracts in such a manner as to ensure that the
contracts will be treated as variable contracts under the Code and any
regulations thereunder; or
(i) by either the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of disinterested Fund Board
members, that an irreconcilable material conflict exists among the
interests of (1) all owners of variable contracts or (2) the interests
of the Participating Insurance Companies investing in the Fund; or
(j) at the option of the Fund, the Adviser, or the Underwriter, if (1)
the Fund, the Adviser, or the Underwriter, respectively, shall
determine, in their sole judgment reasonably exercised in good faith,
that the Company has suffered a material adverse change in its business
or financial condition or is the subject of material adverse
<PAGE> 22
publicity and such material adverse change or material adverse publicity
will have a material adverse impact upon the business and operations of
either the Fund or the Underwriter, (2) the Fund, the Adviser, or the
Underwriter shall notify the Company in writing of such determination and
its intent to terminate this Agreement, and (3) after considering the
actions taken by the Company and any other changes in circumstances since
the giving of such notice, such determination of the Fund, the Adviser, or
the Underwriter shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth (60th) day shall be
the effective date of termination, unless the Fund or the Underwriter, as
the case may be, rescinds its determination in writing and delivers such
writing to the Company on or before the sixtieth (60th) day; or
(k) at the option of the Company, if (1) the Company shall determine,
in its sole judgment reasonably exercised in good faith, that the Fund,
the Adviser, or the Underwriter has suffered a material adverse change
in its business or financial condition or is the subject of material
adverse publicity and such material adverse change or material adverse
publicity and such material adverse change or material adverse publicity
will have a material adverse impact upon the business and operations of
the Company, (2) the Company shall notify the Fund, the Adviser, and the
Underwriter in writing of such determination and its intent to terminate
the Agreement, and (3) after considering the actions taken by the Fund,
the Adviser, and/or the Underwriter and any other changes in
circumstances since the giving of such notice, which sixtieth (60th) day
shall be the effective date of termination, unless the Company rescinds
its determination in writing and delivers such writing to the Fund, the
Adviser, and the Underwriter on or before the sixtieth (60th) day; or
(l) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the
Code, or if the Fund reasonably believes that the Contracts may fail to
so qualify; or
(m) upon the assignment of this Agreement unless the non-assigning
parties consent thereto.
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Except as otherwise provided in Section 10.1, no termination of this
Agreement shall be effective unless and until the party terminating this
Agreement gives prior written notice to all other parties to this Agreement of
its intent to terminate which notice shall set forth the basis for such
termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(b), 10.1(j), or
10.1(k) of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
<PAGE> 23
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination; and
(c) in the event that any termination is based upon the provisions of
Section 10.1(e) of this Agreement, such prior written notice shall be
given at least sixty (60) days before the date of any proposed vote to
replace the Fund's shares.
10.4 (a) Notwithstanding any termination of this Agreement, the Fund, the
Adviser, and the Underwriter shall at the option of the Company continue
to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the owners
of the Existing Contracts shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts.
(b) In the event of a termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund, the Adviser, and the
Underwriter shall promptly notify the Company whether the Underwriter,
the Adviser, and the Fund will continue to make Fund shares available
after such termination. If Fund shares continue to be made available
after such termination, the provisions of this Agreement shall remain in
effect except for Section 10.1(a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.4, upon prior written notice to the other party, such notice
to be for a period that is reasonable under the circumstances but, if
given by the Fund, need not be for more than six (6) months.
(c) The parties agree that this Section 10.4 shall not apply to any
termination made pursuant to Article VII or any conditions or
undertakings incorporated by reference in Article VII, and the effect of
such Article VII termination shall be governed by the provisions set
forth or incorporated by reference herein.
10.5 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in either
Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations
or judicial or other legal precedent of general application (hereinafter
referred to as a "Legally Required Redemption"). Upon request, the Company
will promptly furnish to the Fund and the Underwriter the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the Fund
and the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
ninety (90) days notice of its intention to do so.
<PAGE> 24
10.6 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify other parties and the Adviser and
Underwriter's obligation to pay costs under Section 6.2 shall survive and not
be affected by any termination of this Agreement. In addition, with respect
to Existing Contracts for which the Fund, the Adviser, and Underwriter are
continuing to make Fund shares available in accordance with Section 10.4(a),
the provisions of Article I, Article II, Article III, Article V, Article VI
and Sections 13.2 and 13.6 shall also survive and not be affected by any
termination of this Agreement.
ARTICLE XI. Applicability to New Accounts and New Contracts
-----------------------------------------------
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in and the addition of separate accounts
by the Company and to reflect changes in or relating to the Contracts and to
add new classes of variable life insurance policies to be issued by the
Company through each Account investing in the Fund. The provisions of this
Agreement shall be equally applicable to each such separate account and each
such class of policies, unless the context otherwise requires.
ARTICLE XII. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Life & Annuity Trust
525 Market Street, 12th Floor
San Francisco, CA 94105
Attention:
If to the Company:
84 Business Park Drive
Suite 303
Armonk, NY 10504
Attention: Mr. Kiri Parankirinathan
If to the Underwriter:
Stephens, Inc.
111 Center Street
Little Rock, Arkansas 72201
Attention:
<PAGE> 25
If to the Adviser:
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, CA 94163
Attention:
ARTICLE XIII. Miscellaneous
-------------
13.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
13.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
13.3 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5 If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule of otherwise, the remainder of the Agreement
shall not be affected thereby.
13.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the New York Insurance Commissioner
with any information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to ascertain
whether the variable life insurance operations of the Company are being
conducted in a manner consistent with the New York variable life insurance
regulations and any other applicable law or regulations.
13.7 The Fund, Underwriter, and the Adviser agree that to the extent any
advisory or other fees received by the Fund, the Underwriter or the Adviser
are determined to be unlawful in legal or administrative proceedings under the
1973 NAIC model variable life insurance regulation in the states of Colorado,
Maryland, or Michigan and any other applicable states,
<PAGE> 26
the Adviser and the Underwriter, on a joint and several basis, shall indemnify
and reimburse the Company for any out of pocket expenses and actual damages the
Company has incurred as a result of any such proceeding; provided however that
the provisions of Section 8.2(b) and 8.2(c) of this Agreement shall apply to
such indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund, the Underwriter, and/or the Adviser
under this Agreement.
13.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
SECURITY EQUITY LIFE INSURANCE COMPANY
By its authorized officer,
SEAL By:
--------------------------------------------
Title:
-----------------------------------------
Date:
------------------------------------------
Fund:
LIFE & ANNUITY TRUST
By its authorized officer,
SEAL By:
--------------------------------------------
Title:
-----------------------------------------
Date:
-------------------------------------------
Underwriter:
STEPHENS, INC.
SEAL By:
--------------------------------------------
Title:
-----------------------------------------
<PAGE> 27
Date:
------------------------------------------
ADVISER:
WELLS FARGO BANK
SEAL By:
--------------------------------------------
Title:
-----------------------------------------
Date:
------------------------------------------
<PAGE> 28
SCHEDULE A
ACCOUNTS
--------
Account Date Established Corresponding Portfolio
- ------- ---------------- -----------------------
<PAGE> 29
SCHEDULE B
CONTRACTS
---------
As used in this Agreement, the term "Contracts" shall mean the contracts and
certificates with the form numbers listed below:
Contracts
---------
Generic Name Number
- ------------ ------
<PAGE> 1
EXHIBIT 3.(iii)
April 22, 1997
Board of Directors
Re: Security Equity's Variable Life Separate Account 13
To the Board of Directors:
This opinion is furnished in connection with the filing attachments to the
Registration Statement on Form S-6 (No. 33-88524) which covers premiums
received under certain flexible premium variable life insurance contracts
("Contracts") issued by Security Equity Life Insurance Company (the
"Company").
The Prospectus included in the Registration Statement describes Contracts
which are issued by the Company. The Contract forms were reviewed under my
direction, and I am familiar with the Registration Statement and exhibits
thereto. In my opinion:
1. The illustrations of death benefits, insurance account values, net cash
surrender values and accumulated premiums included in the Registration
Statement and based upon assumptions stated in the illustrations, are
consistent with the provisions of the Contract. The rate structure of the
Contract has not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of a Contract for the ages and sexes show, than to
prospective purchasers of a Contract for other ages and sex.
2. The table of representative Minimum Death Benefit factors included in
the "Death Benefits Under the Contract" section is consistent with the
provision of the Contract.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and the use of my name relating to actuarial matters under the
heading of "Experts" in the Prospectus.
/s/ Ralph Gorter
----------------
Ralph Gorter, FSA
Second Vice President -- Actuary
<PAGE> 1
EXHIBIT 9
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Security Equity Life Insurance Company
We consent to the use of our reports included herein and to the reference of
our firm under the heading "Experts" in the Registration Statement and
Prospectuses for Security Equity Life Insurance Company Separate Account 13.
KPMG Peat Marwick LLP
St. Louis, Missouri
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 33,682
<INVESTMENTS-AT-VALUE> 33,963
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,963
<PAYABLE-FOR-SECURITIES> 25
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,938
<TOTAL-LIABILITIES> 33,963
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,099
<SHARES-COMMON-PRIOR> 545
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,938
<DIVIDEND-INCOME> 96
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 38
<NET-INVESTMENT-INCOME> 58
<REALIZED-GAINS-CURRENT> 360
<APPREC-INCREASE-CURRENT> 759
<NET-CHANGE-FROM-OPS> 1177
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 25,083
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
